WT/DS141/R
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ANNEX 1-1
FIRST SUBMISSION OF INDIA
(6 March 2000)
CONTENTS
Page
EXECUTIVE SUMMARY .............................................................................................................. ...85
A. DUMPING ISSUES............................................................................................................... ...... 86
B. INJURY AND CAUSALITY ISSUES ........................................................................................ 87C. PROCEDURAL  ISSUES............................................................................................................ .8 8
D. OTHER ISSUES ................................................................................................................. ......... 88
I. INTRODUCTION ................................................................................................................. ................ 88
II. GENERAL FACTUAL BACKGROUND ........................................................................................... 89
1. The measure concerned........................................................................................................ 89
2. History: the first Bed linen proceeding................................................................................ 903. The second Bed linen proceeding ........................................................................................ 914. Dispute settleme nt thus far.................................................................................................. .9 1
III. CLAIMS RELATED TO THE DUMPING DETERMINATION AND
THE EXPLANATION THEREOF...................................................................................................... 92
A. A
RTICLE 2.2.2: DETERMINATION OF SG&A AND PROFIT AMOUNTS .............................................. 92
1. Facts........................................................................................................................ ............. 92
2. The text of Article 2.2.2.................................................................................................... . 120
3. Claims under Article 2.2.2 (Claims 1-6)............................................................................ 122
4. Claim 1:  Inconsistency with Article 2.2.2......................................................................... 122
4.1 The first argument of the first claim relating to Article 2.2.2: while the EC has
applied the calculation method as foreseen in Article 2.2.2(ii), this method wasnot open to it. This method could not be applied since its requirements forapplication were not met ........................................................................................... 122
4.2 The second argument of the first claim relating to Article 2.2.2: even within
the application of Article 2.2.2(ii), the EC has acted inconsistent with the
provision. Instead of using ‘the actual amounts incurred and realised’ byother producers or exporters the EC has used amounts for SG&A and profitsthat were restricted to sales in the  ‘ordinary course of trade’.................................... 127
4.3 The third argument of the first claim relating to Article 2.2.2: By switching the
order of preference contained in Article 2.2.2 the EC has acted inconsistently
with that Article......................................................................................................... 131
5. Claim 2: inconsistency with Article 12.2.1........................................................................ 133
5.1 The text of Article 12.2.1 .......................................................................................... 1335.2 Legal arguments relating to the claims relating to Article 12.2.1.............................. 134
6. Claim 3:  inconsistency with Article 12.2.2....................................................................... 134
6.1 The text of Article 12.2.2 .......................................................................................... 134
6.2 Legal arguments relating to the claims relating to Article 12.2.2.............................. 135
7. Claim 4:  inconsistency with Article 2.2............................................................................ 135WT/DS141/R
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7.1 The text of Articles 2.2 and 2.2.2 .............................................................................. 135
7.2 Legal arguments relating to the claims relating to Article 2.2................................... 136
8. Claim 5:  inconsistency with Article 12.2.1....................................................................... 139
8.1 The text of Article 12.2.1 .......................................................................................... 139
8.2 Legal arguments relating to the claims relating to Article 12.2.1.............................. 139
9. Claim 6:  inconsistency with Article 12.2.2....................................................................... 139
9.1 The text of Article 12.2.2 .......................................................................................... 1399.2 Legal arguments relating to the claims relating to Article 12.2.2.............................. 139
B. C
LAIM 7: A RTICLE 2.4.2: ZEROING OF NEGATIVE DUMPING AMOUNTS ........................................ 140
1. Facts........................................................................................................................ ........... 140
2. The relevant part of the text of article 2.4.2....................................................................... 141
3. Claim relating to Article 2.4.2 ........................................................................................... 141
IV. CLAIMS RELATED TO THE INJURY DETERMINATION AND
THE EXPLANATION THEREOF.................................................................................................... 144
A. A RTICLE 3.1: CONSIDERATION OF OTHER THAN ‘DUMPED IMPORTS ’........................................... 144
1. Facts........................................................................................................................ ........... 144
2. EC practice.................................................................................................................. ....... 159
3. Claims....................................................................................................................... ......... 159
4. Claim 8:  inconsistency with Article 3.1............................................................................ 160
4.1 The text of Article 3.1 ............................................................................................... 1604.2 Legal arguments relating to Article 3.1 claim ........................................................... 161
5. Claim 9: inconsistency with Article 12.2.1........................................................................ 164
5.1 The text of Article 12.2.1 .......................................................................................... 1645.2 Legal arguments relating to the claims relating to Article 12.2.1.............................. 164
6. Claim 10: inconsistency with Article 12.2.2...................................................................... 165
6.1 The text of Article 12.2.2 .......................................................................................... 1656.2 Legal arguments relating to the claims relating to Article 12.2.2.............................. 165
B ARTICLE 3.4: THE EC FAILED TO EVALUATE ALL RELEVANT
ECONOMIC FACTORS AND INDICE S HAVING A BEARING ON THE
STATE OF THE DOMES TIC INDUSTRY ............................................................................. 165
1. Facts........................................................................................................................ ........... 165
2. Claims....................................................................................................................... ......... 170
3. Claim 11: inconsistency with Article 3.4........................................................................... 170
3.1 The text of Article 3.4 ............................................................................................... 170
3.2 Legal arguments relating to the claim relating to Article 3.4. ................................... 171
4. Claim 12: inconsistency with Article 12.2.1...................................................................... 177
4.1 The text of Article 12.2.1 .......................................................................................... 1774.2 Legal arguments relating to the claims relating to Article 12.2.1.............................. 178
5. Claim 13: inconsistency with Article 12.2.2...................................................................... 178
5.1 The text of Article 12.2.2 .......................................................................................... 1785.2 Legal arguments relating to the claims relating to Article 12.2.2.............................. 178
6. Claim 14:  inconsistency with Article 6............................................................................. 179
6.1 The text of Article 6 .................................................................................................. 1796.2 Legal arguments pertaining to Article 6. ................................................................... 179
C. ARTICLE 3.4:  THE EC FAILED TO MAKE A CONSISTENT DETERMINATION OF
THE STATE OF THE 'DOMESTIC INDUSTRY' .................................................................... 1801. Facts........................................................................................................................ ........... 180
2. Claims....................................................................................................................... ......... 196
3. Claim 15:  inconsistency with Article 3.4.......................................................................... 196
3.1 The text of Article 3.4 ............................................................................................... 196
3.2 Legal arguments relating to the claims relating to Article 3.4. ...................... 198
3.2.1 The EC did in fact rely on companies outside the domestic
industry to find injury.................................................................................. 198WT/DS141/R
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3.2.2 The EC, once it selected a sample from among the domestic industry,
was not entitled to subsequently deviate from that sample in order tofind injury ............................................................................................................... 202
3.2.3 The EC has at no point indi cated or made clear why exactly it
relied on which industry level for each injury factor.............................................. 203
4. Claim 16:  Inconsistency with Articles 6.10 and 6.11 ....................................................... 205
4.1 The text of Articles 6.10 and 6.11 ............................................................................. 2054.2 Legal arguments relating to Articles 6.10 and 6.11................................................... 205
5. Claim 17:  inconsistency with Article 12.2.1..................................................................... 206
5.1 The text of Article 12.2.1 .......................................................................................... 206
5.2 Legal arguments relating to the claims relating to Article 12.2.1.............................. 206
6. Claim 18:  inconsistency with Article 12.2.2..................................................................... 207
6.1 The text of Article 12.2.2........................................................................................ 2076.2 Legal arguments relating to the claims relating to Article 12.2.2........................... 207
D. A
RTICLES 3.4 AND 3.5: FOR THE INJURY AND CAUSALITY DETERMINATIONS
THE EC TOOK  INTO ACCOUNT  OTHER THAN “DUMPED IMPORTS ”.............................................. 208
1. Facts........................................................................................................................ ........... 208
2. EC practice.................................................................................................................. ....... 215
3. Claims....................................................................................................................... ......... 216
4. Claim 19:  inconsistency with Article 3.4.......................................................................... 217
4.1 The text of Article 3.4 ............................................................................................... 217
4.2 Legal arguments relating to the claims relating to Article 3.4................................... 218
5. Claim 20:  inconsistency with Article 3.5.......................................................................... 2216. Claim 21:  inconsistency with Article 12.2.1..................................................................... 222
6.1 The text of Article 12.2.1 .......................................................................................... 2226.2 Legal arguments relating to the claims relating to Article 12.2.1.............................. 222
7. Claim 22:  inconsistency with Article 12.2.2..................................................................... 223
7.1 The text of Article 12.2.2 .......................................................................................... 223
7.2 Legal arguments relating to the claims relating to Article 12.2.2.............................. 223
V. CLAIMS RELATING TO  PROCEDURAL ISSUES....................................................................... 225
A. ARTICLE 5.3: THE EC DID NOT EXAMINE THE ALLEGATIONS IN THE
COMPLAINT BEFORE INITIATING THE ANTI-DUMPING PROCEEDING. SUCHEXAMINATION WAS EVEN MORE IMPORTANT IN THE LIGHT OF EXISTING
COUNTER-EVIDENCE............................................................................................................ 225
1. Facts........................................................................................................................ ........... 225
2. Claims....................................................................................................................... ......... 233
3. Claim 23:  inconsistency with Article 5.3.......................................................................... 234
3.1 The text of Article 5.3 ............................................................................................... 234
3.2 Legal arguments relating to the claims relating to Article 5.3................................... 235
4. Claim 24:  inconsistency with Article 12.2.1..................................................................... 237
4.1 The text of Article 12.2.1 .......................................................................................... 2374.2 Legal arguments relating to the claims relating to Article 12.2.1.............................. 239
5. Claim 25:  inconsistency with Article 12.2.2..................................................................... 240
5.1 The text of Article 12.2.2 .......................................................................................... 240
5.2 Legal arguments relating to the claims relating to Article 12.2.2.............................. 240
B. A
RTICLE 5.4: THE INVESTIGATING AUTHORITIES FAILED TO MAKE A STANDING
DETERMINATION IN CONFORMITY WITH ARTICLE 5.4.................................................................. 240
1. Facts........................................................................................................................ ........... 240
2. Commission practice.......................................................................................................... 251
3. Claims....................................................................................................................... ......... 252
4. Claim 26:  inconsistency with Article 5.4.......................................................................... 252
4.1 The text of Article 5.4 ............................................................................................... 2524.2 Legal arguments relating to the claims relating to Article 5.4................................... 256
5. Claim 27:  inconsistency with Article 12.2.1..................................................................... 259WT/DS141/R
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5.1 The text of Article 12.2.1 .......................................................................................... 259
5.2 Legal arguments relating to the claims relating to Article 12.2.1.............................. 260
6. Claim 28: inconsistency with Article 12.2.2...................................................................... 261
6.1 The text of Article 12.2.2 .......................................................................................... 261
6.2 Legal arguments relating to the claims relating to Article 12.2.2.............................. 261
VI. CLAIMS RELATING TO INDIA’S STAT US AS A DEVELOPING COUNTRY....................... 261
A. ARTICLE 15:  THE INVESTIGATING AUTHORITIES FAILED TO CONSIDER POSSIBILITIES OF
CONSTRUCTIVE REMEDY EVEN THOUGH INDIAN EXPORTERS HAD STRESSED THEIMPORTANCE  OF THE BED LINEN INDUSTRY TO INDIA
................................................................. 261
1. Facts........................................................................................................................ ........... 262
2. Claims....................................................................................................................... ......... 264
3. Claim 29:  inconsistency with Article 15........................................................................... 264
3.1 The text of Article 15 ................................................................................................ 2643.2 Legal arguments relating to the claims relating to Article 15.................................... 266
3.2.1The alleged special treatment granted by the EC.............................................. 2663.2.2The EC's obligations under Article 15 in the Bed Linen II proceeding ............ 270
4. Claim 30:  inconsistency with Article 12.2.1..................................................................... 271
4.1 The text of Article 12.2.1 .......................................................................................... 2714.2 Legal arguments relating to the claims relating to Article 12.2.1.............................. 272
5. Claim 31:  inconsistency with Article 12.2.2..................................................................... 272
5.1 The text of Article 12.2.2 .......................................................................................... 272
5.2 Legal arguments relating to the claims relating to Article 12.2.2.............................. 272
VII. CONCLUSIONS AND REQUESTS .................................................................................................. 2 72
A. CONCLUSIONS.................................................................................................................. ...... 272
B. REQUESTS..................................................................................................................... ........... 273WT/DS141/R
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LIST OF ANNEXES
1. Council Regulation (EC) No 384/96 on protecti on against dumped imports from countries not
members of the European Community
2. Notice of initiation of the Bed linen I anti-dumping proceeding
3. Non-Confidential Complaint leading to the Bed linen I anti-dumping proceeding
4. Evidence on co-operation by Indian exporters in the Bed linen I anti-dumping proceeding
5. Decision terminating the Bed linen I proceeding
6. Non-Confidential Complaint leading to the Bed linen II anti-dumping proceeding
7. Notice of initiation of the Bed linen II anti-dumping proceeding
8. Commission Regulation (EC) No 1069/97 of 12 June 1997 imposing a provisional anti-
dumping duty on imports of cotton-type bed linen originating in Egypt, India and Pakistan
9. Council Regulation (EC) No 2398/97 of 28 November 1997 imposing a definitive anti-
dumping duty on imports of cotton-type bed linen originating in Egypt, India and Pakistan
10. List of questions raised by Indi a during the consultations with the EC
11. Verbatim report drafted by the Indian delegation during the first round of consultations held 
on 18 September 1998
12. Letter from the EC of 1 October 1998 containing some answers to the questions raised by 
India
13. Verbatim report drafted by the Indian delegation during the second round of consultations
held on 15 April 1999
14. Letter from the EC of 29 June 1999 containing  some further answers to the questions raised
by India
15. Letter from the European Commission (reference 059462) of 13 September 199616. Letter of 26 September 1996 (reference 17277) from the legal representatives of Texprocil to 
the European Commission concerning the selection of the sample
17. Letter of 27 September 1996 (reference 17289) from the legal representatives of Texprocil to 
the European Commission concerning the selection of the sample
18. Letter of 30 September 1996 (reference 17342) from Texprocil’s legal representatives to the
European Commission with further information regarding the sample selection
19. Letter of 8 October 1996 (reference 60434) from the European Commission to Texprocil’s
legal representatives concerning the selection of the sample
20. Letter of 9 October 1996 (reference 17568) from Texprocil’s legal representatives to the
European Commission concerning Texprocil’s counterproposal for a sample
21. Letter of 10 October 1996 (reference 17611) from Texprocil’s legal representatives to the
European Commission concerning the selection of the sample
22. Letter of 11 October 1996 (reference 60644) from the European Commission to Texprocil’s
legal representatives on the final sample selection
23. Provisional general disclosure document of 2 June 1997 (reference 40038)
24. Company-specific provisional disclosure documents for the sample companies
25. Comments by Anglo-French on the provisional disclosure dated 6 June 199726. Comments by Madhu on the provisional disclosure dated 6 June 1997
27. Comments on behalf of Texprocil on the provisional disclosure dated 6 July 1997
28. Comments on behalf of Anglo-French on the provisional disclosure dated 6 July 1997
29. Comments on behalf of Bombay Dyeing on the provisional disclosure dated 6 July 1997
30. Comments on behalf of Omkar on the provisional disclosure dated 6 July 199731. Comments on behalf of Madhu on the provisional disclosure dated 6 July 1997
32. Comments on behalf of Prakash on the provisional disclosure dated 6 July 1997
33. Definitive disclosure documents for the Indian companies dated 3 October 1997
34. Comments by Anglo-French on the definitive disclosure dated 13 October 1997WT/DS141/R
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35. Comments by and on behalf of Bombay Dyeing on the definitive disclosure dated
13 October 1997
36. Comments by Omkar on the definitive disclosure dated 13 October 1997
37. Comments by Madhu on the definitive disclosure dated 13 October 199738. Comments by Prakash on the definitive disclosure dated 13 October 1997
39. Letter of 17 October 1997 (reference 092847) from the Commission Services to Bombay
Dyeing
40. Letter of 17 October 1997 (reference 092870)  from the European Commission to Prakash’
legal representatives
41. Excerpt from Oxford Concise Dictionary
42. Excerpt from Websters New Collegiate Dictionary
43. Excerpt from Oxford Student’s Dictionary
44. Excerpt from Websters New Collegiate Dictionary
45. Declaration of Standard Industries that it was willing to be sampled, and indicating its
domestic sales
46. Excerpt from the disclosure document for Bombay Dyeing
47. Excerpt from W ebsters dictionary
48. Excerpts from the Concise Oxford dictionary  and from Websters dictionary
49. Disclosure in another proceeding (excerpt)50. Injury submission on behalf of Texprocil
51. Comments on behalf of Texprocil on the general disclosure document (injury, causation and
procedural issues)
52. Excerpts from disclosure documents of the sample companies showing the total amount of
non-dumped exports to the EC
53. Non-confidential summaries of the questionnaire responses of the producers in the EC sample
54. First post-hearing brief dated 13 January 1997, filed on 6 February 1997
55. Second post-hearing brief, dated 17 July 1997
56. Definitive disclosure document dated 3 October 1997
57. Excerpt from Webster's New World Dictionary
58. Letter of 7 January 1997 (reference 050071) from the European Commission to Texprocil’s
legal representatives regarding the non-confidential standing file
59. Non-confidential standing file as per 8 January 1997
60. Comments on behalf of Texprocil on the definitive disclosure document
61. Sheet issued during the consultations detailing the alleged domestic industry
62. Draft Guide on how to draft an anti-dumping complaint  (excerpt)
63. Questionnaire for exporters used in the Bed linen II proceeding64. Questionnaire used by the EC against OECD members
65. Questionnaire used by the EC against Taiwan
66. Questionnaire recently used by the EC against Taiwan
67. Letters of 18 October 1996 (reference 060965) and of 29 October 1996 (reference 061570)
from the European Commission to Giraffe International and Nidhi Exports, respectively
68. Correspondence between Texprocil’s legal representatives and the European Commission
concerning the extension of the deadline for the sample companies in view of the Diwali
festivities in India
69. Excerpt from Webster’s New Collegiate Dictionary , 1975
70. Excerpt from Webster’s II New Riverside Dictionary , 1984
71. Excerpt from The Concise Oxford Dictionary of Current English
72. Relevant correspondence on the possibilities to negotiate an undertaking
73. Examples of standard EC statements on prima facie evidence
74. Examples of statements on the standing determination in other anti-dumping proceedingsWT/DS141/R
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75. Commission Regulation (EC) No 1632/97 ame nding Regulation (EC) No 1023, and excerpt
of Council Regulation (EC) No 2334/97 imposing a definitive anti-dumping duty on certain
imports of flat pallets of wood originating in the Republic of Poland and collecting
definitively the provisional duty imposed
76. Council Regulation (EC) No 1890/97 imposing a definitive anti-dumping duty on imports of
farmed Atlantic salmon originating in Norway (excerpt)
77. Documents from the Unbleached cotton fabrics II proceeding: the relevant pages from the
amendment to the definitive disclosure document and letter of 14 September 1998 (reference
068909) from the European Commission to Legal Representatives
78. Letter of 7 May 1999 (reference 067167) fr om the European Commission to Legal
Representatives regarding access to the non-confidential file
79. Letter from ATEVAL (Asociacion de impresarios textiles de la Comunidad Valenciana) of
18 September 1996 to Eurocoton alleging ‘non-opposition’ on behalf of six companies
80. Letter of 25 March 1997 from Eurocoton to the European Commission concerning the
‘disappeared’ EC producersWT/DS141/R
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EXECUTIVE SUMMARY
1. On 27 October 1999 the Government of India requested for the second time the establishment
of a panel in the matter concerning the imposition by the EC of definitive anti-dumping duties oncotton-type bed linen from India.  The Panel was constituted on 24 January 2000.  This submission is
the first submission of India to the panel.
2. India believes that the EC, by adopting Council Regulation (EC) No 2398/97 of
28 November 1997 imposing a definitive anti-dumping duty on imports of cotton-type bed linenoriginating in inter alia  India, has in many ways acted inconsistently with the WTO Agreement, and
more specifically with the Anti-Dumping Agreement [hereinafter: “ADA”].  As a result, India’s
benefits accruing under the WTO Agreement have been nullified and/or impaired.
3. The EC did not properly examine the standing of the complainant.  Moreover, the EC failed
to take into account information available to it at  the time of initiation pointing to lack of material
injury caused by dumped imports.  In the determination of dumping an unreasonable profit margin of
over 18 per cent was applied, leading to artificially inflated dumping margins.  The dumping margins
were further inflated through the use of a partial  weighted-average to weighted-average comparison.
In the injury determination, only certain injury factors were examined and discussed.  Furthermore,the EC explicitly determined that the domestic indu stry consisted of 35 companies, but relied in its
injury determination on companies outside this group in order to determine injury.   The EC chose a
sample from the domestic industry, but did not consistently base its injury determination on this
sample.  Rather, the EC chose to rely on different ‘levels’ of industry for different injury indices
without any apparent reason other than goal-oriented ‘picking and choosing’ of injury.  The EC hasfailed to appropriately determine to what extent injuries caused by other factors were responsible for
the injury allegedly suffered by the domestic industry.  Finally, in the imposition of measures, there is
nothing to show which would consider India’s spec ial status as a developing country.  All of the
above deficiencies were criticized during the administrative proceeding, but were never addressed by
the administering authority.  This is not a complete summary of claims, but merely a succinct
overview of some of the most important ones.  The full claims are addressed in detail below.
4. India respectfully requests that the Panel recommend that the EC bring Regulation No
2398/97 of 28 November 1997 imposing a definitive an ti-dumping duty on imports of cotton-type bed
linen originating in, inter alia , India into conformity with the ADA and GATT 1994; and suggest that,
in light of the numerous outcome-decisive violations of the ADA, the EC immediately repeal the
Regulation imposing definitive anti-dumping duties and refund anti-dumping duties paid thus far.
5. For the sake of clarity India’s claims are divided in four parts.  Part III deals with the claims
concerning the dumping margin determination.  Part IV discusses the claims concerning the injury
determination.  Part V elaborates the claims concerning procedural issues.  Last, Part VI contains the
claims relating to India’s status as a developing country.  In addition India raises various claims underArticle 12 of the Anti-Dumping Agreement.  It was deemed convenient to discuss such transparency
claims together with the substantive claims to which they are related.  For example, the claims related
to the not transparent explanation by the EC of its application of Article 2.2.2 are discussed with the
substantive claims concerning that provision, and so on.
6. India’s claims as set out in this submission are summarised as follows:
1
                                                     
1 The descriptions in this executive summary are given for brief summarisation purpose only.  For the
full elaboration of the facts and arguments the Panel is referred to the Part concerned.WT/DS141/R
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A. DUMPING ISSUES
7. Claim 1:  The EC misapplied Article 2.2.2 by resorting to the option laid down in
Article 2.2.2(ii), and by misapplying this option.
8. First argument of first claim:  While the EC has applied the calculation method as foreseen
in Article 2.2.2(ii), this method was not open to it.  This method could not be applied since its
requirements for application were not met.  The explicit wording of the ADA, mandates that amounts
of other exporters or producers  need to be averaged, and not that an amount  itself (of one single
exporter or producer) has to be established by means of using a method involving weighted averages.
9. Moreover, the exact wording of Article 2.2.2(ii) makes abundantly clear that more than one
exporter or producer should be involved: “other exporters or producers ” clearly refers to a plural.
This text of the ADA makes sense since it would otherwise not be mathematically possible to
establish a (weighted) average of such amounts.  The concept of an average, as defined above, does
by its nature not allow itself to be inferred from one parameter only, such as only one producer.
10. Nevertheless, the EC applied just one amount from one producer.  The fact that no average
from more than one exporter or producer was ever applied is not contested.
11. Second argument of first claim:  Even within the application of Article 2.2.2(ii), the EC has
acted inconsistently with the provision. Instead of inferring the amounts from other producers or
exporters which were ‘incurred and realized’ (12.09 per cent), the EC inferred the amounts from
other producers or exporters which were ‘determined’ (18.65 per cent).
12. Third argument of first claim:  In the calculation of the dumping margins the EC has, in the
Regulation imposing provisional measures, as confirmed by the Regulation imposing definitive
measures, applied Article 2.2.2(ii) of the ADA.  However, as noted above, the method foreseen in
Article 2.2.2(ii) was not available to the EC since its requirements were not met.  Moreover, this
option was applied instead of Article 2.2.2(i), which was available to the investigating authorities.
This is inconsistent with, and violates the spirit and structure of, Articles 2.2.2 and 2.2.
13. Claim 2:  The EC failed to properly explain its reasoning at the provisional stage and thus
acted inconsistently with Article 12.2.1.
14. Claim 3:  The EC further failed to properly explain its determination at the definitive stage
and thus acted inconsistently with Article 12.2.2.
15. Claim 4:  The EC further applied the selling, general and administrative expenses (SG&A)
and profit amounts thus determined even though these amounts were clearly not ‘reasonable’ and
therewith acted inconsistently with Article 2.2.
16. The EC failed to properly explain why it considered the amounts determined to be
‘reasonable’, and consequently acted inconsistently with Article 12.2.1 ( claim 5 ) and 12.2.2
(claim 6 ).
17. Claim 7:  The EC acted inconsistent with Article 2.4.2 by zeroing negative dumping amounts
on a per-type basis.  Therefore, effectively the EC only averaged within a model, and not between
models.WT/DS141/R
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B. INJURY AND CAUSALITY ISSUES
18. Claim 8:  Contrary to the wording of Article 3.1 of the ADA, the EC automatically and
without further explanation assumed that all imports of the product concerned during the investigation
period were dumped.
19. The EC’s failure to explain this determination properly is inconsistent with Article 12.2.1
(claim 9 ) and Article 12.2.2 ( claim 10 );
20. Claim 11:  The EC failed to consider all injury factors mentioned in Article 3.4 of the ADA
for its determination on the state of the domestic industry.  Particularly, the EC did not consider:
• Productivity;
• Return on investments;
• Utilization of capacity;
• The magnitude of the margin of dumping;
• Cash flow;
• Inventories;
• Wages;
• Growth;
• Ability to raise capital or investments.
The EC thus acted inconsistently with Article 3.4.21. As far as the EC would argue that it did in fact consider all factors in Article 3.4, it failed to
disclose or make public its findings thereon and thus acted inconsistently with Article 12.2.1 ( claim 2 )
and Article 12.2.2 ( claim 13 ).  This also violates the rights of defence as contained in Article 6
(claim 14) ;
22. Claim 15:  The EC acted inconsistently with Article 3.4.  The EC has explicitly determined
that the domestic industry consists of 35 companies, but relied in its injury determination on
companies outside this group in order to determine injury ( first argument of claim 15 ).   The EC has
chosen a sample from the domestic industry, but did not consistently base its injury determination on
this sample ( second argument of claim 15 ).  The EC chose to rely on different ‘levels’ of industry
for different injury indices without any apparent reason other than goal-oriented ‘picking and
choosing’ of injury ( third argument of claim 15 ).  The sample selected by the EC was not
representative in violation of Articles 6.10 and 6.11 ( claim 16 ).
23. The EC’s failure to explain its determination properly is also inconsistent with Article 12.2.1
(claim 17 ) and Article 12.2.2 ( claim 18 );
24. Claim 19:  The EC failed to make an unbiased and objective analysis (as per Article 17.6
ADA) of the development of market share of the domestic industry and insufficiently explained its
position, as required by Article 3.4 of the ADA;
25. Claim 20:  The causality finding made by the EC is inherently flawed and unintelligible.  The
EC has failed to appropriately determine to what extent injuries caused by other factors (such as, for
example, contraction in demand or changes in the patterns of consumption) were responsible for the
injury allegedly suffered by the domestic industry.  As such, the establishment of the facts for theWT/DS141/R
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determinations required by Article 3.5 of the WTO Anti-Dumping Agreement was not proper and/or
the evaluation of those facts was not unbiased and objective;
26. As far as the EC would argue that it did in fact make such analysis with respect to claim 18, it
has insufficiently explained it, and thus acted inconsistently with Article 12.2.1 ( claim 21 ) and Article
12.2.2 ( claim 22 );
C. PROCEDURAL ISSUES
27. The procedure leading up to Regulation 2398/97, including the imposition of provisional anti-
dumping duties, suffered from among others the following shortcomings:
28. Inconsistently with Article 5,  and especially Article 5.3 of the ADA, the EC did not examine
the allegations in the complaint ( first argument of claim 23 ).  Moreover, and also inconsistently with
Article 5.3, the EC failed to take into account info rmation available to it at the time of initiation
pointing to lack of material injury caused by dumped imports ( second argument of claim 23 );
29. In any event, even if the EC made such examination, no record has been made available in the
file or in the notice of initiation or in the published Regulations attesting to this, even though Indian
exporters had raised this issue.  This is inconsistent with Article 12.2.1 ( claim 24 ) and 12.2.2
(claim 25 );
30. The EC did not properly examine the representa tiveness of the complainant, and/or failed to
make a proper determination on representativeness as required by Article 5.4 of the ADA.  Such
information as has been made available belatedly in the non-confidential file appears to contradict thepublished findings.  The EC thus acted inconsistently with Article 5.4 ( claim 26 );
31. Moreover, the EC has never during the investigation or in the published Regulations
adequately responded to detailed queries from Indian exporters on this issue, and thus acted
inconsistently with Articles 12.2.1 ( claim 27 ) and 12.2.2 ( claim 28 );
D. OTHER ISSUES32. Claim 29 : Inconsistently with Article 15 ADA, the EC failed to consider India’s special
situation of developing country Member before imposing provisional anti-dumping duties.  Even if
the EC would have considered India’s special status as a developing country it did not explain this in
the public notice, or make available through a separate report that it did so.  This is inconsistent withArticle 12.2.1. ( claim 30 ) and Article 12.2.2 ( claim 31 ).
I. INTRODUCTION
1.1 On 27 October 1999 the Government of India requested for the second time the establishment
of a panel in the matter concerning the imposition by the EC of definitive anti-dumping duties oncotton-type bed linen from India.  This submission elaborates the claims made by India in the dispute
concerning the second EC anti-dumping proceeding concerning bed linen from, inter alia , India.
1.2 The EC initiated the anti-dumping proceeding against the import of cotton type bed linen
from India by publishing a notice of initiation in September 1996.  Provisional anti-dumping dutieswere imposed by EC Commission Regulation N° 1069/97 dated 12 June 1997.  This was followed by
the imposition of definitive duties by the above-mentioned Regulation of 28 November 1997.  The
Government of India [hereinafter: GOI] considers that the procedure which led to the adoption ofWT/DS141/R
Page 89
Regulation 2398/97 including the initiation of the proceeding and the imposition of provisional duties,
the determination of dumping and injury caused thereby in such Regulation, and thus that Regulation
itself, are inconsistent with WTO law. Accordin gly, India respectfully requests that the Panel
recommend that the EC bring Regulation No 2398/97 of 28 November 1997 imposing a definitiveanti-dumping duty on imports of cotton-type bed linen originating in, inter alia , India into conformity
with the ADA and GATT 1994; and suggest that, in the light of the numerous outcome-decisive
violations of the ADA, the EC immediately repeal the Regulation imposing definitive anti-dumping
duties and refund anti-dumping duties paid thus far.
1.3 The structure of this first submission to the Pa nel is as follows: Part II discusses the general
factual background to the matter.  Part III discusses the claims relating to the dumping determination.
Part IV discusses the claims relating to the injury and causality determination.  Part V discusses claims
relating to procedural matters.  The claims relatin g to India’s status as a developing country are
discussed in Part VI.  Last, the requests to the Panel are set forth in Part VII.
1.4 India believes that in various instances the EC acted inconsistently with Article 12.  For the
sake of convenience, and in order to avoid tedious  repetition, such claims are discussed as much as
possible with the fact pattern to which they refer.  Thus, claims concerning inconsistencies with
Article 12 in the context of the dumping determination are discussed in Part III, etc.
II. GENERAL FACTUAL BACKGROUND
1. The measure concerned
2
2.1 The European Community’s [hereinafter: “EC”] current anti-dumping law is laid down in
Council Regulation (EC) No 384/96 on protection against dumped imports from countries not
members of the European Community, as amended [hereinafter: “basic Regulation”, attached as
Annex 1].3  Under the basic Regulation, the European Commission acts as the investigating authority
in anti-dumping proceedings.  If it finds that the substantive conditions are fulfilled, it may impose
provisional anti-dumping duties.  The EC Council of Ministers may replace such provisional anti-
dumping duties by definitive anti-dumping measures.
2.2 In 1997 the EC imposed definitive anti-dumping duties on bed linen from India, Egypt and
Pakistan by Regulation 2398/97.4  As far as India is concerned, duties were imposed up to 24.7 per
cent, the weighted average duty being 11.6 per cent, and the residual duty being 24.7 per cent.5  This
definitive anti-dumping measure is the subject of the present WTO dispute settlement proceeding.
                                                     
2 The summary in this Part is merely intended to provide the broad background to the case.  Factual
details are, whenever necessary, elaborated in Parts III and following.
3 Official Journal [“OJ”] (1996) L 56/1
4 Council Regulation (EC) No 2398/97 of 28 November 1997 imposing a definitive anti-dumping duty
on imports of cotton-type bed linen originating in Egypt, India and Pakistan, OJ (1997) L 332/1.
5 The residual duties for Pakistan and Egypt were respectively 6.7 and 13.5 per cent, with respective
weighted averages of 6.4 and 13 per cent.WT/DS141/R
Page 90
2. History: the first Bed linen proceeding
2.3 On 25 January 1994 the Commission initiated an anti-dumping proceeding concerning bed
linen6 from India, Pakistan, Thailand and Turkey [hereinafter: “Bed Linen I”] (notice of initiation in
Annex 2). 7 The complainant was the Committee of the Cotton and Allied Textile Industries of the EC
[“Eurocoton”].  This organisation is the EC federation of national producers’ associations of cotton
textile products.  The complaint8 in the Bed Linen I proceeding is attached as Annex 3.
2.4 It appears that Eurocoton had polled support for its complaint by consulting its national
member associations.  In any event, no evidence was made available in the non-confidential fileshowing that the European Commission had checked, before initiating the proceeding, that the
proceeding carried sufficient  support among EC producers.
2.5 The cooperation of Indian exporters in the Bed linen I proceeding was exemplary: 41 Indian
exporters submitted a confidential questionnaire response and a non-confidential summary thereof.9
By contrast, the large majority of Community producers refused to submit questionnaire responses or,
at least, no or virtually no non-confidential summaries from them were made available in the non-
confidential file.  After some time (and, as far as India believes, after some secret correspondence
between the European Commission and the complainant), Eurocoton withdrew the complaint.  The
Bed linen I anti-dumping proceeding was consequently terminated on 10 July 1996.10  In the Decision
terminating this proceeding the European Commission noted that:
“[t]he complainant Community producers formally withdrew the complaint concerning
imports of certain types of bedlinen originating in India, Pakistan, Thailand and Turkey. The
Commission considers that a termination in this context would not be contrary to the interestof the Community.
Consequently, the anti-dumping proceeding concer ning imports of certain types of bedlinen
originating in India, Pakistan, Thailand and Turkey should be terminated without imposition
of protective measures.”  (Annex 5)
This—rather terse—statement, however, only partially reflects the facts.  Even though the formal
reason for the termination was the withdrawal of th e complaint, it would appear that the termination
was connected with the non-co-operation of the Community industry in the Bed linen I proceeding.
                                                     
6 The product scope of the Bed linen I proceeding consisted of Combined Nomenclature headings
6302 2100, 6302 2290, 6302 3110, 6302 3190 and 6302 3290. For easiness’ sake this is henceforth referred to as
“bed linen”  or “the product” .
7 OJ (1994) C 21/8. For background information it is noted that Eurocoton also submitted complaints
concerning alleged dumping of cotton fabrics and synthetic fabrics from ( inter alia ) India. The two anti-dumping
proceedings pursuant to these complain ts were initiated around the same time as Bed linen I, and terminated for
largely the same reasons and on the same grounds. The proceeding concerning cotton fabrics was thereafter re-initiated twice, in neither case leading to definitive anti-dumping duties, and the second time leading to WTO
consultations between India and the EC.
8 In EC parlance, the application is called “complaint” . In this submission the two terms are used
interchangeably.
9 Evidence attached as Annex 4.
10 OJ (1996) L 171/27.WT/DS141/R
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3. The second Bed linen proceeding
2.6 The complainant Eurocoton brought a new complaint that was formally submitted on
30 July 1996, i.e. twenty days after the termination of Bed linen I.11  The European Commission
initiated an anti-dumping proceeding on the basis of this new complaint on 13 September 1996[hereinafter: “Bed linen II”].
12  The Indian industry again co-operated massively: most exporters made
themselves known, accounting for well over 80 per cent of total exports.13
2.7 In the Bed linen II proceeding, the European Commission decided to first take a sample from
among the Indian exporters, and to determine the dumping margin for the co-operating exporters onthe basis of a weighted average of this sample.  As in the Bed linen I proceeding, Indian exporters
were represented by the Cotton Textiles Export Promotion Council of India [hereinafter: “Texprocil”].
Negotiations on the sample ensued between the EC case handlers and Texprocil’s representatives.
However, no agreement could be reached on the sample and the European Commission unilaterally
selected the sample on the basis of Article 6.10 of the WTO Anti-Dumping Agreement [“ADA”].
2.8 The European Commission imposed provisional anti-dumping duties with effect from
14 June 1997 [hereinafter: “provisional Regulation”, attached as Annex 8].
14
2.9 Definitive anti-dumping duties varying from 2.6 per cent to 24.7 per cent were imposed onbed linen from India by Council Regulation (EC) No 2398/97 of 28 November 1997 [hereinafter:
“definitive Regulation”, attached as Annex 9].
15
4. Dispute settlement thus far
2.10 On 3 August 1998 India requested consultations with the European Community pursuant to
Article 17 of the ADA and Article 4 of the Understanding on Rules and Procedures governing the
Settlement of Disputes [“the DSU”] concerning this issue. This request was notified to the Dispute
Settlement Body and was circulated to WTO Members.16  Pakistan requested to be joined in the
consultations on 25 August 1998.17
2.11 The first round of consultations was held in Geneva on 18 September 199818 (list of questions
raised by India attached as annex 10; verbatim report drafted by the Indian delegation attached as
                                                     
