RESTRICTEDWORLD TRADE
ORGANIZATIONG/ADP/IG/W/13
27 October 1998
(98-4186)
Committee on Anti-Dumping Practices
Informal Group on Anti-CircumventionOriginal:  English
TOPIC 1 - WHAT CONSTITUTES CIRCUMVENTION?1
Paper by the European Community
1. As the European Community has previously stated, circumvention of anti-dumping duties
may occur where , in reaction  to the existence of an anti-dumping proceeding, duties are either evaded
or are not paid, in a manner which undermines the purpose and effectiveness of measures.  Themeasures will have been intended to remedy injury caused to a domestic industry in an importing
country by the dumping of like goods from one or more exporting countries.  The following note
reiterates the Community’s perception of circumventi on, including suggested criteria to assist in the
identification of those instances of circumvention wh ich require corrective action.  Finally, the factual
outlines of two real examples are presented, in or der to show how these reference criteria may be
applied in practice.
2. The European Community’s last submission to the Group outlined the variety of types of
reactions to an anti-dumping proceeding which can result in non-payment of duties. These ranged
from simple trans-shipment practices and fraudulent  customs declarations to the complete relocation
of product manufacturing facilities.  Such activities may be subject to existing national sanctions or
penalties, or may simply reflect the legitimate global investment strategy of firms.  The EC does notpropose that all types of reaction resulting in a changed pattern of trade be categorised negatively, nor
that the means to counter them all be included in  the Anti-Dumping Agreement. Nevertheless, certain
examples and scenarios already presented by the United States and the EC clearly illustrate that there
exist a number of reactions (chiefly operations of minor product modification or simple (re)assembly)
for which the overriding economic justification is  avoiding payment of an anti-dumping duty, and
against which corrective action must therefore be taken in order to uphold the objectives and
effectiveness of measures adopted in accordance with the Anti-Dumping Agreement.
3. Only through agreement on common rules based on clear criteria of assessment can we be
sure that such corrective action will be applied tran sparently, consistently and predictably.  With this
in mind, in order to assist in classifying a reaction as either legitimate or undesirable the European
Community has suggested the elaboration of criteria for the identification of those types of changes in
the pattern of trade against which corrective action is justified, namely:
(i) the timing  of the practice identified – the co-incidence in time with the anti-dumping
case concerned must be treated as an overall indicator of whether the reaction can
reasonably be linked to the non-payment of duties;
(ii) the extent of new investment  – for de-localised facilities, the nature and depth of
investment, the effort involved in the manufacturing or assembly operation, level of
financial commitment, sourcing of components and inputs;
                                                     
1 See document G/ADP/IG/W/1 and G/ADP/IG/W/6 for previous papers by the EC on this question.G/ADP/IG/W/13
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(iii) the evidence of practices  for which the principal apparent justification is the
existence of an anti-dumping proceeding, and which undermine the effectiveness of
the duty concerned (such circumventing practices  include minor product
modifications, postponement of a final insubstantial assembly operation until after
importation).
These basic criteria should be discussed and elaborated further by the Group.  To illustrate how they
may be applied in reality, and in response to the requests of a number of Members of the Group, there
appear below two factual summaries of cases which have been brought to the attention of the
Community anti-dumping authorities, which according to the above criteria should be investigated as
possible instances of undesirable circumvention.
4. Factual example 1.
Fibre (HS code 1234 56) is subject to an AD duty. After imposition of the AD duty, a marked
substitution of imports of fibre by imports of “tow” - i.e. fibre in uncut form - originating in the same
country of export takes place. As tow is classified in another HS heading (HS 1234 57), it has notbeen covered in the operative part of the Regulation imposing the AD duty.  There is a clear co-
incidence in timing of the imports of the new form of fibre with the presence of the anti-
dumping measure.   
After importation, tow is cut into fibre; a relatively simple, mechanical process,  involving no
particular know-how and only very minor materi al investment. It is then sold for the same
applications and to the same customers as the fibre previously exported in cut form. The extent of
investment in the importing country can therefore be classed as insignificant.
The cutting operation, which in the vast majority of cases is part of a continous process,
generates extra costs in terms of packaging and labour which are not offset by any significant cost
savings or price premiums but even compounded by the higher hourly labour cost in the importing
country, if compared with that in the exporting country.  The new activity resulting in non-payment
of anti-dumping duties (circumventing practice) has no apparent economic justfication  other
than avoidance of anti-dumping measures.
5. Factual example 2.
Bicycles (HS code 8712 00) are subject to an  AD duty. After imposition of the AD duty, a
marked substitution of imports of bicycles by imports of knocked down kits of bicycles, i.e. bicycle
parts originating in the same country of export takes place. Bicycle parts are classified in other HS
headings (HS 8714 xx). There is therefore a clear co-incidence in timing of the imports of the
component bicycle parts with the pres ence of the anti-dumping measure.
The shipments of the bicycle kits are spread over various containers, and shipments, and are
routed to several customs entry points. Therefore they cannot be classified as complete bicycles
pursuant to classification rule 2a of the Community  Customs Code (which allows for the constituent
parts to be classified under the heading of the completed product, should they all be contained in the
same shipment), and are not covered by the operative part of the Regulation imposing the AD duty.
After importation, the bicycle parts are being easily assembled (a relatively simple,
mechanical process, not involving particular traini ng, know how or investment) and sold for the same
uses and to the same customers as the complete bicycles previously exported. The extent of
investment in the importing country can therefore be classed as insignificant.G/ADP/IG/W/13
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The value of the parts coming from the exporting country, compared to the value of other
parts used in the assembly operations, is significan t. The value added in the importing country to the
parts assembled is limited. The leading apparent economic justification  for the new activity which
results in non-payment of anti-dumping duties (circumventing practice) is precisely the
avoidance of anti-dumping measures.
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