RESTRICTEDWORLD TRADE
ORGANIZATIONG/ADP/IG/W/14
27 October 1998
(98-4189)
Committee on Anti-Dumping Practices
Informal Group on Anti-CircumventionOriginal:  English
TOPIC 1 – WHAT CONSTITUTES CIRCUMVENTION?
Paper by the United States
The following communication was received on 26 October 1998 from the Permanent Mission
of the United States.
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INTRODUCTION
This paper responds to questions submitted by Hong Kong, China to the United States at the
April 1998 meeting concerning the three hypothetical examples of circumvention described in our
8 October 1997 paper (G/ADP/IG/W/2) and to comments on those same hypothetical examples
submitted by Japan in its paper on anti-circumvention for the second meeting of the informal group.
To make review of these issues easier, we have repeated in this paper both our hypothetical examples
and the questions and comments of  Hong Kong, China and Japan.
NICKEL / NICKEL ALLOY
Hypothetical example.  An importing country places an antidumping measure on
nickel (the element) from an exporting country.  The product description in the
measure defines nickel as consisting of at least 99 per cent pure nickel (which is the
industry standard).  The measure covers shipments from the exporting country that
have averaged 100 tons per year over the last few years.  The exporting country
responds to the measure by adding a small amount of silver to the nickel during itsproduction process, so that the resulting metal is 98.5 per cent pure nickel, 0.5 per
cent silver, and 1 per cent normal impurities.  Exports of industry-standard nickel
from the exporting country immediately drop to zero and are replaced by 100 tons per
year of the new alloy, which is made by the same producers in the exporting country
and sold, under the original nickel contracts, at prices and volumes so similar as toreinforce the notion that these are the same goods, sold to the same customers, for
similar purposes as the previously-exported nickel.
Question from Hong Kong, China.  Would the addition of silver have any impact on the
cost and the value of the alloy?
Response.  Presumably, the addition of the silver would raise the cost of the alloy slightly.
Any effect on value likely would be insignificant, because the new alloy is sold to the same customers
as before for similar purposes.G/ADP/IG/W/14
Page 2
Question from Hong Kong, China.   Would the new alloy carry different physical
characteristics and have different end-uses?  What criteria should be used to decide whether the new
alloy is actually a new product or not?
Response.  The only different physical characteristic of the new alloy is the additional silver.
The imported metal has the same uses as 99 per cent pure nickel.  The second question is not entirelyclear.  The “new” alloy is new because it was not produced prior to the A-D investigation.
Question from Hong Kong, China.   If nickel alloy and nickel are later ruled to be the same
product, why has the alloy not been included in the or iginal A-D petition and A-D order?   If the alloy
is later found to be a different product, what would be the justification for its inclusion in the original
A-D order?
Response.   The nickel alloy is not exactly the same as the original subject merchandise, but is
nearly identical.  With regard to why the new alloy was not included in the petition, the answer
presumably is that the petitioners simply did not anticipate that the exporters would modify nickel in
this way.  However, why the petitioners did not include marginally different alloys in their petition is
not necessarily relevant to the question of circumvention.  The justification for including the nickelalloy under the order is that it is a very similar product that has been substituted for the nickel exports
originally covered by the order, so as to render the order ineffective as relief from dumping.
Comment from Japan.   A product with 98.5 per cent nickel may, or may not be similar to a
product with 99 per cent nickel.  This is a factual determination which depends on factors such aswhether the 98.5 per cent nickel can be used interchangeably with the 99 per cent nickel.  In a case
where two products are similar, it is always possible to define the product coverage precisely to
include products with minor alterations in the original investigation.
Response.  Our hypothetical example was based on the assumption that the difference
between 99 per cent pure nickel and the new alloy consisting of 98.5 per cent nickel and 0.5 per cent
silver was minor.  If it is not clear that this is a minor difference, we would be willing to modify the
hypothetical example to involve 99 per cent pure nickel and a new alloy of 98.99 per cent pure nickel
and 0.01 per cent silver. That the old and new products are interchangeable is clear from the fact that
the new products are being sold to the same customers for the same use.  We recognize that not allnew products would have only minor differences from the products originally covered by the order.