11 The complaint is attached as Annex 6.
12 The notice of initiation can be found in OJ (1996) C 266/2 (Annex 7).
13 Page 2 of the provisional disclosure document (attached as Annex 23).
14 Commission Regulation (EC) No 1069/97 of 12 June 1997 imposing a provisional anti-dumping
duty on imports of cotton-type bed linen originating in Egypt, India and Pakistan, OJ (1997) L156/11.
15 Council Regulation (EC) No 2398/97 of 28 November 1997 imposing a definitive anti-dumping duty
on imports of cotton-type bed linen originating in Egypt, India and Pakistan, OJ (1997) L 332/1.
16 WT/DS141/1, G/L/253, G/ADP/D13/1 of 7 August 1998.
17 WT/DS141/2 of 25 August 1998.
18 On the issue of using the information obtained during the dispute settlement consultations for panel
proceedings we note the panel report Korea—Taxes on Alcoholic Beverages, Report of the Panel, WT/DS75/R,
WT/DS84/R of 17 September 1998 at § 10.23:
“We note that Article 4.6 of the DSU requires confidentiality in the consultations betweenparties to a dispute. This is essential if the parties are to be free to engage in meaningful
consultations. However, it is our view that this confidentiality extends only as far as requiring
the parties to the consultations not to disclose any information obtained in the consultations toany parties that were not involved in those consultations. We are mindful of the fact that thepanel proceedings between the parties remain confidential, and parties do not thereby breachWT/DS141/R
Page 92
Annex 11).  On 1 October the European Community provided written answers to part of the questions
raised by India (Annex 12).
2.12 Although the EC noted in its letter of 1 Oc tober 1998 that a second round was necessary for
replying to the remainder of India’s questions, it pr oved excessively difficult for the EC to agree to a
second round within a reasonable time.  Ultimately, after considerable delay, the EC could agree to a
second round of consultations on 15 April 1999 (verbatim report drafted by the Indian delegation
attached as Annex 13).
2.13 The legal representatives of Texprocil again requested access to the non-confidential file in
April 1999, but this was refused in May 1999.19
2.14 On 29 June the European Community provided  further written answers to part of the
questions raised by India (Annex 14).
III. CLAIMS RELATED TO THE DUMPING DETERMINATION AND THE
EXPLANATION THEREOF
A. ARTICLE 2.2.2:  DETERMINATION OF SG &A AND PROFIT AMOUNTS
3.1 Summary: the EC misapplied Article 2.2.2 by resorting to the option laid down in
Article 2.2.2(ii), and by misapplying this option ( claim 1 ).  The EC failed to properly explain its
reasoning at the provisional stage and thus acted inconsistently with Article 12.2.1 ( claim 2 ). The EC
further failed to properly explain its determination at the definitive stage and thus acted inconsistently
with Article 12.2.2 ( claim 3 ). The EC further applied the SGA and profit amounts thus determined
even though these amounts were clearly not ‘reason able’ and therewith acte d inconsistently with
Article 2.2 ( claim 4 ). The EC failed to properly explain why it considered the amounts determined to
be ‘reasonable’, and consequently acted inconsistently with Article 12.2.1 ( claim 5 ) and 12.2.2 ( claim
6).
1. Facts20
3.2 The European Commission (the investigating auth ority) decided to resort to sampling of the
Indian exporters.  The Notice of initiation (Annex 7) as well as the European Commission’s letter of13 September 1996 (Annex 15) requested data for the sampling selection.  The relevant part of the
notice of initiation stated the following:
                                                                                                                                                                    
any confidentiality by disclosing in those proceedings information acquired during the
consultations. Indeed, in our view, the very essence of consultations is to enable the parties togather correct and relevant information, for purposes of assisting them in arriving at amutually agreed solution, or failing which, to assist them in presenting accurate information tothe panel. It would seriously hamper the dispute settlement process if the information acquired
during consultations could not subsequently be used by any party in the ensuing proceedings.”
(Emphasis added)
This part of the Panel report was not overturned by the Appellate Body.
19 Annex 78.
20 These facts are also relevant in the context of some of the other claims (notably, those concerning
Article 2.4.2).WT/DS141/R
Page 93
“ . . . In order to enable the Commission to decide whether sampling is necessary and, if so,
to select a sample, exporters, or representatives acting on their behalf, are hereby requested
to make themselves known by contacting the Commission and by providing the following
information . . . :— the turnover in local currency of cotton-type bed linen sold for export to the
Community during the period 1 July 1995 to 30 June 1996,
— the turnover in local currency of cotton-type bed linen sold on the domestic market
during the period 1 July 1995 to 30 June 1996, . . .”
The relevant part of the letter requested the same information:
“ . . . To facilitate the selection of a sample, each producer/exporter in your country is
requested to provide the following information by 28.9.96 at the latest:
— the turnover in local currency of cotton-type bed linen sold for export to the
Community during the period 1 July 1995 to 30 June 1996;
— the turnover in local currency of cotton-type bed linen sold on the domestic market
during the period 1 July 1995 to 30 June 1996. . . .”
3.3 On 26 September 1996 the legal representatives of the Indian exporters submitted to the
European Commission information in connection with the above.
21  The relevant part of that letter
(Annex A) can be summarized as follows:
Ser
NoName Export
quantity% Export
value% Local
quantit
yLocal value Willingness
for sample
64 Prakash 1726000 18.48 427484000 18.63 - - Yes
15 Madhu 902989 9.67 244630080 10.66 - - Yes
27 Omkar 915321 9.8 205447090 8.95 - - Yes
73 Bombay
Dyeing748000 8.01 150800000 6.57 465000 1006000000 Yes
4 Hindoostan 418576 4.48 66484958 2.90 - - Yes
16 Standard 71090 0.76 26070000 1.14 87000 24992000 Yes
The respective stages of production of these companies were as follows:
Ser No Name Stages of Production
64 Prakash SP-WV
15 Madhu MA-PA
27 Omkar TR-JW
73 Bombay Dyeing SP-WV-DY-PT
4 Hindoostan SP-WV-DY-PT-MA-PA
16 Standard SP-WV-DY-PT-JW
3.4 In addition it was mentioned in the cover letter  attached in Annex 16 that the company Jindal
had an export sales quantity of 93,492 kgs and an export sales value of 217,687,914 and production
stage TR.  It was also mentioned in this cover letter that the company Jindal had no domestic sales.
                                                     
21 Please refer to Annex 16.WT/DS141/R
Page 94
3.5 On 27 September 1996 the legal representatives of Texprocil submitted further information
from the companies regarding the sample.22  The relevant attachments from the various companies
were as follows:
“No 15 Madhu Industries . . .
1. Turnover . . . for export to the community . . . is Rs 24,46,30,080 and Kgs 9,02,989
(detail statement enclosed).
2. The Turnover . . . of bedlinen sold on the domestic market . . . is NIL.”
“No 16 Standard Mills . . .
I. Turnover . . . of bedlinen sold for export to the community . . . Kgs 71090, Value Lac
Rs. 260.7
II. The turnover of bedlinen sold on the domestic market . . . Kgs 87000, Value Lac Rs
249.92”
“No 27 Omkar Exports . . .
6. . . .turnover of . . . bed linen exported to the EC . . . Kgs 915321, Rupees 20,54,47,090
7. . . .turnover of . . . bed linen sold in India . . .: NIL”
“No 64 Prakash Cotton . . .
1. . . . . turnover . . . for export to the Community . . . Rs 4274.84 Lacs and Qty 17.260
Lacs Kgs. . . .
2. . . . turnover . . . of bedlinen sold on domestic market . . .: NIL”
“No 73 Bombay Dyeing . . .
5. . . . turnover of bed linen to the EC: 748 metric tonnes, Rs 150.8 Millions
6. turnover of cotton type bed linen sold in India; 465 metric tonnes, Rs 100.6 Millions”
3.6 On 30 September 1996 Texprocil’s legal representatives submitted a letter with further
information regarding the sample selection including the relevant data from the company Anglo-
French.23  The attached table contained the following information regarding Anglo-French:
Ser No Name of the
ExporterExport to EC
(Kgs)Export to EC (Rs) Local qty/ Local value Willingness
for sample
26 Anglo
French9,02,467 161.11 Million Rs 0.25% of total turnover Yes
The production stages of Anglo-Fr ench were SP/WVG/DY/PT/MA/PA.
3.7 The relevant part of the attached statement of Anglo-French mentioned the following:
“page 42 Anglo French Textiles . . .
1) For the period . . . we have exported 9,02,467 kgs of Cotton bed Linen to the
European Community and the total invoice value of this quantity is Indian Rs 161.11
million.
2) With respect to sales of Cotton Bed Linen in the Domestic market for the period . . .
we wish to bring to your kind attention that we are selling Bed Linen qualities only in
the Export market, and that the value of Bed Linen sold in the domestic market will be
                                                     
22 Please refer to Annex 17.
23 Annex 18.WT/DS141/R
Page 95
less than 0.25 per cent of our total turnover of around Indian Rs.1,200 million, and
hence our turnover for Cotton Bed Linen in the Domestic market will be less than
Indian Rs.3.00 million. . . .”
3.8 On the basis of the above information the EC proposed a sample on 8 October 1996
(Annex 19).  The European Commission’s letter stated the following:
“As it has already been discussed during our meeting of 1 October 1996 the following
criteria should be taken into account in the selection of the sample:1. size of company with regard to export sales to the EU;
2. size of company with regard to domestic sales;
3. stages of production performed by the company.
On the basis of the above criteria the Commission is proposing the following companies to be
included in the sample:
(1) Prakash Cotton Mills Ltd;
(2) Madhu Industries Ltd;
(3) Jindal Worldwide Ltd;(4) Anglo French Textiles;
(5) The Bombay Dyeing & Manufacturing Co. Ltd.
As reserve companies the Commission is proposing Omkar Exports and Standard Industries
Ltd.
Due to the strict time constraints, we would appreciate any comments on our proposal by
tomorrow the 9 October 1996 at 16:00 at the latest.”
3.9 In its response dated 9 October 1996 Texprocil’s legal representatives made a
counterproposal
24 on the basis of suggestions made by Texprocil (attached to the same fax):
“You will note that we propose that the sample be changed slightly as follows:
1. Prakash Cotton Mills
2. Bombay Dyeing & Mfg
3. Standard Industries
4. Hindoostan Spg & Wvg Mills5. Madhu Industries
Reserve:
1. Anglo French Textiles
2. Omkar Exports”
3.10 On 10 October 1996 the legal representatives reiterated once again in writing their preference
for the inclusion of Standard Industries in the main sample:
25
“Standard Industries would be more appropriate to be included as a fourth company.”
3.11 On 11 October 1996 the EC finally selected the sample, excluding Standard from the main
sample:26
                                                     
24 Please refer to Annex 20.
25 Please refer to Annex 21.WT/DS141/R
Page 96
“. . . we do not consider it appropriate to include Standard Industries Ltd in the sample
because of its minor export sales to the EU during the investigation period. Nevertheless we
insist on maintaining this company in the rese rve because of its significant domestic sales.”
3.12 The final sample thus selected included Prakash, Madhu, Omkar Exports [“Omkar”], Anglo-
French, and Bombay Dyeing. The companies included in the reserve sample were Jindal and Standard
Industries.
3.13 Texprocil and its legal representatives never agreed to this sample. Nevertheless, the Indian
exporters co-operated to the best of their ability  with the investigating authorities.  On-the-spot
verifications took place in India in January and February 1997.
3.14 On 2 June 1997 the EC provided provisional general disclosure.27  As far as the dumping
determination is concerned, this general disclosure included the same considerations as the
provisional Regulation. The provisional Regulation provided in relevant part that:
“(15) In view of the large number of exporters in the countries concerned, the Commission
decided to apply sampling techniques in accordance with Article 17 of the basic Regulation.
In order to enable the Commission to select a sample, exporters and representatives acting on
their behalf, were, pursuant to Article 17(2) of the basic Regulation, requested to make
themselves known within three weeks of the in itiation of the proceeding and to provide basic
information on their export and domestic turnover, the stages of production performed andthe names and activities of all related companies in the bed linen sector. The authorities of
the countries concerned were in this context also contacted by the Commission.
2. Pre-selection of the sample(16) The companies which identified themselv es, provided the requested information within
the three weeks period and had exported the product concerned to the Community during theinvestigation period, were considered as cooperating companies and were taken into account
in the selection of the sample.
These companies represented approximately 100 per cent, 82 per cent and 77 per cent of the
total exports to the Community from Egypt, India and Pakistan respectively.
(17) The companies which were not finally reta ined in the sample, were informed that any
anti-dumping duty on their exports would be calculated in accordance with the provisions of
Article 9(6) of the basic Regulation, i.e. without exceeding the weighted average margin of
dumping established for the companies in the sample.
(18) The companies which did not make themse lves known within the three weeks period were
considered as non-cooperating companies.
3. Selection of the sample
                                                                                                                                                                    
26 Please refer to Annex 22.
27 Please refer to Annex 23.WT/DS141/R
Page 97
(19) For all the countries concerned, the selection of the sample was made in agreement with
the representatives of the companies, associations and/or governments concerned.
(20) The companies selected in the sample and which fully cooperated with the investigation
were attributed their own dumping margin and individual duty rate.
(21) The Commission also selected reserve co mpanies which though having to reply to the
questionnaire would only be investigated in the event that companies in the main sample
would subsequently refuse to cooperate.
These companies were also informed that any anti-dumping duty on their exports would be
calculated in accordance with the provisions of Article 9(6) of the basic Regulation unless
they were selected to replace a company in the original sample in which case they would have
their own dumping margin and individual duty rate.
4. Individual examination of companies not selected in the sample(22) Seven co-operating companies not selected in the sample requested the calculation of
individual margins of dumping and accompanied this request with a reply to thequestionnaire within the deadlines set for this purpose. In accordance with Article 17(3) of
the basic Regulation, their requests, however, could not be accepted in the current
investigation since the number of exporters was so large that individual examinations would
have been unduly burdensome and prevented completion of the investigation in good time.
The seven companies in question were informed accordingly.
D. DUMPING1. Normal value(a) India
1. (23) In accordance with Article 2(2) of the basic Regulation, the Commission first
examined whether global domestic sales of cotton-type bed linen by each exporter/producer
were representative, i.e. whether the total volume of such sales was greater than or equal to
5 per cent of the total volume of the corresponding export sales to the Community.
This assessment revealed that only one exporter/producer had representative sales of cotton-
type bed linen on the domestic market during the investigation period.
(24) The Commission then examined whether the different product types exported to the
Community were sold in representative quantitie s on the domestic market. In this context, the
Commission found that domestic and export types which had similar size, weaving
construction, finish of fabric and final presentation were comparable products.
Domestic sales of a particular type were considered as sufficiently representative when the
volume of that type sold on the domestic market during the investigation period represented5 per cent or more of the total volume of the comparable type sold for export to the
Community.WT/DS141/R
Page 98
For the sole company with representative global domestic sales, this assessment revealed that
five types of cotton-type bed linen exported to the Community had also been sold in
representative quantities on the domestic market during the investigation period.
(25) The Commission subsequently examined wh ether the domestic sales of each of the five
representative types of this company could be considered as being made in the ordinary
course of trade pursuant to Article 2(4) of the basic Regulation.
It was found that the five types in question had been sold at a loss i.e. at prices below cost of
production plus selling, general and administrative costs (hereafter ‘SG& A’). Therefore, it
was considered that these types were not sold in the ordinary course of trade and that the
domestic prices did not provide an appropriate basis for establishing normal value.
(26) For all types sold for export to the Community by all companies normal value had,
therefore, to be constructed in accordance with Article 2(3) of the basic Regulation.
The constructed value was determined by adding  to the cost of production of the exported
types of each company, a reasonable amount for SG&A and a reasonable amount for profit.
2. Since only one company had representative global domestic sales and the profitable
domestic types represented less than 80 per cent but more than 10 per cent of total domestic
sales, the amount for SG&A and profit used for the construction of normal value for all
companies investigated were those respectively  incurred and realised by this company, in
accordance with Article 2(6) of the basic Regulation.
. . .
2. Export price(37) In general, sales of cotton-type bed linen made by the exporters/producers on the
Community market were made to independent customers. Consequently the export price was
established by reference to the prices actually paid or payable in accordance with Article
2(8) of the basic Regulation.
. . .
3. Comparison
3. (39) For the purpose of ensuring a fair comparison between normal value and export
price, due allowances in the form of adjustme nts were made where applicable and justified
for differences affecting price comparability in accordance with Article 2(10) of the basicRegulation.
The adjustments made were as follows:
India: allowances for differences in import charges and indirect taxes, transport and
handling, ocean freight, ocean insurance, packing costs, credit and commissions;
. . .WT/DS141/R
Page 99
(40) The Indian exporter/producer with representative global domestic sales requested an
adjustment to normal value of 5 per cent for differences in levels of trade based on the fact
that export sales to distributors in the Community are made in much larger quantities thansales through three distinct sales channels on the domestic market (exclusive wholesalers for
branded products, other wholesalers and industrial users).
As a result of this request, the Commission examined whether such an adjustment could be
granted under Article 2(10) of the basic Regulation.
An adjustment for differences in quantities was not justified since no indication was found
that distributors in the domestic market had benefited from discounts or rebates because of
the larger quantities allegedly purchased by them.
An adjustment for differences in levels of trade could not be granted either, since the
company concerned limited itself to refer to the different distribution channels in the domestic
and export markets but failed to show that the alleged difference between the levels of trade
of the export price and the normal value had affe cted price comparability as demonstrated by
consistent and distinct differences in the functions and prices between the different levels oftrade in the domestic market.
(41) The same company also requested an adjustment to normal value of 10 per cent for
differences in brand promotion expenses on the basis that it was incurring excessive
promotion expenses when selling to its exclusive domestic wholesalers which were notincurred in its exports to the Community. In order to evaluate whether such a difference in
promotion expenses borne could have affected price comparability, the Commission looked at
the total of SG&A incurred by this company with respect to domestic sales to exclusive
wholesalers which bought only branded products and found that it was the same as that
incurred on domestic sales to other wholesalers which bought non-branded products only.
Furthermore, no evidence was supplied that customers had been consistently paying higher
prides [sic] for branded products. Since exports to the Community of the company concerned
consisted of non-branded products, it was concluded that brand promotion expenses was not
a factor affecting price comparability. Consequently, the request for such an adjustment was
also rejected.
(42) Finally, it should be noted that the quantification of both adjustments requested (see
recitals (40) and (41)) was not supported by any verifiable data and was found to exceed the
total level of SG& A expenses incurred by the company concerned during the investigation
period.
(43) All Indian exporters/producers claimed an adjustment for credit granted in respect of
export sales on the basis of their actual credit costs. However, since the basic Regulation
provides in Article 2(10)(g) that such adjustment shall be made when the credit granted is a
factor taken into account in the determination of prices charged, the Commission calculated
this adjustment on the basis of the credit agreed at the time of sale, i.e. cost calculated on
payment terms/number of days and prevailing interest rate.
(44) The Indian exporter/producer with representative global domestic sales claimed an
adjustment for credit costs in respect of domes tic sales. This had to be rejected on the ground
that there was no evidence during the investigation period that any payment terms had beenWT/DS141/R
Page 100
agreed at the time of sale. In fact the investigation revealed that the delivery of the goods
always took place after payment.
. . .4. Dumping margins(a) General methodology
(46) In general, weighted average constructed normal value by type was compared with
weighted average export price by type.
. . .
(b) Methodology for groups of companies
(47) It has been the consistent practice of the Commission to consider related companies or
companies belonging to the same group as one single entity and, therefore, to establish for all
of them one single dumping margin. Indee d, calculating individual dumping margins might
encourage circumvention of anti-dumping measures, thus rendering them ineffective, by
enabling related producers to channel their exports to the Community through the company
with the lowest individual dumping margin.
In accordance with this practice, related exporters/producers belonging to the same group
were regarded as one single entity and attributed one single dumping margin. For
exporters/producers belonging to a same group it was decided to first calculate a dumping
margin per company. Then, a weighted average of these dumping margins was established
and attributed to the group as a whole.
(c) Specific application
(48) The above methodology was applied to two Indian and two Pakistani groups of
companies. However, with regard to both one Indian and one Pakistani group, the exports to
the Community of one company of each group were considered minor and have not been
taken into account in the calculations.
. . .
(d) Dumping margins for companies in the sample(49) The comparison, as described under recital (39) and (46) to (48), showed the existence
of dumping in respect of all companies which fully cooperated in the investigation. The
provisional dumping margins expressed as a pe rcentage of the cif import price at the
Community frontier are the following:
India
— Anglo French Textiles, 27.3 %,
— The Bombay Dyeing Manufacturing Co., Ltd, 9.4 %,
— Nowrosjee Wadia Sons Ltd, 9.4 %,
— Madhu Industries Ltd, 19.5 %,WT/DS141/R
Page 101
— Madhu International, 19.5 %,
— Omkar Exports, 16.5 %,
— Prakash Cotton Mills Ltd, 3.9 %;
. . .
(e) Dumping margin for cooperating companies not in the sample(50) Cooperating companies not selected in the sample (see recitals (17) and (21)) were
attributed the average dumping margin of the companies in the sample, weighted on the basis
of their export turnover to the Community. In accordance with Article 9 (6) of the basic
Regulation, when calculating this average dum ping margin de minimis margins established
have been disregarded. Expressed as a percentage of the cif import price at the Community
frontier, these provisional dumping margins are the following:
— India13.6 per cent,
. . .
(f) Dumping margin for non-cooperating companies
(51) For non cooperating companies a dumping margin was determined on the basis of the
facts available in accordance with Article 18 of the basic Regulation. Since the level of
cooperation was high, it was considered appropriate to set the dumping margin for non
cooperating companies in each country concerned at the level of the highest dumping margin
established for a company in each sample because it would constitute a bonus for non-cooperation to assume that the dumping margin attributable to exporters/producers which did
not make themselves known is lower than the highest found for a cooperating
exporter/producer.
These provisional dumping margins expressed as a percentage of the cif import price at the
Community frontier, are the following:
— India 27.3 per cent,. . .
(130) In all but one case, the undercutting margins calculated as a percentage of free-at-the-
Community-frontier price were higher than th e respective dumping margins established for
exports in the sample and there was therefore, in accordance with the lesser duty rule as setout in Article 7 (2) of the basic Regulation, no need to establish injury elimination levels
based on the difference between the export price and the cost of production of the Community
producers plus a minimum amount of profit required to ensure the viability of the Community
industry.
However, in the case of one exporter the undercutting margin was slightly lower than the
respective dumping margin and therefore, in order to calculate the amount of duty, an injury
elimination level was established by comparing the export prices to the result of adding to the
Community cost of production a very conservative profit margin of 5 per cent on turnover.
The injury elimination level thus established was higher than the dumping margin. Therefore,
in all cases, the provisional duties, for expor ters in the sample, should be limited to the
dumping margins . . .”WT/DS141/R
Page 102
3.15 The EC also provided company-specific disclosures28, the relevant excerpts of which are
quoted hereunder.
3.16 For Bombay Dyeing (and its related company Nowrosjee Wadia) the relevant part of the
disclosure reads as follows:
“Although Bombay Dyeing had representative global domestic sales of the product
concerned, it had no representative domestic sales made in the ordinary course of trade
during the investigation period (see section C.1.(a) of the Disclosure Document)[corresponding to recital (23) of the provisional Regulation] . Its related company Nowrosjee
Wadia had no domestic sales at all. Normal value had, therefore, to be constructed for each
type of bed linen exported to the EU during th e investigation period for both companies in
accordance with Article 2(3) of Regulation (EC) No 384/96.
. . .
2. NORMAL VALUE
As indicated in section C.1.(a) of the Disclo sure Document, the five representative domestic
types of Bombay Dyeing (D14, D22, D36, D37, D51) were sold in the domestic market at a
loss. Consequently, constructed values have been calculated for all export types reported in
the ECSALUR listings of both companies.
= cost of production (COP) of exported types plus selling, general and administrative
expenses (SG&A) incurred in domestic sales plus profit realized on domestic sales.
*COST OF PRODUCTION: use of COP as given in ECCOP - Annex III I.2.f . . .*SG&A: the amount for SG&A used wa s based on the average SG&A expenses
incurred by Bombay Dyeing on its global domestic bed linen sales during the
investigation period and it is 10.39 per cent on turnover (see attachedsummary of DMPROFIT - Annex III 1.2.g).
*PROFIT: the profit margin used was the weighted average profit margin realized by
the same company on its global domestic sales of profitable sales of bed linen
and it is 18.65 per cent on turnover (see attached summary of DMPROFIT -Annex III 1.2.g.) . . .
NORMAL VALUE = COP/ (1-0.2904) = COP/0.7096
ALLOWANCES on Normal Value:
actual packing cost
REMARKS:
As explained in section C.3 of the Disclosure Document, Bombay Dyeing
failed to justify the adjustments claimed on Normal Value for level of trade,
brand promotion and credit costs . . .”
                                                     
28 Attached as Annex 24.WT/DS141/R
Page 103
3.17 For the other four companies in India, the relevant part of the disclosure are reproduced
hereunder.
3.18 For Prakash:
“NORMAL VALUE: Constructed value  (no domestic sales of the product under investigation)
= cost of production (COP) of exported types plus a reasonable amount for selling, general
and administrative expenses (SG&A) and a reasonable amount for profit.
*COST OF PRODUCTION: Use of COP as given in Exhibits 8 . . .
*SGA+PROFIT: the amount for SG&A and profit used is 29.04 per cent on turnover . .
.
NORMAL VALUE = COP/(1-(29.04 %)) = COP/(1-0.2904) = COP/0.7096  . . .”
3.19 For Omkar Exports:
“NORMAL VALUE: Constructed value  (no domestic sales of the product under investigation)
= cost of production (COP) of exported types plus a reasonable amount for selling, general
and administrative expenses (SG&A) and a reasonable amount for profit.
*COST OF PRODUCTION: Use of COP as given in Exhibit 5A of the on-the-spot
investigation (statement showing COP per set)
*SGA+PROFIT: the amount fo r SG&A and profit used is 29.04 per cent on turnover
NORMAL VALUE = COP/(1-(29.04 %)) = COP/(1-0.2904) = COP/0.7096  . . .”
3.20 For Madhu Industries:
“NORMAL VALUE: Constructed value  (no domestic sales of the product under investigation)
= cost of production (COP) of exported types plus a reasonable amount for selling, general
and administrative expenses (SG&A) and a reasonable amount for profit.
*COST OF PRODUCTION: Use of COP as given in Exhibit 3 of the on-the-spot
investigation . . .
*SGA+PROFIT: the amount fo r SG&A and profit used is 29.04 per cent on turnover
NORMAL VALUE = COP/(1-(29.04 %)) = COP/(1-0.2904) = COP/0.7096  . . .”
3.21 And for Anglo French:
“The company had domestic sales of the product concerned during the investigation period
but they were not considered representative (2.10 per cent of sales volume to the Community).
Normal value had, therefore, to be constructed for each type of bed linen exported to the EUWT/DS141/R
Page 104
during the investigation period in accordance with Article 2(3) of Regulation (EC) No
384/96.
Constructed normal value = cost of production (COP) of exported types plus a reasonable
amount for selling, general and administrative expenses (SG&A) and a reasonable amount
for profit.
COST OF PRODUCTION: Use of COP as given in ECCOP.XLS file
SGA+PROFIT: the amount for SG&A and profit used is 29.04 per cent on
turnover . . .
CONSTRUCTED NORMAL VALUE = CO P/(1-(29.04%)) = COP/(1-0.2904) =
COP/0.7096”
3.22 In response to these disclosures, a number of companies submitted comments. Anglo-Frenchand Madhu submitted among others the following comments.
3.23 Anglo-French:
29
“We note that since our domestic sales of the product concerned for the investigation period
was only 2.10 per cent of sales volume to the Community, the same was not considered
representative. Hence, normal value was constructed for each type of Bed linen exported to
the European Union. In so constructed normal value [sic], we note with regret that extremely
high Selling, General and Administrative expense s and a margin of profit of 29.04 per cent on
turnover has been added to our cost of production!
The Selling, General and Administrative expenses of 10.39 per cent on sales price is based on
global calculations for dissimilar products sold in the domestic market by one of the Indian
producers, presumably Bombay Dyeing, who sell their products through chain stores and
under specific Brand/Trade names. In fact, Bo mbay Dyeing is the only Textile Company in
India which sell the product concerned through specific chain stores and under specific
Brand/Trade names created by vigorous administrative and promotional efforts for over a
period of more than 4 decades. In fact, on account of this, Bombay Dyeing would have
incurred huge advertisement and other costs which are not at all required by any other
Producer for marketing products concerned in In dia. Further, since the exports are also made
to traders without any Brand names, it is unreasonable and unjust to add these additional
costs of S, G and A to the cost of production. This will lead to unfair and unjust comparisons.
The Commission Services have also in construction of normal values added a very high
percentage of profit margin of 18.65 per cent alleged to be reasonable, earned presumably byBombay Dyeing on some of its dissimilar domes tic products, sold under Brand names to its
chain shops. [Article C(1)(a) of disclosure  document clearly demonstrates that Bombay
Dyeing had only five (5) types which were representative and all of them were not sold in the
normal course of trade, and as such disregarded for the purpose of calculation of profit]. We
would respectfully submit that such a high margin of profit is not only abnormal, unjust andunimaginable, but also non-existent in the Textile Industry and can be attributed only to a
high realisation of a Brand name by the specif ic Indian producer marketing products through
chain stores. Therefore, it is prayed that the additional realisation on account of Brand/Trade
                                                     
29 Annex 25.WT/DS141/R
Page 105
names by the relevant Indian producer may be discounted to a reasonable level as specified in
Article 2(6)(c) of the basic regulations [sic].
We would also like to re-emphasize that if such profits are existent in the domestic market for
the product concerned, there would have been no need to export the goods at a profit margin
of even less than five percent (5 per cent).
The Commission Services have the responsibility to ensure vide provisions of Article 2(6)(c)
that profit margins established shall not exceed the normally realised profit margins incurredby other exporters or producers on sales of the product of the same category in the domestic
market of the Country of origin.”
3.24 Madhu submitted the following comments to the provisional disclosure:
30
“(I) NORMAL VALUE:
(A) In construction of normal values very high percentage of S.G. and A. of 10.39 per cent on
sales price has been added which is based on global calculations for dis-similar products
sold in domestic market by one of the Indian producer presumably Bombay Dyeing who selltheir products through chain store and under specific brands/trade name. In fact on account
of these two factors Bombay Dyeing is the only textile company in India which sells the
product concerned through specific chain stores and under a brand name created by vigorous
administrative and promotional efforts includi ng huge advertisement and other costs, which
are not at all required for marketing product concerned in India by any other producer. Infact for the product under consideration no such additional effort and cost are normally
required by any body else. Further since the exports are also made to traders without any
brand name it is unreasonable and unjust to add the additional cost of SG and A which
involves higher cost of selling general and administration. This will also lead to an unfair
comparison.
(B) The commission services have also in construction of normal value added a very high
percentage of profit margin of 18.65 per cent alleged to be reasonable, earned presumably by
Bombay Dyeing on some of its dissimilar dom estic products, sold under the brand name to
the chain shops (Article C(1)(a) of disclosure document clearly demonstrates that Bombay
Dyeing had only 5 types which were representativ e and all of them were not sold in normal
course of trade and as such disregarded for the purpose of calculation of profit). Madhuwould respectfully submit that such a high margin of profit is not only abnormal, unjust,
unimaginable but also non-existent in the textil e industry and can be attributed only to a high
realisation of brand name by the specific Indian producer marketing products through such
chain stores. Therefore it is prayed that th e additional realisation of on account of dis
similarity of the product marketing by the rel evant Indian producer may be discounted to a
reasonable level as specified in Article 2(6)(c) of the basic regulations [sic].
The commission services have the responsibility to ensure vide provisions article 2(6)(c) that
profit margin established shall not exceed the normally realised profit margin incurred by
other exporters or producers on sales of the product of the same category in the domesticmarket of the country of origin.”
                                                     
30 Annex 26.WT/DS141/R
Page 106
3.25 Texprocil and the companies also filed responses to these disclosures through their legal
representatives.  Relevant excerpts are as follows:
3.26 Comments made on behalf of Texprocil:31
“2.2 Apart from the fact that profits were not reliable [as per point 2.1], the Commission
Services have acted not in accordance with the law by applying Article 2(6)(a). The
application of this Article is not allowed under the current factual circumstances.
Hence, Article 2(6)(b) or 2(6)(c) should be applied for the determination of a
‘reasonable’ profit as per Article 2(3)
Apart from the fact that profits were not reliable [as per point 2.1], the Commission Services
have also acted not in accordance with the law by applying Article 2(6)(a). The very language
of Article 2(6)(a) does not allow a profit to be inferred from one producer only: it should be a“weighted average” of [other] “exporters
 or producers .” A weighted average by its nature
can only be inferred from more than one producer. Also the wording exporters or producers
makes clear that it was the intention of the legislator that the law of averages be applied so
that there is no distortion due to the special status of one single producer or exporter. In the
present case the single producer/exporter whose profit margins have been used has a specialstatus as discussed hereinafter.
In the view of our client therefore the admonition in Article 2(6)(a) has not been respected.
The Commission Services are therefore not allo wed to apply Article 2(6)(a) and should apply
Article 2(6)(b) or Article 2(6)(c).
2.3 Even if the Commission Services insist on applying non-reliable profits as well as
Article 2(6)(a), it is submitted that the provisions of Article 2(3) j° 2(6)(c) were not
respected. The concept of a profit determined under a “reasonable” method is clearly
defined in Article 2(6)(c) and no heed has been given to this provision
It is observed by our client that the Commission Services in its current determination have in
the construction of the normal values for four companies extrapolated an extra-ordinary
profit of 18.65 per cent which was determined on the basis of the profitable sales only of
Bombay Dyeing. Such unrealistic and unreasonable profit addition is due to a blind
application of only Article 2(6)(a), without any consideration being given to the complete
letter of the law and the entire structure of Article 2, most notably Articles 2(3) and Article
2(6)(c).
Article 2(3) mandates that in a situation where the normal value is constructed, “a
reasonable amount for . . . profits” [emphasis added] should be added. While Article 2(3)
itself does not define the concept of ‘reasonable’, Article 2(6)(c) explicitly provides that a
profit which is established under a reasonable method “shall not exceed the profit normally
realized . . . in the same general category in the domestic market.” Any reasonable profit as
per Article 2(3) is therefore mandatorily limited to the profit normally realized in the same
general category in the domestic market.
The following table shows at a glance which profits are attained by the producers in the same
general category of products:
                                                     
31 Annex 27.WT/DS141/R
Page 107
Name Company Overall Same category domestic
Anglo-French -14.99% 5.49%
Bombay Dyeing 4.66% 12.13%
Madhu 4.26% -
Omkar 9.23% -
Prakash 3.5% 3.5%
Average: 5.41% 7.04%
These profits are the profits as per the P/L, and are therefore the profits which are “normally
realized” in the domestic market [Article 2( 6)(c)]. Clearly, the profit determined under
Article 2(6)(a) is currently exceeding the profit normally realized. It is not  allowed under
Article 2(6)(c) to deem reasonable a method which applies a profit which exceeds the profitwhich is realized in the same general category. The profit determined under Article 2(6)(a)
should still have undergone the reasonability test of Articles 2(3) j° 2(6)(c). In other words,the profit of 18.65 per cent should mandatorily have been limited to 7.04 per cent. The
Commission has therefore acted ultra vires by applying a profit in excess of the maximum
which is allowed under Article 2(6)(c).
In case Article 2(6)(b) were to be applied, the lower individual actual amounts [5.49%,
4.26%, 9.23%, 3.5%] as mentioned in the above table should have been applied.
Apart from the legal obligations provided in the basic Regulation it is clear from common
sense that a profit of 18.65 per cent is excessive for the textile sector. The profit of 18.65 per
cent has resulted from special circumstances, no tably the inflatory effect of the 80-10 rule
[whereby loss making transactions are excluded] as well as the particular circumstances
under which Bombay Dyeing operates. Our client would like to highlight at this stage some of
the abnormal, non-representative circumstances which may well have led to such abnormal
profits realized by Bombay Dyeing on the domestic market. These facts will also underline as
to why Article 2(6)(a) mandates that profits of one single producer alone can never be
applied [see also point 2.2]. Bombay Dyeing is a solitary case with its own peculiarities:
• Channel of sale: Bombay Dyeing sells its products through big chain stores covering the
entire country. This contrasts with the normal sales channel through middlemen by other
companies;
• Product range: Bombay Dyeing through the above-mentioned channel of sales sells a
large variety of products which includes inter alia towels, fabric, ready-mades, curtain
cloth, furnishing fabrics, bed linen, table linen, etc. This contrasts with the other sample
companies which are exclusively dealing with bed linen or, at best, with fabrics;
• Brand name: Bombay Dyeing is the only company in India which sells its product under
brand name, a brand name created by incurring huge expenditure on infrastructure,
maintenance and publicity, resulting in additional profits realized for brand premium;
• Direct to end-users: Bombay Dyeing 87.18 per cent of the sales are to the end-user
through these retail chain shops and institutional sales which is in contrast to the sales by
any other producer whose almost entire sales would be through a number of middlemen.
Indeed, as a result of the Commission’s determination of a profit of 18.65 per cent, the
average return on shareholders funds for the companies to which this profit has been applied
is excessive, as the following table shows:32
                                                     
32 Footnote in original: For details we refer to the company-specific comments.WT/DS141/R
Page 108
Anglo-French 165.42%
Madhu 159.46%
Omkar 131.82%
Prakash 201.04%
2.4 The profit determined is three times higher than the average profit determined for the
other countries under investigation. As an alternative it is suggested that the
Commission Services apply the w.a. profit margin determined for the other countries
Our client wishes to draw attention to the fact that the profit which is determined reasonable
for the other countries under investigation is completely different than the “reasonable”profit determined for India. For comparison purposes we reproduce the profits that are
considered “reasonable” in the case of the three other countries under investigation:
Country Profit
Egypt: 5.8
Pakistan: 7.4
EC: 5
Average: 6.06
Thus, these facts clearly show that it cannot be reasonably be maintained that 18.64 per cent
could be considered to constitute a “reasonable” profit in the sense of the basic Regulation.Indeed, no textile producer in the world would ever make a profit of 18.64 per cent. The
current approach is therefore devoid of commercial reality and as shown above in fact
violates an essential requirement of the basic Regulation.
It is therefore respectfully requested that the Commission Services seriously reconsider the
exorbitant profit that has been applied. Instead, it is suggested that as a reasonable
alternative, the average profit of 6.06 per cent be applied. This would also be in accordance
with Article 2(6)(c), since 6.06 per cent does not exceed the profit realized in the same
general category of profits [7.04%].”
3.27 Texprocil’s legal representatives submitted the following comments on behalf of the company
Anglo-French:
33
“2. Dumping Margin
It is respectfully requested that the Commission Services take into account the fact that Anglo-French is a state-owned enterprise. This has important consequences for the amount of profit
that is deemed “reasonable” to be added to COP in order to arrive at the constructed normal
value.
2.1 The current profit margin that has been applied to Anglo-French cannot be
considered “reasonable” for a State-owned enterprise operating in the Textile sector
When determining the “reasonable” profit margin it is respectfully requested that the
Commission Services take into account that Anglo-French is a fully state-owned company
perhaps the only one dealing in product concerned. It is not a private enterprise and the
                                                     
33 Annex 28.WT/DS141/R
Page 109
primary aim of Anglo-French is not to make profits. Anglo-French has a social function. Its
sole purpose is to provide work and a social safety-net to the people of Pondicherry. About
10,000 people of Pondicherry are dependent on Anglo-French. This amounts to about 5 per
cent of the population. Taking into account the families as well, it can safely be assumed thatroughly 25 per cent of Pondicherry depends on Anglo-French for a living.
It can also be easily inferred from the P/L that Anglo-French has a different cost and profit
structure than the other companies. The labour  costs alone represent 27 per cent of the COM
since Anglo-French obligatory incurs high minimum wages [as against the usual 9 to 10 percent for other companies]. The company also works with old machines and a low productivity
ratio. The only reason for the existence of the company is to keep the people in Pondicherry
employed, not to attain huge business profits.
Anglo-French is therefore completely different from the other companies in India.
Nevertheless, the profits that have been applied to Anglo-French are inferred by reference to
these other, completely different, privately run companies [through application of Article
2(6)(a)]. Since it is not mandatory to apply the profit by reference to the profit determined as
per Article 2(6)(a), the other two options of de termining profit are equally valid. In the case
of Anglo-French the 18.65 per cent would seem out of line with reality for a Governmentowned enterprise, especially in the area of textiles.
It is therefore suggested that for Anglo-French, Article 2(6) should therefore be applied by
reference to option (c): “any other reasonable method, provided that the amount for profit so
established shall not exceed the profit normally realized by other exporters or producers onsales of products of the same general category in the domestic market of the country of
origin.” Since Anglo-French is the only Stat e-owned company in India, the most reasonable
method would seem to be the profit realized on the domestic market for the product concerned
by Anglo-French itself. As would be clear fr om Annex III 1.2.h.P.L. the profit of the total
domestic turnover of the product concerned for Anglo-French is 5.49 per cent which,
considering the application of Article 2(6)(c), could be a reasonable amount of profit earned
by a State-Owned company. Further, in view of the Commission Services’ own determination
of a reasonable profit of 5 per cent for the EU, 5.8 per cent for Egypt, and 7.4 per cent for
Pakistan, it would be grossly improper to apply a profit margin of 18.65 per cent drawn from
a company which is dealing in entirely different types of products, different channels of sale
[large retail chain stores], different customers [end-users and institutional] and under a
brand name created over 40 years of huge investment and continuous publicity whichobviously results in higher profit margins on their products.
Anglo-French also considers the profit margin of 18.65 per cent as unreasonable and beyond
scope of Article 2(6) as this would result in a return on shareholders fund of 165.42 per cent
during the investigation period as with a shareholders fund of Rs 12.3 crores and turnover ofRs 116.48 crores the resultant net profit margin of 18.65 per cent on turnover would bring
165.42 per cent return to shareholders [detailed calculation with supporting as per Annexure
2]. As such application of 5.49 per cent profit margin would seem to be “reasonable”,
allowed under Article 2(6)(c), and appropriate for the circumstances of a State-owned
company and do justice to the people of Pondicherry.”
3.28 The relevant part of the comments submitted by the legal representatives of Bombay Dyeing
is as follows:
34
                                                     
