WORLD TRADE
ORGANIZATIONTN/RL/W/134
14 July 2003
(03-3800)
Negotiating Group on Rules Original:  English
REPLY FROM CANADA TO QUESTIONS POSED BY THE
UNITED STATES IN TN/RL/W/103
The following communication, dated 11 July 2003, has been received from the Permanent
Mission of Canada.
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Q1.  Like Product - Canada suggests clarifying the definition of domestic like product “to
limit the scope of product types that can be considered as a single ‘like product”.  Canada states
that “[t]his would help reduce the instances where products are grouped together and treated as
the same product when they, in fact, compet e in different markets”.  When referring to
competing in “different markets,” how does Canada define the term “market”?
Reply
In its paper, Canada advanced the view that, in certain cases, the marketplace might
demonstrate that products that were grouped together in the product definition based on their physical
characteristics, in reality compete in different markets and, as such, should not be considered as a
single "like product" for purposes of an investigation.  
The issue of “likeness” has traditionally been based on the physical characteristics and
properties of products.  The particular physical characteristics and properties of a product will also
have a bearing on the market in which it competes.  In this context, “market” generally refers to the
predominant end use of a product.
Q2.  ADA/ASCM Harmonization - Canada observes that there are numerous divergences
between similar provisions of the AD and SCM Agreements and proposes addressing those
divergences in these negotiations so that, wh ere appropriate, differences between similar
provisions of the two Agreements are eliminated.  Would Canada please provide examples of
divergences between similar provisions that it believes are appropriate for elimination, as wellas examples of divergences between similar provisions that it believes are not appropriate for
elimination?
Reply
Given that investigations often include both anti-dumping and countervail elements, and that
both the Anti-Dumping Agreement (the “AD Agreement”) and Part V of the Agreement on Subsidies
and Countervailing Measures (the “Subsidies Agreement”) trace their genesis to Article VI of the
GATT, Canada believes that divergences between the two Agreements should be eliminated to the
extent possible, provided that the intent and purpose of the provisions in question are not
compromised in the process.  By way of example, Article 19.2 of the Subsidies Agreement, which
provides expedited reviews for any exporter that was not actually investigated, diverges fromTN/RL/W/134
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Article 9.5 of the AD Agreement, which restricts expedited reviews to new shippers.  Similarly,
Article 5.8 of the AD Agreement, which provides for a numerical negligible volume threshold,
diverges from Article 11.9 of the Subsidies Agreement, which does not.  Canada believes that such
divergences should be examined with a view to determining whether greater convergence is possible.
Q3.  Public Interest and Competition Policies - Canada proposes that efforts to improve the
AD Agreement should include an examination of the unintended effects of anti-dumping
actions, and efforts to strengthen existing provisions of the Agreement so as to fully consider the
consequences of anti-dumping duties for broader economic, trade and competition policy
concerns.  Does Canada believe that existing provisions of the Agreement prohibit the
consideration of such issues, and if so, which provisions?
Reply
The existing provisions of the AD Agreement do not prohibit the consideration of public
interest and broader economic policy concerns when taking an anti-dumping action.  Canada would
like consideration to be given to strengthening the provisions of the Agreement to require that
Members provide an opportunity for taking into account public interest concerns during their anti-
dumping process.
Q4.  Initiation Standards - To what extent would Canada’s suggestions require an extension
of the time between filing of the application and initiation, and of the overall time for
completing anti-dumping investigations?  What  is meant by an  “objective” assessment of
industry support, and how does this differ from the general requirement of Article 17.6(i) that
an evaluation of facts be unbiased and objective?
Reply
Canada’s suggestions would not require an extension of the time between filing an application
and initiation, or of the overall time for completing an anti-dumping investigation.  Canada believes
that its initiation proposal can be accommodated within existing investigation timelines.
