RESTRICTED
WORLD TRADE G/ADP/IG/W/7
22April 1998
ORGANIZATION(98-1642)
Original: English Committee onAnti-Dumping Practices
Informal Group onAnti-Circumvention
TOPIC 1-WHAT CONSTITUTES CIRCUMVENTION?
Paper bytheUnited States
Thefollowing communication wasreceived on21April 1998 from thePermanent Mission
oftheUnited States.
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1. Introduction
Summary oftheOctober 1997 Meeting
Pursuant totheMinisterial Decision attheconclusion oftheUruguay Round, theInformal
Group onAnti-Circumvention wasestablished bytheCommittee onAnti-Dumping Practices toseek
uniform rulesonanti-circumvention. Atthefirstmeeting oftheInformal Group onAnti-Circumvention,
inOctober 1997, submissions were received from fiveMembers. Those submissions, onthetopic
ofwhatconstitutes circumvention, formed thebasis forthediscussion inthegroup.
Thepaper submitted bytheEuropean Union presented whatitconsiders tobeobvious examples
ofcircumvention. Thedelegation oftheEuropean Union, initsoralremarks, noted thatitisdifficult
todefine precisely whatconstitutes circumvention orevasion ofananti-dumping dutyorder, andthus
thesubject canbestbeapproached, asintheirpaper, byproviding examples ofcircumvention. They
urged thatapragmatic approach betaken infulfilling themandate oftheMinisterial Decision toreach
uniform rules onthesubject.
Thepaper submitted bytheUnited States alsopresented examples ofwhatitconsiders tobe
clear-cut cases ofcircumvention. Inoralremarks, theUnited States delegation agreed withtheremarks
made bytheEuropean Union andstated thatwithout meaningful rules dealing withcircumvention,
anti-dumping orders would frequently bemade meaningless. Thedelegation alsodiscussed theexamples
provided andurged agreement thatthese obvious examples doconstitute circumvention, topermit the
group tomove ontoamore detailed discussion ofexactly whatcircumvention isandisnot.
Thepaper submitted byCanada discussed anumber offactors which itconsiders critical in
determining whether circumvention exists. TheCanadian delegation noted thattheissue isavery
complex one,andstated thatcircumvention canbegin asearlyasthetimeofinitiation ofananti-dumping
investigation. Thedelegation alsostated thatcircumvention would notexistiftheindustry injured
bythenewly imported product weredifferent fromtheindustry determined tobeinjured intheoriginal
investigation.
Thepaper submitted byJapan tooktheviewthatsince anti-dumping measures areaspecific
exception tothefreetrade principles oftheWTO, theymust beconstrued narrowly. Assuch,G/ADP/IG/W/7
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anti-circumvention measure areinconsistent withexisting WTO rules. TheJapanese delegation stated
thatonlyfraudulent activity byexporters andimporters properly could beconsidered ascircumvention,
andsince suchactivities areproperly dealtwithunder existing rules, nonewrules areneeded.
ThepapersubmittedbytheASEANcountriesnotedthattheincreasingglobalizationofproduction
hasgiven risetochanges intheproduction andsourcing ofproducts thatshould notbemistaken for
circumvention. They suggested thatcircumvention could notbedetermined toexistintheabsence
ofaverycomprehensive examination ofthesituation.
Infurther discussion atthemeeting Japan inparticular expressed theviewthatthere cannot
beaWTO-consistentanti-circumventionactionevenintheextremeexamplescitedinthepaperssubmitted
bytheEuropean Union andtheUnited States. TheEuropean Union andUnited States delegations
disagreedwiththisposition,repeatingthatwithoutmeaningfulanti-circumventionmeasures,anti-dumping
orders would become empty shells. These delegations stated thattheJapanese position amounts to
anassertion thatvalid, properly entered anti-dumping orders cannot beenforced. TheEuropean Union
andtheUnited States added thattheirviewdoesnotmean thatanti-circumvention measures canor
should beusedtoexpand theeffective coverage oforders, butonlytopreserve theintegrity ofexisting
orders. Further, theystated, anti-circumvention measures arenotintended to,andshould not,affect
legitimate economic activity which isjustified byconsiderations otherthanevading anti-dumping duties.