34 Annex 29.WT/DS141/R
Page 110
“2. The concept of a reasonable profit margin and SG&A
The Commission Services have applied Articles 2(3) jº 2(4) jº 2(5) jº 2(6) in the computation
of the constructed normal value.
In this regard our client wishes to emphasize the following points:1. Article 2(3) mandates the addition of a “reasonable” profit margin;
2. Article 2(3) itself does not provide a definition of “reasonable”; and
3. Article 2(6)(c) defines the notion of “reasonable”.
In the view of our client this third step has not been respected. Article 2(6)(c) explains that a
“reasonable” method entails that “profit so established shall not exceed the profit normally
realized by other exporters or producers on sales of products of the same general category in
the domestic market of the country of origin.” This argument will also be provided by
Texprocil in further detail hence our client refers also to Texprocil’s comments in this regard.
However, our client wants to provide the following remarks which, in its view, explain why
the profit currently determined is not reasonable:
In the domestic market Bombay Dyeing markets its products under a brand name and through
exclusive chain stores thereby necessitating higher administrative and operational and
substantial advertising costs exclusively for brand/trade creation incurred over a period of
four decades and as such should not be included in the channel selection for profitdetermination. It is the view of our client that the only channel which is comparable to the
export side is the wholesale channel. The industrial and RDS channel represent sales to end-
users who buy the goods for own consumption and hence are prepared to pay for the brand
name and therefore resulting into a higher profit realization. The fact remains that the
institutional buyers, i.e. hotels, Air India, Indian Airlines, etc., are the actual users and they
buy directly from the company on a payment of the market prices whereby the higher profits
are realized. The middleman, i.e. the wholesal er and semi-wholesaler does not buy for own
consumption and hence cannot be induced to pa y an extra premium for the brand. This fact
remains indisputable though on account of certain misinformation in the questionnaire there
appears to be a misunderstanding with the Commi ssion Services that this industrial channel
is the one synonymous to the wholesaler and not to the end-user/customer. Bombay Dyeing
hopes that facts cannot be changed by any amount of defective explanation or
misunderstandings on either side.
The fact that the SGA percentages expressed as a percentage of T/O seem similar [EC’s
observation] is not completely correct since in the case of Bombay Dyeing these percentages
are calculated first as a percentage of production cost. Only later these percentages areexpressed as a percentage of turnover; our client refers to Annexure 2 with details in this
regard. From Annexure 2 it is clear that th e SGA for the RDS channel as a percentage of
production cost is significantly higher [14.62%] than for the wholesale channel [6.26%].
We should further point out that in view of the mandatory reasonability requirement, the
profit established for Bombay Dyeing is not reasonable when compared with the profit
determined to be reasonable for other countr ies. While for Egypt, Pakistan, and the EU the
Commission Services have determined profits of  respectively 5.8 per cent, 7.4 per cent, 5 per
cent to be reasonable, a profit of 18.65 per cent for Bombay Dyeing can impossibly beWT/DS141/R
Page 111
considered “reasonable”. 18.65 per cent is more than three times as high as the profit for the
three other entities under investigation. Moreover, it should be pointed out that the “profit
normally realized . . . on sales of products of the same general category in the domestic
market” is 12.13 per cent [see P/L]. Again, this latter profit sharply contrasts with the18.65 per cent determined to be reasonable by the Commission Services. It is respectfully
requested that not only the letter, but also the spirit and structure
 of the law be applied when
determining a “reasonable” profit margin. It is clear that it could never have been theintention of the legislator that excessive profits are determined, resulting from special
circumstances on the domestic market [see above]. The current application of the 80-10 ruleto all three channels has resulted in a highly artificial profit margin which is devoid from
commercial reality.
. . .
3.d. Level of Trade
As for the statement that an allowance for level of trade could not be granted in view of the
fact that this, compounded with the other allowances, would exceed the total SGA expenses
would be somewhat unfair in view of the specific  nature of a level of trade allowance. Level of
trade can clearly be a factor in the difference in profit level incurred on domestic and export.
We refer to the Ring binder mechanism proceeding where this fact was recognized and the
level of trade allowance was linked to and quantified on the basis of the profit. On this basis,
and in view of the excessive domestic profit t hat has been determined for Bombay Dyeing, an
allowance for differences in level of trade would seem reasonable.”
3.29 The following is an excerpt of the relevant comments made by the legal representatives on
behalf of Omkar:
35
“1. The addition of a 18.65 per cent profit margin cannot be considered “reasonable.”
The concept of a profit determined under a “reasonable” method is clearly defined in
Article 2(3) (c) and no heed has been given to this Article. Moreover, the profit
determined is three times higher than the average profit determined for the other
countries under investigation
It is observed by our client that the Commission Services in its current determination have inthe construction of the normal value extrapolated to Omkar an extra-ordinary profit whichwas determined for another company. It is cl ear from the P/L of Omkar that its profit
normally realized is 9.23 per cent [Annex III-I.2.h]. Not disturbed by this observation the
Commission Services have mechanically applied a profit margin which is five times higher
than the 3.5 per cent profit which is normally realized. Such irrealistic and unreasonableprofit addition is due to a blind application of Article 2(6)(a), without any consideration beinggiven to the spirit and structure of the law, most notably Articles 2(3) and Article 2(6)(c).
Article 2(3) mandates that in a situation where the normal value is constructed, “a
reasonable amount for . . . profits” [emphasis added] should be added. While Article 2(3)
itself does not define the concept of reasonable, it is clear that Article 2(6)(c) explicitly
provides that a profit which is established under a reasonable method “shall not exceed the
profit normally realized . . . in the same general category in the domestic market.” No
                                                     
35 Annex 30.WT/DS141/R
Page 112
product could therefore be more reasonable than a profit which is in line with the overall
profit of the P/L of the company itself. In the case of our client this is 9.23 per cent.”
3.30 An excerpt of the comments on behalf of Madhu is as follows:36
“1. The addition of a 18.65 per cent profit margin cannot be considered “reasonable.”
The concept of a profit determined under a “reasonable” method is clearly defined in
Article 2(3) (c) and no heed has been given to this Article. Moreover, the profit
determined is three times higher than the average profit determined for the other
countries under investigation
It is observed by our client that the Commission Services in its current determination have in
the construction of the normal value extrapolated to Madhu an extra-ordinary profit which
was determined for another company. It is cl ear from the P/L of Madhu that its profit
normally realized is 4.26 per cent [Annex III-I.2.h]. Not disturbed by this observation the
Commission Services have mechanically applied a profit margin which is four and one half
times higher than the 4.26 per cent profit which is normally realized. Such irrealistic and
unreasonable profit addition is due to a blind application of Article 2(6)(a), without any
consideration being given to the spirit and structure of the law, most notably Articles 2(3) andArticle 2(6)(c).
Article 2(3) mandates that in a situation where the normal value is constructed, “a
reasonable amount for . . . profits” [emphasis added] should be added. While Article 2(3)
itself does not define the concept of reasonable, it is clear that Article 2(6)(c) explicitly
provides that a profit which is established under a reasonable method “shall not exceed the
profit normally realized . . . in the same general category in the domestic market.” No
product could therefore be more reasonable than a profit which is in line with the overall
profit of the P/L of the company itself. In the case of our client this is 4.26 per cent.
Apart from this legal admonition provided in the basic Regulation it is clear from common
sense that a profit of 18.65 per cent is excessive for the textile sector. The profit of 18.65 percent has resulted from special circumstances, no tably the inflatory effect of the 80-10 rule
[whereby loss making transactions are excluded] as well as the particular circumstances
under which Bombay Dyeing operates.”
3.31 On behalf of Prakash the following comments were submitted:
37
“1. The addition of a 18.65 per cent profit margin cannot be considered “reasonable.”
The concept of a profit determined under a “reasonable” method is clearly defined in
Article 2(3) (c) and no heed has been given to this Article. Moreover, the profit
determined is three times higher than the average profit determined for the other
countries under investigation
It is observed by our client that the Commission Services in its current determination have in
the construction of the normal value extrapolated to Prakash an extra-ordinary profit which
was determined for another company. It is cl ear from the P/L of Prakash that its profit
normally realized is 3.5 per cent [Annex III-I.2.h]. Not disturbed by this observation the
Commission Services have mechanically applied a profit margin which is five times higher
                                                     
36 Annex 31.
37 Annex 32.WT/DS141/R
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than the 3.5 per cent profit which is normally realized. Such irrealistic and unreasonable
profit addition is due to a blind application of Article 2(6)(a), without any consideration being
given to the spirit and structure of the law, most notably Articles 2(3) and Article 2(6)(c).
Article 2(3) mandates that in a situation where the normal value is constructed, “a
reasonable amount for . . . profits” [emphasis added] should be added. While Article 2(3)
itself does not define the concept of reasonable, it is clear that Article 2(6)(c) explicitlyprovides that a profit which is established under a reasonable method “shall not exceed the
profit normally realized . . . in the same general category in the domestic market.” No
product could therefore be more reasonable than a profit which is in line with the overall
profit of the P/L of the company itself. In the case of our client this is 3.5 per cent.”
3.32 Hearings were held on 18 July 1997 during which the above arguments were explained orally.
3.33 In response to the above-cited comments submitted in writing and during the hearing, the
Commission Services provided replies in the definitive disclosure documents of 3 October 1997.38
With respect to the text of the general disc losure we refer to the definitive Regulation39 which
contains—as far as the dumping determination is concerned—the same text.  With respect to the
company-specific disclosures, the relevant excerpt is  similar for each of the five sample companies:
“Please find set out below the essential elements that will assist you in understanding the
dumping calculations we have made in this case . . . These explanations will complement the
remarks contained in the general disclosure document . . .
2. Normal value
No changes.
. . .—S G A
No changes.
—P r o f i t
No changes . . .”
3.34 On 13 October 1997 all companies submitted final disclosure comments.
40  F r o m  t h e s e
comments the following observations from Bombay Dyeing may be highlighted:
“2.2 The concept of a ‘reasonable’ profit: Article 2(3) provides that in CNV a reasonable
amount of profit [and SGA] should be added to COM. It is respectfully submitted that even if
such profit is inferred on the basis of the method of Article 2(6)(a), the qualification ofreasonableness should still apply. In this regard Article 2(6)(c) provides sufficient
qualification and explanation of when a profit can be considered ‘reasonable.’ Under this
logic the current profit, although established under 2(6)(a), is not ‘reasonable’ as mandated
by Article 2(3) and defined in Article 2(6)(c). It is respectfully requested that the Commission
Services look into this matter.”
                                                     
38 Annex 33.
39 Please refer to Annex 9.
40 Annex 34: Anglo-French; Annex 35: Bombay Dyeing; Annex 36: Omkar; Annex 37: Madhu;
Annex 38: Prakash.WT/DS141/R
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3.35 As far as this issue is concerned, the Commission Services in their reply of 17 October 1997
to Bombay Dyeing (Annex 39) merely referred to the definitive disclosure documents.  Except for a
correction for certain selling expenses previously not granted, the Commission Services made nochanges to the dumping margin calculations.
41
3.36 In the definitive Regulation42 the EC provided the following comments on the issue:
“D. DUMPING1. Normal value(a) Methodology for the construction of normal value
. . .
(d) Domestic profit margin(18) All Indian exporting producers contested the use of the actual profit margin realized by
one Indian company on its representative profitable domestic sales in the construction of
normal value for other Indian companies. They argued that this profit margin is exceptionally
high because, to a great extent, it relates to domestic sales of branded products and that since
export sales always concerned non-branded products, such domestic sales do not permit a
proper comparison within the terms of Article 2(3) of the basic Regulation. Four of theseexporting producers also argued that this profit is not calculated by reference to the weighted
average profits of other exporters or producers as provided for in Article 2(6)(a) of the basic
Regulation, but corresponds to only one exporting producer. It was further claimed in this
respect that, in order to ensure that the amount for profits used is reasonable, the profits
realised on sales of products of the same general category in India should in any event not be
exceeded.
It should be noted that the profit margin used in constructing normal value corresponds to the
weighted average profit realized on domestic sales of profitable types of branded and non-
branded products by the Indian company concerned and that, had this claim been accepted,
this would have been to the disadvantage of the producers, the profit margin used being lower
than the profit margin realized by the same company solely on its domestic sales of non-branded products.
With regard to the use of the profit margin of only one company, it should be recalled that the
investigation has been restricted to a sample of exporting producers in accordance with
Article 17 of the basic Regulation and that the vast majority of the cooperating Indiancompanies are export oriented companies with  no domestic sales of the like product. The
Commission selected for the sample five I ndian exporting producers two of which had
declared at the time of the selection that they had made domestic sales of the like product.
However, as indicated in recital 23 of the provisional Regulation, the investigation revealed
that only one had representative domestic sales of the like product during the investigationperiod. Moreover, the reference in Article 2(6)(a) of the basic Regulation to a weighted
                                                     
41 See also recital (22) of the Regulation imposing definitive measures.  As an example, the letter of the
Commission Services of 17 October 1997 (reference 092870) to Prakash is attached as Annex 40.
42 Please refer to Annex 9.WT/DS141/R
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average amount for profits determined for other exporters or producers, does not exclude that
such amount can be determined by reference to a weighted average of transactions and/or
product types of a single exporter or producer. Consequently, it is not considered justified to
establish the amount for profits in accordance with Article 2(6)(b) or 2(6)(c) of the basic
Regulation, as claimed by the Indian companies concerned.
(19) One Indian exporting producer argued that its domestic profitability should have been
assessed only on the basis of those types of the product concerned sold both domestically and
on the Community market.
It should be noted however, that Article 2(2) of the basic Regulation provides that the sales of
the like product intended for domestic consum ption shall normally be used to determine
normal value if such sales volume constitutes 5  per cent or more of the sales volume to the
Community of the product under consideration. Therefore, all domestic sales of the likeproduct intended for domestic consumption were, where appropriate, used to establish the
domestic profit margin, whether or not particular product types were also exported to the
Community.
It follows from the above that the methodology and the findings as set out in recitals 23 to 36
of the provisional Regulation are hereby confirmed.
. . .3. Comparison(21) One Indian exporting producer contested the Commission's refusal to grant an
adjustment for level of trade.
Article 2(10) (d) of the basic Regulation requires that it has to be shown that the export price
is at a different level of trade from the normal value and that the difference has affected price
comparability, which is demonstrated by consistent and distinct differences in functions andprices of the seller for the different levels of trade in the domestic market of the exporting
country. Therefore, in the absence of any substantiated evidence to this effect, the claim was
rejected as already explained in recital 40 of the provisional Regulation.
(22) The same Indian company also contested the Commission's refusal to grant adjustments
to normal value for certain selling expenses.
The request was provisionally rejected because the adjustments requested exceeded the
expenses incorporated in the constructed normal value.
The company's renewed request showed the same  shortcomings and could not, therefore, be
accepted either.
However, it was finally decided to grant an adjustment limited to those expenses (e.g.
commissions and freight) which could be identified in the allocation of SG&A expenses assubmitted by the company in its response to the Commission's questionnaire and which were
verified during the investigation and incorporated in the constructed normal value.WT/DS141/R
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(23) This Indian company further challenged the Commission's refusal to grant an adjustment
to normal value for credit costs.
As explained in recital 44 of the provisional Regulation, this claim had to be rejected given
that the delivery of all goods sold in the domestic market by the company concerned took
place only after payment. Thus, since the seller did not pass on to the buyer the use or the
possession of the goods in question until the time of  payment, it cannot be argued that there
was any credit granted by the seller.
. . .
4. Dumping margins(a) General methodology(28) The representatives of the Indian and the Egyptian cooperating exporting producers,
which were not included in the sample and, therefore, were not investigated, argued that the
dumping margins established for investigated st ate-owned companies should not be taken into
account when calculating the dumping margins to be allocated to private-owned companiesnot investigated.
As already explained above, the Commission cannot treat differently state and privately
owned companies where all companies are oper ating in free market conditions. Therefore,
the claim cannot be accepted and the provisions of recitals 46 to 48 of the provisionalRegulation are confirmed.
(b) Dumping margins for companies in the sample(29) The comparison between the normal value and the export price, in accordance with the
methodology of the provisional Regulation and after revisions, where appropriate, following
the arguments made by interested parties, showed  the existence of dumping in respect of all
companies investigated. The definitive dumping ma rgins expressed as a percentage of the CIF
import price at the Community frontier are as follows:
India
Anglo French Textiles 24.7 %
The Bombay Dyeing Manufacturing Co. Ltd 7.7 %
Nowrosjee Wadia Sons Ltd 7.7 %
Madhu Industries Ltd 17.0 %
Madhu International 17.0 %Omkar Exports 14.2 %
Prakash Cotton Mills Ltd 2.6 %
. . .
(c) Dumping margin for cooperating companies not in the sample
(30) Cooperating companies not selected in the sample (see recitals 17 and 21 of the
provisional Regulation and recitals 12 and 13 of this Regulation) were allocated the averageWT/DS141/R
Page 117
dumping margin of the companies in the samp le, weighted on the basis of their export
turnover to the Community. In accordance with Article 9 (6) of the basic Regulation, when
calculating this average dumping margin de minimis margins established have been
disregarded. Expressed as a percentage of the CIF import price at the Community frontier,these definitive dumping margins are as follows:
India 11.6  per cent. . .(d) Dumping margin for non-cooperating companies(31) For non-cooperating companies a dumping margin was determined on the basis of the
facts available in accordance with Article 18 of the basic Regulation. Since the level ofcooperation was high, it was considered appropriate to set the dumping margin for non-
cooperating companies in each country concerned at the level of the highest dumping margin
established for a company in each sample because it would constitute a bonus for non-
cooperation to assume that the dumping margin to be allocated to exporting producers which
did not make themselves known is lower than that found for a cooperating exportingproducer.
These definitive dumping margins expressed as a percentage of the CIF import price at the
Community frontier, are the following:
India 24.7 per cent . . .”
Articles 2, 2.2, and 2.2.2 were also discussed in detail during the first round of consultations, of which
the following is an excerpt:
43
“[EC]: On the issue of reasonableness of profit, indeed Article 2 speaks about a ‘reasonable’
amount of SGA and profits.  Later on, in Arti cle 2.2.2, the Agreement refers to this 2.2. If
there are no actual data, then three options are given. Any of these options is an
interpretation of ‘reasonable’ in 2.2 . . .
Bhargava:  . . . Article 2.2.2(ii) excludes the possibility of using one company’s data, since it
requires a ‘weighted average’, therewith presuming at least two companies. This is to avoid a
determination strongly coloured by the peculia rities of one single company. The EC had all
the necessary information to use any other method.
[The EC] replies that there are several points in this presentation. . . . he cannot agree that
Article 2.2 overrides 2.2.2. Rather, the concept of “reasonable” is explained in 2.2.2.. . .It is EC practice to follow in Article 2(6) of the basic Regulation as much as possible the
product concerned, but there is no formal sequence in 2(6). The fact that the word ‘exporters’in 2(6) is in plural does not necessarily mean that you need at least two companies.
                                                     
43 The verbatim report on the discussions during the first round of consultations is attached as
Annex 11.WT/DS141/R
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. . .
[EC]: We consider all three options in 2.2.2 reasonable. It depends, however, on the
circumstances. The EC considered in this case that Article 2.2.2(ii) was the most reasonable.. . .
Mr Seth: On the questions concerning the sequencing in 2.2.2 we reserve our rights.
[EC]: In principle all options are reasonable unless there is any factor rendering them
unreasonable. This was not the case here . . .”
3.37 In its letter of 1 October 199844 the EC further answers pertaining to and relevant in the
context of Articles 2, 2.2., and 2.2.2:
“Question 48
Would the EC agree that it is necessary to es tablish per Article 2.2 that the amounts for SGA
and profit applied in the constructed value are reasonable?
It is evident that Article 2.2 of the WTO Anti-Dumping Agreement (the Agreement) requires
that the investigating authorities establish reasonable amounts of selling, general and
administrative costs (SGA), and profits, for use in all constructions of normal value.
Questions 49 to 57 and 61 to 71
Concerning the methodology to be used to establish the amounts of SGA and profits for
constructing normal value.
For discussion in a new round of oral consultations.Questions 58 to 60 and 72 to 74
Concerning the treatment of exporters’ claims concerning the level of profit used in the
construction of normal value.
Recitals (23) to (26) of Regulation (EC)  No 1069/97 imposing a provisional anti-dumping
duty specify which provisions of Regulation (EC) 384/96 (the Basic Regulation)—and thereby
the WTO Anti-dumping Agreement—have been followed.
Recital (18) of Regulation (EC) No 2398/97 imposing a definitive anti-dumping duty replies
to all claims raised by the Indian exporters in the course of the administrative procedure with
regard to the profit used in the construction of the normal value.”
3.38 Discussion on the subject also took plac e during the second round of consultations:45
                                                     
44 Please refer to Annex 12.
45 The verbatim report on the discussions during the second round of consultations is attached as
Annex 13.WT/DS141/R
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“ . . . Mr Seth: I will now turn to questions 49-57 and 61-71. As you will recall, these
questions concerned the concept of “reasonable” profit in the context of Article 2.2 and 2.2.2.
The EC in its letter of 1 October 1998 referred to a second round of consultations, during
which it would reply to the questions 49-57 and 61-71 raised by India. We are at yourdisposal now.
[EC]: We are talking about alternative methods that the [Agreement] provides. Any of these
methods are reasonable as long as the methods are stable and the elements for their
application are present. 2.2.2(iii) only gives an alternative to 2.2.2 chapeau and (i)/(ii). Sothere are three methods plus an alternative in 2.2.2(iii). There is no preference between
methods (i)-(iii).  . . .
. . .
Mr Seth: Concerning us [question 50] there was a failure to check whether the result of
2.2.2(ii) was reasonable and that is inconsistent with 2.2.
[EC]: Our response is that the profit established was reasonable.
Mr Seth: Would the EC agree that Article 2.2.2(iii) suggesting that to apply a profit which
does not exceed the profit normally realized by other exporters or producers on sales of the
same general category of products is a reasonable method? [question 51]
[EC]: The use of any method is reasonable. That does answer your question. Even in this
case it was reasonable. The WTO Agreement entitles a Member to develop a method that as
long as it is followed consistently it is reasonable.
Mr Seth: Thank you. Would the EC agree that  a profit applied in the constructed normal
value which is three times higher than profits normally realized by other exporters or
producers on sales of products of the same general category in the domestic market is not
reasonable in the sense of Article 2.2.2(iii)?
[EC]: I just reiterate that the EC has developed a method such as existed in your case. We
have followed the method in your case and we follow it. We do not change the method when
the profit is very low and we also do not change it when the profit is very high.
. . .
4. Mr Seth: I refer to questions 60 and 61. Would the Community agree that the
application of SGA and profits of one producer only is not allowed under the text of 2.2.2(ii)
which mandates that a weighted average be used of exporters or producers.
[EC]: Is your position that the Agreement does not permit the use of the profit and SGA of
one company?
Mr Seth: In Article 2.2.2(ii) it talks of the weighted average of companies .
[EC]: This is a very interesting interpretation. We do not read it like that.
. . .”WT/DS141/R
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3.39 In its letter of 29 June 199946 the EC further provided the following answers in the context of
Article 2.2.2:
“Questions 49 to 57 and 61 to 71
Concerning the methodology to be used to establish the amounts of SGA and profits for
constructing normal value.
The answers repeat recitals (23) through (26) of the Regulation imposing provisional measures.”
Questions 58 to 60 and 72 to 74
Recitals (23) to (26) of the provisional duty Regulation specify which provisions of
the basic Regulation have been followed and therefore the Community consider that itsmethodology has been justified and recital (18) of the definitive duty Regulation replies to all
claims raised by the Indian exporters in the course of the administrative procedure with
regard to the profit used in the construction of the normal value.
As already mentioned above, the findings of the investigation, which relied on the
responses to the questionnaires and the information obtained during the on-spot verifications
of the Community investigators, showed that only one of the five companies selected in the
sample had representative domestic sales of the like product.  Domestic sales of that company
were made through three channels: a) to exclusive wholesalers -- branded products, b) to
other wholesalers -- non-branded products and c) to industrial users such as hotels, hospitalsetc. -- non-branded products.  The average profit margin realized by the company in question
on profitable types of non-branded products in the domestic market was 39 per cent higher
than the overall average profit realized on profitable branded and non-branded types of the
like product in the same market.  It should be noted that had the Community followed the
request of the company itself and construc ted normal value using the SG&A and profit
realized only on non-branded products, instead of the overall SG&A and profit which it
actually used, the normal value and consequently the dumping margin would have beenhigher than that calculated by the Community.”
47
2. The text of Article 2.2.2
3.40 The relevant part of Article 2.2.2 of the ADA sets forth that:
“2.2 When there are no sales of the like product in the ordinary course of trade in the
domestic market of the exporting country or when, because of the particular market situation
                                                     
46 Annex 14.
47 Note that the answer does not address the questions.  For example, question 60: “Would the EC
agree that the application of amounts for SGA and profit inferred from one producer is not allowed as per
Article 2.2.2(ii)?”  is not answered, nor is question 71.  It is further noted that the recurring references to the
dumping margin having been lower if the request of the company had been followed is only partially correct:while a comparison between the branded and the total of the non-branded sales reveals 4.02 per cent higher
SG&A and profits for non-branded sales, the situation is the reverse when the (non-comparable) industrial
channel is not considered in this comparison.  A comparison between the branded and the similar normal non-
branded sales channel (which both incur virtually similar SG&A expenses) reveals that the profit on non-branded sales is 5% lower [17.84 per cent vs. 12.21 per cent].WT/DS141/R
Page 121
or the low volume of the sales in the domestic market of the exporting country48, such sales do
not permit a proper comparison, the margin of  dumping shall be determined by comparison
with a comparable price of the like product wh en exported to an appropriate third country,
provided that this price is representative, or with the cost of production in the country oforigin plus a reasonable amount for administrative, selling and general costs and for profits .
. .
2.2.2 For the purpose of paragraph 2, the amounts for administrative, selling and
general costs and for profits shall be based on actual data pertaining to productionand sales in the ordinary course of trade of the like product by the exporter or
producer under investigation. When such amounts cannot be determined on this
basis, the amounts may be determined on the basis of:
. . .
(ii) the weighted average of the actual amounts incurred and realized by
other exporters or producers subject to investigation in respect of production
and sales of the like product in the domestic market of the country of origin;”
3.41 The ‘corresponding’
49 provisions in the basic EC Anti-Dumping Regulation are Articles 2(3)
and 2(6), which provide that:
“2(3) When there are no or insufficient sales of the like product in the ordinary course of
trade, or where because of the particular market situation such sales do not permit a propercomparison, the normal value of the like product sh all be calculated on the basis of the cost
of production in the country of origin plus a reasonable amount for selling, general and
administrative costs and for profits, or on the basis of export prices, in the ordinary course of
trade, to an appropriate third country, provided that those prices are representative.
. . .
2(6). The amounts for selling, for general and administrative costs and for profits shall be
based on actual data pertaining to production and sales, in the ordinary course of trade, of
the like product, by the exporter or producer under investigation. When such amounts cannot
be determined on this basis, the amounts may be determined on the basis of:
(a) the weighted average of the actual amounts determined for other exporters or
producers subject to investigation in respect of production and sales of the like
product in the domestic market of the country of origin;”
3.42 The last paragraph of Recital (18) of the Regulation imposing definitive measures makes clear
that the EC in fact applied Article 2(6)(a) of its domestic legislation:
                                                     
48 Footnote in original: Sales of the like product destined for consumption in the domestic market of the
exporting country shall normally be considered a sufficient quantity for the determination of the normal value ifsuch sales constitute 5 per cent or more of the sales of the product under consideration to the importing Member,
provided that a lower ratio should be acceptable where the evidence demonstrates that domestic sales at such
lower ratio are nonetheless of sufficient ma gnitude to provide for a proper comparison.
49 This is not to say that the obligations laid down in Article 2(6) are identical to those of Article 2.2.2
of the ADA.WT/DS141/R
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“Moreover, the reference in Article 2(6)(a) of the basic Regulation . . . Consequently, it is not
considered justified to establish the amount for profits in accordance with Article 2(6)(b) or
2(6)(c) of the basic Regulation, as claimed by the Indian companies concerned”
3. Claims under Article 2.2.2 (Claims 1-6)
3.43 Six claims follow from the facts and legal text as described above.
3.44 First, the EC has acted inconsistently with Article 2.2.2 in its calculation of the dumping
margins.
3.45 Second, the EC has acted inconsistently with Article 12.2.1, by failing to sufficiently explain
why and how it applied Article 2.2.2.
3.46 Third, the EC has acted inconsistently with Article 12.2.2, by failing to sufficiently explain
why and how it applied Article 2.2.2.
3.47 Fourth, the EC has acted inconsistently with  Article 2.2 in its calculation of the dumping
margins.
3.48 Fifth, the EC has acted inconsistently with Ar ticle 12.2.1, by failing to sufficiently explain
why and how it applied Article 2.2.
3.49 Sixth, the EC has acted inconsistently with Article 12.2.2, by failing to sufficiently explain
why and how it applied Article 2.2.
4. Claim 1:  Inconsistency with Article 2.2.2
3.50 There are three arguments under the first claim as to why the EC has acted inconsistently with
Article 2.2.2.
3.51 The first argument of the first claim is that while the EC has applied the calculation method as
foreseen in Article 2.2.2(ii), this method was not open to it. This method could not be applied since itsrequirements for application were not met.
3.52 The second argument of the first claim is that even within the application of Article 2.2.2(ii),
the EC has acted inconsistently with the provis ion.  Instead of inferring the amounts from other
producers or exporters which were ‘incurred and realized’ (12.09 per cent), the EC inferred the
amounts from other producers or exporters which were ‘determined’ (18.65 per cent).
3.53 The third argument of the first claim is that in the calculation of the dumping margins the EC
has, in the Regulation imposing provisional measures, as confirmed by the Regulation imposing
definitive measures, applied Article 2.2.2(ii) of the ADA. However, as noted above, the methodforeseen in Article 2.2.2(ii) was not available to the EC since its requirements were not met.
Moreover, this option was applied instead of Article 2.2.2(i), which was available to the investigating
authorities. This is inconsistent with, and violates the spirit and structure of, Articles 2.2.2 and 2.2.
4.1 The first argument of the first claim relating to Article 2.2.2: while the EC has applied the
calculation method as foreseen in Article 2.2.2(ii), this method was not open to it. This
method could not be applied since its requirements for application were not metWT/DS141/R
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3.54 As noted above, Article 2.2.2(ii) sets forth that, when amounts for SG&A and profits cannot
be determined on the basis of the method foreseen in the chapeau of Article 2.2.2, the amounts in
question may among others be determined on the basis of:
“the weighted average of the actual amounts incurred and realized by other exporters or
producers subject to investigation in respect of production and sales of the like product in the
domestic market of the country of origin;”
3.55 The wording of this option merits attention.  First of all, the Article mandates the use of a
‘weighted average’.
3.56 The Oxford Concise Dictionary defines ‘average’ as: “an amount obtained by dividing the
total of given amounts by the number of amounts in the set”.50  Websters New Collegiate Dictionary
defines ‘average’ a “a single value (as a mean, mode, or median) that summarises or represents thegeneral significance of a set of unequal values.”
51  Oxford Student’s Dictionary defines ‘average’ as:
“the result of adding several quantities together and dividing the total by the number of quantities” .52
Webster's New World Dictionary defines ‘average’ as “the numerical result obtained by dividing the
sum of two or more quantities by the number of quantities.” The common note in all these definitions
is that the group (set) over which the average is to be taken, should consist of more than one unit.
3.57 The next word is ‘weighted’. ‘Weighted’ is used as an adjective to ‘average.’ Websters New
Collegiate Dictionary defines ‘weighted’ as: “having a statistical weight attached”.53
3.58 The two words together, ‘weighted average’ could henceforth be described as an average that
attributes statistical weight to (each of) the parameters that are being summarised into a single value.
In the context of anti-dumping a ‘weighted average’ is often contrasted with a ‘simple average.’  A
‘simple average’ could be described as an average that does not attribute statistical weight to each of
the parameters that need to be summarised into a single value.
3.59 In any event, it is clear that the word ‘average’ relates to the fact that more than one parameter
needs to be summarised.  The fact that such summarisation needs to take place by use of a statisticalweight stresses the fact that more than one factor needs to be taken into account.
3.60 The question is then to what the ‘weighted average’ actually refers. In this regard, the text of
Article 2.2.2(ii) explicitly refers to “the actual amounts incurred and realized by other exporters or
producers.” Clearly, the average should be of the amounts incurred and realised by other exporters or
producers.
3.61 As a sub-question one may ask to what the word ‘amounts’  refers. In this connection the
chapeau of  Article 2.2.2 provides sufficient clarity:
“2.2.2 For the purpose of paragraph 2, the amounts for administrative, selling and general
costs and for profits shall be based on actual data pertaining to production and sales in the
ordinary course of trade of the like product by the exporter or producer under investigation.
When such amounts cannot be determined on this basis, the amounts  may be determined on
the basis of:
                                                     
50 Excerpt attached as Annex 41.
51 Excerpt attached as Annex 42.
52 Excerpt attached as Annex 43.
53 Excerpt attached as Annex 44.WT/DS141/R
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. . .
(ii) the weighted average of the actual amounts incurred and realized by other
exporters or producers subject to investigation in respect of production and sales of
the like product in the domestic market of the country of origin;” [emphasis added]
3.62 The chapeau makes abundantly clear that amounts in Article 2.2.2(ii) relates to the amounts
for “administrative, selling and general costs and for profits”.  For example, the word “such”  in the
last sentence of the chapeau clearly refers to the words “amounts for administrative, selling and
general costs and for profits”  in the first sentence of the chapeau .  In Article 2.2.2.(ii) it is therefore
clearly the amounts “for administrative, selling and general costs and for profits”  from “other
producers or exporters” for which a ‘weighted average’ needs to be established.
3.63 Yet, despite the clear and explicit wording of the Article, the EC tersely mentioned in the
definitive Regulation that:
“(18) . . . Moreover, the reference in Article 2(6)(a) of the basic Regulation to a weighted
average amount  [sic] for profits determined for other exporters or producers, does not
exclude that such amount [sic] can be determined by reference to a weighted average of
transactions and/or product types of a single exporter or producer  . . . ”
3.64 First of all, the EC changes the word “amounts”  to ‘amount’, thereby reducing the plural
which needs to be averaged into one singular ‘amount’.  Second, the EC disconnected the explicit
relation in the ADA between the “weighted average”  and the “amounts incurred and realized by
other exporters or producers” .  Instead, the EC suddenly takes the view that when one amount itself
is a weighted average, this would also serve the purpose of constituting a weighted average of
amounts.
3.65 In other words, the EC blurs the distinction between more than one amount that needs to be
averaged and one single amount that is based on a weighted average itself.  Clearly, this is contrary to
the explicit wording of the ADA, which mandates that amounts of other exporters  or producers  need
to be averaged, and not that an amount itself (of one  single exporter or producer) has to be established
by means of using a method involving weighted averages.
3.66 Moreover, the exact wording of Article 2.2.2(ii) makes abundantly clear that more than one
exporter or producer should be involved: “other exporters or producers ” clearly refers to a plural.
This text of the ADA makes sense since it would otherwise not be mathematically possible to
establish a (weighted) average of such amounts.  The concept of an average, as defined above, does
by its nature not allow itself to be inferred from one parameter only, such as only one producer.
3.67 Nevertheless, the EC applied just one amount from one producer.  It is clear that no average
of amounts from more than one exporter or producer was ever applied. Instead, the EC purposely and
purely used one amount (of 29.04 per cent) inferred from Bombay Dyeing.54
3.68 It is therefore indisputable that the explicit requirements of Article 2.2.2(ii) were simply not
met.  The EC has acted ultra  vires  by stating that the SG&A and profit data from a single producer is
the same as the data from “other exporters or producers ”.  The EC’s ‘interpretation’ of the text of
Article 2.2.2(ii) has clearly trespassed the boundaries of a permissible use of Article 2.2.2(ii) and
violates its plain meaning.
                                                     
54 See also the provisional disclosure documents for Anglo-French, Madhu, Omkar, and Prakash.WT/DS141/R
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3.69 Indeed, this very case shows how the EC’s lo gic perverts the text of Article 2.2.2(ii): The
calculation of the constructed normal values for companies without domestic sales is coloured by
factors unique to one sole producer whose SG&A and profits amounts were used, thereby artificially
finding dumping for all where none for most in reality exists.  One can imagine that it was precisely toavoid such extreme effects that the Agreement requires that the weighted average of data of at least
two exporters or producers be used.  This rationale can be clearly inferred from the main rule of the
chapeau of Article 2.2 , namely  that the application of SG&A and profit should be “reasonable” .
How can the SG&A and profit from one peculiar and extraordinary company be considered
reasonable?  Nevertheless, this is precisely what happened in Bed linen II: the company whose datawere used for the determination of SG&A and profit (Bombay Dyeing) is wholly a-typical in India.
55
The specific reference in Article 2.2.2(ii) to amounts, exporters  and producers  in the plural is a
specific application of the requirement of reasonableness in the chapeau of Article 2.2 .  It is a
recognition of the fact that the method contained in Article 2.2.2(ii) is a substitute for the normal
circumstance wherein SG&A and profit is determined by reference to actual data of the exporter orproducer under investigation.  As such, this substitute method is more prone to inaccuracies and
distortion than the actual data, and it is precisely to minimize such possible distortion that Article
2.2.2(ii) requires the inclusion of at least two exporters or producers.
3.70 Despite the clear and explicit wording of the ADA, the EC did infer the data in question from
only one sole producer.  It follows that the EC, by  determining the SG&A and profit for all Indian
exporters on the basis of the data of one company only, has acted inconsistently with Article 2.2.2(ii)
since the terms of this option were not met in the Bed linen II proceeding.56
3.71 Furthermore, the EC misleadingly stated th e following in recital (18) of the definitive
Regulation that:
“With regard to the use of the profit margin of only one company, it should be recalled that
the investigation has been restricted to a sample of exporting producers in accordance with
Article 17 of the basic Regulation and that the vast majority of the cooperating Indian
companies are export oriented companies with  no domestic sales of the like product. The
Commission selected for the sample five I ndian exporting producers two of which had
declared at the time of the selection that they had made domestic sales of the like product.
However, as indicated in recital 23 of the provisional Regulation, the investigation revealed
that only one had representative domestic sales of the like product during the investigationperiod.”
3.72 This recital suggestively announces that at the time of the selection of the sample there were
two companies that had declared to have domestic sales.  However, when one looks at the actual
sample selection process, as described in detail in section III.A.1 above, it is evident that the
investigating authorities knew or could have k nown that there was only one company in the main
sample for which there would be representative  domestic sales: Bombay Dyeing.
3.73 With respect to the other company referred to in recital (18), Anglo-French, it was very clear
at the moment of the selection of the sample that its domestic sales were insignificant if not
                                                     
55 For details as to why Bombay Dyeing is wholly a-typical for India we refer to the disclosure
comments as submitted during the proceeding by Texprocil and by Anglo-French, Madhu, Omkar, and Prakash(please refer to Annexes 25-32).
56 Except of course for Bombay Dyeing for whom its own data were used.WT/DS141/R
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meaningless.  It is recalled that Anglo-French itse lf had stated at the moment of the sample selection
that:57
“1) For the period . . . we have exported 9,02,467 kgs of Cotton bed Linen to the EuropeanCommunity and the total invoice value of this quantity is Indian Rs 161.11 million.
2) With respect to sales of Cotton Bed Linen in the Domestic market for the period . . . we
wish to bring your kind attention that we are selling Bed Linen qualities only in the Export
market, and that the value of Bed Linen sold in the domestic market will be less than 0.25 per
cent of our total turnover of around Indian Rs.1,200 million, and hence our turnover forCotton Bed Linen in the Domestic market wi ll be less than Indian Rs.3.00 million. . . .”
3.74 It was therefore abundantly clear from this moment (30 September 1996) that Anglo-French
with Rs 3 million worth of domestic sales, and Rs 161.11 worth of export sales, would not have
representative domestic sales in the sense that the 5 per cent threshold would not be met [it was only(3 ÷ 161.11) * 100 = 1.86%].  It was in fact also made clear in Anglo-French’ questionnaire responses
that the company did not have sufficient domestic sales.
3.75 It is further recalled that the company Standard Industries, which Texprocil at the time of the
sample selection insisted upon having included in the sample, did
 have sufficient representative
domestic sales (as declared at the time of sample selection).58  However, the Commission refused to
include Standard.
3.76 Moreover, during the investigation nothing w ould have prevented the EC to investigate one
more company with representative domestic sales, namely Standard Industries.  The questionnaire
response of this company was readily available for investigation because of its selection in the reserve
sample.59
3.77 The insinuation in recital (18) that it was the fault of the Indian exporters that there were not
sufficient exporters with representative domestic sales in the main sample and that the EC somehow
tried to select the main sample with sufficient domestic sales is therefore not borne out by the facts.60
                                                     