The proposed obligation to conduct an “objective assessment” of industry support in order to
ensure that the required level of support is properly established, would be imposed on theinvestigating authorities of a Member.  In this regard, the Canadian proposal is in the same vein as
Article 3.1 of the AD Agreement, which imposes an obligation upon the investigating authority to
conduct an “objective examination” in respect of injury factors.  By contrast, the obligation in
Article 17.6(i) of the AD Agreement to determine whether the evaluation of facts determined to have
been properly established, was unbiased and objective, is directed at dispute settlement panels.
The “objective assessment” obligation proposed by Canada would require the investigating
authority to impartially assess the actual level of industry support for an application.  In Canada’s
view, the objectivity of an assessment is compromised when, for example, a Member at any time
provides domestic producers with a financial incentive to support an application, or its investigatingauthority encourages support for an application.
Q5. Explanation of Determinations and Decisi ons - The United States strongly agrees that
sufficient explanations are a key protection provided by the Anti-Dumping Agreement.  Are
there any steps, other than ch allenging insufficient explanations through dispute resolution,
which Members could take to encourage more co mplete explanations?  With respect to this
issue, does Canada suggest pursuing better explanations of general policy decisions, such as
decisions made when regulations are adopted, in ad dition to better explanations of case-specific
decisions?TN/RL/W/134
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Reply
Canada believes that providing investigating authorities with more precise guidance on the
informational requirements of Article 12  of the AD Agreement, should result in more thorough
explanations of determinations and a reduced need to invoke dispute settlement procedures.  In terms
of steps short  of WTO dispute settlement, an insufficient explanation of administrative determinations
could certainly be subject  to domestic judicial review under the laws of Canada and (as we understand
it) the United States, among others.  This is consistent with the judicial review requirements of
Articles 13 and 23 of the AD Agreement and Subsid ies Agreement, respectively.  Canada would, of
course, be willing to discuss proposals from other Members to render the procedures under the AD
Agreement and Subsidies Agreement more open and tr ansparent.  Canada would also be willing to
examine other proposals concerning the information reporting requirements under the Agreements
that might benefit from clarification and improvem ent, such as the requirements to inform the
appropriate committee of a Member’s domestic procedures governing the initiation and conduct of
investigations under the Agreements.
 Q6.  Profitability Test - Is Canada proposing that, in addition to determining whether sales
are made below cost of production, authorities also be required to determine why such sales
were made below cost in the particular indust ry under investigation?  What would be the goal
of such a subjective determination?
Reply
The basic principle underlying Article 2.2.1 of the AD Agreement is that sales in the domestic
market must be made in the ordinary course of trade in order to be taken into account for dumping
determinations.  The Agreement currently recogniz es that some sales below cost should not be
excluded from dumping determinations.  Canada is not proposing that the authorities be required to
determine why sales below cost were made.  Rather we are proposing that Members examine whether
the absence of cost recovery within six months or one year, as provided for under the AD Agreement,
is always a good indicator that sales are not in the ordinary course of trade in particular industries.
Q7.  Cost Allocation - Canada proposes that costs should be allocated by value, rather than
volume, when construction of a calculating cost of production is necessary under Article 2.2.1.1.
At the same time, Canada supports basing cost calculations on the records kept by the exporter
or producer.
(a) In the experience of the United States , very few companies allocate costs by
value in their normal records because of the numerous complex issues raised inattempting to do so.  How should authorities address the frequent situation in which a
company's records do not allocate costs by value?  Would a requirement to allocate
costs by value in some situations greatly increase the burden on certain respondents ( e.g.
by requiring respondents to report pricing of products which are not under
investigation)?
(b) If a company itself has determined that it is too complex to allocate costs by
value, could a requirement for authorities to  undertake such an allocation result in
widespread inaccuracies?
(c) Given that cost is calculated under Article 2.2.1.1 as a benchmark against which
to measure whether home market prices are in the ordinary course of trade, how would
Canada ensure that using those very prices  to calculate the costs against which the
prices will be measured is not inherently distortive?TN/RL/W/134
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Reply
Canada would like to emphasize that its proposal concerning value-based allocations relates
only to those industries that are characterized by joint production, for example, chemicals, lumber,canneries, meat-packing and petro-chemicals.  Canada is not proposing to use a value-based approach
exclusively, but rather feels that guidance on the use of such an approach in appropriate circumstances
would be beneficial.