AllMembers agreed thattheincreasing globalization ofbusiness hasintroduced anewdynamic
intothequestion ofcircumvention ofanti-dumping dutyorders. Andmany Members made constructive
comments, totheeffect thatanti-circumvention measures werenecessary, atleastinsome situations,
while expressing concerns about thestandards andscope ofsuchmeasures. Most Members alsoagreed
thatcircumvention isanimportant andcomplex subject which willrequire much thought andstudy,
andthatreaching agreement onspecific rules orguidelines foranti-circumvention measures willbe
alonganddifficult process. Nonetheless, thereappeared tobeageneral consensus thatitwasimportant
andworthwhile tomove forward with efforts toreach agreement onexactly what constitutes
circumvention.
2. What Constitutes Circumvention?
Initssubmission fortheOctober 1997 meeting (G/ADP/IG/W/2, 8October 1997), the
United States setforth three specific examples ofwhat itconsiders tobeobvious instances of
circumvention. Itishoped thatabetter understanding ofwhatdoesconstitute circumvention willbe
gained byexplaining justwhyeachoftheseexamples constitutes circumvention. These threeexamples
were:1
After ananti-dumping dutyorcountervailing dutyorder wasissued on99percentpurenickel,
0.5percentsilver wasadded totheproduct bythesame producers intheexporting country, andsold
under theoriginal contracts, atverysimilar prices andvolumes, tothesamecustomers intheimporting
country, andforsimilar purposes. Thevolume of99percentpurenickel solddropped tozero.
After ananti-dumping dutyorcountervailing dutyorder wasplaced onhinges, thefewessential
partsofhinges, produced bytheoriginal hinge producers intheexporting country, wereshipped, either
toathirdcountry ortheimporting country, foranextremely simple andfastassembly process. The
finished hinges weresoldtothesamecustomers intheimporting country, atsimilar prices andvolumes,
andunder thesame contracts andforsimilar uses, asbefore theorders were putinplace.
1Only abrief description ofeachexample ispresented here. Reference should bemade totheOctober submission for
amore complete description.G/ADP/IG/W/7
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After animporting country places ananti-dumping orcountervailing dutyorder onsaltfrom
anexporting country, thesalt,described intheorder asingranular form, iscombined withwater and
exported asasaline syrup. Other thanthat,itissoldbythesame producers tothesame customers
intheimporting country, atsimilar prices andvolumes andunder thesame contracts andforsimilar
uses.
Thethree examples intentionally areextreme innature, andthehypothetical facts, aswellas
elements which arecommon toallthree, arenotmeant tobelimitations onwhat constitutes
circumvention oronwhatmaybetherange ofcriteria appropriate foridentifying circumvention. Other
circumstances alsowould constitute circumvention, butitwould notbeproductive tomove tothemore
difficult taskofsetting boundaries before agreeing onsome basic principles. Asweproceed inthis
group togainabetter understanding ofcircumvention, other relevant examples andcriteria verylikely
willbeidentified, discussed, and,hopefully, agreed upon.