57 Please refer to the declaration by Anglo-French attached in Annex 18.
58 It is clear from the fact description that on two occasions in the final stage of the sample selection
process Texprocil requested, in writing, to have Standard included in the sample. The Commission could plainlyknow from Standard’s declaration that it was willing to be sampled that the company had sufficient domesticsales. This declaration, submitted well before the samp le was negotiated, is attached as Annex 45.  See also
Annex 16.
59 The fact that additional companies are sometimes included into the main sample and investigated is
for example witnessed by the EC anti-dumping proceed ing concerning Flat pallets of wood originating in
Poland (published in Official Journal of the EC (year 1997) L-series Number 150 page 4, Regulation imposingprovisional duties, at recitals (12) and (13)):
“(12) One Polish exporter selected for the sample did not reply to the questionnaire. Another Polish
exporter, which did not produce pallets and did not sell on the domestic market, replied to the questionnaire;
however its suppliers, whose cooperation was indispen sable for establishing normal value, refused to
cooperate. Accordingly, the Commissi on had to disregard the information submitted by the exporter concerned.
(13) In these circumstances, the Commission consider ed it appropriate to add to  the initial sample two
or more producers, in order to reinforce the repres entative of the sample, both in quantitative terms and in
relation to the conditions of the Polish domestic market for pallets. . . .”
60 Indeed, in this respect recital (18) contradicts the statement contained in the EC letter of
11 October 1996 (reference 060644; Annex 22) where it is stated that: “ . . . we insist on maintaining this
company [Standard] in the reserve because of its significant domestic sales.”   If it was so clear to the EC that
Standard had significant domestic sales, and the Indian side insisted on having Standard in the main sample,WT/DS141/R
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In any event, it follows from the argument above that it is not relevant for Article 2.2.2 whether the
EC knew at the time of sample selection whether there was only one company with sufficient
domestic sales.
4.2 The second argument of the first claim relating to Article 2.2.2: even within the application of
Article 2.2.2(ii), the EC has acted inconsistent with the provision. Instead of using ‘the actual
amounts incurred and realised’ by other producers or exporters the EC has used amounts for
SG&A and profits that were restricted to sales in the  ‘ordinary course of trade’
3.78 The application by the EC of Article 2.2.2(ii) in Bed Linen II constitutes paramount
inconsistency with the methodology set forth therei n with respect to the calculation of amounts for
SG&A and profits.  It is recalled that the relevant part of Article 2.2.2(ii) provides that the amounts
for SG&A and profits shall be based on: “ . . . the actual amounts incurred and realized by other
producers or exporters. . . ” (Emphasis added).  However, the EC did in fact not apply “the actual
amounts incurred and realized by other producers or exporters” .  Rather, the EC has resorted to
applying amounts for SG&A and profits in the ordinary course of trade only.  A summary table
illustrates the difference:61
Item The actual amounts
incurred and realized :Amounts in the ordinary
course of trade:
SG&A 10.39% 10.39%
Actual profit amounts incurred asa % of turnover12.09%
Profit % pertaining to sales in the
ordinary course of trade18.65%
Total 22.48% 29.04%
Source: Table of DMprofit in disclosure docu ment for Bombay Dyeing (excerpt attached as
Annex 46)
3.79 Whilst it is not clear from the published dete rminations or otherwise as to why the EC has
deviated from the text of Article 2.2.2(ii), several th eories appear possible, all of which, however, are
inconsistent with the mandatory nature of Article 2.2.2.
3.80 First of all, it could be possible that the EC, in application of Article 2(6)(a) of its domestic
legislation, has used SG&A and profits that were “determined” for other producers and exporters.62
This use of the word “determined” in the EC’s domestic legislation could then have led to a
discrepancy with the actual amounts that had in fact been ‘incurred and realized’ by other exporters
or producers.63
                                                                                                                                                                    
then why does recital (18) suggest that is it the fault of the Indian exporters that there were not sufficient
exporters with representative domestic sales?
61 In short, the difference is that in the profit determination the sales below cost are systematically
excluded, thus inflating the profit margin and therewith the constructed normal value.
62 It is recalled that Article 2(6)(a) of the rele vant EC legislation in question provides that:
“6. The amounts for selling, for general and admi nistrative costs and for profits shall be based on
actual data pertaining to production and sales, in the ordinary course of trade, of the like product, by the
exporter or producer under investigation. When such amounts cannot be determined on this basis, the amountsmay be determined on the basis of:
(a) the weighted average of the actual amounts determined for other exporters or producers
subject to investigation in respect of production and sales of the like product in the domestic market of thecountry of origin;
63 This is also the view held by literature in the field.WT/DS141/R
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3.81 In other words, the amounts of SG&A and profits for those producers for whom the method
of the chapeau of Article 2.2.2 is followed, are merely transplanted’ to Article 2.2.2(ii), since this was
the amount that had been ‘determined’ under Article 2.2.2 chapeau.  In doing so, there is failure torecognize that ‘the actual amounts incurred and realized’ by other producers in Article 2.2.2(ii) is in
fact different from the ‘amounts determined’ in the chapeau of Article 2.2.2.  In casu , this has lead to
an overstatement of (29.04 per cent (amount determined) - 22.48 per cent (amount incurred and
realized)) = 6.56 per cent.
64  Clearly, such EC application of Article 2.2.2(ii) would be incorrect since
the factual deviation from the actual amounts incurred and realized, as mandated, is massive.
3.82 A second possibility would be that the EC has wrongly interjected within the provision of
Article 2.2.2(ii) the requirement of the chapeau in that SG&A and profits shall be calculated based on
sales ‘in the ordinary course of trade’.  The EC would therefore have only included profitable sales
with respect to its calculation under Article 2.2.2(ii).  While the method for calculating SG&A andprofits in the chapeau of Article 2.2.2 does indeed include the restriction that SG&A and profits shall
be based on data pertaining to sales ‘in the ordinary course of trade’, this requirement is excluded in
the method contained in Article 2.2.2(ii). Indeed, Article 2.2.2(ii) makes no reference to any
requirement that the amounts incurred and realized be  restricted to those in the ‘ordinary course of
trade’ only.
3.83 In order to agree with such EC's interpretation of Article 2.2.2(ii), i.e. that SG&A and profits
under 2.2.2(ii) only includes amounts incurred or realized ‘in the ordinary course of trade’, it would
be necessary to find that the wording of Article 2.2.2(ii) implicitly refers back to and incorporates the
reference to ‘ordinary course of trade’ in the chapeau of Article 2.2.2.  However, such an approach isdemonstrably inconsistent with the express wording of Article 2.2.2(ii).  The chapeau of Article 2.2.2
and Article 2.2.2(ii) provide that:
“2.2.2 [T]he amounts for administrative, sellin g and general costs and for profits shall be
based on actual data pertaining to production and sales in the ordinary course of trade of the
like product by the exporter or producer under investigation. When such amounts cannot be
determined on this basis, the amounts may be determined on the basis of:
. . .(ii) the weighted average of the actual amounts incurred and realized by other exporters
or producers subject to investigation in respect of production and sales of the likeproduct in the domestic market of the country of origin”
3.84 The first part of the first sentence of Article 2.2.2 defines the subject of what is to be
calculated; namely “. . . the amounts for administrative, se lling and general costs and for profits . . .”
The second part of the first sentence, introduced by the clause “. . . shall be based on . . .”  then
provides the specific method by which the SG&A and profits shall be calculated under the chapeau of
Article 2.2.2.
3.85 It is important to note that the word  “amounts” in the chapeau refers only to the amounts for
SG&A and profit; this word does not refer to amounts for SG&A and profits “. . . in the ordinary
course of trade” .  Rather, the first sentence of the chapeau of Article 2.2.2 stipulates that, for the
purposes of the method detailed there, the ‘amounts’ for SG&A and profits shall be ‘based on’ (actual
                                                     
64 In other words, the amounts that were 'incurred and realized' were overstated in the calculations by
almost one-third:  (6.56÷22.48)x100=29.18% of overstatement.WT/DS141/R
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data pertaining to production and sales in the ordinary course of trade of the like product by the
exporter or producer under investigation).  In other words, the basis, or factors which are to be used in
order to arrive at the amounts for SG&A and profits under the specific method detailed in the chapeau
are “actual data pertaining to production and sales in the ordinary course of trade of the like product
by the exporter or producer under investigation.”
3.86 Websters’ New Collegiate Dictionary defines the word ‘basis’ as: “Foundation. Something on
which something else is constructed or established” (emphasis added). Similarly, the word ‘base’ is
defined as “Foundation. The bottom of something considered as its support.”65  In other words, the
“amounts for SGA and profits” constitute, in the context of the chapeau of Article 2.2.2 and sub-
paragraph (ii), by definition ‘something else’ i.e., a value or amount that is conceptually distinct from
the ‘foundations’ or ‘basis’ upon which it is constructed or established.  The amounts for SG&A and
profits is what is to be established; the “actual data . . . in the ordinary course of trade . . .
investigation” is (one of) the means to establish it.
3.87 Therefore, when the second sentence of the chapeau of Article 2.2.2 states that when “such
amounts”  cannot be determined on the basis of the chapeau of Article 2.2.2, then the method in
Article 2.2.2(ii) (among others) may be used; the words “such amounts”  refer to “amounts”  as
described in the first sentence of the chapeau.  Indeed the entire purpose of Article 2.2.2(ii) is toprovide for a different and alternative basis upon which to establish SG&A and profits (from the basis
contained in the chapeau of Article 2.2.2).
3.88 As has been noted, the definition of the words  “amounts for SG&A and profits”  in the first
sentence of the chapeau does not include the words “ordinary course of trade” . Instead, since in the
chapeau of Article 2.2.2 the words “ordinary course of trade” occur after the words “based on” , this
requirement is clearly intended to form part of the specific basis or foundation for the specific method
provided under the chapeau. Consequently, the words “such amounts”  in the second sentence of the
chapeau cannot logically be taken to refer back to SG&A and profits “in the ordinary course of
trade” , but instead only to SG&A and profits.  Thus, the word ‘amounts’ used for the purposes of
Article 2.2.2(ii) do not include any requirement that the amounts be incurred or realised in the
ordinary course of trade.
3.89 It is equally impossible to interpret Article 2.2.2(ii) as referring back to the remainder of the
text of the chapeau of Article 2.2.2.  As noted above, the words “ordinary course of trade”  in the
chapeau occur after the words “based on” . Consequently, if the EC is to argue that Article 2.2.2(ii)
refers back to and includes the requirement of “ordinary course of trade” , it must argue that the basis
provided in Article 2.2.2(ii) for calculating SG&A and profits refer back to and include the basis
provided in Article 2.2.2 chapeau.  Such an argument would be logically impossible and inherently
contradictory.  Again, the entire purpose of Article 2.2.2(ii) is to provide a different basis for
calculating SG&A and profits from the basis provided under the chapeau.  If the purpose of article2.2.2(ii) is to provide for a different basis, or foundation, upon which to establish SG&A and profitsthan the basis provided under Art. 2.2.2 chapeau, it would of course be logically absurd to then argue
that the foundations referred to under 2.2.2(ii) shall be interpreted as referring back to and implicitly
including the same foundations that are present in the chapeau of 2.2.2. Indeed, the second sentence of
Article 2.2.2 chapeau expressly states that one is only entitled to resort to the methodology under
2.2.2(ii) when the foundations under the chapeau of the 2.2.2 “cannot”  be used. It is a clear ‘either-or'
situation.
                                                     
65 Excerpt attached as Annex 47.WT/DS141/R
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3.90 Consequently, there is no basis for inferring a requirement under Article 2.2.2(ii) that only
profitable sales shall be taken into account for th e purposes of calculating SG&A and profits under the
methodology provided therein.
3.91 This interpretation is further confirmed by specifically contrasting the wording of the method
provided in the chapeau against the wording of th e method contained in Article 2.2.2(ii).  Under the
method in Article 2.2.2 chapeau, SG&A and profits shall be calculated “. . . based on actual data
pertaining to production and sales in the ordinary course of trade of the like product by the exporter
or producer under investigation . . .” (emphasis added).  Under the method in Article 2.2.2(ii) on the
other hand, SG&A and profits shall be based on “the weighted average of the actual amounts
incurred or realized by other producers or exporters subject to investigation . . .”  (emphasis added).
Article 2.2.2(ii) clearly stipulates that the data which is to be taken into account under this method are
the weighted average of “. . . the actual amounts incurred and realized . . .”
3.92 The context in which the word “actual”  is used in this paragraph is important. The Concise
Oxford dictionary  defines the word “actual”  as “existing in fact; real (often as distinct from ideal).”
(Emphasis added). Likewise, Websters’ New Collegiate Dictionary defines “actual” as “Existing in
fact . . . and not merely potentially.”66
3.93 In other words, if one refers to the actual  amounts (for SG&A and profit), one is expressly
referring to the complete amounts which in fact exis t; nothing more and nothing less.  It follows that
this formulation expressly excludes any qualification or limitation of the amounts for SG&A and
profit which are to be included in the calculation under this method (provided that these amounts are
generated in respect of production and sales of the like product etc.).  Consequently, the use of the
word ‘actual’ in this context is intended to specifically clarify that it is the complete amounts which
are to be taken into account under this method, as opposed to amounts which have been artificially
qualified or limited in some way.
3.94 The wording of Article 2.2.2(ii) should be contrasted with the wording of the chapeau of
Article 2.2.2.  The word “actual”  in this paragraph is used in an entirely different context.  Article
2.2.2 chapeau does not provide that the relevant amounts should be determined on the basis of the“actual amounts incurred and realized . . .”  Rather it states that the “amounts”  shall be determined
on the basis of “actual data” . The term data is immediately qualified and defined as “data pertaining
to production and sales in the ordinary course of trade.”  Thus, Article 2.2.2 chapeau artificially
qualifies and limits the “actual data”  to be used (and thereby the ‘amounts’ which will be
ascertained) to “. . . data pertaining to production and sales in the ordinary course of trade . . .”
3.95 Therefore, given the fact that Article 2.2.2(ii) specifically refers to “actual amounts incurred
and realized” , and the meaning of this formulation as demonstrated above, and given that the
reference to “ordinary course of trade”  is excluded from Article 2.2.2(ii), it is clear that this
paragraph is expressly differentiated from Article 2.2.2 chapeau in that the ‘ordinary course of trade’qualification does not apply.
3.96 It follows that the EC misapplied sub-paragraph 2.2.2(ii) and thus acted inconsistently with
Article 2.2.2 of the ADA.
                                                     
66 Excerpts of both dictionaries attached as Annex 48.WT/DS141/R
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4.3 The third argument of the first claim relati ng to Article 2.2.2: By switching the order of
preference contained in Article 2.2.2 the EC has acted inconsistently with that Article
3.97 The EC has, instead of using the (available) alternative that Article 2.2.2(i) provides, used the
alternative provided in Article 2.2.2(ii).  It is recalled that Article 2.2.2 provides for four possible
SG&A and profit calculation methods in Article 2.2 situations:
1. Actual data pertaining to production and sales in the ordinary course of trade of the like
product by the exporter or producer under investigation  (Article 2.2.2 chapeau);
2. Actual amounts incurred and realized by the exporter or producer in question in respect of
production and sales in the domestic market of the country of origin of the same general
category of products (Article 2.2.2(i));
3. Weighted average of the actual amounts incurred and realized by other exporters or producers
subject to investigation in respect of productio n or sales of the like product in the domestic
market of the country or origin (Article 2.2.2(ii));
4. Any other reasonable method, provided that the amount for profit so established shall not
exceed the profit normally realized by other exporters or producers on sales of the same
general category in the domestic market of the country of origin (Article 2.2.2(iii)).
3.98 From the context of the Article and the very concept of dumping, it is clear that method 2 is
both preferred and preferable over methods 3-4 (it being understood that method 1 is preferred overmethods 2-4).  Namely, method 2, being the first alternative mentioned to the main rule, relies on the
specific situation of the producer concerned.  Dumping being a highly producer-specific concept
67
should by its intrinsic nature be calculated as much as possible on the basis of the data of the producerwhose behaviour is under scrutiny.  In this regard the order of the Agreement makes sense, since it
establishes a preference for producer-specific data.  This preference for data of the producer is first
reflected in the main rule of the chapeau of Article 2.2.2 and repeated in its first alternative.  In
context, the wording of Article 2.2.1.1 could be considered: in the context of the cost calculations alldata are to be inferred from the producer/exporter under consideration (and not from other producers
or exporters).  Hence, when it comes to SG&A expenses and profits, it makes sense to follow thissame preference and rely as much as possible on producer-specific data.  Only where this is no longer
possible could further alternatives be considered.
3.99 Indeed, the text of the Agreement reveals a gradually declining scale in the order of options as
far as the relation with the producer is concerned: the first alternative of the chapeau being the actual
dumping situation and the fourth option being the most alternative method.  Recourse to methods 3-4
normally deprives an exporter not only of the possibility to check his own dumping margin
calculation (because he does not have access to the SG&A and profit amounts of his competitors), atleast in the EC system, it furthermore makes it impossible for him to prevent dumping because he will
never know whether he is dumping in the first place.
68  It therefore makes all the more sense that these
third and fourth options are ranked at a place where their use would be less easily available than the
                                                     
67 In one and the same country in the same proceeding in the same investigation period, one producer
may found dumping while another producer may not be found dumping.
68 In the absence of a system of disclosure of confidential information under administrative protective
order, the EC’s system precludes producers without sufficient domestic sales from checking or knowing theirvery own dumping margin calculations.WT/DS141/R
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first option of the chapeau, or the second option of 2.2.2(i) which, respectively, have a direct or
indirect link with the producer concerned.
3.100 Therefore, on the basis of the wording of Article 2.2.2 as well as a systemic interpretation of
the concept of dumping and the ADA, the GOI believes that Article 2.2.2 establishes a preference for
use of producer-specific data.
3.101 It is noted, however, that the EC basic Regulation turns around methods 2 and 3 and, to that
extent, does not follow the order of the ADA.  Thus, Article 2(6) of Regulation 384/96 of the ECdomestic legislation provides as follows:
“The amounts for selling, for general and administrative costs and for profits shall be based
on actual data pertaining to production and sales,  in the ordinary course of trade, of the like
product, by the exporter or producer under investigation. When such amounts cannot bedetermined on this basis, the amounts may be determined on the basis of:
(a) the weighted average of the actual amounts determined for other exporters or
producers subject to investigation in respect of production and sales of the like
product in the domestic market of the country of origin;
(b) the actual amounts applicable to production and sales, in the ordinary course of
trade, of the same general category of products for the exporter or producer in
question in the domestic market of the country of origin;
(c) any other reasonable method, provided that the amount for profit so established shall
not exceed the profit normally realized by other exporters or producers on sales of
products of the same general category in the domestic market of the country oforigin.”
3.102 In other words, the options listed in Articles 2.2.2(i) and 2.2.2(ii) of the Agreement are
switched around in Article 2(6) of Regulation 384/96. While the facts of the matter would appear
clear-cut, a summary table may clarify the contradiction between the EC law and practice, vis-à-vis
the relevant WTO provision:
Methods of inferring SG&A and
profitArticle 2.2.2 ADA Article 2(6) EC legislation
First option From domestic sales of like
product of exporter/producer in
questionFrom domestic sales like
product of exporter/producer in
question
Second option From domestic sales of same
general category of products of
exporter/producer in questionFrom weighted average of
domestic sales of like product of
other exporters/producers
Third option From weighted average of
domestic sales of like product of
other exporters/producersFrom domestic sales of same
general category of products of
exporter/producer in question
Fourth option Any other reasonable method Any other reasonable method
3.103 In fact, the explicit switching of the first tw o options in the basic EC Regulation would appear
to suggest that the European Co mmunity implicitly does consider the order of the options to be
relevant.  Indeed, in recital (18) of the definitive Regulation it becomes clear that the EC does
consider that Article 2(6)(a) has preference over 2(6)(b) and 2(6)(c).  In this recital it is implicitly
observed that Articles 2(6)(b) and 2(6)(c) could have been applied, but that such application was notjustified in the circumstances of the situation, because Article 2(6)(a) was already applicable:WT/DS141/R
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“ . . . the reference in Article 2(6)(a) of the basic Regulation to a weighted average
amount for profits determined for other exporters or producers does not exclude that
such amount can be determined by reference to a weighted average of transactionsand/or product types of a single exporter or producer. Consequently, it is not
considered justified to establish the amount for profits in accordance with Article
2(6)(b) or 2(6)(c) of the basic Regulat ion, as claimed by the Indian companies
concerned.”
3.104 The EC therefore did not even consider wh ich option would be most reasonable, but only
posited that Article 2(6)(a) applied and that for that reason Articles 2(6)(b) or (c) could not apply.
The fact that Article 2(6)(b) could indeed have been  applied is for example illustrated by the situation
of (inter alia ) Prakash Cotton Mills, which had domestic sales of other products in the same general
category on the domestic market.
69  This is the first indication that the EC considers the order laid
down in Article 2(6) of the basic Regulation, whic h differs from the order of the ADA, as mandatory.
Incidentally, the EC method also led to the most disadvantageous result possible for the Indian
industry.
3.105 It should further be noted that it has also been confirmed by case law of the European Court
of Justice that the order in which the three alternatives must be considered is the order in which theyare presented in the provision.
70  In fact, one may argue that where the European Court of Justice
considers that the order of the Regulation is of a mandatory nature, the order of the ADA contains the
same imperative character.
3.106 Finally, as far as the EC’s domestic legislation is concerned, it is noted that recent EC
literature on the subject confirms that in practice the order as set out in the Regulation is followed.71
While there may therefore not be a de jure  preference (apart from the Court judgements mentioned),
there is certainly a practice which exists de facto  as witnessed by the Bed Linen II proceeding. This de
facto  preference as established by the EC therefore establishes an inconsistency with the order of
preference as established by the ADA.
3.107 In conclusion it may be summarised that the ADA contains thorough, solid, and logical rules
with respect to the methods of determining SG&A and profits.  The EC legislation deviates from these
rules and moreover does so in a manner which makes it difficult, if not impossible, for a producer to
predict his potential dumping exposure in certain instances where such possibility would have existed
under the rules of the ADA.  The EC’s legislation on this point, as well as its practice in this regard is
inconsistent with its WTO obligations.
5. Claim 2: inconsistency with Article 12.2.1
5.1 The text of Article 12.2.1
3.108 It is recalled that Articles 12.2 and 12.2.1 of the ADA provide in relevant part as follows:
                                                     
69 I.e. the method as per Article 2.2.2(i) was available to at least for example Prakash, but it could also
be considered to be applicab le to Anglo-French and Madhu.
70 Case C-105/90, Goldstar Co. Ltd vs Council , [1992] ECR I-677 (paragraph 35); Case C-69/89,
Nakajima All Precision Co. Ltd vs Council , [1991] ECR I-2069 (paragraph 61).
71 Muller, Khan, Neumann, EC Anti-Dumping Law—A commentary on Regulation 384/96 , Wiley
(1998) at 97: “The Community legislation also falls short of imposing a strict legal hierarchy, but in practice,
unless there are good reasons to the contrary, the order as set out in the Regulation is followed.”WT/DS141/R
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“12.2 Public notice shall be given of any preliminary or final determination, whether
affirmative or negative . . . of the termina tion of a definitive anti-dumping duty. Each such
notice shall set forth, or otherwise make available through a separate report, in sufficientdetail the findings and conclusions reached on all issues of fact and law considered material
by the investigating authorities . . .
12.2.1 A public notice of the imposition of provisional measures shall set forth, or otherwise
make available through a separate report, sufficiently detailed explanations for thepreliminary determinations on dumping and injury  and shall refer to the matters of fact and
law which have led to arguments being accepted or rejected. Such a notice or report shall,
due regard being paid to the requirement for the protection of confidential information,
contain in particular: . . .
(iii) the margins of dumping established and a full explanation of the reasons for the
methodology used in the establishment and comparison of the export price and the
normal value under Article 2; . . .
(v) the main reasons leading to the determination.”
5.2 Legal arguments relating to the claims relating to Article 12.2.1
3.109 The second claim is that the EC has acted inconsistently with Article 12.2.1, by failing to
sufficiently explain why and how it applied Article 2.2.2 in the provisional Regulation.  This claim
consists of three arguments:
3.110 The first argument of the second claim is that in contradiction to Article 12.2.1, the EC has
not provided a sufficient explanation as to why it decided to apply an option for which the
requirements were not fulfilled.
3.111 The second argument of the second claim is th at in contradiction with Article 12.2.1 the EC
did not explain why it resorted to the amounts ‘determined’ that only related to data based on
profitable sales, instead of to the actual amounts incurred and realised.
3.112 The third argument of the second claim is that despite the fact that the EC’s choice washeavily contested, the EC has nowhere provided a su fficient explanation in the public notice (or made
available in a separate report) as to why it applied option 2.2.2(ii) instead of 2.2.2(i). This is
inconsistent with the requirements of Article 12.2.1 of the ADA.
6. Claim 3:  inconsistency with Article 12.2.2
6.1 The text of Article 12.2.2
3.113 It is recalled that Article 12.2.2 of the ADA provides in relevant part as follows:
“A public notice of conclusion or suspension of an investigation in the case of an affirmative
determination providing for the imposition of a definitive duty or the acceptance of a price
undertaking shall contain, or otherwise make available through a separate report, all
relevant information on the matters of fact and law and reasons which have led to theimposition of final measures . . ., due regard being paid to the requirement for the protection
of confidential information. In particular, the notice or report shall contain the informationWT/DS141/R
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described in subparagraph 2.1, as well as the reasons for the acceptance or rejection of
relevant arguments or claims made by the exporters and importers . . .”
6.2 Legal arguments relating to the claims relating to Article 12.2.2
3.114 The third claim is that the EC has acted inconsistently with Article 12.2.2 by failing to
sufficiently explain why and how it applied Article 2.2.2 in the definitive determination.
3.115 As noted in section III.A.1, I ndian exporters made very detailed arguments on these issues.
Nevertheless, in the definitive Regulation the EC’s explanations of these arguments was little more
than the statement in recital (18) that:
“Moreover, the reference in Article 2 (6) (a) of the basic Regulation to a weighted average
amount for profits determined for other exporters or producers, does not exclude that suchamount can be determined by reference to a weighted average of transactions and/or product
types of a single exporter or producer. Consequently, it is not considered justified to establish
the amount for profits in accordance with Article 2(6)(b) or 2(6)(c) of the basic Regulation,
as claimed by the Indian companies concerned.”
3.116 This ‘justification’ for applying 2(6)(a) (corresponding to Article 2.2.2(ii)) was little more
than noting that the conditions for its appli cation were—in the eyes of the EC—fulfilled and
application of other options was therefore out of the question.  There are four reasons why this
‘explanation’ is inconsistent with Article 12.2.2:
3.117 The first argument is that contrary to Article 12.2.2, the EC has not provided a sufficient
explanation as to why it decided to apply an option for which the requirements were not fulfilled.
3.118 The second argument is that contrary to Ar ticle 12.2.2 the EC did not explain why it resorted
to the amounts ‘determined’ instead of to the amounts ‘incurred and realised’.
3.119 The third argument is that contrary to Article 12.2.2 the EC did not explain why it considered
the profit so established reasonable as per Article 2.2.2(iii).
3.120 The fourth argument is that despite the fact that the EC’s choice was heavily contested, the
EC has nowhere provided a sufficient explanation in the public notice or made available in a separate
report as to why it applied option 2.2.2(ii) instead of 2.2.2(i).  This contradicts the requirements ofArticle 12.2.2.
3.121 It follows that the EC acted inconsistently with Article 12.2.2 of the ADA.
7. Claim 4:  inconsistency with Article 2.2
7.1 The text of Articles 2.2 and 2.2.2
3.122 It is recalled that Articles 2.2 and 2.2.2 provide in relevant part as follows:
“2 2 When there are no sales of the like product in the ordinary course of trade in the
domestic market of the exporting country or when, because of the particular market situation
or the low volume of the sales in the domestic market of the exporting country, such sales do
not permit a proper comparison, the margin of  dumping shall be determined by comparisonWT/DS141/R
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with a comparable price of the like product wh en exported to an appropriate third country,
provided that this price is representative, or with the cost of production in the country of
origin plus a reasonable amount for administrative, selling and general costs and for profits.
2.2.2 For the purpose of paragraph 2, the amounts for administrative, selling and general
costs and for profits shall be based on actual data pertaining to production and sales
in the ordinary course of trade of the like product by the exporter or producer underinvestigation. When such amounts cannot be  determined on this basis, the amounts
may be determined on the basis of: . . .
(iii) any other reasonable method, provided that the amount for profit so
established shall not exceed the profit normally realized by other exporters orproducers on sales of products of the same general category in the domestic
market of the country of origin.” (Emphasis added, footnote omitted)
3.123 As a first observation it is noted that Article 2.2.2 refers to 2.2 in its opening words ( “[f]or
the purpose of paragraph 2” ). Furthermore, the distinction is noted between the phrase “reasonable
amount for administrative, selling and general costs and for profits”  in Article 2.2 and the phrase
“amounts for administrative, sellin g and general costs and for profits”  in Article 2.2.2. Read in
combination and context, it follows that the “amounts for administrative, selling and general costs
and for profits”  of Article 2.2.2 are covered by Article 2.2 as well.  Article 2.2 instructs Article 2.2.2,
as re-confirmed by the very cross-reference in Article 2.2.2.  It subsequently follows that the amounts
in Article 2.2.2 must be “reasonable”  as per the last sentence of the chapeau of Article 2.2.
7.2 Legal arguments relating to the claims relating to Article 2.2
3.124 The fourth claim is that the EC has acted inconsistently with Article 2.2 of the ADA by not
adding a ‘reasonable’ amount of SG&A and for profits. The chapeau of Article 2.2 sets forth that:
“When there are no sales of the like product in the ordinary course of trade in the domestic
market of the exporting country or when, because of the particular market situation or the
low volume of the sales in the domestic market of the exporting country, such sales do notpermit a proper comparison, the margin of dum ping shall be determined by comparison with
a comparable price of the like product when exported to an appropriate third country,
provided that this price is representative, or with the cost of production in the country of
origin plus a reasonable amount for administrative, selling and general costs and for
profits.”  (Emphasis added)
3.125 A distinction must be made here between the procedural aspects (how are SG&A and profits
determined?) and the substantive aspects (what are the limitations on the end result?).
3.126 How the “amount for administrative, selling and general costs and for profits”  i s  t o  b e
determined is laid down in Article 2.2.2.  It is noted that this latter provision does not contain exactly
the same formula as 2.2.  If 2.2.2 had read as follows: “For the purpose of paragraph 2, the
reasonable amounts for administrative, selling and general costs and for profits” , then there was no
question that the remainder of 2.2.2 elaborates the concept of “reasonable” .  Then the four methods
laid down in 2.2.2 could be considered to be the statement of what could be reasonable.
3.127 However, 2.2.2 does not explain how the reasonable amounts for SG&A and for profits are to
be determined, but merely how “the amounts for administrative, selling and general costs and for
profits”  are to be established.  It follows that the word “reasonable”  in 2.2 has maintained its separateWT/DS141/R
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function: the “amount for administrative, selling and general costs and for profits”  in 2.2 are
explained in 2.2.2, not the “reasonable  amount for administrative, selling and general costs and for
profits” .  The ‘reasonable’ test in 2.2 is thus an over-arching requirement in addition to the
requirements of 2.2.2, rather than a rule, concretized by Article 2.2.2.  This is also in accordance with
the plain meaning of Article 2.2 and the structure of the Article.
3.128 The next question then becomes what “reasonable”  in 2.2 means.  It cannot be a procedural
requirement: the possible procedures for determining SG&A and profits are elaborated in 2.2.2.  It
follows that “reasonable”  must be interpreted as a substantive requirement: whatever method under
Article 2.2.2 is used, Article 2.2 requires that the result of the method used must be “reasonable” .
3.129 Contrary to what might be expected, the ADA does not at first sight appear to contain any
explicit definition of the word ‘reasonable’.  However, upon closer reading of the three alternative
options contained in Article 2.2.2, the third option does in fact contain an implicit definition of thenotion of ‘reasonable’:
“(iii) any other reasonable method, provided that the amount for profit so established shall
not exceed the profit normally realized by other exporters or producers on sales of products
of the same general category in the domestic market of the country of origin.”
3.130 Thus, the text suggests that while any other method may be used to establish SG&A and
profits, any such method may not lead to an additi on of a profit that exceeds profits normally realised
by other exporters or producers.  In other words, if the profit under option three exceeds the profit that
is normally realised by other exporters or producers on sales of products of the same general categoryin the domestic market, the method is not considered reasonable.
3.131 Accordingly, for a method—and therefore a profit—to be reasonable, it should not exceed
profit normally realised by other exporters or producers (on sales of products of the same general
category in the domestic market of the country of origin).
3.132 Nothing in the text of Article 2 would appear to suggest that this criterion for reasonableness
as defined in the third option does not apply with respect to the rest of Article 2.  Indeed, failing any
indication to the contrary, the criterion in option (iii) is the only guideline as to the notion of
‘reasonable’ contained in Article 2.2 of the ADA.  The third option refers not to a specific method but
instead to a general, abstract, open-ended category of “any other reasonable method.”   It is therefore
clear that the words that follow in the third option are intended to define reasonableness in terms of ageneral criterion which all reasonable methods must fulfil.  Thus the wording of the third option
expressly defines a reasonable method as one which does not result in excess profits as defined
above.
72
                                                     
72 This conclusion fits with the structure of Article 2.2.2. As noted earlier, Article 2.2.2 contains four
alternative methods for determining SG&A and profits (namely, the normal method in the chapeau and the threealternative methods in sub-paragraphs (i)-(iii). Whatever one’s views on the order of these alternatives, it seemsevident from the wording that the method laid down in sub-paragraph (iii) is a residual one, so to speak, one oflast recourse if all other methods fail. This would—ap art from its place at the bottom of the provision—follow
from the words “any other” . The ADA thus provides three reasonably accurately described methods for
determining SG&A and profits, plus the residual ‘any other’ method of the third sub-paragraph. Contrary to the
first three methods, sub-paragraph (iii) does not so much lay down the procedure to be used, but rather
constrains the result. Since the term “reasonable”  in Article 2.2 also is a substantive rather than a procedural
requirement, there is a large degree of correspondence between the two words.WT/DS141/R
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3.133 As noted, there seem to be no further indications in the text of the ADA which elaborate on
the notion of ‘reasonable.’  As far as the literature on the subject is concerned one may note the
observation of one internationally recognised scholar with respect to Article 2:4 of the 1979 Anti-
Dumping Code: “international obligations  [mandate] . . . that a realistic method be used to compute the
constructed cost and prices based on constructive cost.”73 [emphasis added] As far as concrete
percentages are concerned, it might be recalled that in the Panel Report concerning US—imposition
of anti-dumping duties on Atlantic salmon from Norway74, the EC observed as third party and
therefore supposedly because of systemic reasons that:75
“ . . . it had to be borne in mind that the Department of Commerce did not have
access to data on domestic sales in Norway of fresh Atlantic salmon and that therefore a
reasonable estimate had to be made of the amount for profit. In the absence of any other
information, it did not seem unreasonable to use a figure which after all represented only
about 5 per cent on turnover. In addition, the EEC considered these figures as notinappropriate for the Atlantic salmon industry.”
3.134 Turning to the factual situation of the Bed linen proceeding under consideration it is recalled
that while not all producers had sales of the product concerned on the domestic market, some
producers did have sales of other products in the same general category (textiles).  As far as these
other producers were concerned it is recalled that the following companies realised the following
profits in their same general category of products and (especially for some companies, failing such
categories) obtained the following overall profit:
Name Company Same category domestic Overall
Anglo-French 5.49% -14.99%
Bombay Dyeing 12.13% 4.66%
Madhu - 4.26%
Omkar - 9.23%
Prakash 3.5% 3.5%
Average: 7.04% 5.41%
The Commission has never contested these figures.
3.135 It is further recalled that the profits obtained for Bed Linen were determined as follows for the
other countries in the proceeding:
Country Profit
Egypt: 5.8
Pakistan: 7.4
Average: 6.1
3.136 It is also recalled that the profit determined on the basis of the profitable sales of one Indian
company and applied to all others was 18.65 per cent.
                                                     
73 Jackson, The World Trading System  (1989) at 235.
74 United States—Imposition of anti-dumping duties on imports of fresh and chilled Atlantic Salmon
from Norway, Report of the Panel adopted by the Committee on Anti-Dumping Practices on 27 April 1994
(ADP/87).
75 Ibid., recital 323.WT/DS141/R
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3.137 Last, it is recalled that the reasonable profit imputed to the EC industry was 5 per cent.
3.138 It is evident from the above that in comparison with all other amounts for profits that have
been relevant in the context of the proceeding, 18.65 per cent stands out as a complete anomaly.  Thisdoes not in any way reflect the profit actually realised by the Bed Linen producers inside and outside
India.  In fact, the particular profit is more than three times higher than the average profit determined
for the other two countries involved in the inves tigation, as well as the EC’s own Bed Linen industry.
3.139 If the word reasonable is defined by reference to the criteria indicated in the third option of
Article 2.2.2, the inconsistency is equally obvious and paramount.  The profit so established does not
fit the definition of Article 2.2 since it is contrary to any perception of reasonableness that can and
may exist in and outside the textile industry.
8. Claim 5:  inconsistency with Article 12.2.1
8.1 The text of Article 12.2.1
3.140 Please refer to section III.A.5.1, above.
8.2 Legal arguments relating to the claims relating to Article 12.2.1
3.141 The provisional Regulation merely contained a brief statement on the calculation of SG&A
and profit, which read in relevant part that:
“(26) . . . The constructed value was determined by adding to the cost of production of the
exported types of each company, a reasonable amount for SG&A and a reasonable amount
for profit.
Since only one company had representative globa l domestic sales and the profitable domestic
types represented less than 80  per cent but more than 10  per cent of total domestic sales, the
amount for SG&A and profit used for the cons truction of normal value for all companies
investigated were those respectively incurred and realised by this company, in accordancewith Article 2(6) of the basic Regulation.“
3.142 The fifth claim is that the EC has acted inconsistently with Article 12.2.1 by failing to
sufficiently explain in the provisional Regulation or the disclosure document why and how it applied
Article 2.2, and especially, why it considered the uniquely established and exceptionally high profitmargin ‘reasonable’.  This is inconsistent with Article 12.2.1.
9. Claim 6:  inconsistency with Article 12.2.2
9.1 The text of Article 12.2.2
3.143 Please refer to section III.A.6.1, above.
9.2 Legal arguments relating to the claims relating to Article 12.2.2
3.144 The sixth claim is that the EC has acted inconsistently with Article 12.2.2 by failing to
sufficiently explain why and how it applied Article 2.2.  Despite extensive and detailed argumentsWT/DS141/R
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from exporters and Texprocil76, the EC did not sufficiently explain in the public notice, or make
available through separate a report, why it considered the uniquely established and exceptionally high
profit margin ‘reasonable’.
3.145 As noted in section III.A.1 above, following the provisional Regulation and provisional
disclosure the Indian exporters made extensive arguments on the interpretation of ‘reasonable’.
Although the EC in recital (18) noted the issue of the interpretation of ‘reasonable’, it never replied to
the claims by Indian exporters that the profit and SG&A determined were not reasonable as per
Article 2(3) of the basic Regulation (Article 2.2 of the ADA).  This is all the more serious in view ofthe very tangible impact of this issue on the dumping margins.  The EC therewith acted inconsistently
with Article 12.2.2.
B. C
LAIM 7:  ARTICLE 2.4.2: ZEROING OF NEGATIVE DUMPING AMOUNTS
3.146 Summary: the EC acted inconsistent with Article 2.4.2 by zeroing negative dumping amounts
on a per-type basis ( claim 7 ).
1. Facts
3.147 First, reference is made to the fact s described above in section III.A, above.  The following
facts may be added to this description.  It is recalled that during the first round of consultations, thefollowing question was asked:
77
“114. Would the EC indicate what the basis under the WTO Anti-Dumping Agreement is for
the practice of per-type zeroing when weighted average normal values are compared to
weighted average export prices as per Article 2.4.2? (In other words, why does the EC applyinter-type zeroing?)”
3.148 In response, the EC answered at the time:
“[EC]: The basis for such practice is the requirement that prices be ‘comparable’. We
compare therefore, within one like product, on a type-by-type basis. Why zeroing? Because if
we would not zero negative amounts, the requir ement that we compare like with like would
not be respected.”
3.149 During the second round of consultations this matter was again discussed in detail.78
3.150 In its letter of 29 June 199879 the EC provided the following answer with respect to
question 114 regarding Article 2.4.2:
“Question 114
Would the EC indicate what the basis under the WTO Anti-Dumping Agreement is for the
practice of per-type zeroing when weighted average normal values are compared to
weighted average export prices as per Article 2.4.2? (In other words, why does the EC apply
inter-type zeroing?)
                                                     