With respect to the issues raised by the United  States in their question, Canada recognizes that
very few companies allocate costs by value in their normal records.  By the same token however, very
few companies keep records in the format in which they must be submitted to anti-dumpingauthorities in the course of an investigation.  As an example, most investigations do not cover the full
range of products produced by a company and, while normal records reflect the operations of the
company as a whole, investigating authorities are in terested in the costs associated with the specific
products that are being investigated.  In many cases this distinction necessitates the allocation of costs
to the products at issue.  In our view, the allocat ion methodology used should be that methodology
that best reflects the cost structure of the products involved, whether this is based on sales or
production volume, direct material, direct labour, sales value or some other appropriate allocation
basis.
Canada acknowledges that such an approach may increase the burden on certain respondents.
Canada would note, however, that if the respondent believes that a value-based allocation
methodology best reflects the true production costs of the products, then the respondent would likely
not see the methodology as an increased burden.
Q8.  Lesser Duty - Canada states the view that “before we consider wider application of
lesser duty, as proposed by some members, the group should consider ways to provide
appropriate methodologies for the calculation of  a duty that is less than the full margin of
dumping but which is adequate to remove the injury to the domestic industry.”  Does Canada’s
suggestion also include procedural methodologies, to ensure that lesser duty is not used as an
arbitrary, discriminatory or political tool, and that all parties have a full opportunity to defend
their interests?
Reply
Yes, Canada’s suggestions concerning the wider application of the lesser duty concept would
include procedural methodologies to address how  and when a lesser duty would be applied, its
calculation, as well as the procedural fairness and transparency of the process.   In Canada’s viewsuch methodologies must be sufficiently detailed to ensure that parties have a full opportunity to
defend their interests and that the lesser duty concept is not used in an arbitrary or discriminatory
manner.
Q9.  Codifying Decisions - Does Canada have in mind some sort of objective test for
determining, in a non-arbitrary manner, which panel and Appellate Body decisions are
appropriate for incorporation into the AD and SCM Agreements?
Reply
The appropriateness of codification would have to be determined on a case-by-case basis by
Members.TN/RL/W/134
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Q10.  Initiation Standards - Canada specifically proposes a swift dispute settlement procedure
for initiations, “ under the Understanding on the Settlement of Disputes ”.  By this language, is
Canada proposing a mechanism, which would apply to investigations other than AD and CVD
investigations?
Reply
The swift dispute settlement procedure that Canada is proposing is intended to be applicable
for the adjudication of claims of violation relating to the initiation of anti-dumping and countervail
investigations.  In the appropriate forums, Canada would be willing to consider other proposals for
swift dispute settlement procedures for other investigations under the WTO agreements.
Q11.  De Minimis  Margin of Dumping - In Canada’s view, on what basis should Members
assess whether changes are needed to the de minimis  threshold?  In Canada’s view, should any
such change be made applicable to all Members?
Reply
Canada has not proposed changing the de minimis  threshold, but notes that a number of
Members have made such a proposal. It is Canada’s position that the rationale upon which any
proposed change would be made, must be clea rly explained.  As stated in TN/RL/W/47 and
TN/RL/W/92, Canada is of the view that any change in  de minimis  levels which may be agreed to by
the Members, must be applicable to all Members.
Q12.  Duty Imposition - In discussing the relative merits of imposing duties on a retrospective
or prospective basis, should Members cons ider the relative accuracy of assessment
methodologies vis-a-vis each entry of merchandise?
Reply
Because the amount of anti-dumping duty cannot exceed the margin of dumping, any system
used for the assessment of anti-dumping duties must be as accurate as reasonably possible.  At the
same time, any such system should minimize uncertainty for importers/exporters as to final duty
liability, which itself can have a chilling effect on trade.  Canada does not view accuracy and businesscertainty as mutually exclusive duty assessment objectives.
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