We do not agree that it is always possible to define the scope of an order precisely to include
all possible minor variations that should be covere d.  New variations can always be devised.  For
example, if the original A-D order had applied to 98.5 per cent pure nickel, it would have been
possible to evade the order by producing nickel that was 98.49 per cent pure.  If the original A-D
order had applied to nickel that was 98 per cent pur e, it would have been possible to evade the order
by producing nickel that was 97.99 per cent pure, and so on.
Comment from Japan.  In fact, 98.5 per cent nickel and 99 per cent nickel (less than 1.5 per
cent cobalt) are classified in different HS lines, regardless of small purity difference.  99 per cent
nickel is necessary to make stainless steel, while 98.5 per cent nickel is mainly used as valve.Separate dumping investigations are necessary in this case.
Response.  The fact that 98.5 per cent nickel and 99 per cent nickel are classified in different
HS lines is not relevant to the issue of circumvention.  The statement that 98.5 per cent nickel is
mainly used as valve appears to assume that the impurity is cobalt, or some other substance thatwould not be suitable for the production of stainless steel.  It would be an easy matter, however, for
the nickel producer to make nickel that was 99 per cent pure and then add 0.5 per cent steel.  This
98.5 nickel / 0.5 per cent steel might be perfectly suitable for making stainless steel - the onlyG/ADP/IG/W/14
Page 3
difference would be that a bit more of it would be required in order to achieve the same proportion of
nickel in the final alloy.
Comment from Japan.   If a Member expands the scope of definition of a product by
conducting anti-circumvention measures well after an original injury determination, it means that the
injury determination was based on incomplete information regarding imports and domestic productionof the product of expanded definition.  Such initial decision based on incomplete information would
be inconsistent with the provisions of Article 3 of the Anti-Dumping Agreement.
Response.  An anticircumvention finding on the new alloy would not extend the protection of
the order.   It simply would ensure that the order covered what, from a practical commercial point of
view, was essentially the same flow of exports.  These exports injure the same industry as the original
exports.  The original injury determination was based on all of the information that was available atthe time it was made.
ASSEMBLED / UNASSEMBLED HINGES
Hypothetical example.   An importing country places an antidumping measure on
hinges from an exporting country.  The product description in the measure describes
complete hinges, which are what the exporting country has been exporting.  The
exporting country responds by shipping the two hinge halves and pin separately to the
importing country, or a third country, where they are assembled in a matter of
minutes and sold in the importing country.  The hinge components are manufacturedby the same producers in the exporting country and sold at prices and volumes so
similar as to reinforce the notion that these are the same goods, sold to the same
customers in the importing country, under the original hinge contracts, for similar
uses as before the antidumping or countervailing duty measure.
Question from Hong Kong, China.  Do the shipments of hinge halves and pins into the
importing country fall within the scope of General Rule 2(a) of the Harmonized System?
1
Response.   Whether the shipments fall within the scope of General Rule 2(a) of the
Harmonized System is not necessarily dispositive of the issue of circumvention.  The productdescription in the order in the hypothetical example is not based on the harmonized system, so that the
result under the harmonized system would not necessarily govern the outcome of the
anticircumvention inquiry.
Question from Hong Kong, China.  Are the hinge halves and pins necessarily sold at
dumped prices?
Response.   No.  As a practical matter, there are two possibilities.  In a constructed export
price situation, the assembly would be performed by a related importer in the United States before the
sale to the US customer.  In this case, the sale would be of complete hinges, presumably for the same
price as before.  The only difference would be that final assembly would occur after, rather than
before, importation.  In an export price situation, the sale would be of the hinge components.  In thatcase, the price charged to the US customer presumably would be reduced by the cost of assembling
                                                     
1 General Rule 2(a) of the Harmonized System states that: “Any reference in a heading to an article
shall be taken to include a reference to that article inco mplete or unfinished, provided that, as presented, the
incomplete or unfinished article has the essential character  of the complete or finished article.  It shall also be
taken to include a reference to that article complete or fini shed (or failing to be classified as complete or finished
by virtue of this Rule), presented unassembled or disassembled.”G/ADP/IG/W/14
Page 4
the hinges.  The components might not be sold at  dumped prices.  A finding of circumvention does
not mean that the imports are dumped.  It simply means that the imports are subject to the A-D order.