76 Please refer to section III.A.1, above.
77 See Annex 11.
78 For the verbatim report please refer to Annex 13.
79 Annex 14.WT/DS141/R
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It should be noted that the methodology described in recital (46) of the provisional duty
Regulation for the calculation of dumping margins, i.e. weighted average constructed normal
value by type compared to weighted average export price by type, was never disputed duringthe administrative procedure.  Article 2 (11) of the basic Regulation, which deals with this
aspect, is clearly restricted to sales within a particular type -- that does not address how the
results found for each type are averaged which is dealt with in Article 2 (12).  The latter is
more a question of how findings are imposed in the form of measures of duties [sic] and in
this case the Community as per consistent practice imposed an average rate of dumping to
cover all types with non-dumped types given a zero margin for the quantity concerned.”
2. The relevant part of the text of article 2.4.2
3.151 It is recalled that Article 2.4.2 of the ADA provides that:
“ . . . the existence of margins of dumping during the investigation phase shall normally be
established on the basis of a comparison of a weighted average normal value with a weighted
average of prices of all comparable export transactions or by a comparison of normal value
and export prices on a transaction-to-transaction basis. A normal value established on a
weighted average basis may be compared to prices of individual export transactions if theauthorities find a pattern of export prices which differ significantly among different
purchasers, regions or time periods, and if an explanation is provided as to why such
differences cannot be taken into account appropriately by the use of a weighted
average-to-weighted average or transaction-to-transaction comparison.”
3. Claim relating to Article 2.4.2
3.152 Inconsistently with Article 2.4.2, the EC zero ed negative dumping incurred for certain types
when comparing the overall weighted average per-type normal values with per-type weighted average
export prices.
3.153 It appears that Article 2.4.2 provides for three possibilities to establish a dumping margin:
1. A comparison of a weighted average normal value with a weighted average of prices of all
comparable export transactions;
2. A comparison of normal value and export prices on a transaction-to-transaction basis; or
3. A normal value established on a weighted average basis may be compared to prices of
individual export transactions
3.154 In the provisional Regulation the EC stated that “(46) In general, weighted average
constructed normal value by type was compared with weighted average export price by type.”
All six other dumping margins for India did not exceed 17 per cent.  Clearly, any use of a ‘reasonable’
profit margin ( i.e. any profit margin lower than the excessive 18.65 per cent), such as had been
suggested countless times during the proceeding, would have led to lower dumping margins.
3.155 It would therefore appear that the EC opted to apply the first possibility of establishing a
dumping margin as per Article 2.4.2.  This view is also confirmed by the discussions that took place
during the two rounds of consultations.WT/DS141/R
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3.156 It appears therefore unquestionable that in it s calculations of the dumping margins, the EC
had decided to apply the ‘first option’ of establishing a dumping margin as per Article 2.4.2 which is
to establish “ . . . a comparison of a weighted average normal value with a weighted average of prices
of all comparable export transactions.”
3.157 As noted in the claim above, it is submitted that the EC has not de facto  m a d e  s u c h  a
comparison. Instead, it has zeroed the ‘negative dumping’ which was found for certain models. This
has led to overstatement of the dumping margins for four companies. For one company this has evenled the EC to find dumping where dumping did not exist.  More precisely, the overstatement of the
actual dumping margins has been as follows:
Name CIF Value of
ExportsActual Dumping
ResultActual DM
PercentageDumping Amount
as per ECEC DM
Percentage
Anglo-French126,464,037 30,820,812 24.37% 31,287,342 24.74%
Bombay
Dyeing100,924,637 5,612,587 5.56% 7,842,226 7.77%
Madhu 183,063,049 30,898,430 16.87% 31,169,522 17.03%
Omkar 212,877,521 28,025,198 13.16% 30,328,190 14.25%
Prakash 314,529,134 -1,328,119 -0.42%, i.e. 0 8,412,131 2.67%
Source: Based on Data provided in Disclosure documents
3.158 How this overstatement came about may be illustrated by the details of the calculations of
Prakash:
Data
PRODUCT
CONTROL
NUMBERSum of CIF VALUE IN
CURRENCY OF
EXPORTING
COUNTRYSum of DUMPING
RESULTDUMPING
AMOUNT
AS PER EC %
1 54,595,034.24 2,444,661.168  2,444,661.17 4.48%
2 28,379,349.81 -840,871.6374 0.00 0.00%
3 35,119,956.8 787,797.5404 787,797.54 2.24%
4 26,940,135.47 -1,923,730.158 0.00 0.00%
5 21,859,280.04 -977,723.0105 0.00 0.00%
6 19,426,021.26 2,132,781.439 2,132,781.44 10.98%
7 15,915,117.53 -255,135.296 0.00 0.00%
8 14,604,200.8 156,272.4031 156,272.40 1.07%
9 12,526,247.49 225,785.7921 225,785.79 1.80%
10 10,064,340.52 391,620.1423 391,620.14 3.89%
11 9,195,177.3 -2,114,764.402 0.00 0.00%
12 7,182,757.11 1,195,525.219 1,195,525.22 16.64%
13 6,578,793.64 -921,095.2336 0.00 0.00%
14 7,783,783.55 73,158.60636 73,158.61 0.94%
15 7,355,982.32 435,593.6285 435,593.63 5.92%
16 7,968,378.95 -903,413.7129 0.00 0.00%
17 6,127,736.67 -691,408.4469 0.00 0.00%
18 4,812,847.04 -239,001.1542 0.00 0.00%
19 6,543,607.06 -567,224.405 0.00 0.00%
22 3,552,510.28 -188,257.2337 0.00 0.00%
25 4,164,049.29 327,548.0475 327,548.05 7.87%WT/DS141/R
Page 143
46 1,510,123.95 -117,626.1048 0.00 0.00%
63 577,254.4 150,550.1243 150,550.12 26.08%
68 869,897.26 77,215.41208 77,215.41 8.88%
70 876,551.29 13,621.79908 13,621.80 1.55%
Grand total 31,452,9134.1 -1,328,119.472 8,412,131.32 2.67%
Source: Based on Data provided in Disclosure documents
3.159 Clearly, to models where negative dumping existed, the EC attributed a zero margin.  The
issue is material since in the absence of this peculiar practice no dumping for the largest exporter fromIndia would have been found:
Total CIF Value Actual Dumping Result Actual Dumping Margin
314,529,134.1 -1,328,119.472 -0.42%, i.e. 0
Source: Based on Data provided in Disclosure documents
3.160 The fact that the practice as applied in the Bed Linen proceeding is not always followed by
the EC may be illustrated by the attached disclosure of a calculation in another EC anti-dumping
proceeding.80  In that other case it may be clear from the tables that the negative dumping which
existed for certain models was allowed to offset the dumping found for other models which were
positively dumped.
3.161 Hence, it is first of all clear that Commission practice is not always consistent on this point.
3.162 Second, regard should be had to the exact wording of the text of Article 2.4.2. The text of this
Article comprises the following elements:
1. a comparison of;
2. a weighted average normal value;
3. a weighted average of prices of all comparable export transactions.
3.163 The elements of ‘comparison’ and ‘weighted average normal value’ do not seem in dispute.
A comparison has been made, and a weighted average normal value has been established for all
models that were exported.
3.164 The question then becomes what exactly is meant by the ‘weighted average of prices of all
comparable export transactions.’ This third element comprises five notions:
1. weighted average
2. of prices
3. of all
4. comparable
5. export transactions.
3.165 Out of these five, the key notions are the notion of ‘weighted average’, the notion of ‘all’, and
the notion of ‘comparable.’
3.166 As noted in secti on III.A.4.1 a bove, the Oxford Concise Dictionary  defines ‘average’ as “an
amount obtained by dividing the total of given amounts by the number of amounts in the set.”
                                                     
80 Annex 49.WT/DS141/R
Page 144
3.167 Clearly, for establishing an average, there is no justification to exclude certain amounts.  The
definition of ‘average’ clearly relates to the total of given amounts and not to a number of given
amounts from where a selection can then be made as to which ones are to be averaged.
3.168 This view on the notion of average is further underlined by the use of the word ‘all’ within the
text of Article 2.4.2.  By no stretch of imagination could it be understood that instead of ‘all’ one
could also read ‘some’ or ‘a number of’, etc.
3.169 Finally the word ‘comparable’ merits attention. Clearly it is understood that in order for a
comparison to be effectuated the comparable models will first have to be compared with each other.
Assigning various product control numbers to the various models accomplish this: for each respective
model the relevant normal value is compared with the appropriate export price. However, this does
then not mean that for the eventual weighing of the overall dumping margins the negative dumping
should be attributed a zero value. This latter practice is contrary to the concept of weighing and in fact
distorts the process of actually weighing the dumping margin. The fact that the actual process ofweighing is being distorted is clearly shown by the above-cited calculations with respect to Prakash
that clearly showed a no dumping situation in case the weighted average of all comparable
transactions was properly compared.
3.170 The EC, by suddenly inserting a new, unwritten, rule into the text of Article 2.4.2 has thereby
acted inconsistently with the concept of a weighted average dumping margin.  In fact, it is recalled
that paragraph (349) of the (unadopted) ATC Panel report provides that “ . . . [i]n the view of the
Panel, the issue of “zeroing” would not arise in  cases where the comparison was made between an
average normal value and an average export price.”
3.171 We note that, contrary to the ATC issue on negative dumping, the EC method always will
lead to a higher dumping margin compared to the unqualified method envisaged by the ADA. [Except
of course in the exceptional situation where all models are dumped, in which rare case the results
would be the same (a situation which did not occur in the Bed Linen case)].
3.172 The EC, by unilaterally deviating from the text of the ADA, has therefore acted inconsistently
with Article 2.4.2 of the ADA.
IV. CLAIMS RELATED TO THE INJURY DETERMINATION AND THE
EXPLANATION THEREOF
A. ARTICLE 3.1: CONSIDERATION OF OTHER THAN ‘DUMPED IMPORTS ’
4.1 Summary: the EC considered, for the purposes of the injury determination, all imports from
India to have been dumped, even though much bed linen from India exported during the investigation
period was clearly found not to be dumped.  By including such non-dumped imports for the injury
determination, the EC acted inconsistently with Article 3.1 of the ADA ( claim 8 ).
The EC further failed to properly explain its reas oning, and consequently acted inconsistently with
Article 12.2.1 ( claim 9 ) and 12.2.2 ( claim 10 ).
1. Facts
4.2 The Indian exporters argued from the beginning that their exports of bed linen to the EC had
not caused injury.  Such arguments were made in the submission on injury (Annex 50), during their
first injury hearing on 13 January 1997, and in the post-hearing brief submitted on 6 February 1997.WT/DS141/R
Page 145
4.3 In its provisional Regulation the EC made a determination on Community industry and injury
which for the convenience of the Panel is quoted here in toto :
“E. COMMUNITY INDUSTRY
1. Definition of the Community industry
(52) After elimination from the list of companies included in the complaint of seven of them
found not to be complainants, the Commission found that the remaining companies
represented a major proportion of Community production of bed linen and satisfied the
requirements of Article 5(4) of the basic Regulation.
After initiation of the proceeding, a number of organizations representing exporters and
importers of bed linen from the countries co ncerned alleged that several of the producers
which made up the Community industry were also importing the dumped product from the
countries subject to the proceeding. In these circumstances, the Commission re-examined
whether, in the light of the provisions of Article 4(1)(a) of the basic Regulation, these
companies should be excluded from 'the Community industry'.
(53) For the purposes of carrying out this re-examination, and in accordance with consistent
practice of the Community institutions, it appeared appropriate to determine whether those
companies were primarily producers in the Co mmunity with an additional activity based on
imports and merely supplementing their Community production, in order to be able to offer acomplete range of products, or whether they were importers with relatively limited additional
production in the Community.
(54) In all but one case, companies alleged to  be importing bed linen from the countries
concerned were among those selected in the sample of Community producers (see recitals
(58) to (61)). The Commission was therefore able to examine the extent of these imports
during the course of its on-the-spot verification visits. For all but one of these sampledcompanies, the investigation show ed that the imports of dumped products from the countries
concerned had accounted for less than 10 per cent of the turnover of the companies in
question in the period examined. It is therefore the opinion of the Commission that these
companies were not shielded from the effect s of dumped imports and that for the purposes of
Article 4 of the basic Regulation these companies may be considered along with the othercooperating producers, as belonging to the Community industry.
In the case of the one other sampled company, it was found that a higher proportion of its bed
linen sales in the investigation period were of Pakistani origin and also that only a minor part
of its sales were of its own production. It appeared in addition that the company's futureactivity was likely to be further focused on imports. This company, whose core interests were
deemed clearly not to be in the production of  bed linen within the Community, was therefore
eliminated from the Community industry.
(55) Since all but one of the sampled companies alleged to be importing bed linen from the
countries concerned were found, on examination, not to be doing so in quantities sufficient to
warrant exclusion, it has been considered that  the allegations made by the exporters in this
regard were excessive and unreliable. Consequently, on the basis of the findings concerning
the sample, no exclusion of the one non-sampled company is warranted. This companyWT/DS141/R
Page 146
should, therefore, be retained in the definition of the Community industry. In any event, this
issue has no substantial influence on the question of the representativity of the Community
industry.
(56) Three other companies were eliminated. In one case the company was found no longer to
produce bed linen. In two other cases the companies did not respond to the requests for
information which were addressed, via Eurocoton and the national associations, to those
complainants which were not selected in the sample of Community producers, in order to
obtain information on the Community industry as a whole.
(57) The remaining 35 companies, which cooperated with the enquiry and are located in
France, Germany, Italy, Spain, Portugal, Austria and Finland, represented a major
proportion of total Community production in the investigation period. These companies were
therefore deemed to make up the Community industry under the terms of Article 4 (1) of thebasic Regulation.
2. Sampling
(58) Because of the number of companies in th e Community industry it was decided to resort
to sampling, in accordance with Article 17 of the basic Regulation.
(59) 27 of the 35 companies, representing 96.7 per cent of Community industry production
and 32.5 per cent of total Community production in 1995, (the latest figures available at the
time of sample selection) were situated in Germany, Italy, France and Portugal.
(60) As a general rule, Community producers sell a large proportion of their bed linen
production in their own Member State, in part because of differences between Member States
in standard products and sizes. This is true of Germany, France and Italy which are both the
largest producers of bed linen in the Comm unity and very important importers. The
producers in these Member States were therefore clear candidates for assessing the impact of
the imports on the Community industry.
Producers in Portugal, for their part, sell a large proportion of their production in other
Member States and represent about one third of the production of complainant companies.
Even though Portugal is not a significant importer, therefore, it was decided that the effect of
the imports on the producers there should be assessed and that Portugal should berepresented in the sample.
(61) In consultation with the complainant Eurocoton an initial list of 19 companies was
arrived at (eight from France, six from Germ any, four from Italy and one from Portugal).
In the course of the enquiry one of these companies was eliminated from the sample for
failing to cooperate with the enquiry. As a result of this exclusion, and of the exclusion of the
other company under Article 4(1)(a) of the basic Regulation (see recital (54)), in the
following injury analysis inform ation given for 'sampled producers` is based on information
supplied by the remaining 17 producers which represented 20,7 per cent of total Communityproduction and 61.6 per cent of the production of the Community industry. They included the
largest Community industry companies in Germ any, Italy and Portugal, and also smaller
producers. The Commission therefore considered this sample to be representative of the
Community industry.WT/DS141/R
Page 147
F. INJURY
1. Collection of data
(62) Data for the examination of injury caused to the Community industry was collected and
analysed at three different levels, as follows:
— at the level of the entire Community (EU-15), for trends concerning production,
consumption in the Community, imports, exports and market share. Data was
obtained from Eurocoton and from recognized industry sources, notably the CITH
(Centre d'Information Textile et Habillemen t) which produces a series of production
figures across the Community for the whole of textile category 20. This category is
very slightly broader than the definition of the product concerned in the presentproceeding. However, the difference is very slight, as the extra products it includes
are of very minor significance,
— at the level of the Community industry, as defined above, for trends concerning
production, sales by value and employment,
— at the level of the sampled Community producers, for the factors mentioned above
and also for trends concerning prices and profitability.
2. Consumption
(63) Community consumption of the product concerned (as measured by production plus
imports minus exports) decreased from 200 000 tonnes in 1992 to 186 000 tonnes in the
investigation period, a decrease of 7 per cent.
3. Cumulative assessment of the effects of the dumped imports
(64) The Commission considered, in the light of  Article 3(4) of the basic Regulation, whether
cumulative assessment of injury caused by the three exporting countries was justified.
(65) With regard to the conditions laid down in Article 3(4)(a) the margin of dumping
established in relation to the imports from ea ch country is more than the minimis and the
volume of imports from each country is not ne gligible. In this respect India and Pakistan are
both subject to quotas on their exports of bed linen to the Community. Both countries used
these quotas in full (at least 98 per cent) in each of the 1993, 1994 and 1995 quota years and
increased the effective quotas by transferring quota allocation from other categories. In
addition, it appears that in 1995, India exported to the Community a volume of bed linen20 per cent higher than the amount licensed for the 1995 quota year.
All three exporting countries involved in this proceeding increased their exports of the
product concerned between 1992 and the investigation period. The largest exporter, Pakistan,
increased its exports by volume by 6 per cent, and the second largest, India, increased itsexports by 56 per cent. Exports from Egypt, which are not subject to quotas, rose by 282 per
cent between 1992 and the investigation period though remained well below the other two
countries.WT/DS141/R
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In accordance with the terms of Article 3(4 )(b), the conditions of competition between
imported products, and between imported products and the like Community products, were
analysed. It was found that the imports compete directly with each other and with the like
Community product, and that in particular a num ber of large purchasers of bed linen buy
both from the Community industry and from the countries concerned. While there are
variations in the proportions by type and desti nation of exports from each of the countries
concerned, it was found that products from each exporting country were substitutable and
competed with each other and with the products of Community producers on the Community
market.
(66) It was therefore held that a cumulative assessment of the effects of the imports was
appropriate in terms of Article 3(4) of the basic Regulation.
4. Volume and market share of dumped imports
(67) Dumped imports from the three countrie s concerned increased from 33 825 tonnes in
1992 to 46 656 tonnes during the investigation period i.e. an increase of 12 831 tonnes or
38 per cent. During the same period their market share increased from 16,9 per cent to
25,1 per cent.
5. Prices of the imports concerned
(68) The Commission examined whether the exporting producers' sales in the Community
were at prices that undercut the prices of the sampled Community producers during the
investigation period.
(69) Given the great diversity of products involved, the Commission defined certain reference
products of particular importance in each of the principal markets analysed (France,
Germany, Italy) for which price and cost data would be determined for the sampled
Community producers. Because of different habits and traditions these products were
different in each of the Member States examined.
For each of the reference products and for certain other bed linen products of particular
interest in specific markets sold by the sampled Community producers the Commission
established average prices during the investigation period using information obtained from
the sampled Community producers. These prices were then compared with imported productsof similar size, weaving construction and finish, where these were sold to clients in the
Member State concerned.
(70) Certain exporters contended that even when products corresponded in size, weaving
construction and finish they should not be regarded as comparable, in particular because theimported goods were of poorer quality. These quality differences were alleged to arise, for
example, from lower weaving production technology.
(71) Differences in production technology do not of themselves, however, mean that there are
physical differences between the articles produced. In addition, the Commission receivedevidence that exporters in the countries concerned produced bed linen using the most modern
machinery.WT/DS141/R
Page 149
It was also found that the products were often sold alongside each other, for example
appearing on the same page of mail order catalo gues without any indication of origin. In any
event, no quality differences could be established.
The Commission therefore considered that there were no reasons not to compare the prices of
products corresponding in size, weaving construction and finish, as envisaged in recital (69)
above.
(72) Certain exporters also claimed that the imported and Community products were sold
through different sales channels and were not therefore in competition. They alleged that
while the exporters sold to large hypermarket ch ains, mail order companies etc, in particular
for lower-priced ‘promotion’ sales, the European producers concentrated on branded goods
sold through specialists or department stores etc.
On examination it was found that the mix of sales channels did indeed differ to the
Community producers and for importers, and ind eed differed between Community producers.
However, large purchasers such as hypermarkets and mail order companies were also
important to the majority of the sampled Community producers, and were sometimes their
dominant clients. It was also found that selling to these clients for promotional sales was animportant part of this output. It was therefor e held that prices of imported and Community-
produced goods could be compared.
(73) The Commission examined how quantities and prices of the imports concerned and of the
sampled Community producers varied by sales channel. The results varied between MemberStates. In France and Germany, for example, Community producers made more than 80  per
cent of their sales directly to retailers, and small quantities at relatively high prices to
wholesalers and distributors. Imports were di vided between retail and wholesalers and some
exporters sold exclusively to wholesalers. In these circumstances the Commission considered
that a comparison of prices by sales channel would not be appropriate: the prices of
Community producers to wholesalers and distributors could not be considered to be
representative ones with which the prices of imports sold in higher volumes could becompared.
(74) The comparison was therefore made betwee n average prices of the imports, expressed
duty paid cif Community frontier, and average ex- works prices of the Community producers
for each reference product. The prices of the Community producers were adjusted downwardsby a margin calculated to give the average price through the cheapest sales channel (eg.
discount stores in Germany, hypermarkets in France). The resulting price was further
adjusted to take account of importers' costs.
(75) Certain exporters observed that some product types (notably a particular quality called
seersucker, and white (bleached) products which are often destined for use by institutions
such as hotels and hospitals) were important in their exports but were not represented among
the reference products. They claimed that this showed that the products they exported to the
Community and the products sold by Community producers were not in competition with each
other, that a valid undercutting analysis could not be carried out or that these types should be
excluded from any measures imposed.
(76) The Commission considered these arguments but concluded that a difference of product
mix did not invalidate the finding that there was competition between the products sold by theWT/DS141/R
Page 150
exporters and the products sold by Community producers. The Commission found that the
concentration by Community producers on other products was a reflection of the level of
competition from the dumped imports, and decided that the analysis undertaken according to
the methodology set out above was a valid measure of the degree of price undercuttingpractised by the exporters.
(77) The reference products used for the undercutting analysis, which in effect represent a
product sample, were found to be represented among the Community sales of all the sampled
exporters from the countries concerned except one Egyptian company, with a variable degreeof importance among the rest. Where the degree of representativity was particularly low, the
Commission examined the prices of other products (or a per kilo basis) to check that those
used for the undercutting analysis were in line with the prices of the rest of their sales to the
Community.
(78) The Egyptian company whose exports to the Community contained no reference products
was one of the three State-owned producers. The company exported almost exclusively
bleached articles to the Community in the investigation period. A calculation was made using
the prices of these articles which matched reference products in all respects apart from the
fact that they were bleached, adjusted upwards for dyeing costs.
(79) All the sampled exporters were found to be undercutting the prices of the reference
products of the Community producers. In India, the level of undercutting ranged from
13.8 per cent to 40.8 per cent, in Pakistan from 11.9 per cent to 34.7 per cent and in Egypt
from 23.8 per cent to 53.7 per cent, expressed as percentages of the adjusted average pricesof the Community industry.
(80) The Commission assessed the development of the average prices of imports from the
countries concerned. It was established that since 1992 the prices of Indian and Egyptian
imports had fallen by up to 18 per cent. While the prices of Pakistani imports had risen in that
period, the rise had been at a much slower rate than the very sharp increases in the world
price of raw cotton.
6. Situation of the Community industry
(a) Production
(81) Total output of bed linen by producers in the Community fell by 9,6 per cent from
138,400 tonnes in 1992 to 125,100 tonnes in the investigation period. This fall in production
arose essentially through the closure of enterprises or their cessation of bed linen production
within the Community (see recital (91) below). It should also be noted that total exports by
Community producers have increased by 50 per cent, from 14,027 tonnes in 1992 to 21,756 inthe investigation period. Without this export performance, Community bed linen production
would have suffered further than the figures given above.
The pattern observed for total Community production was not replicated at the level of the 35
producers of the Community industry, whose production rose by 8.7 per cent from 39,370tonnes in 1992 to 42,781 tonnes in the investigation period. The Commission concluded that
the Community industry represented those companies which were strong enough to survive
the competition from dumped imports and whic h to a certain extent had benefited from the
demise of those which had not so survived.WT/DS141/R
Page 151
Indeed, in the course of its investigation the Commission acquired evidence of 29 companies
other than the Community industry which ceased or reduced bedlinen production in the
Community between 1992 and the investigation period. It is estimated that total loss ofproduction amounted to at least 10,000 tonnes per annum.
The sales, employment and profits of companies which have since disappeared are not
included in the aggregated data for the Community industry, thus artificially improving the
apparent trends for the survivors.
(b) Sales by volume
(82) At the level of the total Community producers, sales by volume in the Community, as
measured by production minus exports, fell by 17 per cent from 124,400 tonnes in 1992 to103,350 tonnes in the investigation period.
Sales by the sampled producers of the Community industry also declined, from 23,706 to
23,347 tonnes, a decrease of 1.5 per cent.
(c) Sales by value
(83) Sales by the Community industry rose by 4.2 per cent from ECU 428.6 million in 1992 to
ECU 446.6 million in the investigation period. Sales by the sampled producers also rose,
from ECU 280.6 million in 1992 to ECU 285.3 million (a rise of 1.7 per cent). It should benoted that these rises in nominal terms do not take account of inflation and represent a fall in
real terms, since consumer prices in ecus ro se by 5.5 per cent over the same period for the
EU-15 countries. It should also be noted that these rises were overtaken by rises in the price
of raw cotton (see recital (88) below).
It should be noted that among the sampled producers it was observed that sales have been
maintained by seeking higher value market niches as the lower value, mass market items areundercut by imports. This pattern is indicated by developments on prices (see recital (87)
below).
(d) Market share
(84) The market share by volume of producers at the level of the entire Community fell from
62.2 per cent in 1992 to 55.6 per cent in the investigation period. In that period the sampled
producers from the Community industry increased their market share slightly, from 10.7 per
cent to 11.3 per cent. The reason why the market share of survivors has slightly increased is
that they have taken over some of the sales of those which had not survived the competitionfrom dumped imports, particularly the sales of higher value niche products.
(85) An estimated analysis was done of market share by value. The patterns observed were
the same as for market share by volume: producers at the level of the entire Community lost
market share (from 77.8 per cent in 1992 to 72.0 per cent in the investigation period), whilethe Community industry as a whole and sampled producers gained market share, from
22.4 per cent to 25.1 per cent and from 14.7 per cent to 16.0 per cent respectively.
(e) Price developmentWT/DS141/R
Page 152
(86) The Commission examined the development in average prices achieved by the sampled
Community producers for the defined reference products between 1993 and the investigation
period, using a constant product mix of the re ference products. This showed that prices, in
index terms, fell from 100 in 1993 to 97.6 in 1994, recovering to 98.3 in 1995 and 99.2 in the
investigation period. This represents a greater fall in real terms, since in the same period
average consumer prices measured in ECUs rose by 5.5 per cent in the Community.
(87) The development in average prices per kilogram of the sampled producers was also
measured. This measure showed an average price development from 100 in 1992 to 97.8 in
1993 to 103.2 in the investigation period. The fact that this measure has developed more
positively than prices for the defined reference products further reflects the fact the sampled
producers have been forced to move into ni che markets and away from high volume, mass
market products.
(88) The Commission also examined the development of the standard measure for prices of
cotton, the principal raw material. This measure showed increases of 48  per cent from 1992
to the investigation period and of 59 per cent between 1993 and the investigation period.
Since the raw material can represent typically 15 per cent of the costs of the finished product,it follows that the prices achieved by the sampled Community producers were far from
reflecting the rises in the costs of that material.
(f) Profitability
(89) The profitability of the sampled companies declined by more than 50  per cent between
1992 and the investigation period, from a figure of 3.6 per cent to 1.6 per cent of sales. This is
well below the figure of 5 per cent which can be regarded as a minimum level which was
achieved by these companies in 1991 when the dumped imports concerned were 30 per cent
lower than in the investigation period. It is also below profit levels achieved by importers,
which explains why certain producers have ceased production and switched to importing.
(90) It should be recalled again that the sampled companies are among those which have
been able to survive the competition of dumpe d imports. It should also be noted that the
industry in question is not capital intensive and that it contains a large number of SMEs,
which means that any move into loss-making can lead to immediate exit rather than
remaining in business waiting for better times. This is why the companies that are left arethose that are profitable or, as in this case, only just profitable.
(g) Employment
(91) Direct employment by the 35 companie s of the Community industry on the product
concerned declined by 5.3 per cent between 1992 and the investigation period, from around
7,000 jobs to 6,700.
In analysing data on the Community industry, account should be taken of the 29 companies
other than the Community industry which ceased or reduced bed linen production in theCommunity between 1992 and the investigation period (see recital (81)). The associated job
losses numbered over 2,400.
(h) Conclusion on injuryWT/DS141/R
Page 153
(92) The Commission took into account all the economic indicators mentioned above in
determining whether or not the Community indu stry was suffering material injury. Account
was taken of the fact that the number of companies making up the Community industry wasreduced in comparison with the start of the injury investigation period. The production, sales,
employment and profits of companies which ha ve since disappeared are not included in the
aggregated data for the Community industry, thus improving the apparent trends for the
survivors.
(93) The Commission noted the decline in the total production and market share of
Community producers. This background demonstrat es the difficult conditions in which the
remaining Community industry was operating. The fact that these surviving companies were
able to maintain production and market share shou ld not detract from the assessment of the
overall situation. Above all, the remaining Community industry suffered declining andinadequate profitability, as further evidenced by prices which had not been able to reflect
increases in the costs of raw cotton or to keep pace with inflation in prices of consumer
goods.
(94) Accordingly the Commission reached the vi ew that the Community industry had suffered
material injury.
G. CAUSATION
1. Introduction
(95) The Commission examined the volume and prices of the dumped products from the
exporting countries concerned and their consequent impact on the situation of the Community
industry. As part of this examination the Co mmission also examined the effects of other
factors in order to ensure that these effects were not incorrectly attributed to the dumped
imports. This examination had to take into account the existence of quotas, which might have
limited the potential for growth in sales on the Community market by the countries concernedand other third countries.
2. Effects of the dumped imports from the countries concerned
(96) The investigation of the Community industry showed as the main injury indicator the
unsatisfactory development of sales prices and the consequent declining profitability. It was
also established that the dumped imports were sold at prices which significantly undercut
those of the Community producers and in substantial and increasing quantities, reaching
25 per cent market share in the investigation period.
(97) In order to assess the full impact of th e dumped imports, it should be noted that the
market for bed linen is characterised by product substitutability and transparency. Large
retailers were found to sell the imported products and the Community-produced products
alongside each other, without the ultimate cons umer being informed of the product's origin.
The transparency of the market was found not to be significantly affected by the differences instandard products among Member States: several sampled exporters in the countries
concerned sold products in three or more Member States, in each case adapting their
production to supply the standard products of the territory concerned. In view of the price
sensitivity of the large purchasers it can be concluded that the consistently low prices of theWT/DS141/R
Page 154
imports concerned, coupled with their substantial and increasing market share (see recitals
(67) to (80)), have applied continuous downward pressure on prices on the Community
market.
(98) It was observed among sampled producers that they had been obliged increasingly to
shift production and sales to high value niche markets in order to maintain production and
sales levels. The undercutting calculation provided evidence that this shift was caused by the
imports concerned. Undercutting margins were lower in the lower value qualities, indicating
that the imports significantly influence price levels in this market segment and have forceddown Community producers' prices. Where higher value items were imported the
undercutting margins were higher, indicating that imports of these qualities were not yet at
sufficient volume to bring down Community prices to the same extent.
It is worth noting that the Commission has received indications from importers, from
Community producers and from suppliers of textile machinery to the exporting countries to
the effect that exporters in the countries concerned are increasingly moving to higher value
items.
(99) Since price suppression and consequent decreasing profitability to inadequate levels
were the main indicators on which the Commission's finding of injury was based, and in view
of the coincidence in time between the dete rioration of the situation of the Community
industry and the significant increase of the dumped imports, it can be concluded that there
was a direct causal link between these imports and the material injury found.
3. Effects of other factors
(a) Imports from third countries
(100) Imports from other third countries not covered by this proceeding fell between 1992
and the investigation period, both in absolute terms (from 41 600 tonnes to 35 800 tonnes)
and in terms of market share (from 20.8 per cent in 1992, considerably above the total of thecountries concerned in this proceeding, to 19.3 per cent in the investigation period,
considerably below). These imports originate in a wide range of third countries outside the
countries concerned by this investigation. The most significant in terms of volume was, with
its 1995 market share, Turkey (3.6 per cent). However Eurostat statistics show that imports
from Turkey declined between 1992 and 1995 and were imported at prices significantly abovethose of the countries concerned by this inves tigation. Countries with prices comparable to
those of the countries concerned by this in vestigation include Romania, Slovakia and Estonia.
However, their combined market share of 2.8 per cent in 1995 is just over 10 per cent of the
combined share of the countries concerned by this investigation.
(101) It follows from the fore going that imports from countries not concerned which undercut
the Community industry's prices could also have contributed to the injury suffered by the
Community industry. However, the Commission considered that the link between the dumped
imports and the injury to the Community indus try was sufficiently clear and direct as to
consider that injury from these other sources, which had only a small market share, had notbeen wrongly attributed in the analysis. In this respect, there was shown to be a reasonable
coincidence in timing between, on the one hand, the degree of the effects of low prices and
rising volumes of the dumped imports and, on the othe r, the material injury attributed to the
dumped imports.WT/DS141/R
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(b) Increase in raw cotton prices
(102) The world raw cotton price, as measured by the Cotton Outlook A index (converted
from US$ into ECUs) rose by 48 per cent  between 1992 and the investigation period. Over
the same period prices on the Community market of the product concerned by this proceeding
were experiencing strong downward pressure because of price undercutting by the dumped
imports. In this period the sampled producers were not able to achieve a satisfactory price
development. As noted in recital (86) above, prices of the reference products fell on averagein real terms.
(103) The Commission concluded that increases in raw material prices had caused injury.
However, the extent of such injury depends on the ability of the producers to pass on some or
all of the increased cost. In this case, it was reasonable to assess that the dumped imports
were the main reason why such pass-through did not occur.
(c) Developments in Community consumption and demand
(104) Certain exporters suggested that any inju ry being suffered by the Community industry
could be ascribed to the steady decrease in total consumption of the product concerned, by
7 per cent between 1992 and the investigation period.
(105) It is clear that the decline in cons umption between 1992 and the investigation period
has contributed to the situation of the Community industry. However, the fall did not affect alloperators equally. During this period the total volume of sales by Community producers fell
by an amount 50 per cent higher than the tota l fall in consumption. While sales by the
Community industry have remained relatively stable, benefiting from the disappearance of
other Community producers, the dumped imports from the countries concerned increased by
48 per cent. Imports from other third countries decreased by 14 per cent. Because total sales
by Community producers fell by 50 per cent more than the total fall in consumption and sales
by other imports declined, it can be concl uded that increased dumped imports through severe
price undercutting gained at least one third of the sales volumes lost by Community
producers. This clearly constitutes a cause of material injury not attributable to the decline in
consumption.
(106) In addition, even if the decline in consumption contributed to some extent to the
situation of the Community industry, in particular because it strengthened the position of
large purchasers in price negotiations with Community producers, this strengthened position
depended critically on the availability to these purchasers of the dumped imports
undercutting the Community industry’s prices.
(d) Competition from non-complainant producers in the Community
(107) The Community industry represents only a part of total Community production. It
should therefore be examined whether competition from other producers within the
Community affects the situation of the Community industry. Other producers of bed linen areknown to include, in particular, a large numbe r of ‘converters’, i.e. producers who make bed
linen from grey cloth woven elsewhere, wher eas the Community industry consists largely of
integrated producers who weave most or all of their own grey cloth. As has been found, on a
provisional basis, in the separate proceeding c oncerning imports of grey cloth from India,WT/DS141/R
Page 156
Pakistan, Egypt, China, Indonesia and Turkey, important sources of supply of this product
were imported into the Community at dumpe d prices which would have provided these
producers with an unfair advantage over the Community industry in the present proceeding.
It cannot therefore be ruled out that distorted competition from this source contributed to thesituation of the Community industry.
(108) Nevertheless it should be noted that the production and market share of the non-
complainant producers have fallen between 1992 and the investigation period. Indeed the fall
in production across the Community has been due to reduction by the non-complainantsrather than by complainants. Since the imports concerned have increased over this timescale,
the Commission decided that competition by non- complainants did not invalidate the
conclusion that the imports concerned caused the injury observed.
4. Conclusion on causation
(109) As has been shown above, there is a direct causal link between the increased volume
and the price effect of the dumped imports and th e material injury suffered by the Community
industry. The direct link in this case is demonstrated by the existence of heavy undercutting
which can reasonably explain the significant incr ease in market share of the dumped imports
from 16.9 per cent in 1992 to 25.1 per cent in the investigation period and the corresponding
negative consequences on volumes and prices of sales of Community producers. In terms of
volumes, Community producers' market share decreased from 62.2 per cent in 1992 to
55.6 per cent in the investigation period. This fall was not reflected at the level of individual
producers of the Community industry because they obtained sufficient benefit from the demiseof other Community producers to keep their sales volume relatively stable. However, as far as
the prices of the dumped imports are con cerned, they have had an evident impact on the
sampled producers, may of them being SMEs, whose profitability has fallen from 3.6 per cent
to 1.6 per cent. In this respect, the Commission noted that such a situation can cause
particular difficulty for SMEs given their lack of resources and the reluctance of banks to
finance any losses.
(110) The consequent impact of the low-priced dumped imports has to be considered at two
levels. Firstly, they have resulted in the exit of a significant number of firms with a
considerable number of jobs lost. This is an on-going process which is likely to continue if
dumping persists. Secondly, as to the surviving producers, they face continuing injury on two
fronts. For low-value products the injury is very heavy since they are gradually pushed out ofthe corresponding market segment. For higher-value products, these producers have done
considerably better but dumped imports are now pr ogressively targeting this segment with the
result that profitability is also falling in this respect.
In connection with this it should be noted that the larger Community industry producers,
however, have a production capacity which cannot be utilized at a reasonable rate on the
basis of high value items only. This capacity utilization can only be maintained through
production of mass-market lower value items the market for which is now highly penetrated
by imported goods.
(111) The analysis of the effects of other fact ors than the dumped imports on the state of the
Community industry has in fact confirmed the above direct causal link. Imports from some
countries not concerned, increases in raw material prices, contraction in demand and
competition from non-complainant bed linen producers had or may have negatively affectedWT/DS141/R
Page 157
the Community industry. However, even the combined effect of these other factors could not
break the direct causal link established since it can reasonably be concluded that the
Community industry could, in the absence of th e dumped imports, have adapted to these other
factors without being materially injured. Th e dumped imports themselves were therefore
determined to have caused material injury within the terms of Article 3(6) of the basic
Regulation.”
4.4 Texprocil made substantial arguments following this determination (Annex 51).
4.5 In the definitive Regulation the EC provided the following explanations on the state of the
domestic industry:
“(40) Exporters from all the exporting countri es claimed that the Commission's analysis of
injury was defective in that it referred to the significant decline in total Communityproduction of bed linen in assessing the situation of the Community industry. They claimed in
particular that information concerning compan ies not included in the definition of the
Community industry or which no longer produce bed linen cannot be used to construe a
finding of material injury.
These claims were examined carefully. It should however be remarked that the principal basis
for the finding of material injury was the reduced profitability and price suppression of the
Community industry as observed among the sampled companies.
(41) In the assessment of injury pursuant to Article 3 of the basic Regulation, the Community
institutions have to assess the economic situation of the Community industry. This assessment
usually covers the analysis of a time period of four to five years as in the present case
('assessment period’). Such an assessment is commonly based on an analysis of the
complaining industry and not necessarily on companies accounting for the totality ofCommunity production on the ground that the situation of a major proportion of the
Community production is representative for it s totality. Such an assessment, however, also
has to take into account the structure and the nature of the industry under consideration. Inthe present case this industry is characterized by a high number of operators, in many cases
small- and medium-sized companies, and by the fact  that it is a sector with relatively low
barriers to exit. The latter is mainly due to the fact that machinery can be sold or used for
other products relatively simply. This has the effect that material injury is likely to manifest
itself through the exit of economic operators within the assessment period.
Consequently, to limit the assessment of injury only to companies which are still operational
at the end of the assessment period (i.e. at th e time of the lodging of the complaint) and thus
able actively to support a complaint would mean that any injury caused to companies which
have closed down before this point in time would go unconsidered in the analysis.
Furthermore, it should be noted that this distortion could even be aggravated as the surviving
complaining companies of the Community industry may have benefited, possibly only
temporarily, from the disappearance of othe r companies, causing their positive development
to be overestimated.
In the present case, it should be noted that 29 companies of the bed linen industry have closed
down or ceased production: that is to say,  that a substantial number of companies have
ceased operation. Furthermore, given the subs tantial price undercutting established, the
strong increase in the volumes of the imports concerned and their consequent rise in marketWT/DS141/R
Page 158
share, any relatively positive development of the complaining producers must be seen as
threatened in the absence of anti-dumping measures.” (Emphasis added)
4.6 During the first round of consultations, India raised its concern that imports other than
dumped imports had been taken into account for the assessment of injury:81
“Mr Seth: Several provisions in Article 3 of the Agreement require that injury caused by
dumped imports be determined. Article 3.1 requires that
‘[a] determination of injury . . . shall . . . involve an objective examination of both (a) the
volume of the dumped imports and the effect of the dumped imports  on prices in the domestic
market for like products, and (b) the consequent impact of these imports on domestic
producers of such products.’
Similarly, Articles 3.2, 3.4, 3.5, 3.6 and 3.7 refer to ‘dumped imports’ as opposed to ‘all
imports of the product concerned’. The Eur opean Community has in two different ways
included non-dumped imports in its determinati on and this affects each and all of these
provisions.
. . . it is clear from the disclosure documents that the EC in its injury determination implicitly
considers all Indian exports to the EC during the investigation period to have been dumped,
even though the case handlers in the dumping team have ascertained that not all Indianexports during the investigation period (1 July 1995 to 30 June 1996) were dumped.
India believes that, for these two reasons, the EC has determined injury and causality
inconsistently with Articles 3.1, 3.2, 3.4 and 3.5.
. . .[EC]: You recognise that this is normal practice. I cannot deny there is an assumption
element. We make the dumping calculation over the like product. On this basis we found that
the dumping determination covered  all imports during the IP. We compensated for this by
using WA-to-WA comparison in the dumping margins.
Mr Seth observes that no such compensation takes place due to the zeroing practice . . . ”
4.7 During the second round of consultations the matter was raised again: 82
“Mr Seth: I’ll move on to a slightly different aspect now. Did the EC agree that it assumed for
the injury analysis that all imports from India were dumped?
[EC]: Yes. This responds to your questions 19 to 24. Article 2.1 requires that dumping is
established for a ‘product’. On this basis, we put dumping results of types in an average form.
Thus, the result is an average.”
4.8 In its letter of 29 June 199983, the EC provided the following written answers:
                                                     