Turning tothethree examples inquestion, allhaveanumber offactors incommon: (1)Each
example involves aninconsequential change ineither theproduct ortheproduction process. Changes
intheproduct, orinthemanner ofitsproduction, weremade afterissuance oftheorder. Thephysical
changes inexamples (a)and(c)wereinsubstantial anddidnotchange thenature oftheproduct inany
meaningful wayoraffect theusestowhich itcould beput.Similarly, theassembly operation in(b)
wasinsignificant interms oftheresources, labour, materials, andinvestment needed toconvert the
partstoafinished product. (2)Ineachexample, thechanges weremade bytheproducers oftheoriginal
product intheexporting country, orcompanies related tothem. (3)Theresulting products weresold
tothesame customers intheimporting country, forthesame purposes, andunder thesame contracts,
withprices andsalesvolumes similar tothose oftheoriginal product priortotheinvestigation. These
factors support theconclusion thatineachinstance ananti-dumping orcountervailing dutyorder is
being evaded byparties covered bytheorder through aminor change inpractice. Additionally, the
riseinsalesofthe“new”product closely paralleled thedecrease insalesoftheoriginal product. This
additional consideration oftrade trends canbeveryinformative, demonstrating movement toevade
orders. Inallcases, thejudgment about circumvention must bebased upon objective, factual, and
verifiable elements, from which conclusions, onewayoranother, canbedrawn.
Anyconclusion thattheclear-cut examples useddonotrepresent circumvention is,intheview
oftheUnited States, adenial thatcircumvention potentially canexist. TheUnited States hasnotyet
received anexplanation ofwhytheclear, straightforward circumstances setforth inthese examples
would notconstitute circumvention. Totheextent thatsome Members haveargued thatonlyfraud
constitutes circumvention, theUnited States doesnotagree withthatview. Even iftheintentional
misrepresentation ofthenature ororigin ofaproduct canbeconsidered arather extreme form of
circumvention, suchanactisbetter viewed ascustoms fraud, andcustoms fraud iseffectively and
severely dealtwithunder thelawsofmost, ifnotall,countries, often under criminal statutes. The
United States certainly isnotsuggesting thatother forms ofcircumventing ananti-dumping measure
should becriminal offenses. However, todenythatactswhich maynotconstitute fraud cananddo
havetheeffect ofcircumventing anti-dumping orders istobelieeconomic reality.
TheUnited States alsodisagrees withtheviewthatcircumvention canbefound onlyaftera
newinvestigation ofdumping, causation, andinjury. Such aview would serve tonullify Member
countries ’ability toenforce anti-dumping measures. Asoneobvious example, when achange inthe
physical nature orproduction process ofaproduct issoinsignificant thatitisvalid toconclude that
itisessentially thesameproduct found tohavebeendumped andcaused orthreatened injury, torequire
acompletely newinvestigation would onlyserve toundermine thelegitimate purposes ofanti-dumping
laws.G/ADP/IG/W/7
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TheUnited States considers thattheviewpoints expressed byJapan effectively denythepotential
existence ofcircumvention asaseparate phenomenon, which doesnot,inourexperience, reflect reality.
Denying thepotential existence ofcircumvention, evenintheobvious examples given, renders the
efficacy ofanti-dumping orders meaningless andundermines thelegitimacy ofArticle VIofGATT 1994
andtheAgreements which flowfrom it.2
TheUnited States wishes tounderscore thatinurging agreement upon realistic rules for
determining whether circumvention exists, ithasnodesire toinhibit legitimate investment ortocreate
anyunwarranted obstacles totrade. Indeed, weagree withthose whonotethatchanges inproduction
anddistribution havecreated neweconomic realities thatbenefit usall.Oneofthose realities, however,
istheeasewithwhich itoften ispossible tocircumvent anti-dumping orders.
Byworking together wecanreach agreement onthenature ofthisproblem andhowbestto
address it.Such aneffort willhelpensure thatlegitimate trade isnotburdened needlessly, thatthe
criteriafordeterminingtheexistenceofcircumventionarereasonableandrealistic,andthatanti-dumping
andcountervailing dutyorders areallowed tohavetheeffect envisioned byGATT 1994andtheWTO
Agreements.
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2Apart from thefewinstances noted, noattempt hasbeenmade inthispaper toexpress agreement ordisagreement with
themany thoughts andsuggestions ofother Members made inearlier papers orattheOctober 1997 meeting.