Annual administrative reviews of sales subject to the order determine whether dumping has occurred.
Question from Hong Kong, China.   Does the assembly of the hinges merely constitute a
marginal alteration?
Response .  We are not certain exactly what is meant by “marginal alteration.”  However, the
hypothetical example is based on the premise that the additional assembly is insignificant from a
commercial point of view.
Question from Hong Kong, China.   Are the finished products assembled in a third country
necessarily sold at dumped prices?  Would the assembly operation carried out in the third countryaffect the costs of production?
Response.   As noted above, there is no necessary connection between a finding of
circumvention and the existence of dumping margin s.  A finding of circumvention simply renders
sales of the imported merchandise subject to potential duties under the order.  Administrative reviewsare conducted to determine whether actual dumping margins exist.  Assembly operations carried out
in either the United States or third countries could affect the cost of production, but would not
necessarily do so.
2
Question from Hong Kong, China.  Is it possible that the producer/exporter find good
business reasons (e.g. comparative advantages) in choosing a separate location for the assembly
operation?  For example, the pins and hinge halves are machine-made, whereas the assembly involves
human labour.  Different places do offer different advantages.
Response .  In our example, the assembly involved is so minor that it is highly unlikely that
there could be any “good business reason” (other than evading dumping duties) for moving the
assembly operation.
Question from Hong Kong, China.   Why hasn’t the description such as “hinges and parts
thereof” been used in the original A-D petition and A-D order?
Response.  There could be a variety of reasons, but the most likely one is that parts of hinges
were not being exported at the time of the investigation.
Comment from Japan.   Given the trend towards globalization of manufacturing, a producer
would shift production process to another country for a variety of commercial reasons unrelated to an
anti-dumping proceeding, including changes in relative labour costs, exchange rate fluctuation, andgrowing sales in a particular region of the world (e .g. the third country now assembles the product).  It
is not considered in the examples whether there were factors, independent of the anti-dumping
proceeding, that may motivate manufacturers to alter the configuration of their global production
operations.
In addition, the second category of examples may tempt Members to “circumvent” procedural
provisions of the Anti-Dumping Agreement.  Where imports of parts increase as an assembly
operations arise, there must be an injury determination with respect to these parts prior to the
                                                     
2 Assuming that the cost of producing the hinges exported to the United States were affected, this
would not necessarily affect the US price .G/ADP/IG/W/14
Page 5
imposition of anti-dumping duties, because the import activity and the “domestic industry” to be
examined for injury purposes, could change drastically.
For example, the stamping industry making parts of steel door hinges, is usually quite
different from industries that assemble, paint and sell finished door hinges.  Parts of steel door hinges
could have an independent, original market from finished door hinges in the importing country.Therefore, there is no reason to presume that the part imports are being dumped, even if finished
products are being dumped.  The dumping inquiry on the parts involves a comparison of the selling
prices in the home market and for export.  The existing provisions in the Anti-dumping Agreement
allow a separate investigation of the part imports.
Response.   As explained above, the premise of the hypothetical example is that the process of
assembling hinges is so simple that there could not be significant cost savings from moving thatprocess to another country.  Also, the hinges in the example are not painted and presumably are sold
by the manufacturer.  To the extent that additional processing (such as painting or finishing) or
assembly operations added substantial additional value to the hinges, a finding of circumvention
arguably could become harder to reach.  In our example, the minor nature of the additional assembly
makes it very unlikely that “independent commercial factors” are the real reason for the shift inproduction.  As explained above, a finding that hinge components were circumventing the order on
hinges would not necessarily mean that those hinge components were being dumped.  It would simply
result in their becoming subject to review under the order.
We acknowledge that it would always be possible to initiate a new investigation against the
circumventing merchandise or components.  Acceptance of a new investigation as the only remedy for
circumvention, however, would ensnare administering authorities in a perpetual shell game in which,
every time they identified the stream of dumped imports and covered it with a new  A-D order, the
exporters would make another slight shift in either production or marketing that would circumvent the
order.  The requirement to file a new petition would also be an unfair burden on the domesticproducers that applied for the A-D measure.  They would be required to start the process all over
again, merely to preserve the effectiveness of a remedy for which they had already established their
entitlement.