81 The verbatim report of this first round is attached as Annex 11.
82 The verbatim report of the second round is attached as Annex 13.
83 Annex 14.WT/DS141/R
Page 159
“Questions 19 to 24
Concerning dumped imports as opposed to all imports in the injury and causality
determinations
In this case, the Community calculated dumping for the like product as a whole.
Dumping was investigated for a period of 1 year prior to the initiation of the proceeding.  For
injury, data was also examined for the investigation period though some factors wereaddressed for a longer period mainly to enable trends to be established.”
2. EC practice
4.9 In EC practice, the injury determination consists  of two elements.  An injury [underselling (or
sometimes undercutting)] margin is calculated per investigated exporter.
84  In Bed linen II the
investigation period [“IP”] covered the period from 1 July 1995 to 30 June 1996.85  This underselling
margin is calculated over the investigation period.
4.10 Second, the investigating authorities make an assessment of the total imports and prices, and
of the state of the domestic industry (the determinations required by Articles 3.1 through 3.6 ADA,inclusive).  The remainder of this claim concentrates on the second determination, and notably on
Article 3.1.
4.11 For the determination of the volume of “dumped”  imports, the EC implicitly considers all
Indian exports to the EC during the investigation to have been dumped. This is standard practice:
“The injury analysis concerning the examination of the volume and price effects of the dumped
imports will also take into consideration imports  with no or de minimis dumping margins . . . “86
3. Claims
4.12 Several claims flow from the facts as described above.
4.13 First, India considers the EC determination to  automatically assume that all imports of bed
linen from India during the investigation period were dumped to lead to a finding inconsistent with
Article 3.1.
4.14 Second, in the provisional Regulation the EC ha s insufficiently explained the basis for its
consideration of all imports of bed linen from India as being “dumped” .  (If the EC has not taken
account of non-dumped imports, this is not evident from the provisional Regulation and the
provisional disclosure document.)  Consequently, the EC acted inconsistently with Article 12.2.1 of
the ADA.
4.15 Third, in the definitive Regulation the EC has insufficiently explained the basis for its
consideration of all imports of bed linen from India as being “dumped” .  (If the EC has not taken
account of non-dumped imports, this is not evident from the definitive Regulation and the definitive
disclosure document.)  Consequently, the EC ac ted inconsistently with Article 12.2.2 of the ADA.
                                                     
84 On the basis of this, the sample injury margin and the residual injury margin are determined.
85 Provisional Regulation at recital (9).
86 See in this respect Müller, Khan, Neumann, EC Anti-Dumping Law—A Commentary on Regulation
384/96 , Wiley (1998)  at 189.WT/DS141/R
Page 160
4. Claim 8:  inconsistency with Article 3.1
4.1 The text of Article 3.1
4.16 Articles 3.1, 3.2, 3.4, 3.5, and 3.6 of the ADA require that injury caused by “dumped”
imports be determined:
“Determination of Injury1
3.1 A determination of injury for purposes of Article VI of GATT 1994 shall . . . involve an
objective examination of both (a) the volume of the dumped imports and the effect of the
dumped imports on prices in the domestic market  for like products, and (b) the consequent
impact of these imports on domestic producers of such products.
3.2 With regard to the volume of the dumped imports, the investigating authorities shall
consider whether there has been a significant increase in dumped imports, either in absolute
terms or relative to production or consumption in the importing Member. With regard to the
effect of the dumped imports on prices, the in vestigating authorities shall consider whether
there has been a significant price undercutting by the dumped imports as compared with the
price of a like product of the importing Member, or whether the effect of such imports is
otherwise to depress prices to a significant degree . . .
3.4 The examination of the impact of the dump ed imports on the domestic industry concerned
shall include an evaluation of all relevant economic factors and indices . . .
3.5 It must be demonstrated that the dumpe d imports are, through the effects of dumping , as
set forth in paragraphs 2 and 4, causing injury within the meaning of this Agreement. The
demonstration of a causal relationship betw een the dumped imports and the injury to the
domestic industry shall be based on an examination of all relevant evidence before the
authorities. The authorities shall also examine any known factors other than the dumped
imports which at the same time are injuring the domestic industry, and the injuries caused by
these other factors must not be attributed to the dumped imports. Factors which may be
relevant in this respect include inter alia the volume and prices of imports not sold at
dumping prices 
3.6 The effect of the dumped imports shall be as sessed in relation to the domestic production
of the like product when available data permit the separate identification of that production
on the basis of such criteria as the production process, producers’ sales and profits. If such
separate identification of that production is not possible, the effects of the dumped imports
shall be assessed by the examination of the production of the narrowest group or range of
products, which includes the like product, for which the necessary information can beprovided.
. . .Footnote 1. Under this Agreement the term ‘injury’  shall, unless otherwise specified, be taken
to mean material injury to a domestic industry, threat of material injury to a domestic
industry or material retardation of the establishment of such an industry and shall be
interpreted in accordance with the provisions of this Article.”WT/DS141/R
Page 161
(Emphasis added)
4.17 First, throughout Article 3 the language is consistent: the injury to the domestic industry must
have been caused by “dumped imports” .87  The first issue is thus what the meaning is of “dumped
imports” .
4.18 Thus, the plain meaning of the provision is clear in as much as it refers to imports.  In this
context, Article 2.1 of the ADA is of relevance:
“For the purpose of this Agreement, a produc t is to be considered as being dumped, i.e.
introduced into the commerce of another country at less than its normal value, if the export
price of the product exported from one country to another is less than the comparable price,
in the ordinary course of trade, for the like product when destined for consumption in the
exporting country.”  (Emphasis added)
4.19 Article 2.1 is not limited to “for the purpose of this Article” ; rather the definition of
“dumped”  contained in it is also applicable to other Articles of the ADA.  In other words, imports in
Article 3 are only considered to be “dumped”  if they have been introduced into the commerce of the
EC at less than their normal value, if their export price is less than the comparable price, in theordinary course of trade, for the like product when destined for consumption in the exporting country.
4.20 It may be observed that under Article 17.6(ii) of the ADA the Panel will interpret:
“the relevant provisions of the Agreement in accordance with customary rules of
interpretation of public international law.  Where the panel finds that a relevant provision of
the Agreement admits of more than one permis sible interpretation, the panel shall find the
authorities’ measure to be in conformity with the Agreement if it rests upon one of those
permissible interpretations.”
4.21 However, in the clear language (plain meaning) of the Agreement as interpreted in
accordance with the customary rules of interpretation of public international law “dumped imports”
means “dumped imports” , and not “dumped and non-dumped imports of the like product” .  To
consider “dumped imports” to include “dumped and non-dumped imports”  is a leap in logic not
authorized by the ADA.  The issue of Article 17.6(ii) therefore does not arise in this context.
4.2 Legal arguments relating to the Article 3.1 claim
4.22 For its injury determination the EC cumulated the volume of imports from all three targeted
countries. It is clear from page 13 of the provisional disclosure document88 that the volume taken into
account for the purposes of Article 3 is the total imports from these three countries, and not just the
volume of “dumped imports” :
                                                     
87 It is noted that the main difference between Article 3.4 of the ADA and its predecessor, Article 3.3 of
the 1979 Anti-Dumping Code is that in the ADA the words “of the dumped imports”  were added to the opening
words “The examination of the impact on the industry concerned . . . ”
88 Annex 23.WT/DS141/R
Page 162
“4. Volume and market share of dumped imports (Annex 3)
Dumped imports from the three countries co ncerned increased from 33,825 tonnes in 1992 to
46,656 tonnes during the investigation period i.e.  an increase of 12,831 tonnes or 38 per cent.
During the same period their market share increased from 16.9 per cent to 25.1 per cent.”
4.23 The amount of 46,656 tonnes can be found back on page 32 of the same document, if the total
imports (total product concerned—tonnes) for the three targeted countries are added:
India: 18,428 tonnes
Pakistan: 21,514 tonnes
Egypt:  6,714 tonnes
Total: 46,656 tonnes
4.24 It follows from Annex 3 to the same document (page 33) that the market share of 25.1%
mentioned by the European Commission also refers to this 46,656 tonnes (46,656 ÷ total apparent
consumption of 185,825 = 25.1%).
4.25 A considerable amount of the exports by the sampled companies was found not to have been
dumped.  The percentages of sets found not to be dumped, on the basis of the disclosure documents of
the European Commission, is as follows (disclos ure calculation sheets attached as Annex 52):
Name company Total q’ty non-
dumped setsTotal q’ty exported sets Percentage non-dumped out of
total exported
OmkarPrakashMadhu
Anglo-French
Bombay Dyeing111,409
808,464
39,352
20,130
209,2541,363,149
1,616,859
859,152
1,210,043
620,6558.17%
50.00%
4.58%
1.66%
33.71%
Total sample 1,188,609 5,669,858 20.96%
4.26 Moreover, if the EC had not zeroed negative dumping inconsistently with the ADA, the
company Prakash would have been found not to be du mping at all.  In view of the fact that this
company accounted for 28.5 per cent89 of the volume of all exports to the EC of bed linen of the
sample, it is evident that the total amount of “non-dumped imports”  accounted for more than one-
third of India’s exports [ i.e. all exports of Prakash plus non-dumped sets of other companies].90
4.27 Due to the confidentiality rules in force, India cannot know the amount of non-dumped
imports from Egypt and Pakistan that have similarly been taken into account.  But if the percentage of
these would be in the same order as for India, it would imply that the total market share of the
“dumped imports”  has been overstated with more than one-fifth, and should be [25.1% x (1-
0.2096)=] 19.8 per cent instead.  Additionally, if the errors in the dumping calculation are corrected, it
would likely dwindle to only a fraction of this amount.
4.28 It is granted that the EC cannot review th e overview of ‘dumped imports’ from the period
preceding the investigation period up to the in vestigation period, simply because the EC has no
information on the level of any ‘dumped imports’ in the years preceding the investigation period.
This does not, however, imply a licence to consider all imports of bed linen during the investigation
                                                     
89 [1,616,859 ./.. 5,669,858]*100 = 28.5%.
90 [1,188,609 + (1,616,859 - 808,464) ./.. 5,669,858]*100 = 35.2%WT/DS141/R
Page 163
period as being dumped.  Especially when the EC determines the investigation period market shares
of EC producers and producers of the targeted countrie s, it should have referred to the market share
during the investigation period of “dumped imports”  only.91  By considering the total volume and
market share of imports during the investigation period rather than that of dumped imports, the ECgrossly overstated their volume and market share.
4.29 In this context the obiter dictum of the Panel in EC—Imposition of anti-dumping duties on
imports of cotton yarn from Brazil is noted:92
“. . . the Panel noted that in responding to a question by the Panel the EC had stated
‘Regarding the volume to be considered for injury purposes, the Community took into account
all imports, whether dumped or non-dumped, for the reasons mentioned above.’  Articles 3:2
and 3:4 of the Agreement required that the investigating authorities examine the volume and
effects of the ‘dumped’ imports.  The Panel not ed that the EC stated in its response that it
had, for the purposes of its injury analysis, taken into account the effects of all imports from
Brazil, whether dumped or non-dumped.  As Brazil had not made a claim that the EC had
thereby acted inconsistently with the Agreement, the Panel could not pronounce itself on any
such claim.” (Single underlined emphasis in original; Double underlined emphasis added)
4.30 Unlike Brazil in the above-mentioned GATT panel proceeding, India does claim that the EC’s
determination is inconsistent with Article 3 of the Agreement.
4.31 The EC indicated during the consultations that it could legitimately consider the total amount
of imports to have been dumped, since per company it had averaged the dumping results of non-dumped and dumped products.  This argument, in India’ s view, is incorrect.  To begin with, it negates
the clear wording of Article 3 and imputes injury where the clear wording of the ADA will have none.
4.32 Additionally, in Article 2.1 “a product is to be considered as being dumped”  if “the export
price of the product . . . is less than the comparable price . . . for the like product when destined for
consumption in the exporting country” .  In EC practice (as applied in the Bed linen II proceeding) the
EC first compares normal value and export prices on a per-type basis.  Then the total dumping amountis calculated, and this is divided by the total CIF border price.  The oft-stated reason for this
calculation method, in which the total dumping amount is ‘spread’ over all types, appears to be that it
would be impractical to impose an anti-dumping duty on a per-type basis.  However, that does not
automatically imply that the types for which no dumping is found then suddenly become “dumped”
for purposes of the injury determination: These are two completely different issues.  If on average fora type the export price was not less than the comparable price for the like product sold in India
93, then
that type was not “dumped” ; and it does not become “dumped”  in retrospect merely because the EC
averages the dumping margin calculated at the very end of the dumping margin calculation.
4.33 Furthermore, in EC practice, even if one or more companies of the sample would have been
found not to be dumping, and only some other companies were, the EC would still consider all
                                                     
91 Without prejudice to India’s views on the appropriateness of the sample chosen, the EC could have
calculated the amount of non-dumped imports by reference to the total amount of non-dumped exports of thesample during the IP, as a percentage of the total exports of the sample.
92 EC—Imposition of anti-dumping duties on imports of cotton yarn from Brazil , ADP/137 of
4 July 1995 at § 525.
93 Or, in case of comparisons between a weighted average normal value with export transactions on a
transaction-by-transaction basis: if in no case the export price of a transaction of the type concerned was lessthan the comparable price of the like product sold in India.WT/DS141/R
Page 164
imports of the product concerned from all companies for the purposes of Article 3.1.  If the EC had
not made the errors in the dumping calculation noted in Part III of this submission, this would have
been directly relevant for the situation of at least the company Prakash.
4.34 Last, the conceptual consequence of the EC’s practice should be considered in its extreme
application: if just one model out of a hundred models under investigation causes a weighted average
dumping margin slightly over the de minimis  threshold, dumping will be found overall and all imports
will be considered dumped for the injury analysis.
4.35 India considers that the failure of the EC to examine dumped transactions only for the purpose
of the injury determination in the Bed linen II proceeding is inconsistent with Articles 3.1, 3.2, 3.4,
3.5, and 3.6 ADA.
5. Claim 9: inconsistency with Article 12.2.1
5.1 The text of Article 12.2.1
4.36 It is recalled that Articles 12.2 and 12.2.1 of the ADA provide in relevant part as follows:
“12.2 Public notice shall be given of any preliminary or final determination, whether
affirmative or negative . . . Each such notice shall set forth, or otherwise make available
through a separate report, in sufficient detail the findings and conclusions reached on all
issues of fact and law considered material by the investigating authorities . . .
12.2.1 A public notice of the imposition of provisional measures shall set forth, or otherwise
make available through a separate report, sufficiently detailed explanations for the
preliminary determinations on dumping and injury  and shall refer to the matters of fact and
law which have led to arguments being accepted or rejected. Such a notice or report shall,
due regard being paid to the requirement for the protection of confidential information,
contain in particular . . .
(iv) considerations relevant to the injury determination as set out in Article 3;
(v) the main reasons leading to the determination.”
5.2 Legal arguments relating to the claims relating to Article 12.2.1
4.37 In anti-dumping proceedings the investigating au thorities have a very dominant position as far
as knowledge of the facts is concerned.  This is especially so in the EC, where contrary to the ADsystems in the United States and Canada, the European Commission is the only entity having access
to all facts relating to the investigation.  Article 12 fulfils the crucial rôle of ensuring a certain
minimum degree of transparency.  In this context the dictum of the Panel in Korea—Anti-dumping
duties on imports of polyacetal resins from the United States is recalled:94
“In the view of the Panel, the purpose of this provision would be frustrated if in a dispute
settlement proceeding . . . a Party were allowed to defend a challenged . . . determination by
reference to alleged reasons for such determination which were not part of a public statement
of reasons accompanying t hat determination . . .”
                                                     
94 Korea—Anti-dumping duties on imports of polyacet al resins from the United States, Report of the
Panel, ADP/92 and Corr.1 of 2 April 1993 at § 209.WT/DS141/R
Page 165
4.38 If the EC took account for the purposes of Article 3 in any way of only the dumped imports,
there is nothing in the published Regulations or the non-confidential file to show for it.  The volume
and market share of “dumped imports”  would seem to be a matter of vital importance to any injury
determination.  Under these circumstances, the EC can hardly claim that the provisional Regulation or
the provisional disclosure explained “in sufficient detail the findings and conclusions reached on all
issues of fact and law considered material” .  Nor can it claim that these documents properly
explained the “ considerations relevant to the injury determination as set out in Article 3” .
4.39 For the above reasons India considers that the EC, even if it did consider only the impact of
the “dumped imports”  for the purpose of Article 3, acted inconsistently with Article 12.2.1.
6. Claim 10: inconsistency with Article 12.2.2
6.1 The text of Article 12.2.2
4.40 The text of Article 12.2.2 differs somewhat from that of Article 12.2.1:
“A public notice of conclusion or suspension of an investigation in the case of an affirmative
determination providing for the imposition of a definitive duty or the acceptance of a price
undertaking shall contain, or otherwise make available through a separate report, allrelevant information on the matters of fact and law and reasons which have led to the
imposition of final measures . . . In particular, the notice or report shall contain the
information described in subparagraph 2.1 . . .”  (Emphasis added)
6.2 Legal arguments relating to the claims relating to Article 12.2.2
4.41 Reference is made to the logic in section 5.2, above. India believes that neither the definitive
Regulation nor the definitive disclosure or the non-c onfidential file explained the EC’s determination on
Article 3 in the light of its use of all imports from India rather than only “dumped imports” .  The
Regulation thus suffers from the same def ect under Article 12.2.2 as it does under Article 12.2..1
B. ARTICLE 3.4:  THE EC FAILED TO EVALUATE ALL RELEVANT ECONOMIC FACTORS AND INDICES
HAVING A BEARING ON THE STATE OF THE DOMESTIC INDUSTRY
4.42 Summary: for the purpose of the determination required under Article 3.4 the EC failed to
evaluate all relevant factors and indices having a bearing on the state of the domestic industry
(claim 11 ).  The EC further failed to properly explain its reasoning, and consequently acted
inconsistently with Article 12.2.1 ( claim 12 ) and 12.2.2 ( claim 13 ).  This also violates the rights of
defence as contained in Article 6 ( claim 14 ).
1. Facts
4.43 After the initiation of the Bed linen II proceeding, the European Commission selected a
sample from the companies determined to constitute the domestic industry.95  This sample was asked
to complete questionnaires.96
                                                     
95 The determination and use of the domestic industry are issues addressed in separate claims (see
notably section IV.C of this submission).
96 India believes that the EC has acted inconsistently with Article 3.4 in several ways. This section
(IV.B) discusses the EC’s failure to evaluate all relevant factors and indices listed in Article 3.4. Section IV.CWT/DS141/R
Page 166
4.44 On 25 October 1996 Texprocil filed a brief concerning injury issues (Annex 50) in which it
provided comments on the information (such as it was) available on return on investments, capacity
and capacity utilisation, cash flow, inventories, wages, growth, and investments.
4.45 After the non-confidential summaries of the questionnaire responses of the EC sample
(Annex 53) were filed97, the Indian exporters were able to provide more detailed comments on these
factors.  During their first injury hearing on 13 January 1997 Texprocil argued in detail why the non-
confidential questionnaire responses (as far as any had been made available by that time) did notindicate material injury caused to the domestic industry.  This was followed up by the post-hearing
brief filed on 6 February 1997 (Annex 54), which noted amongst others the following:
“4.7 Capacity and capacity utilisation
The complainant acknowledges that it has no statistics on the capacity or capacity utilisation
of bed linen because such statistics are ‘far too specific.’ This statement does not make sense:
one of the criteria called in support of the like product definition mentioned by the complaint
is ‘the equipment used’ for the production of bed linen. It is hard to see why EC producers of
bed linen would be unable to supply information on the development of their capacityutilisation.
The allegation that capacity utilisation followed the trend in production is little more than a
simple assertion, unsubstantiated by relevant evidence and should therefore be ignored . . .
Since there is no other evidence on capacity utilisation pointing towards injury, it follows that
there is nothing on capacity utilisation indicati ng that imports of bed linen from India caused
material injury to the Community industry.
4.8 Cash flowNo information on cash flow whatsoever has been provided suggesting that imports of bed
linen from India caused material injury to the Community industry.
If such information has been provided in th e confidential questionnaire responses of the EC
sample, it has not been summarised in non-confidential form and should be left without
consideration by the Commission.
4.9 InventoriesNo information whatsoever has been provided in the non-confidential version of the
complaint suggesting that imports of bed linen from India caused material injury to the
Community industry.
                                                                                                                                                                    
discusses the EC’s failure to correctly determine whether the ‘domestic industry’ has suffered material injury.
Section IV.D discusses the EC’s determination concerning imports from before the investigation period.
97 Under the EC’s practice of confidentiality producers have to submit—next to the confidential
versions of their questionnaire responses and briefs—non-confidential summaries thereof. Especially in cases
where the complainants are (generally) not stock-listed, such non-confidential summaries are often the majorsource of relevant information available to the exporters. This footnote is not intended as criticism of the EC'srules on confidentiality per se.WT/DS141/R
Page 167
If such information has been provided in th e confidential questionnaire responses of the EC
sample, it has not been summarised in non-confidential form and should be left without
consideration by the Commission . . .
4.11 Wages
No information whatsoever has been provided in the non-confidential version of the
complaint suggesting that imports of bed linen from India caused material injury to the
Community industry.
4.12 GrowthNo information whatsoever has been provided in the non-confidential version of the
complaint suggesting that imports of bed linen from India caused material injury to the
Community industry.
4.13 InvestmentsNo information whatsoever has been provided in the non-confidential version of the
complaint suggesting that imports of bed linen from India caused material injury to the
Community industry.
If such information has been provided in th e confidential questionnaire responses of the EC
sample, it has not been summarised in non-confidential form and should be left withoutconsideration by the Commission.”  (Footnotes omitted)
4.46 In the provisional Regulation and the provisional disclosure document the European
Commission discussed the following factors and indices listed in Article 3.4:
(a) production: recital (81);
(b) sales by volume: recital (82);(c) sales by value: recital (83);
(d) market share: recitals (84) and (85);
(e) prices: recitals (86)-(88);
(f) profitability: recitals (89) and (90); and
(g) employment: recital (91).
4.47 Specifically, the EC did not comment in the provisional disclosure or the provisional
Regulation on
— productivity;
— return on investments;
— capacity and capacity utilisation;
— factors affecting domestic prices;
— actual and potential negative effects on cash flow;
— inventories;— wages;
— growth; and
— investments.WT/DS141/R
Page 168
4.48 In the definitive disclosure document and definitive Regulation the EC confirmed its
provisional assessment of the factors and indices having a bearing on the state of the domestic
industry (recitals (40)-(42)), again without further me ntioning or explaining the following factors and
indices:
— productivity;
— return on investments;
— capacity and capacity utilisation;
— factors affecting domestic prices;— actual and potential negative effects on cash flow;
— inventories;
— wages;
— growth; and
— investments.
4.49 During the first round of consultations betwee n India and the EC the failure of the EC to
evaluate some of the injury factors and indices listed in Article 3.4 was discussed:
98
“Mr Seth:  . . . The following issue again concerns Article 3.4.
In the provisional duties Regulation the EC discussed the following factors affecting thedomestic industry: production, sales by volume, sales by value, market share by volume,
market share by value, price development, and profitability and employment. In the definitive
duties Regulation these determinations were not altered.
Neither in the provisional, nor in the definitive duties Regulation did the EC discuss or
consider the following factors listed in Article 3.4:
— productivity, return on investments, or utilization of capacity;
— factors affecting domestic prices;
— the magnitude of the margin of dumping;
— actual and potential negative effects on cash flow, inventories, wages, growth, ability
to raise capital or investments.
It is recognised that Article 3.4 provides that ‘[t]his list is not exhaustive, nor can one or
several of these factors necessarily give decisive guidance.’ In other words, if the
investigating authorities find that not all factors listed in Article 3.4 point towards an injuryfinding, they may nevertheless conclude that material injury exists if a sufficiently good case
can be made.
However, it follows from this, and from the literal wording of Article 3.4, that the
investigating authorities first must discuss the factors listed in Article 3.4. In casu this has nothappened for the factors indicated above. The EC thus acted inconsistently with Article 3.4.  .
. .
[EC]:  Which point has not been dealt with? We believe all points are covered. Moreover,
Article 3.4 is not exhaustive, the phrase ‘not . . . guidance’ means ‘not relevant’.”
4.50 In its letter of 1 October 1998 the EC provided an answer in writing on this issue (Annex 12):
                                                     
98 The verbatim report of the first round of consultations is attached as Annex 11.WT/DS141/R
Page 169
“Ouestion 45
Would the EC agree that it did not discuss or consider the following injury factors listed in
Article 3.4?— productivity, return on investments, or utilisation of capacity;
— factors affecting domestic prices;
— the magnitude of the margin of dumping;
— actual and potential negative effects on cash  flow, inventories, wages, growth, ability to
raise capital or investments.
It is the general practice of the European Community to consider all possible injury factors.
In this proceeding, the following injury indicators were considered particularly relevant for
the purpose of assessing injury to the Community industry:
(a) -Production -recital (81) of provisional duty Regulation
(b) -sales by volume -recital (82)
(c) -sales by value -recital (83)
(d) -market share -recital (84) and (85)
(e) -price development -recital (86) to (88)(f) -profitability -recital (89) and (90)
(g) -employment -recital (91)
In recitals (93) to (94) of the provisional duty Regulation as well as in recital (40) of the
definitive duty Regulation, it was concluded that the decisive injury indicators which led tothe conclusion of material injury suffered by the Community industry were its declining and
inadequate profitability, price suppression and the low level of its sales prices in the
Community market.”
4.51 The EC therefore clearly acknowledged that it did not discuss all
 Article 3.4 factors.  Despite
this acknowledgement in its answer to ques tion 45, the EC in its letter of 29 June 199999 stated that:
“Question 46
Would the EC agree that the text of Article 3.4 -- while recognising that “[t]his list is not
exhaustive, nor can one or several of these factors necessarily give decisive guidance” --
does require at least discussion of each of the factors?
As stated in the answer to Q 45 above, it is the practice of the European Community to
consider all possible factors in the overall assessment of injury as well as to identify the most
important aspects as regards injury.
Question 47
Could the EC indicate where in the provisional and definitive Regulations (or elsewhere) it
has done so?
See reply to Q 46 above.”
                                                     
99 See Annex 14.WT/DS141/R
Page 170
2. Claims
4.52 Three claims flow from the facts described above.
4.53 First, the EC’s failure to evaluate all relevant economic factors and indices having a bearing
on the state of the industry is inco nsistent with Article 3.4 of the ADA.
4.54 Second, even if the EC did make an evaluation of all factors and indices having a bearing on
the state of the industry, it failed to properly expl ain this in a sufficiently detailed manner in the
provisional Regulation or in the provisional disclosure document. This is inconsistent withArticle 12.2.1.
4.55 Third, even if the EC did make an evaluation of all factors and indices having a bearing on the
state of the industry, it failed to properly explain this in a sufficiently detailed manner in the definitive
Regulation or in the definitive disclosure document. This is inconsistent with Article 12.2.2.
3. Claim 11: inconsistency with Article 3.4
3.1 The text of Article 3.4
4.56 It is recalled that Article 3.4 provides as follows:
“The examination of the impact of the dumped imports on the domestic industry concerned
shall include an evaluation  of all  relevant economic factors and indices having a bearing on
the state of the industry, including actual and potential decline in sales, profits, output,
market share, productivity, return on investments, or utilization of capacity; factors affecting
domestic prices; the magnitude of the margin  of dumping; actual and potential negative
effects on cash flow, inventories, employment, wages, growth, ability to raise capital or
investments. This list is not exhaustive, nor can one or several of these factors necessarily
give decisive guidance.”  (Emphasis added)
4.57 The first key word would seem to be “shall” . In the words of the Appellate Body:100
“The chapeau of Article 5.5 clearly states that the schedule in the body of that provision is
mandatory. The word used in the chapeau is ‘shall’, not ‘may’. There is no qualifying
language, and there is no language that permits any method other than that set out in the
schedule in Article 5.5 as a basis for the calculation of additional duties.”
4.58 There is no reason why this logic would be any different in the context of Article 3.4 of the
ADA.101  It follows that the evaluation mentioned in Article 3.4 “shall” by necessity include “all
relevant . . . factors” .  The word “all”  indicates that all relevant factors must be included in this
“evaluation” .  The word “evaluation”  implies an assessment or weighing of these factors: in Korea—
                                                     
100 European Communities—Measures affecting the importation of certain poultry products , AB-1998-
3, WT/DS69/AB/R of 13 July 1998 at § 165.
101 It is noted that the interpretative standard in Article 17.6(ii), last sentence only comes into play if the
interpretation “in accordance with customary rules of interpretation of public international law” would lead to
more than one result. In casu , however, the interpretation of the ordinary meaning to be given to the terms of
Article 3.4 in their context and in the light of its object and purpose supports only the interpretation of theAppellate Body quoted above.WT/DS141/R
Page 171
Anti-dumping duties on imports of polyacetal resins102 the Panel noted (in the context of the 1979
Anti-Dumping Code) that:
“While the relative weight to be accorded to each of [the] factors [in Article 3.3 of the 1979
Anti-Dumping Code] depended upon the circumstan ces of each particular case, the overall
context of an analysis of the specific factors men tioned in Article 3:3 was that of ‘an evaluation
of all relevant economic factors and indices havi ng a bearing on the state of the industry’ . . .”
4.59 In order for this assessment or weighing to lead to a correct result, it is by necessity
imperative that all relevant factors and indices are considered.
4.60 The word “all”  is given further meaning by the word “including” .  It follows from this term
that at a minimum the factors and indices listed in the remainder of the sentence must be considered
(evaluated).  The last sentence adds that there may in fact be additional factors and indices which, if
relevant to the state of the domestic industry, should also be evaluated; but this does not mean that the
factors and indices explicitly mentioned in the first sentence should not all be evaluated.103
3.2 Legal arguments relating to the claim relating to Article 3.4
4.61 There are two issues involved.
4.62 First, the wording of Article 3.4 is not specific to the ADA.  Similar or identical wording
featured in Article 3.3 of the 1979 Anti-Dumping Code104, Article 6(3) of the 1979 Agreement on
interpretation and application of Articles VI, XVI and XXIII of the General Agreement on Tariffs andTrade
105; and in Article 15.4 of the Agreement on Subsidies and Countervailing Measures.106
                                                     
102 Korea—Anti-dumping duties on imports of polyacetal resins from the United States, Report of the
Panel, ADP/92 and Corr.1 of 2 April 1993 at § 276.
103 This interpretation was recently confirmed in the Panel Report on Mexico—Anti-dumping
investigation of high fructose corn syrup (HFCS) from the United States, WT/DS132/R of 28 January 2000.
Regarding the interpretation of Article 3.4, the Panel stated at § 7.218 that:
“In our view, [the language of Article 3.4] makes it clear that the listed factors in Article 3.4 must be
considered in all cases. There may be other relevant economic factors in the circumstances of a particular case,consideration of which would also be required. In a threat of injury case, for instance, the AD Agreement itselfestablishes  that consideration of the Article 3.7 factors is also required. But consideration of the Article 3.4 factors
is required in every case, even though such consideration may lead the investigating author ity to conclude that a
particular factor is not probative in the circumstances of a particular industry or a particular case,  and therefore
is not relevant to the actual determination. Moreover, the consideration of each of the Article 3.4 factors must beapparent in the final determination of the investigating authority.”
104 “The examination of the impact on the industry concerned shall include an evaluation of all
relevant economic factors and indices having a bearing on the state of the industry such as actual and potentialdecline in output, sales, market share, profits, productiv ity, return on investments, or utilization of capacity;
factors affecting domestic prices; actual and potential negative effects on cash flow, inventories, employment,
wages, growth, ability to raise capital or investments. This list is not exhaustive, nor can one or several of these
factors necessarily give decisive guidance.”
105 “The examination of the impact on the domestic industry concerned shall include an evaluation of
all relevant economic factors and indices having a bearing on the state of the industry such as actual andpotential decline in output, sales, market share, pro fits, productivity, return on investments, or utilization of
capacity; factors affecting domestic prices; actual and potential negative effects on cash flow, inventories,
employment, wages, growth, ability to raise capital or investment and, in the case of agriculture, whether therehas been an increased burden on Government support programmes. This list is not exhaustive, nor can one orseveral of these factors nece ssarily give decisive guidance.”WT/DS141/R
Page 172
4.63 In the context of these Agreements there has been consistent Panel jurisprudence on the
necessity to examine ‘all’ relevant factors and indices.  In Brazil—countervailing duties on milk the
Panel made such an analysis:107
“333. The Panel noted that the list of factors mentioned in Article 6:3 in this
provision was illustrative in nature, and the last sentence made it clear that the
provision did not prejudge the weight to be given to any particular factor mentioned
in the provision. At the same time, Article 6:3 clearly required investigatingauthorities to conduct in each case a comprehensive analysis of ‘all relevant
economic factors and indices having a bearing on the state of the industry’. ThePanel was of the view that to consider only the stagnation of domestic production in
the analysis of the impact of imports on the domestic industry was inconsistent with
this comprehensive character of the examination required under Article 6:3.
. . .340. In light of the foregoing considerations, the Panel concluded that the analysis
and findings of the Brazilian authorities regarding the impact of the imports of milkpowder from the EEC were inconsistent with  the requirements of Article 6:3 because
. . . the considerations in Administrative Order No. 569 did not permit the Panel to
find that the Brazilian authorities had carried out a comprehensive analysis of ‘all
relevant economic factors and indices having a bearing on the state of the industry’.”
(Emphasis added)
4.64 The Panel in Korea—Anti-dumping duties on resins went along a similar route:
108
“For the reasons set forth in the preceding paragr aphs, the Panel was of the view that it was
unable to ascertain from the text of the dete rmination on what factua l basis the KTC had found
that the level of net profit in 1989 was insufficient to enable the industry ‘to maintain normal
operations and development.’ While there might hav e been relevant information before the KTC
in this regard, the determination did not enabl e the Panel to determin e how this information
had been evaluated by the KTC in making this  finding. The Panel recalled its statement in
paragraphs 227 and 228 regarding the considerations  by which it was guided in reviewing
whether the KTC's determination was based on pos itive evidence. The Panel concluded that the
KTC's finding that the leve l of net profit in 1989 was not sufficient to permit the industry ‘to
maintain normal operations and development’ was not adequately substantiated by positive
evidence and was thereby inconsistent with Korea's obligations under Article 3:1 of the
Agreement.”
                                                                                                                                                                    
106 “The examination of the impact of the subsidized imports on the domestic industry shall include an
evaluation of all relevant economic factors and indices having a bearing on the state of the industry, including
actual and potential decline in output, sales, market  share, profits, productivity, return on investments, or
utilization of capacity; factors aff ecting domestic prices; ac tual and potential negati ve effects on cash flow,
inventories, employment, wages, growth, ability to raise ca pital or investments and, in  the case of agriculture,
whether there has been an increased burden on government support programmes. This list is not exhaustive, norcan one or several of these facto rs necessarily give decisive guidance.”
107 Brazil—Imposition of provisional and definitive countervailing duties on milk powder and certain
types of milk from the EEC, Report of the Panel adopted on 28 April 1994, SCM/179, and Corr.1 at §§ 333 and
340.
108 Korea—Anti-dumping duties on imports of polyacetal resins from the United States, Report of the
Panel, ADP/92 and Corr.1 of 2 April 1993 at § 254.WT/DS141/R
Page 173
4.65 In the context of Article 3.3 of the 1979 Anti-Dumping Code the Panel in United States—
Salmon noted that:109
“an essential element of a review of whethe r a determination of material injury was in
conformity with Article 3 was an examination of whether the factors set forth in Articles 3:2 and
3:3 had been properly considered by the investigating authorities.”
4.66 This was also the EC’s own view:110
“420. . . . Specifically, the EC while continuing to assert that Article 3 imposed purely
‘procedural’ requirements, had stated that:
‘[I]t is inconceivable on the other hand that injury could be found, where the consideration or
evaluation of the factors and indices did not yield a positive result; the consideration or
evaluation must make clear that for each of the elements (volume, price and consequent
impact on the domestic industry) all the factors or indices have been considered . . .’”
[emphasis added]
4.67 One may also recall that in the recent Panel Proceeding concerning Argentina—Safeguard
Measures the EC argued that:111
“Argument of the European Communities
5.217 The European Communities notes that Article 4.2(a) of the Agreement on Safeguards
requires that the investigation of serious injury , or the threat thereof, evaluate "all relevant
factors of an objective and quantifiable nature having a bearing on the situation of the
domestic industry, in particular the rate and amoun t of the increase in imports of the product
concerned in absolute and relative terms, the sh are of the domestic market taken by increased
imports, changes in the level of sales, production, productivity, capacity utilisation, profits
and losses, and employment."  According to the European Communities, this provision laysdown the principle that an injury investigation must be complete ("all relevant factors") and
reliable ("factors of an objective and quantifiable nature having a bearing on the situation of
that industry").  Furthermore, an investigation must be consistent, adequate, complete, clear
and precise for its conclusions to be sufficiently motivated and transparent.  The European
Communities notes that this position fi nds support in two recent Panel reports
112 which dealt
with the standard of "serious damage" set fo rth in Article 6.3 of the Agreement on Textiles
and Clothing (ATC)113.  Both Panel Reports stressed the obligation to examine each of the
                                                     
109 United States—Imposition of anti-dumping duties on imports of fresh and chilled Atlantic salmon
from Norway, Report of the Panel adopted on 27 April 1994, ADP/87 on § 493.
110 EC—Anti-dumping duties on audio tapes in cassettes originating in Japan, not adopted.
111 Argentina—Safeguard Measures on Imports of Footwear, Report of the Panel adopted on
25 June 1999, WT/DS121/R.
112 [Footnote 208 in original]: “See Panel Report on 'United States – Measure Affecting Imports of
Woven Wool Shirts and Blouses from India', 6 January 1997, WT/DS33/R; and Panel Report on 'United States –Restrictions on Imports of Cotton and Man-made Fibre Underwear', WT/DS24/R, 8 November 1996.  BothPanel Reports were subject to review by the Appe llate Body which did not, however, rule on the standard of
serious damage.”
113 [Footnote 209 in original]: “Article 6:3 ATC reads: "In making a determination of serious damage,
[…] the Member shall examine the effect of those imports on the state of the particular industry, as reflected inchanges in such relevant economic va riables as output, productivity, utilizati on of capacity, inventories, marketWT/DS141/R
Page 174
enumerated injury factors in detail.  In Unit ed States – Restrictions on Imports of Cotton and
Man-made Fibre Underwear'114, the Panel criticised the US for providing inconsistent and
inadequate information.  The Panel in United States – Measure Affecting Woven Wool Shirts
and Blouses from India stated115 that, "[a]t a minimum, the importing Member must be able
to demonstrate that it has considered the relevance or otherwise of each of the factors listed
[…]".  Since the United States examined only eight out of eleven listed factors, while some of
the information provided by the United States was either incomplete, vague or imprecise, the
Panel ruled that the requirements of Articl e 6.3 of the Agreement on Textiles and Clothing
had not been respected.116
5.218 The European Communities argues that even though the wording of Article 6.3 of theAgreement on Textiles and Clothing is slightly different from Article 4.2(a) of the Agreement
on Safeguards, both provisions nevertheless contain a list of injury factors which must be
evaluated properly by the investigating authority.  Therefore, in accordance with therationale stated in the above-mentioned Panel Reports, the European Communities submits
that, at a minimum, a "serious injury" dete rmination under the Agreement on Safeguards
must demonstrate that the relevance or otherwise of each of the factors listed in Article 4.2(a)
of the Agreement on Safeguards was considered.  The European Communities further submits
that that provision requires each injury factor to be properly analysed.  All listed factors haveto be investigated completely and in full.  The result of the analysis cannot be inconsistent,
inadequate, incomplete, vague or imprecise.  Therefore, in the EC view, if Argentina
investigates five separate sectors of the footwear industry, but fails – as mentioned earlier –
to investigate import trends, market share, profits and losses and employment for each market
segment, it violates its obligations under the Agreement on Safeguards.” [Emphasis in
original and emphasis added]
4.68 Even though the wording of Article 4.2(a) of the Agreement on Safeguards is slightly
different from Article 3.4 ADA, both provisions neve rtheless contain a list of injury factors which
must be evaluated properly by the investigating authority.  All listed factors have to be investigated
completely and in full.  The result of the analysis cannot be inconsistent, inadequate, incomplete,
vague or imprecise.
4.69 It is recalled that the Panel agreed with this argument:
117
“8.123 We note, first, that the text of Article 4.2(a) of the Safeguards Agreement explicitly
requires the evaluation of "all relevant factors", in particular those listed in that article.Second, Article 6.4 of the ATC
118 contains no such express requirement and recognises that
                                                                                                                                                                    
share, exports, wages, employment, domestic prices, profits and investments; none of which, either alone or
combined with other factors, can necessarily give decisive guidance." (emphasis added).”
114 [Footnote 210 in original]: “Panel Report on 'United States – Restrictions on Imports of Cotton and
Man-made Fibre Underwear', WT/DS24/R, 8 November 1996, at paragraph 7.45.”
115 [Footnote 211 in original]: “See Panel Report on 'United States – Measure Affecting Imports of
Woven Wool Shirts and Blouses from India', 6 January 1997, WT/DS33/R, at paragraph 7.26.”
116 [Footnote 212 in original]: “Idem, at paragraph 7.51.”
117 Argentina—Safeguard Measures on Imports of Footwear, Report of the Panel adopted on
25 June 1999, WT/DS121/R.
118 [Footnote 510 in original]: “Article 6.4 of the ATC:  "… The Member or Members to whom serious
damage, or actual threat thereof … is attributed, shall be determined on the basis of a sharp and substantial
increase in imports, actual or imminent, from such a Member or Members individually, and on the basis of thelevel of imports as compared with imports from other commercial transac tion; none of these factors, either
alone or combined with other factors, can necessarily give decisive guidance. …".”WT/DS141/R
Page 175
"none of these factors … can necessarily give decisive guidance.  Nonetheless, the panels on
United States - Underwear and United States - Shirts and Blouses ruled that each and every
injury factor mentioned in Article 6.4 of the ATC has to be considered by the national
authority.  With regard to the obligation to evaluate "all relevant factors" we consider thesepast panel reports relevant.  Consequently, in accordance with the text of the Safeguards
Agreement and past practice, we consider that an evaluation of all factors listed in Article
4.2(a) is required.” [Emphasis added]
It is further recalled that the Appellate Body confirmed the view of the Panel on this issue:
119
“136. We agree with the Panel's interpretation that Article 4.2(a) of the  Agreement on
Safeguards requires a demonstration that the competent authorities evaluated, at a minimum,
each of the factors listed in Article 4.2(a) as we ll as all other factors that are relevant to the
situation of the industry concerned.”
4.70 It is further recalled that the EC raised the same argument, and the Panel was of the same
view, in the Proceeding concerning Korean Safeguard measures on Dairy products:120
“Failure to examine correctly all relevant  factors of an objective and quantifiable nature
having a bearing on the situation of the domestic industry
4.296 Article 4.2.(a) of the Agreement on Safeguards requires that the serious injury
investigation evaluate all relevant factors of an objective and quantifiable nature having a
bearing on the situation of the domestic indust ry, in particular the rate and amount of the
increase in imports of the product concerned in  absolute and relative terms, the share of the
domestic market taken by increased imports, changes in the level of sales, production,
productivity, capacity utilization, profits and losses, and employment.
4.297 This provision lays down the principle that an injury investigation must be complete
(“all relevant factors”).  Only factors that are not relevant, or not objective or quantifiable,
or do not have a bearing on the situation, may be excluded.  Clearly, it is necessary toexamine a factor before it can be considered that it is not relevant, or not objective or
quantifiable, or does not have a bearing on the situation.  The European Communities note
that this position has been supported in two recent Panel reports
121 which dealt with the
standard of “serious damage” set forth in Article 6.3 of the ATC.122  Both Panel reports
stressed the obligation to examine each of the enumerated injury factors.  In the US -Underwear case, the Panel criticized the Un ited States for providing inconsistent and
inadequate information.  The Panel in the US - Shirts and Blouses case stated that “at a
minimum, the importing Member must be able to demonstrate that it has considered the
                                                     
119 Argentina—Safeguard Measures on Imports of Footwear, Report of the Appelate Body adopted on
14 December 1999, WT/DS121/AB/R
120 Korea—Safeguard Measures on Imports of Dairy Products, Report of the Panel adopted on
21 June 1999, WT/DS98/R.
121 See, Panel report in US - Shirts and Blouses , 6 January 1997, WT/DS33/R; US - Underwear ,
WT/DS24/6, 8 November 1996 .  Both Panel reports were subject to review by the Appellate Body that did,
however, not rule on the standard of serious damage.
122 “In making a determination of serious damage, [...] the Member shall examine  the effect of those
imports on the state of the particular industry, as reflected in changes in such relevant  economic variables as
output, productivity, utilization of capacity, inventories, market share, exports, wages, employment, domesticprices, profits and investments;  none of which, either alone or combined with other factors, can necessarily givedecisive guidance.” (emphasis added)WT/DS141/R
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relevance or otherwise of each of the factors listed [...]”.123 Since the United States did not
examine eight of these factors in the context of the particular industry without giving any
explanation for not doing so, the requirements of Article 6 of the Agreement on Textiles and
Clothing were not respected.124
4.298 Even though the wording of Article 6.3 of the Agreement on Textiles and Clothing isslightly different from Article 4.2 (a) of the Agreement on Safeguards, both provisions
nevertheless contain a list of injury factors which shall be evaluated by the investigating
authority.  Therefore, in accordance with the rationale stated in the above Panel reports, theEuropean Communities submit that, at a minimum, a serious injury determination under the
Agreement on Safeguards must demonstrate that the relevance or otherwise of each of the
factors listed in Article 4.2(a) of the Agreement on Safeguards was considered.  The
European Communities would further submit that that provision requires each injury factor
to be properly analysed unless it is explained for what reason the injury factor may bedisregarded.”
The Panel agreed:
“7.58 . . . In assessing the serious injury to the whole domestic industry, . . . all factors listed
in Article 4.2 must be addressed. . . .”
The Appellate Body did not overturn this view.4.71 The interpretative standard in Article 17.6(ii), last sentence does not come into play since the
interpretation of the ordinary meaning to be given to the terms of Article 3.4 in their context and in
the light of its object and purpose leaves no doubt on their interpretation.
4.72 As noted in the description of the facts, the EC has failed to take account of several factors
and indices mentioned in Article 3.4 of the ADA, and especially the following factors and indices:
— productivity;
— return on investments;
— capacity and capacity utilisation;
125
— factors affecting domestic prices;— actual and potential negative effects on cash flow;
— inventories;— wages;
— growth; and
— investments.
                                                     
123 See, US - Shirts and Blouses , para. 7.26.
124 See, id. at para. 7.52.
125 § 110 of the provisional Regulation states that:
“In connection with this it should be noted that the larger Community industry producers,
however, have a production capacity which cannot be utilized at a reasonable rate on the basis of
high value items only. This capacity utilization can only be maintained through production of mass-market lower value items the market for whic h is now highly penetrated by imported goods.“
This reference in passing to capacity utilisation—not in the section dealing with the determination but
in the section on causality—, without any further substantiation, can hardly count as a determination on capacityutilisation, or a proper explanation of such determination.WT/DS141/R
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4.73 The investigating authorities thus failed to make a proper evaluation of all relevant economic
factors and indices126, and consequently acted inconsistently with Article 3.4 of the ADA.
4.74 Second, without prejudice to the argument presented above, it is recalled that the Indian
exporters had made specific arguments relating to the available information on— capacity and capacity utilisation;
— cash flow;
— inventories;— wages;
— growth; and
— investments.
4.75 Admittedly, in view of the paucity of the non-confidential summaries made available by the
complainants, it was not possible for Indian exporters to make a meaningful analysis of these factors.
Nonetheless, India believes that the failure of the sampled domestic industry producers to provide
meaningful non-confidential summaries of the data concerning these factors cannot shield the
investigating authorities from their obligations under Article 3.4.  It would rather seem that, in view of
the failure of the domestic industry to provide meaningful non-confidential data on these factors, theinvestigating authorities had, if anything, an additiona l responsibility to investigate and evaluate these
matters.  Otherwise it would be very easy for a domestic industry to manipulate an injury
determination by providing information only on negative factors and not on positive factors.
4.76 In summary, the EC has acted inconsistently with Article 3.4 by not evaluating all relevant
economic factors and indices mentioned in Article 3.4 of the ADA.
4. Claim 12: inconsistency with Article 12.2.1
4.1 The text of Article 12.2.1
4.77 It is recalled that Articles 12.2 and 12.2.1 of the ADA provide in relevant part as follows:
“12.2 Public notice shall be given of any preliminary or final determination, whether
affirmative or negative . . . Each such notice shall set forth, or otherwise make available
through a separate report, in sufficient detail the findings and conclusions reached on all
issues of fact and law considered material by the investigating authorities . . .
12.2.1 A public notice of the imposition of provisional measures shall set forth, or otherwise
make available through a separate report, sufficiently detailed explanations for the
preliminary determinations on dumping and injury  and shall refer to the matters of fact and
law which have led to arguments being accepted or rejected. Such a notice or report shall,
due regard being paid to the requirement for the protection of confidential information,contain in particular . . .
(iv) considerations relevant to the injury determination as set out in Article 3;
(v) the main reasons leading to the determination.”
                                                     
126 Even though India does not believe that it would have made a difference, it is noted that the EC at
no point during the administrative pr oceeding has indicated or recorded anyw here in the file that these factors
and indices would not be “relevant” , or explained why this would be so.WT/DS141/R
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4.2 Legal arguments relating to the claims relating to Article 12.2.1
4.78 As stated, the European Commission is the only entity having access to all facts relating to the
initiation. Article 12 fulfils in this context a crucial rôle to ensure a certain degree of transparency.127
4.79 If the EC took account of productivity, return on investments, capacity and capacityutilisation, factors affecting domestic prices, actual and potential negative effects on cash flow,
inventories, wages, growth, and investments, ther e is nothing in the published Regulations, the
disclosure documents or elsewhere to attest to it.
4.80 First, it would seem that the Article 3.4 determination, which is required under Article 3.1,
letter (b) of the ADA, is by definition an issue “of fact and law considered material”  as implied by
Article 12.2.
4.81 Second, in any event, the determination required by Article 3.4 would be (an important) part
of the “considerations relevant to the injury determination as set out in Article 3”  as intended by
Article 12.2.1(iv).  The wording of Article 12.2.1 is mandatory ( “shall . . . contain in particular” ).
4.82 Third, India believes that a proper determination on the state of the domestic industry belongs
to “the main reasons leading to the determination”  as per Article 12.2.1(v).
4.83 In summary, if the EC did in fact include in its evaluation all relevant economic factors and
indices having a bearing on the state of the industry, it acted inconsistently with Article 12.2.1 by
failing to properly explain its determination.
5. Claim 13: inconsistency with Article 12.2.2
5.1 The text of Article 12.2.2
4.84 It is recalled that Article 12.2.2 requires that:
“[a] public notice of conclusion or suspension of an investigation in the case of an
affirmative determination providing for the imposition of a definitive duty or the acceptance
of a price undertaking shall contain, or otherwise make available through a separate report,
all relevant information on the matters of fact and law and reasons which have led to the
imposition of final measures . . . In particular, the notice or report shall contain the
information described in subparagraph 2.1 , as well as the reasons for the acceptance or
rejection of relevant arguments or claims made by the exporters and importers . . .”
(Emphasis added)
5.2 Legal arguments relating to the claims relating to Article 12.2.2
4.85 First, Article 12.2.2 refers back to subparagraph 2.1 of Article 12.2.  Since the EC made no
further explanations available in the definitive Regulation or elsewhere on productivity, return on
                                                     
127 In this context the dictum of the Panel in Korea—Anti-dumping duties on imports of polyacetal
resins from the United States, Report of the Panel, ADP/92 and Corr.1 of 2 April 1993 at § 209 is recalled:
“In the view of the Panel, the purpose of this pr ovision would be frustrated if in a dispute settlement
proceeding . . . a Party were allowed to defend a challe nged . . . determination by reference to alleged reasons
for such determination which were not part of a public statement of reasons accompanying that determination. . .”WT/DS141/R
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investments, capacity and capacity utilisation, factors affecting domestic prices, actual and potential
negative effects on cash flow, inventories, wages,  growth, and investments, the infringement of
Article 12.2.1 noted in the second claim is by the same token an infringement of Article 12.2.2.
4.86 Moreover, in view of the arguments made by  the Indian exporters the EC was under an
additional obligation to provide explanations on the evaluation of these factors and indices ( “as well
as the reasons for the acceptance or rejection of relevant arguments or claims made by the exporters
and importers” ). Its failure to do so implies in itself an inconsistency with Article 12.2.2.
6. Claim 14:  inconsistency with Article 6
4.87 To the extent that the EC were to argue that it has fulfilled its obligations under Article 12, the
Indian exporters were not aware of this.  Accordin gly the EC has, in addition to acting contrary to
Article 12, also acted inconsistently with the right of defence, as set forth in Article 6 of the ADA.
6.1 The text of Article 6
4.88 It is recalled that the relevant parts of Article 6 require that:
Article 6: Evidence6.2 Throughout the anti-dumping investigation all interested parties shall have a full
opportunity for the defence of their interests.
. . .6.4 The authorities shall whenever practicable provide timely opportunities for all interested
parties to see all information that is relevant to the presentation of their cases, that is not
confidential as defined in paragraph 5, and that is used by the authorities in an anti-dumping
investigation, and to prepare presentations on the basis of this information.
. . .
6.9 The authorities shall, before a final determin ation is made, inform all interested parties of
the essential facts under consideration which form the basis for the decision whether to apply
definitive measures. Such disclosure should take place in sufficient time for the parties todefend their interests.”
6.2 Legal Arguments pertaining to Article 6
4.89 In view of the failure of the EC to disclose to the Indian exporters that and how it has in fact
considered all factors in Article 3.4, it has also acted inconsistently with Article 6.2, 6.4, and 6.9.
4.90 Article 6.2 requires that throughout the investigation all interested parties shall have a full
opportunity for the defence of their interest.  To the extent that information on numerous relevantfactors in Article 3.4 were never divulged, this has not been the case and the EC has acted
inconsistently with Article 6.1.WT/DS141/R
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4.91 Article 6.4 requires that the authorities shall provide the opportunity to see all information
that is relevant.  This has never happened in view of the absence on information on numerous relevant
factors in Article 3.4.
4.92 Article 6.9 requires that interested parties shall be informed of the essential facts under
consideration.  Clearly this has never happened with respect to numerous relevant factors mentioned
in Article 3.4.
C. ARTICLE 3.4:  THE EC FAILED TO MAKE A CONSISTENT DETERMINATION OF
THE STATE OF THE 'DOMESTIC INDUSTRY'
4.93 Claim 15 : The EC has chosen a sample from the domestic industry, but did not consistently
base its injury determination on this sample. In a ddition, the EC has explicitly determined that the
domestic industry consists of 35 companies, but re lied in its injury determination on companies
outside this group in order to determine injury. Last, the EC chose to rely on different ‘levels’ ofindustry for different injury indices without any apparent reason other than goal-oriented ‘picking and
choosing’ of injury. For each of these three reas ons the EC acted inconsistently with Article 3.4.
Moreover, the claim that the sample was representative is mathematically incorrect and therefore
inconsistent with Article 6.10 ( claim 16 ).
The EC further failed to properly explain its reasoning, and consequently acted inconsistently withArticle 12.2.1 ( claim 17 ) and 12.2.2 ( claim 18 ).
1. Facts
4.94 It is recalled that under EC law, the ‘domestic industry’ is defined by reference to the standing
determination. The relevant provisions are Article s 4(1) and 5(4) of the EC basic anti-dumping
Regulation:
Article 4(1): “For the purposes of this Regulation, the term ‘Community  industry' shall be
interpreted as referring to the Community producers as a whole of the like products or to
those of them whose collective output of the products constitutes a major proportion, as
defined in Article 5(4), of the total Community production of those products, except that: . . .”
Article 5(4): “An investigation shall not be initiated pursuant to paragraph 1 unless it has
been determined, on the basis of an examination as  to the degree of support for, or opposition
to, the complaint expressed by Community producers of the like product, that the complaint
has been made by or on behalf of the Communi ty industry. The complaint shall be considered
to have been made by or on behalf of the Community industry if it is supported by thoseCommunity producers whose collective output constitutes more than 50  per cent of the total
production of the like product produced by that portion of the Community industry expressing
either support for or opposition to the complaint. However, no investigation shall be initiated
when Community producers expressly supporting the complaint account for less than 25  per
cent of total production of the like product produced by the Community industry.”  (Emphasis
added)
4.95 Apart from the emphasised text, the provisions seem materially similar to the Articles 4.1 and
5.4 of the ADA.  It follows (and has not been and could not be denied) that the concept of
‘Community industry’ in EC law for all practical purposes corresponds to that of ‘domestic industry’in the ADA.WT/DS141/R
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4.96 Article 3 of the basic Regulation follows the ADA in requiring that the injury determination
be made for the domestic industry (‘Community industry’).128  For example, Article 3(1) provides
that:
“Pursuant to this Regulation, the term `injury'  shall, unless otherwise specified, be taken to
mean material injury to the Community industry, threat of material injury to the Community
industry or material retardation of the establishment of such an industry and shall be
interpreted in accordance with the provisions of this Article.”
4.97 Similarly, Article 3(5) of the basic Regulation (which largely mirrors Article 3.4 of the ADA)
requires that the state of the “Community industry”  be ascertained:
“The examination of the impact of the dumped im ports on the Community industry concerned
shall include an evaluation of all relevant economic factors and indices having a bearing onthe state of the industry, including: the fact that an industry is still in the process of
recovering from the effects of past dumping or  subsidization, the magnitude of the actual
margin of dumping, actual and potential decline in sales, profits, output, market share,
productivity, return on investments, utilization of capacity; factors affecting Community
prices; actual and potential negative effects on cash flow, inventories, employment, wages,growth, ability to raise capital or investments. This list is not exhaustive, nor can any one or
more of these factors necessarily give decisive guidance.”
4.98 At maximum, the domestic industry ( “Community industry” ) whose injury must be
determined can thus consist of the domestic industry defined for standing purposes.  Under ECpractice it is possible that, after the initiation, the investigating authorities determine that one or more
companies have been wrongly included in the Community industry.  Such companies are then
excluded.  Indeed, this happened in the Bed linen II proceeding before the provisional anti-dumping
measures were imposed, as is evident from the quotation from the provisional Regulation below.
4.99 In the Bed linen II proceeding, the European Commission made an explicit determination on
the domestic industry:
“1. Definition of the Community industry
(52) After elimination from the list of companies included in the complaint of seven of them
found not to be complainants, the Commission found that the remaining companiesrepresented a major proportion of Community production of bed linen and satisfied the
requirements of Article 5(4) of the basic Regulation.
. . .
(54) In all but one case, companies alleged to  be importing bed linen from the countries
concerned were among those selected in the sample of Community producers (see recitals
(58) to (61)). The Commission was therefore able to examine the extent of these imports
during the course of its on-the-spot verification visits. For all but one of these sampled
companies, the investigation show ed that the imports of dumped products from the countries
concerned had accounted for less than 10  per cent of the turnover of the companies in
question in the period examined. It is therefore the opinion of the Commission that these
                                                     
128 In the ADA Article 4.1 defines the domestic industry whose injury must be determined under
Article 3.WT/DS141/R
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companies were not shielded from the effect s of dumped imports and that for the purposes of
Article 4 of the basic Regulation these companies may be considered along with the other
cooperating producers, as belonging to the Community industry.
In the case of the one other sampled company, it was found that a higher proportion of its bed
linen sales in the investigation period were of Pakistani origin and also that only a minor part
of its sales were of its own production. It appeared in addition that the company's future
activity was likely to be further focused on imports. This company, whose core interests were
deemed clearly not to be in the production of  bed linen within the Community, was therefore
eliminated from the Community industry.
(55) Since all but one of the sampled companies alleged to be importing bed linen from the
countries concerned were found, on examination, not to be doing so in quantities sufficient to
warrant exclusion, it has been considered that  the allegations made by the exporters in this
regard were excessive and unreliable. Consequently, on the basis of the findings concerning
the sample, no exclusion of the one non-sampled company is warranted. This company
should, therefore, be retained in the definition of the Community industry. In any event, this
issue has no substantial influence on the question of the representativity of the Community
industry.
(56) Three other companies were eliminated. In one case the company was found no longer to
produce bed linen. In two other cases the companies did not respond to the requests for
information which were addressed, via Eurocoton and the national associations, to those
complainants which were not selected in the sample of Community producers, in order toobtain information on the Community industry as a whole.
(57) The remaining 35 companies, which cooperated with the enquiry and are located in
France, Germany, Italy, Spain, Portugal, Austria and Finland, represented a major
proportion of total Community production in the investigation period. These companies were
therefore deemed to make up the Community industry under the terms of Article 4(1) of the
basic Regulation.”
4.100 According to the EC, these 35 companies repr esented approximately 34 per cent of total
production in the EC.  These 35 remaining companies were basically the complainants in the case.
4.101 For its injury determination, the European Commission took a sample from these 35
companies; thus, the provisional determination states:
“(58) Because of the number of companies in th e Community industry it was decided to resort
to sampling, in accordance with Article 17 of the basic Regulation.
(59) 27 of the 35 companies, representing 96.7 per cent of Community industry production
and 32.5 per cent of total Community production in 1995, (the latest figures available at the
time of sample selection) were situated in Germany, Italy, France and Portugal.
(60) As a general rule, Community producers sell a large proportion of their bed linen
production in their own Member State, in part because of differences between Member States
in standard products and sizes. This is true of Germany, France and Italy which are both the
largest producers of bed linen in the Comm unity and very important importers. TheWT/DS141/R
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producers in these Member States were therefore clear candidates for assessing the impact of
the imports on the Community industry.
Producers in Portugal, for their part, sell a large proportion of their production in other
Member States and represent about one third of the production of complainant companies.
Even though Portugal is not a significant importer, therefore, it was decided that the effect of
the imports on the producers there should be assessed and that Portugal should be
represented in the sample.
(61) In consultation with the complainant Eurocoton an initial list of 19 companies was
arrived at (eight from France, six from Germ any, four from Italy and one from Portugal).
In the course of the enquiry one of these companies was eliminated from the sample for
failing to cooperate with the enquiry. As a result of this exclusion, and of the exclusion of theother company under Article 4(1)(a) of the basic Regulation (see recital (54)), in the
following injury analysis inform ation given for ‘sampled producer s’ is based on information
supplied by the remaining 17 producers which represented 20.7  per cent of total Community
production and 61.6  per cent of the production of the Community industry. They included the
largest Community industry companies in Germ any, Italy and Portugal, and also smaller
producers. The Commission therefore considered this sample to be representative of the
Community industry.”
4.102 Subsequently, the provisional Regulation set out that
“(62) Data for the examination of injury caused to the Community industry was collected and
analysed at three different levels, as follows:
— at the level of the entire Community (EU-15), for trends concerning production,
consumption in the Community, imports, exports and market share. Data was
obtained from Eurocoton and from recognized industry sources, notably the CITH
(Centre d'Information Textile et Habillemen t) which produces a series of production
figures across the Community for the whole of textile category 20. This category is
very slightly broader than the definition of the product concerned in the present
proceeding. However, the difference is very slight, as the extra products it includes
are of very minor significance,
— at the level of the Community industry, as defined above, for trends concerning
production, sales by value and employment,
— at the level of the sampled Community producers, for the factors mentioned above
and also for trends concerning prices and profitability.”
4.103 The provisional Regulation then sets out the determination on the state of the domestic
industry:
“(a) Production
(81) Total output of bed linen by producers in the Community fell by 9.6  per cent from
138,400 tonnes in 1992 to 125,100 tonnes in the investigation period. This fall in production
arose essentially through the closure of enterprises or their cessation of bed linen productionWT/DS141/R
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within the Community (see recital (91) below). It should also be noted that total exports by
Community producers have increased by 50  per cent, from 14,027 tonnes in 1992 to 21,756
in the investigation period. Without this export performance, Community bed linen production
would have suffered further than the figures given above.
The pattern observed for total Community production was not replicated at the level of the 35
producers of the Community industry, whose production rose by 8.7  per cent from 39,370
tonnes in 1992 to 42,781 tonnes in the investigation period. The Commission concluded that
the Community industry represented those companies which were strong enough to survivethe competition from dumped imports and whic h to a certain extent had benefited from the
demise of those which had not so survived.
Indeed, in the course of its investigation the Commission acquired evidence of 29 companies
other than the Community industry which ceased or reduced bedlinen production in the
Community between 1992 and the investigation period. It is estimated that total loss of
production amounted to at least 10,000 tonnes per annum.
The sales, employment and profits of companies which have since disappeared are not
included in the aggregated data for the Community industry, thus artificially improving the
apparent trends for the survivors.
(b) Sales by volume
(82) At the level of the total Community producers, sales by volume in the Community, as
measured by production minus exports, fell by 17 per cent from 124,400 tonnes in 1992 to
103,350 tonnes in the investigation period.
Sales by the sampled producers of the Community industry also declined, from 23,706 to
23,347 tonnes, a decrease of 1.5  per cent.
(c) Sales by value
(83) Sales by the Community industry rose by 4.2  per cent from ECU 428.6 million in 1992
to ECU 446.6 million in the investigation period. Sales by the sampled producers also rose,
from ECU 280.6 million in 1992 to ECU 285.3 million (a rise of 1.7  per cent) . . .
It should be noted that among the sampled producers it was observed that sales have been
maintained by seeking higher value market niches . . .
(d) Market share
(84) The market share by volume of producers at the level of the entire Community fell from
62.2 per cent in 1992 to 55.6  per cent in the investigation period. In that period the sampled
producers from the Community industry increased their market share slightly, from 10.7  per
cent to 11.3  per cent. The reason why the market share of survivors has slightly increased is
that they have taken over some of the sales of those which had not survived the competition
from dumped imports, particularly the sales of higher value niche products.
(85) An estimated analysis was done of market share by value. The patterns observed were
the same as for market share by volume: producers at the level of the entire Community lostWT/DS141/R
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market share (from 77.8 per cent in 1992 to 72.0 per cent in the investigation period), while
the Community industry as a whole and sampled producers gained market share, from
22.4 per cent to 25.1 per cent and from 14.7 per cent to 16.0  per cent respectively.
(e) Price development
(86) The Commission examined the development in average prices achieved by the sampled
Community producers for the defined reference products between 1993 and the investigation
period, using a constant product mix of the reference products . . .
(87) The development in average prices per kilogram of the sampled producers was also
measured. This measure showed an average price development from 100 in 1992 to 97.8 in
1993 to 103.2 in the investigation period. The fact that this measure has developed more
positively than prices for the defined reference products further reflects the fact the sampled
producers have been forced to move into niche markets and away from high volume, mass
market products.
. . .
(f) Profitability
(89) The profitability of the sampled companies declined by more than 50 per cent between
1992 and the investigation period, from a figure of 3.6  per cent to 1.6  per cent of sales . . .
(90) It should be recalled again that the sampled companies are among those which have
been able to survive the competition of dumpe d imports. It should also be noted that the
industry in question is not capital intensive and that it contains a large number of SMEs,
which means that any move into loss-making can lead to immediate exit rather than
remaining in business waiting for better times. This is why the companies that are left are
those that are profitable or, as in this case, only just profitable.
(g) Employment
(91) Direct employment by the 35 companie s of the Community industry on the product
concerned declined by 5.3  per cent between 1992 and the investigation period, from around
7,000 jobs to 6, 700.
In analysing data on the Community industry, account should be taken of the 29 companies
other than the Community industry which ceased or reduced bed linen production in the
Community between 1992 and the investigation period (see recital (81)). The associated job
losses numbered over 2,400.
(h) Conclusion on injury
(92) The Commission took into account all the economic indicators mentioned above in
determining whether or not the Community industry was suffering material injury. Account
was taken of the fact that the number of companies making up the Community industry was
reduced in comparison with the start of the injury investigation period. The production, sales,
employment and profits of companies which ha ve since disappeared are not included in theWT/DS141/R
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aggregated data for the Community industry, thus improving the apparent trends for the
survivors.
(93) The Commission noted the decline in the total production and market share of
Community producers. This background demonstrat es the difficult conditions in which the
remaining Community industry was operating. The fact that these surviving companies were
able to maintain production and market share shou ld not detract from the assessment of the
overall situation. Above all, the remaining Community industry suffered declining and
inadequate profitability, as further evidenced by prices which had not been able to reflectincreases in the costs of raw cotton or to keep pace with inflation in prices of consumer
goods.
(94) Accordingly the Commission reached the vi ew that the Community industry had suffered
material injury.
G. CAUSATION. . .
2. Effects of the dumped imports from the countries concerned
(96) The investigation of the Community industry showed as the main injury indicator the
unsatisfactory development of sales prices and the consequent declining profitability. It was
also established that the dumped imports were sold at prices which significantly undercutthose of the Community producers . . .
(98) It was observed among sampled producers that they had been obliged increasingly to
shift production and sales to high value niche markets in order to maintain production andsales levels . . .
(99) Since price suppression and consequent decreasing profitability to inadequate levels
were the main indicators on which the Commission's finding of injury was based, and in view
of the coincidence in time between the dete rioration of the situation of the Community
industry and the significant increase of the dumped imports, it can be concluded that there
was a direct causal link between these imports and the material injury found.
. . .
(105) It is clear that the decline in cons umption between 1992 and the investigation period
has contributed to the situation of the Community industry. However, the fall did not affect all
operators equally. During this period the total volume of sales by Community producers fell
by an amount 50  per cent higher than the total fall in consumption. While sales by the
Community industry have remained relatively stable, benefiting from the disappearance of
other Community producers, the dumped imports from the countries concerned increased by
48  per cent. Imports from other third countries decreased by 14  per cent. Because total sales
by Community producers fell by 50 per cent more than the total fall in consumption and sales
by other imports declined, it can be concl uded that increased dumped imports through severe
price undercutting gained at least one third of the sales volumes lost by Community
producers. This clearly constitutes a cause of material injury not attributable to the decline in
consumption . . .WT/DS141/R
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(d) Competition from non-complainant producers in the Community
(107) The Community industry represents only a part of total Community production. It
should therefore be examined whether competition from other producers within the
Community affects the situation of the Community industry. Other producers of bed linen are
known to include, in particular, a large numbe r of ‘converters’, i.e. producers who make bed
linen from grey cloth woven elsewhere, wher eas the Community industry consists largely of
integrated producers who weave most or all of their own grey cloth. As has been found, on aprovisional basis, in the separate proceeding c oncerning imports of grey cloth from India,
Pakistan, Egypt, China, Indonesia and Turkey, important sources of supply of this product
were imported into the Community at dumpe d prices which would have provided these
producers with an unfair advantage over the Community industry in the present proceeding.
It cannot therefore be ruled out that distorted competition from this source contributed to thesituation of the Community industry.
(108) Nevertheless it should be noted that the production and market share of the non-
complainant producers have fallen between 1992 and the investigation period. Indeed the fall
in production across the Community has been due to reduction by the non-complainants
rather than by complainants. Since the imports concerned have increased over this timescale,
the Commission decided that competition by non-complainants did not invalidate the
conclusion that the imports concerned caused the injury observed.
4. Conclusion on causation
(109) As has been shown above, there is a direct causal link between the increased volume
and the price effect of the dumped imports and the material injury suffered by the Community
industry. The direct link in this case is demonstrated by the existence of heavy undercutting
which can reasonably explain the significant incr ease in market share of the dumped imports
from 16.9 per cent in 1992 to 25.1  per cent in the investigation period and the corresponding
negative consequences on volumes and prices of sales of Community producers. In terms of
volumes, Community producers' market share decreased from 62.2  per cent in 1992 to 55.6
 per cent in the investigation period. This fall was not reflected at the level of individual
producers of the Community industry because they obtained sufficient benefit from the demise
of other Community producers to keep their sales volume relatively stable. However, as far as
the prices of the dumped imports are con cerned, they have had an evident impact on the
sampled producers, many of them being SMEs, whose profitability has fallen from 3.6  per
cent to 1.6  per cent. In this respect, the Commission noted that such a situation can cause
particular difficulty for SMEs given their lack of resources and the reluctance of banks to
finance any losses . . .” (Emphasis added)
4.104 In their comments to the provisional disclosure129, the Indian exporters argued in detail that
this determination was incorrect, since it was based on a ‘pick and choose’ method inconsistent with
Article 3:
“2.2 Definition of Community industryThe European Commission explains in Recital 62 of the provisional duties Regulation that the
injury assessment has been made at three levels, to wit:
                                                     
129 Annex 51.WT/DS141/R
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— at the level of the entire Community (EC-15);
— at the level of the Community industry; and
— at the level of the sampled producers.
As a general point, Texprocil wishes to disagree with the Commission’s double injury
determination. In this proceeding many producer s chose not to support the complaint. Even
Eurocoton admits in its complaint that about one half of the EC producers did not support
it.130
The Commission subsequently determined in the provisional duties Regulation that:
“The remaining 35 companies, which cooperated with the enquiry and are located in France,
Germany, Italy, Spain, Portugal, Austria and Finland, represented a major part of total
Community production in the investigation pe riod. These companies were therefore deemed
to make up the Community industry under the terms of Article 4(1) of the basic Regulation.”
(Recital 57)
Texprocil does not contest the right of the Commission to limit the Community industry to
those companies supporting the complaint. Indeed, in past proceedings the Commission hasrepeatedly excluded companies from the Comm unity industry because these companies where
related to exporters, or for other reasons
131 . . .
. . . Article 3(1) of the basic Regulation restricts the injury determination to ‘the Community
industry’. This is a term of art, defined in Article 4(1). The Commission has in fact in the Bedlinen Regulation determined that the ‘Communi ty industry’ consists of the co-operating 35
companies.
It follows that the Commission cannot eat the cake and have it too by on the one hand
restricting the Community industry to 35 companies for price undercutting purposes, and on
the other hand looking at data covering all producers for the state of the Community industry
determination.
132
Texprocil notes that any injury determination which is based on data of producers explicitlynot part of the Community industry contravenes Article 3(1) of the basic Regulation.
The Commission’s reasoning in Recitals 84 and 96 et seq. that the Community industry is only
taking over the business of companies which went out of business is fallacious and strained,
since it is based on the assumption that exactly and only these 35 companies are economically
viable and able to compete, whereas the two-thirds of EC producers who do not co-operate
were unable to take over market share from such allegedly disappeared firms. This raises the
question why economically viable companies would complain about alleged dumping, whileallegedly not-viable companies do not support this complaint.
                                                     
130 Footnote in original: Non-confidential complaint at 3.
131 Footnote omitted.
132 Footnote in original: Moreover, it is submitted that the sample of the Community industry should be
considered representative for all injury factors, just as the sample of the co-operating Indian industry is
considered representative for that industry.WT/DS141/R
Page 189
In summary, the Commission cannot make a legally valid injury determination including
other companies than those constituting the Community industry as defined in Recital 57 of
the provisional duties Regulation.”
4.105 Texprocil then argued that the available data on the state of the ‘Community industry’
(domestic industry) clearly did not point toward injury.  These arguments were repeated during the
second injury hearing and in the second post-hearing brief133 of 17 July 1997 (Annex 55).
4.106 In the definitive disclosure document (Anne x 56) the EC made the following comments on
the issue:
“3. Situation of the Community industryExporters from all the exporting countries claimed that the Commission's analysis of injury
was defective in that it referred to data concerning total Community production of bed linen
in assessing the situation of the Community industry. They claimed in particular that
information concerning companies not included in the definition of the Community industry
or which no longer produce bed linen cannot be used to construe a finding of material injury.
The Commission services examined these claims carefully. It should however be remarked
that the principal basis for the finding of material injury was the reduced profitability and
price suppression of the Community industry as observed among the sampled companies.
The Commission services nevertheless consider that data concerning total Community
production of bed linen provide indicators of the conditions in which the Community industry
was operating during the period considered. The suggestion that such data cannot be used
ignores the nature of the industry under consideration. In capital- intensive sectors with high
barriers to market entry and exit, material injury is less likely to manifest itself through the
disappearance of economic operators In a sector such as textiles, by contrast, difficult trading
conditions will more quickly force market exit. To ignore the disappearance of significant
numbers of economic operators would therefore distort the analysis of material injurybetween different sectors.
The Commission's finding of material injury is therefore confirmed.H. CAUSATIONExporters from all three countries concerned claimed that any material injury could be
ascribed to the fall in consumption of 7 per cent between 1992 and the investigation period.
However, as noted in recital (105) of the provisional Regulation, the total fall in sales by all
Community producers significantly exceeded the total falI in consumption. As to theexporters' argument that data concerning the totality of Community production were not
relevant to the determination of whether the dumped imports caused material injury, the
Commission services reject this suggestion (see above, G.3) and therefore confirm the finding
that the fall in consumption does not contradict  the finding that the dumped imports, taken in
isolation, have caused material injury to the Community industry.“
                                                     