SALT / SALINE SYRUP
Hypothetical example.  An importing country places an anti-dumping measure on
salt from an exporting country.  The product description in the measure describes
granular salt, which is what the exporting country has been exporting.  The producer
in the exporting country responds to the measure by combining the salt with water
and exporting it as saline syrup.  The syrup is produced by the same producers in the
exporting country and sold at prices and volumes so similar as to reinforce the notionthat these are the same goods, sold to the same customers in the importing country,
under the same contracts, for similar uses as before the antidumping or countervailing
duty measure.
Question from Hong Kong, China.  Would the combination of salt with water and
subsequent exportation in the form of saline syrup have different production and transportation costs?
Response.   Presumably, both the production and transportation costs would be slightly
higher.
Question from Hong Kong, China.  Why hasn’t the saline syrup been included in the
original A-D petition and A-D order?  Does the inclusion of the saline syrup in the original A-D
investigation make it more difficult to meet the injury test?G/ADP/IG/W/14
Page 6
Response .  The hypothetical example is based on the assumption that there is no commercial
market for saline syrup, so that all of the imported syrup will be dried out and sold in the United
States as salt.  In this case, the syrup would not have been included in the petition because there were
no imports of syrup when the petition was filed, and the means of circumvention was not foreseen.
As very similar substitutes, the syrup imports injure the same industry as the original imports, and
therefore would be covered by the original injury determination.  If there were a separate market forsaline syrup, and the syrup  had been included within the original petition and investigation, that
might or might not have made it  more difficult to prove injury.
Question from Hong Kong, China.  Does it constitute circumvention if the producer
subsequently develops a new  product that is a perfect substitute and exports this instead?
Response.  Probably not, at least if, by “new product,” what is meant is a genuinely new
product with a  commercial logic to exist independent from the dumping order.  For example, if some
new chemical compound were invented that looked and tasted like salt, but did not contribute to high
blood pressure, imports of the new product would not constitute circumvention.  However, if the
allegedly “new” product is simply salt with some minor additive that changes nothing except the
technical product description, imports of that product could constitute circumvention.
Question from Hong Kong, China.   Would saline syrup offer unique features/advantages to
some users simply because of the form it comes in?  [For example, spice in the form of dried herb or
powder; deodorant in spray, liquid-roll-on or solid (sport stick) form; medicine in pill, capsule or
syrup form all serve to meet the needs of different users or the different needs of the same users.]
Response .  Again, the example is based on the premise that there is no market for saline
syrup, so that there is no special advantage to be derived from importing salt in that form.  To the
contrary, saline syrup is presumed to be slightly more expensive, both to buy and to process back into
salt for sale to the original customers.  If there were special advantages to some users from buying salt
in the form of saline syrup, then, presumably, there would have been imports of saline syrup at the
time the petition was filed.
Comment from Japan.   A further processed product, such as saline solution, would often be
different from the inputs, such as salt.  The different uses (e.g., food flavoring versus contact lenssolution), different customers, and different channels of distribution of salt and saline solution confirm
this distinction.  It would violate core provisions of the Antidumping Agreement if the anti-dumping
duties were imposed on saline solution imports without the requisite dumping examination and injury
determination, even after examination and determination on salt.  The existing provisions in the Anti-
Dumping Agreement allow a separate investigation of saline imports.  There is no reason to develop
additional procedures and authority in the Anti-Dumping Agreement for addressing such products.
Response.  This objection is based on the premise that salt and “saline solution” are two
different products sold to different customers for different uses, but that imports of saline solution are
nevertheless found to be circumventing an A-D order on salt.  Quite to the contrary, the hypothetical
example is based on the assumption that there were no imports of saline syrup, and that all of the new
imports of saline syrup are being dehydrated and sold to the same customers for similar uses.
With respect to most of the examples, Hong Kong, China and Japan also ask, in substance, “if
it was necessary to cover the additional product to provide relief from dumping, why was that
additional product not covered to begin with?”  As explained above, this could be for a number of
reasons.  The most obvious one is that the circumventing merchandise could be a new product (or avariation of the old product), which the domestic industry simply did not anticipate when it applied
for relief from the dumped imports.
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