133 See section 4.2 and further of that document.WT/DS141/R
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4.107 In their comments on the definitive disclosure, the Indian exporters again argued that the EC’s
determination of the state of the domestic industry relied on companies outside the domestic industry,
inconsistently with Article 3:
“4.2.1 Multi-layered injury determination
Texprocil argued during its second hearing and in its comments on the provisional disclosure
that the Commission is obliged to determine whether the Community industry has suffered
injury. It was argued that, apart from th e question whether the Commission should take
account of the 66 per cent of EC producers who explicitly are not part of the Community
industry, the Commission, by taking recourse to sampling, was obliged to base its
determination on the results found for the sample . In the definitive disclosure the Commission
apparently did not quite understand the argument and merely noted that: [quote from
definitive disclosure document]
This ignores several relevant factors.  First, an injury determination is a legal assessment.
The European Community agreed in the GATT/WTO context to certain rules giving guidance
as to how such assessment must be made.
The EC producers can be distinguished in the following groups:
(1) the Community industry, which represent (roughly) 34 per cent or less of existing
producers;
(2) other EC producers, who represent over 66 per cent of EC production;
(3) producers who have disappeared before the IP.
The argument made by Texprocil was that the Commission cannot legally base its injury
determination on data including group (2). Moreover, the Commission’s reliance on the
‘disappearance’ of group (3) companies does not explain why over 66 per cent, i.e., well over
two-thirds of still existing producers, does not support this proceeding.
Last, there is another falsifying factor. As the Commission will undoubtedly know, the ECtextile industry has gone through a major restructurization process in the past years. This
involved, among others, the merger of many smaller companies in more viable units.
If, four years ago, company A was purchased by  company B, the Commission’s logic seems to
be as follows: company A has disappeared, which is a sign of injury, notwithstanding the factthat company B has expanded its production. Such ‘logic’, however, does not withstand
scrutiny.
Texprocil notes that the Commission, apart from the observation on pages 13-14 of the
disclosure documents, has not further addressed the legal concerns of the Indian exporters.
It is submitted that this creative and highly original manner of explaining away the natural
consolidation processes in the EC textile industry is not supported by letter or spirit of
Articles 3 and 4 of the WTO Anti-Dumping Agreement. Texprocil regrets that the
Commission’s three-level injury determination could create the unfortunate impression of a‘pick-and-choose’ injury assessment. In orde r to avoid any such impression, the Commission
is again invited to explain its position vis-à-vis Texprocil’s arguments in a meaningful
manner, in accordance with Article 12  of the WTO Anti-Dumping Agreement.”WT/DS141/R
Page 191
4.108 In the definitive Regulation the EC changed the statements in the definitive disclosure
document somewhat:
“E. COMMUNITY INDUSTRY
. . .
(34) . . . the finding that the 35 complainant companies represent a major proportion of total
Community production within the meaning of Article 5(4) of the basic Regulation and that
they therefore constitute the Community industry within the meaning of Article 4(1) of the
basic Regulation is confirmed.
F. INJURY
. . .
3. Situation of the Community industry
(40) Exporters from all the exporting countries claimed that the Commission's analysis of
injury was defective in that it referred to the significant decline in total Community
production of bed linen in assessing the situation of the Community industry. They claimed in
particular that information concerning compan ies not included in the definition of the
Community industry or which no longer produce bed linen cannot be used to construe a
finding of material injury.
These claims were examined carefully. It should however be remarked that the principal basis
for the finding of material injury was the reduced profitability and price suppression of the
Community industry as observed among the sampled companies.
(41) In the assessment of injury pursuant to Article 3 of the basic Regulation, the Community
institutions have to assess the economic situation of the Community industry. This assessmentusually covers the analysis of a time period of four to five years as in the present case
('assessment period`). Such an assessment is commonly based on an analysis of the
complaining industry and not necessarily on companies accounting for the totality of
Community production on the ground that the situation of a major proportion of the
Community production is representative for it s totality. Such an assessment, however, also
has to take into account the structure and the nature of the industry under consideration. In
the present case this industry is characterized by a high number of operators, in many cases
small- and medium-sized companies, and by the fact  that it is a sector with relatively low
barriers to exit. The latter is mainly due to the fact that machinery can be sold or used for
other products relatively simply. This has the effect that material injury is likely to manifestitself through the exit of economic operators within the assessment period.
Consequently, to limit the assessment of injury only to companies which are still operational
at the end of the assessment period (i.e. at th e time of the lodging of the complaint) and thus
able actively to support a complaint would mean that any injury caused to companies which
have closed down before this point in time would go unconsidered in the analysis.
Furthermore, it should be noted that this distortion could even be aggravated as the surviving
complaining companies of the Community industry may have benefited, possibly onlyWT/DS141/R
Page 192
temporarily, from the disappearance of othe r companies, causing their positive development
to be overestimated.
In the present case, it should be noted that 29 companies of the bed linen industry have closed
down or ceased production: that is to say,  that a substantial number of companies have
ceased operation. Furthermore, given the subs tantial price undercutting established, the
strong increase in the volumes of the imports concerned and their consequent rise in market
share, any relatively positive development of the complaining producers must be seen as
threatened in the absence of anti-dumping measures.
4. Conclusion
(42) The finding of material injury, within the meaning of Article 3 (1) of the basic
Regulation, is therefore confirmed.”
4.109 During the consultations India expressed its concern that the EC’s determination of the state
of the ‘Community industry’ was inconsistent with Article 3.4 (Annex 11):
“Mr Seth: . . . the EC concluded in Recital (57) of the provisional duties Regulation that a
certain group of 35 companies constituted ‘the Community industry under the terms of Article
4(1) of the basic Regulation.’ In the definitive duties Regulation the EC confirmed this
finding.
It thus follows that injury must be determined with respect to this domestic industry.Notwithstanding this conclusion, the EC determined  injury data at three levels as explained in
Recital (62) of the provisional duties Regulation:
1) at the level of all EC producers (i.e., domestic industry + the almost two-thirds of EC
producers not reckoned to be part of the domestic industry);
2) at the level of the domestic industry (i.e., the 35 companies determined to be part of
the Community industry); and
3) at the sample level (i.e., on the basis of the sample taken from the domestic industry).
Only as a result of occasionally including the almost two-thirds of Community producers who
did not support the complaint and who patently do not belong to the ‘domestic industry’, the
European Community was able to ‘determine’ that imports of bed linen from India, Pakistanand Egypt caused injury.
India believes such determination to be inconsistent with Article 3, and notably with Articles
3.1, 3.4 and 3.5.
In this respect we would like to raise the following questions 25 – 32 [see Annex 11 for
details]:
[EC]: I will make some general comments. I could say that the wording of the provisional
Regulation is not the best. We confirm that the ‘domestic industry’ in Article 3 is the same as
that of Article 4.1. It is not true that we established injury for a larger group. For example for
market share we need data from all producers in order to be able to determine the market
share of the domestic industry. Therefore we have to collect data for all producers. It isWT/DS141/R
Page 193
normal that, when we sample the EC industry, no t all data can be obtained from the sample.
Therefore, we do not see any incompatibility.
[The Indian delegation] clarifies the issue: this is factually not quite correct. For example, in
Rec. 82 of the provisional Regulation the EC cl early seems to rely for other injury factors
than market share on the producers not part of the domestic industry.
[EC]: No single factor is decisive. Some factors are not clearly negative. In such cases we
have provided additional explanations by compari ng with other competitors. This should not
be confused with making an injury determination for extra-domestic industry companies.
Admittedly, the Regulation is not a literary masterpiece.
. . .
2.3 The European Community acted inconsistently with Article 3.1 of the Agreement by
not respecting the result of the EC sample
Mr Seth: There is another issue pertaining to the ‘layered’ injury determination.
On the EC side, the Commission selected a sa mple of 17 companies from the 35 companies
making up the ‘domestic industry’. It is noted that, as far as India is aware, the EC sample
has been selected by the European Commission investigators in collaboration with and with
the approval of the complainant, Eurocoton. It may be expected that the sample thus reflects
the companies where the Commission is most likely to find data suggesting injury. In thissense, the sample is likely to be skewed and to present a more negative picture of the domestic
industry than the domestic industry as a whole.
. . .While it is acknowledged that the European Community is not obliged to sample the
Community industry, it appears that, if the European Community investigators decide to limittheir investigation of Indian exporters by ta king recourse to sampling in accordance with
Article 6.10 of the Agreement, and the result of su ch sample is applied to all other co-operating
Indian exporters, then the result of the domestic industry sample must equally be fully applied to
the whole domestic industry. Disr egard of EC sample data in fa vour for more ‘favourable’ data
of another group of EC producers w ould imply that ‘the authorities’ establishment of the facts’
could hardly be said to be ‘proper’; nor would ‘their evaluation of those facts [be] unbiased
and objective’ as required by implication by Article 17.6 of the Agreement.
By not basing the determination whether material injury had been caused solely on the data of
the Community industry sample, the European Community has acted inconsistently with
Articles 3.1 and 3.4 of the Agreement. Consequently, the European Community has acted also
inconsistent with Article 1 of the Agreement.
The EC sample is not ‘statistically valid’
There is a third issue here. Article 6.10 of the Agreement lays down that the EC may sample
‘interested parties’ provided such sample is ‘statistically valid’. Article 6.11 defines as an
‘interested party’ among others, ‘a producer of the like product in the importing Member or a
trade and business association a majority of the members of which produce the like product inWT/DS141/R
Page 194
the territory of the importing Member.’ This implies that the sample must be chosen from the
‘producer[s] of the like product in the importing Member’ (sampling of associations is not at
play here).
Whatever the meaning of ‘statistically valid’, it would seem certain that it excludes the
possibility of taking a sample from only producers supporting the application. The EC sample
is therefore statistically not valid and the injury determination based on it, vitiated by errors
of facts and law. India believes that the EC has acted inconsistently with Article 6.10.
. . .
[EC]: as far as the sample from the Community  industry is concerned: we have to take the
information from the Community industry. We could not include companies not part of the
domestic industry. There is no clear definition of ‘statistically valid’. The main characteristicsrelevant to the dumping determination of the universe concerned should be reflected in the
sample. These are:
— the volume of production,
— the location of the company,
— the integration of the producer, and— the range of products.
. . .
If Eurocoton agreed to the Community industry sample suggestion (we worked on the basis of
information from the EC),  there was agreement . . .”
4.110 The EC, in its letter of 1 October (Annex 12), provided the following additional answers:
“Question 27
Would the EC agree that the domestic industry was determined by the investigating
authorities to consist of 35 companies, apparently representing around 34 per cent of ECproduction?
As indicated in recital (57) of the provisional duty Regulation, 35 companies were deemed to
make up the Community industry. In recital (32) of the definitive duty Regulation, it is stated
that all exporters from all three exporting countries observed that the complainantCommunity producers taken to be the Community industry made up just 34 per cent of total
Community production.
Question 28
Would the EC agree that in Bed linen II it made the injury assessment on three levels,
namely at?
1) the level of all EC producers (i.e., domestic industry + the almost two-thirds of EC
producers not reckoned to be part of the domestic industry);
2) the level of the domestic industry (i.e., the 35 companies determined to be part of
the Community industry); and
3) the sample level (i.e., on the basis of the sample taken from the domestic industry).WT/DS141/R
Page 195
The injury assessment has been made for the dom estic (Community) industry only. In order to
put this assessment into the adequate economic fram ework, as specified in recital (62) of the
provisional duty Regulation, data was collected and analysed at the level of the entire
Community, the level of the Community industry and at the level of the sampled Communityproducers depending on the economic indicators concerned.
Question 29
Can the EC explain how the inclusion of companies not belonging to the domestic industry
and not supporting the proceeding is compatible with Article 3 (footnote), Article 3.4, 3.5
and 4.1?
No companies not belonging to the domestic (Community) industry have been included in the
injury assessment. As is indicated in recital (93) and (94) of the provisional duty Regulation,the Community reached the view that the domestic industry (Community industry) had
suffered material injury.
This approach was confirmed in recital (40) of the definitive duty Regulation.
Question 31
Would the EC agree that in the Regulation imposing provisional duties it did not even
comment on sales by volume by the Community industry (domestic industry), but merely
looked at data concerning all producers and the sample of 17 companies taken from theCommunity producers?
In recital (82) of the provisional duty Regulation, the Community has defined the framework
of the Community market as far as the total sales volume of the product under investigation is
concerned.
As far as the injury analysis is concerned, the Community has considered the sales volume
pertaining to the sample of complaining Community producers. As set out in recitals (58) to
(61) of the provisional duty Regulation, this sample was considered representative of the
domestic industry (Community industry).
Question 32
Would the EC agree that in recitals (84) and (8 5) of the provisional duties Regulation, the
injury finding hinges very strongly on the data concerning all producers, since the data
concerning the Community industry do not point towards injury (increasing market share
of the ‘domestic industry’)?
As already mentioned in the reply to your questions No. 28 and 29, the findings which led to
the conclusion of material injury to the Community industry were based on injury indicators
pertaining to this industry. The injury indicators which led to the conclusion of material
injury to the Community industry are set out in recitals (93) and (94) of the provisional dutyRegulation.WT/DS141/R
Page 196
As far as the question concerning the positive developments in market share is concerned, as
is rightly pointed out in your question 46 and Article 3.2 of the Agreement, one or several
injury factors cannot necessarily give decisive guidance in the determination of injury.
. . .
Ouestion 34
Would the EC agree that the EC sample, whic h has been taken entirely from companies
supporting the complaint, was agreed betw een the EC and the complainant Eurocoton?
The sample representative of the Community industry was determined ‘in consultation’ with
the complainant as indicated in recital (61) of the Provisional duty Regulation.
The exporters had the opportunity to comment on the selection of the sample but they did not
choose to do so.“
2. Claims
4.111 Three claims flow from the facts as described above:134
4.112 First, the determination on the state of the domestic industry is inconsistent with Article 3.4 of
the ADA, since
— the EC has chosen a sample from the domestic industry, but did not consistently base its
injury determination on this sample;
— the EC has explicitly determined that the domestic industry consists of 35 companies, but
relied in its injury determination on companies outside this group in order to determine injury;
— the EC chose to rely on different ‘levels’ of industry for different injury indices without any
apparent other reason than goal-oriented ‘picking and choosing’ of injury.
4.113 Second, even if the determination on the state of the domestic industry would not have been
made inconsistently with Article 3.4, the EC failed to properly explain it in the provisional Regulation
and the provisional disclosure. This would enta il an inconsistency with Article 12.2.1 of the ADA.
4.114 Third, even if the determination on the state of the domestic industry would not have been
made inconsistently with Article 3.4, the EC failed to properly explain it in the definitive Regulationand the definitive disclosure. This would entail an inconsistency with Article 12.2.2 of the ADA.
3. Claim 15:  inconsistency with Article 3.4
3.1 The text of Article 3.4
4.115 Article 3.4 ADA requires that:
“[t]he examination of the im pact of the dumped imports on the domestic industry concerned
shall include an evaluation of all relevant economic factors and indices having a bearing on
the state of the industry, including . . .”  (Emphasis added)
                                                     
134 It is recalled that other claims pertaining to article 3.4 are discussed separately in this submission
(sections IV.B and IV.D).WT/DS141/R
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4.116 As noted above, ‘domestic industry’ is defined in Article 4.1 as:
“the domestic producers as a whole of the like products or to those of them whose collective
output of the products constitutes a major proportion of the total domestic production of those
products.”135
4.117 As noted earlier in this submission136, there have been and are provisions in GATT/WTO law
with similar or identical wording to  that of Article 3.4. In the context of those provisions, the concept
of “domestic industry”  has been scrutinized by GATT panels on prior occasions.  Notably, in United
States—Definition of industry concerning wine a nd grape products, in the context of the Agreement
on Interpretation and Application of Articles VI, XVI and XXIII of the General Agreement on Tariffs
and Trade:137
“. . . the Panel held the view that Article VI of the GATT and the corresponding Codeprovision should, because they permitted action of a non-m.f.n. nature otherwise prohibited
by Article I, be interpreted in a narrow way.
Article 6:5 of the Code gave a precise definition of a ‘domestic industry’, a definition which
in the view of the Panel could not be interpreted extensively . . .”
4.118 In the same case the European Community delegation observed that:
“the EEC delegation based its views on the provisions of the Code with respect to the
definition of industry. It considered the language of the Code to be precise and unequivocal in
that it stipulated that countervailing duties could only be imposed if subsidized imports were
causing injury to a domestic industry in the importing country as defined in Article 6:5 of the
Code and the footnote to Article 6:1.”138 (Emphasis added)
4.119 This—commendable—narrow interpretation of Article VI has thus been the standard view ofthe EC itself. In Canada—countervailing duty proceeding against EEC exports of boneless
manufacturing beef:139
“[t]he EEC noted that Article 6:5 of the Code defined domestic industry as domestic
producers of the like product. The EEC argued that the use of the word ‘shall’ made this
definition mandatory . . . The concept of ‘domestic industry’ as defined in Article 6:5 alsodetermined the interpretation of  the term ‘industry affected’ in Article 2:1. This precise
definition did not allow for a creative interpretation which would upset the delicate balance
of rights and obligations which was the result of laborious negotiations during the Tokyo
Round.”140 (Emphasis added)
                                                     
135 The exceptions in sub-paragraphs (i) and (ii) of Article 4.1 are not at play in this claim.
136 See footnote 104 and following in section IV.B of this submission, above.
137 Doc. SCM/71 of 24 March 1986 at § 4.5-4.6.
138 United States—Definition of industry concerning wine and grape products, doc. SCM/71 of
24 March 1986 at § 3.10.
139 Canada—countervailing duty proceeding against EEC exports of boneless manufacturing beef,
SCM/85 (unadopted), distributed on 13 October 1987 at § 3.6.
140 Ibid. at § 3.4.WT/DS141/R
Page 198
4.120 Quite apart from the fact that the text of Articles 3.4 and 4.1 is crystal clear, these statements
are perfectly correct and do not allow for any expansive interpretation of the ‘domestic industry’.
3.2 Legal arguments relating to the claims relating to Article 3.4
4.121 Within the context of the ‘domestic industry’ issue, there are three main arguments why the
EC acted inconsistently with Article 3.4. First, the EC did rely on companies outside the domestic
industry in order to find injury (section 3.2.1 of this claim). Second, the EC, once it selected a sample
from among the domestic industry, was not entitled to subsequently deviate from that sample in orderto find injury (section 3.2.2). Third, the EC has at no point indicated or made clear why exactly it
relied on which industry level for each injury factor (section 3.2.3).
3.2.1 The EC did in fact rely on companies outside the domestic industry to find injury
4.122 It transpires from the EC’s replies given during and after the oral consultations that it
considers that injury was in fact determined for the ‘domestic industry’ and that it did not rely on
companies outside the domestic industry to find injury (see, for example, the written reply to
question 29).  This, however, is not corroborated by a careful analysis of the EC’s published
provisional determination (which was confirmed by the definitive Regulation).  All further referencesin this sub-section are to the provisional Regulation, as quoted above in section 1.  Notably, India
would like to draw attention to the following five points:
4.123 a. Production. If the EC did not rely on the production data for the EU-15 producers
141, the
first sub-paragraph of recital (81) is, to put it mildly, pointless. Moreover, that sub-paragraph refers to
recital (91):
“(81) Total output of bed linen by producers in the Community fell by 9,6  per cent from 138
400 tonnes in 1992 to 125 100 tonnes in the investigation period. This fall in production arose
essentially through the closure of enterprises or their cessation of bed linen production within
the Community (see recital (91) below) . . .”
4.124 Recital (91) in turn, states in relevant part that:
“(91) . . . In analysing data on the Community industry, account should be taken of the 29
companies other than the Community industry which ceased or reduced bed linen production
in the Community between 1992 and the investigation period (see recital (81)). Theassociated job losses numbered over 2 400.”
4.125 In other words, the EC “took account”  of the companies “other than the Community
industry”  for the injury determination.  Took account for what?  Logically, for the “evaluation of all
relevant economic factors and indices having a bearing on the state of the industry”  as required by
Article 3.4.
4.126 The word “evaluation”  would seem to denote that the investigating authorities have “to judge
or determine the worth or quality of; appraise” .
142  Some factors may point towards a no-injury
finding, whereas other factors might point towards a positive finding. The investigating authorities
                                                     
141 Following the language of provisional Regulation at § (62) “EU-15”  denotes all producers of the
like product in the EC.
142 Similarly Webster's New World Dictionary , 3rd College Edition, 1994, excerpt attached as
Annex 57.WT/DS141/R
Page 199
will have to weigh these factors.  The metaphor springing to mind is that of a weighing scale, where
the factors and indices concerning the domestic industry are weighted.  Some factors will be negative
and draw the scales toward an injury finding.  Some other factors will be positive, and may militate
towards a no-injury finding.  Thus, in the final analysis not all factors will have to point towardsinjury, as long as, objectively seen, the investigating authorities could reasonably conclude that on the
whole material injury existed and was caused by the “dumped imports” .  That would imply that, in
order to make an objective appraisal of the different injury factors, the determinations on each of these
factors must have been relevant, objective, and in conformity with the ADA.  On balance, the
evaluation should point toward injury or no-injury, whereby no single factor will necessarily bedecisive. However, what the EC did in recital (81) is to use the ‘injury’ allegedly and unprovably
suffered by non-domestic industry producers to somehow ‘justify’ or ‘support’ the injury finding as
far as production data are concerned.  The image that evokes is of weighing scales where, besides theproduct to be weighed, the grocer performing the we ighing secretly pushes a scale with his finger.
4.127 It is further noted that the production increase of 8.7 per cent for the domestic industry
mentioned in the second paragraph of recital (81)143 hardly counts as a factor indicating injury, in
view of the substantial consumption decrease during the same period.  Thus, it becomes clear that the
Commission included non-complaining producers in order to find a decline in output.
4.128 The EC further noted that:
“the Community industry represented those companies which were strong enough to survive
the competition from dumped imports and whic h to a certain extent had benefited from the
demise of those which had not so survived.”
4.129 It would seem that every time one Community producer took over the activities of another,
the Commission counted one disappeared company (attributed to dumped imports), whatever the
reason for the take-over, and whatever the consequences for total production.  In the climate of re-
organisation of the textile industry in the EC in the beginning of the 1990s, this premise is, to use a
charitable word, dubious.
4.130 This determination raises another fundamenta l question: how could the EC properly conclude
that “the Community industry represented those companies which were strong enough to survive the
competition from dumped imports” ?  The data in the Regulation point in a totally different direction,
namely, that the Community industry companies thrived and took over considerable business and
market share from their EC competitors.  Under such circumstances, even if the Commission’s datawere accepted, it is patently clear that, as far as production data are concerned, the domestic industry,
i.e., the 35 companies, did very well.  The reply by the Commission to question 29 thus appears
incongruous with the published determination.
4.131 b. Sales. Under the heading “[s]ales by volume”  recital (82) provides data on EU-15 level,
and on the level of the sampled producers.  No information is provided on the domestic industry.
During the consultations India asked why the EC in cluded the first sentence of recital (on the EU-15
producers) when it did not base its decision on it. The EC answered in its written replies that:
                                                     
143 It is recalled that the second paragraph of Recital (81) reads:  “The pattern observed for total
Community production was not replicated  at the level of the 35 produce rs of the Community industry, whose
production rose by 8.7  per cent from 39,370 tonnes in 1992 to 42,781 tonnes in the investigation period. The
Commission concluded that the Community industry represented those companies which were strong enough tosurvive the competition from dumped imports and which to  a certain extent had benefited from the demise of
those which had not so survived.”WT/DS141/R
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“In recital (82) of the provisional duties Regulation, the Community has defined the
framework of the Community market as far as  the total sales volume of the product under
investigation is concerned.
As far as the injury analysis is concerned, the Community has considered the sales volume
pertaining to the sample of complaining Community producers . . .”
4.132 This, however, does not seem to correspond with the text of the Regulation: recital (92)
clearly notes that
“[t]he Commission took into account all the economic indicators mentioned above  in
determining whether or not the Community industry was suffering material injury. Account
was taken of the fact that the number of companies making up the Community industry wasreduced in comparison with the start of the injury investigation period. The production, sales,
employment and profits of companies which ha ve since disappeared are not included in the
aggregated data for the Community industry, thus improving the apparent trends for the
survivors.”  (Emphasis added)
4.133 In other words, the Commission did base itself on “all”  the economic factors “above” , i.e.,
also on the first paragraph of recital (82). “All”  the economic factors “above”  thus implies that the
Commission did base itself on the EU-15 production da ta. Again, this would appear to contradict the
reply to question 29.  Moreover, in view of the close linkage between market share data and sales
data, the reply is—to put it diplomatically—unlikely.
4.134 c. Market share. Recital (84) gives information on market share by volume, which may be
summarised as follows: the market share of the EU-15 producers allegedly fell, while the market
share of the domestic producers increased. The Commission notes that “[t]he reason why the market
share of survivors has slightly increased is that they have taken over some of the sales of those which
had not survived the competition from dumped imports” .  The EC does not explain or proffer its
evidence for the unproven assumptions that (1) imports from the targeted countries destroyed ECproducers, while (2) subsequently the market share of these was taken over by the domestic industry.
4.135 More important in the context of question 29 is that the Commission mentions in recital (93)
that “[t]he Commission noted the decline in the total production and market share of Community
producers” .  Whose market share?  Not that of the Community industry: that increased.  The market
share, which the Commission specifically “noted”  in recital (93), is that of the EU-15 producers.  The
“patterns observed”  for market share by value “were the same” (recital (85)).  Here too, it was only
the market share of the EU-15 producers that allegedly decreased, while the market shares of the
domestic industry and of the sample increased!  The Commission’s reply to question 29 is again
irreconcilable with the text of the Regulation.
4.136 India believes to have understood the oral reply of the Commission during the first round of
consultations as implying that the market share data for the EU-15 producers were only included in
the Regulation since such data are necessary for making a finding on market share of the domestic
industry.  If this is indeed the EC’s view, it is clearly contradicted by the wording of recital (93),
where the Commission placed special emphasis on the decline of the market share of the EU-15
producers.WT/DS141/R
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4.137 d. Employment. In recital (91) the Commission noted that
“[i]n analysing data on the Community industry, account should be taken of the 29
companies other than the Community industry which ceased or reduced bed linen productionin the Community between 1992 and the investigation period . . . The associated job losses
numbered over 2 400.”
4.138 Recital (41) of the definitive duties Regulation further dealt with this issue:
“to limit the assessment of injury only to companies which are still operational at the end of
the assessment period (i.e. at the time of the lodging of the complaint) and thus able actively
to support a complaint would mean that any injury caused to companies which have closed
down before this point in time would go unconsidered in the analysis.”
4.139 The question is begged how the EC can k now that these companies would have been
complainants and thus part of the Community industry if they still had existed at the time of the
complaint.  Even in the Commission’s determinati on, only 34% of EU-15 production existing at the
time of the complaint supported the complainant and thus were included in the domestic industry.
The Commission’s gratuitous and full inclusion of companies that disappeared well before theinvestigation period for the determination of employment factors clearly implies the inclusion of
companies outside the 35 that make up the domestic industry.  Furthermore, how can the
Commission, without any evidence whatsoever, attribute such disappearance to imports that occurred
in years with respect to which dumping was never established?
4.140 e. Allegedly disappeared companies. Recital (105) is noted:
“sales by the Community industry have remained relatively stable . . . Because total sales by
Community producers fell by 50  per cent more th an the total fall in consumption and sales by
other imports declined, it can be concluded that increased dumped imports through severe
price undercutting gained at least one third of the sales volumes lost by Community
producers. This clearly constitutes a cause of material injury  not attributable to the decline in
consumption.”  (Emphasis added)
4.141 The EC’s causality analysis here hinges very strongly on the sales volume of the EU-15
producers, especially since sales by the domestic industry actually increased with 4.2 per cent.144
4.142 We further point to recital (92) of the provisional duties Regulation, in which the Commissionclarifies that “[a]ccount was taken of the fact that the number of companies making up the
Community industry was reduced in comparison with the start of the injury investigation period.”  In
other words, the Commission did not only base itself on the 35 companies which constituted the
domestic (Community) industry, but also took “account”  of other companies not belonging to the
Community industry, some of which were no l onger existing during the investigation period.
4.143 In summary on this argument, during the first round of consultations the Commission
delegation noted that not one single factor can be decisive for an injury finding.  This is, of course,
correct.  But that is not the issue here. Virtually  the whole injury determination in the provisional
Regulation is—explicitly or implicitly—based on EU-15 data.  Recitals (92) and (93) indicate which
factors were specifically important for the Commission to come to its finding.  The Commission
                                                     
144 As per recital (83) of the provisional Regulation.WT/DS141/R
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specially mentions production, sales, employment and profits.  Of these four factors, three
(production, sales and employment) were clearly based on EU-15 data.
4.144 The provisional Regulation, and consequently the definitive Regulation confirming it, is thus
vitiated by an inconsistenc y with Article 3.4 of the ADA.
3.2.2 The EC, once it selected a sample from among the domestic industry, was not entitled
to subsequently deviate from that sample in order to find injury
4.145 India takes no issue with the EC’s right to resort to sampling of the domestic industry for the
injury determination.  This would seem evident if Articles 6.10 and 6.11 are read together:
“6.10 . . . In cases where the number of exporters, producers, importers or types of products
involved is so large as to make such a determination impracticable, the authorities may limittheir examination either to a reasonable number of interested parties . . . by using samples
which are statistically valid on the basis of information available to the authorities at the timeof the selection . . .
6.11 For the purposes of this Agreement, ‘interested parties’ shall include: . . .
(iii) a producer of the like product in the importing Member . . .”  (Emphasis added)
4.146 As a first observation it is noted that the sample is drawn from the domestic industry (i.e., the
35 companies that supported the complaint), and not from the universe of EU production (therefore
including the 66 per cent of EC producers that did not complain).  India takes no issue with that perse: the sample should reflect the domestic industry, not total EU production.  Moreover, it may be
impractical to try to obtain the co-operation of the 66 per cent of EU production that did not support
the complaint to start with.  The point to be taken, however, is that the sample thus established is
taken exclusively from companies supporting the complaint and thus, by the natural course of things,
is already tilted in comparison with total EU-15 production.
4.147 As a second observation India would like to compare the treatment of the EC sample with that
of the Indian sample.  As discussed earlier in this submission, in this proceeding, the Indian industry
was sampled, too.
145  Cooperation of Indian companies with the EC was 82 per cent146, which
compares with only 34 per cent co-operation by EC producers.  Unlike the Bed linen I proceeding, the
investigating authorities in Bed linen II no longer required all Indian producers to submit a full
questionnaire response before selecting the sample; this time five companies were selected, as may berecalled, without agreement being obtained between Texprocil and the European Commission.
Notwithstanding this lack of agreement, the EC applied the resulting sample dumping margin
rigorously and mechanically to all cooperating Indian exporters
147 and subjected the remainder to a
high residual anti-dumping duty:
“because it would constitute a bonus for non-cooperation to assume that the dumping margin
attributable to exporters/producers which did not make themselves known is lower than the
highest found for a cooperating exporter/producer.”148
                                                     
145 Please refer to section III.A.1, above.
146 Recital (16) of the provisional Regulation.
147 With the exception, of course, of the investigated companies who got their individual dumping
margins.
148 Recital (51) of the provisional Regulation.WT/DS141/R
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4.148 The treatment of the Indian sample contrasts with that accorded the EC sample. First, unlike
the Indian sample, the European Commission obtained the agreement from the industry concerned for
the EC sample.  Then, the EC did not stick to the results of the sample, but rather made a
determination of the state of the industry where for some factors it relied on the sample, but for manyothers not.  For a number of factors, sample data are not even mentioned, even though such data
would normally be available to the investigating authorities in the confidential versions of the
questionnaire responses of the sample.  It transpires from the determination that the EC especially did
not rely on the sample for those factors where the data for the domestic industry or the EU-15
producers pointed to ‘more injury’ than the data for the sample.
4.149  In India’s view, the EC was free to make its determination of the state of the domestic
industry by resorting to sampling of the domestic industry.  However, when it decided to do so, it
should have relied on the results for that sample, and not reverted to other levels of industry when
these were better suited for an injury determination.
4.150  Indeed, the EC’s failure to stick to the resu lts of the sample, especially when compared with
the rigorous and mechanical application of the results of the Indian sample to India, cannot be
considered an ‘unbiased and objective’ evaluation of the factors and indices listed in Article 3.4,
within the meaning of Article 17.6(i ).  It follows that the EC’s de termination of the state of the
domestic industry is inconsistent with Article 3.4 of the ADA.
3.2.3 The EC has at no point indicated or made clear why exactly it relied on which
industry level for each injury factor
4.151 The provisional determination in the relevant part may be summarised as follows:WT/DS141/R
Page 204
Recital Factor or index Industry level Tendency
(81) Production EU-15
Domestic industryDecrease of 9.6%
Increase of 8.7%
(82) Sales by volume EU-15
SampleDecrease of 17%
Decrease of 1.5%
(83) Sales by value Domestic industry
SampleIncrease of 4.2%
Increase of 1.7%
(84) Market share
by volumeEU-15
SampleDecrease from 62.2 to 55.6%
Increase from 10.7 to 11.3%
(85) Market share
by valueEU-15
Domestic industrySampleDecrease from 77.8 to 72%
Increase from 22.4 to 25.1%Increase from 14.7 to 16%
(86)-(88) Price development EU-15
SampleDecrease of 0.8%
Increase of 3.2%
(89)-(90) Profitability Sample Decrease from 3.6 to 1.6%
(91) Employment Domestic industry Decrease of 5.3%
4.152 Even if the EC’s replies to India’s questions 28-32 on the ‘levels of industry’149 issue would
be correct ( quod non ) this does not explain on what basis the EC took which factor as predominant.
The EC did not indicate why it failed to even mention production by the sample; sales (volume) by
the domestic industry; the market share (volume) of the domestic industry; employment of the
sample; or failed to provide any information or indications on the price developments and profitability
situation of the domestic industry.
4.153 There is no apparent logic as to why the EC mentioned which industry level with which
injury factor.  For example, why did the Commission base its conclusions for sales by volume on dataconcerning EC-15 production and the sample, while data on sales by value were based on the
Community industry and sampled producers?  Why is there no indication of the market share by
volume for the domestic industry?
                                                     
149 The term ‘industry level’ is used merely as shorthand for the three levels of industry investigated by
the EC, namely, the EU-15 producers, the domestic industry (the 35 producers), and the sample from thedomestic industry (17 producers).WT/DS141/R
Page 205
4.154 The Commission has in its written answer No 32 relied on Article 3.2 of the Agreement,
which provides that “[n]o one or several of these factors can necessarily give decisive guidance” .
This is true.  But it cannot mean that the EC, wh en making an injury determination, can ‘pick and
choose’ for each factor in Article 3.4, without providing any reasonable basis thereof, which industrylevel it will rely on to arrive at an injury finding.
4.155 The EC’s failure to indicate any basis on which it determined which element should be
appropriately considered at which level, implies that the evaluation of the factors and indices was not
unbiased and objective.  Consequently, this determination is inconsistent with Article 3.4 of the ADA.
4.156 In summary, for the reasons indicated in IV.C.3.2.1, IV.C.3.2.2 and IV.C.3.2.3 the EC acted
inconsistently with Article 3.4.
4.157 As an additional observation India notes that these infringements are not ‘repaired’ by the
special rule of interpretation laid down in the second sentence of Article 17.6(ii).  That rule only
comes into play where the provisions of the Agreement allow for more than one interpretation.  That,
however, is not an issue in this case.
4. Claim 16:  Inconsistency with Articles 6.10 and 6.11
4.1 The text of Articles 6.10 and 6.11
4.158 The relevant of Article 6.10 and 6.11 provides in the relevant part that:
“ . . . In cases where the number of exporters, producers, importers or types of products
involved is so large as to make such a determination impracticable, the authorities may limit
their examination either to a reasonable number of interested parties or products by using
samples which are statistically valid on the basis of information available to the authorities at
the time of the selection , or to the largest percentage of the volume of the exports from the
country in question which can reasonably be investigated.
6.11 For the purposes of this Agreement, ‘interested parties’ shall include:. . .(iii) a producer of the like product in the importing Member or a trade and business
association a majority of the members of which produce the like product in the territory of theimporting Member.
This list shall not preclude Members from allowing domestic or foreign parties other than
those mentioned above to be included as interested parties.”
4.2 Legal argument relating to Article 6.10 and 6.11
4.159 In recital (61) of the Regulation imposing provisional duties it is clear that the EC deemed its
sample to be statistically valid: “The Commission therefore considered this sample to be
representative of the Community industry.”
4.160 However, one does not have to be a mathematician or statistician to understand that the
sample as drawn could never ever be representative and therefore not statistically valid.  Article 6.11WT/DS141/R
Page 206
defines as an ‘interested party’ among others, ‘a producer of the like product in the importing Member
or a trade and business association a majority of the members of which produce the like product in the
territory of the importing Member.’ This implie s that the sample must be chosen from the
‘producer[s] of the like product in the importing Member’ (sampling of associations is not at playhere).
4.161 Whatever the exact meaning of ‘statistically valid’, it would seem certain that it excludes the
possibility of taking a sample from only producers supporting the application. The EC sample was
therefore statistically not valid and the injury determination based on it, vitiated by errors of facts and
law.  India believes that the EC has acted inconsistently with Article 6.10 and 6.11.
5. Claim 17:  inconsistency with Article 12.2.1
5.1 The text of Article 12.2.1
4.162 It is recalled that Articles 12.2 and 12.2.1 of the ADA provide in relevant part as follows:
“12.2 Public notice shall be given of any preliminary or final determination, whether
affirmative or negative . . . Each such notice shall set forth, or otherwise make available
through a separate report, in sufficient detail the findings and conclusions reached on allissues of fact and law considered material by the investigating authorities . . .
12.2.1 A public notice of the imposition of provisional measures shall set forth, or otherwise
make available through a separate report, sufficiently detailed explanations for the
preliminary determinations on dumping and injury  and shall refer to the matters of fact and
law which have led to arguments being accepted or rejected. Such a notice or report shall,
due regard being paid to the requirement for the protection of confidential information,
contain in particular . . .
(iv) considerations relevant to the injury determination as set out in Article 3;
(v) the main reasons leading to the determination.”
5.2 Legal arguments relating to the claims relating to Article 12.2.1
4.163 Earlier in this submission, the argument was already made in the context of Article 12.2.1 that
India should be able to rely on the published determinations and disclosure documents to ascertain
what the basis was for the EC’s determinations.150  This is equally true in the context of the issue here.
There are three issues here:
4.164 First, if the EC did not rely on companies outs ide the domestic industry in order to determine
injury, it did not explain this clearly in the provisional disclosure document or in the provisional
Regulation.
4.165 Second, the EC failed to explain why for many  injury factors it did not rely on the sample
which it had selected in agreement with the complainant, but reverted to the domestic industry or the
EU-15 producers instead.
4.166  Third, the EC has at no point indicated or made clear why it relied on which industry level for
each injury factor.  If there was any logical or proper motive behind this choice, it has not been made
known to the Indian exporters.
                                                     
150 See section IV.A.5.2, above.WT/DS141/R
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4.167  Fourth, the EC has at no point explained why it considered the selected sample representative
(statistically valid).
4.168 In view of the importance of these issues for the Article 3.4 determination, India believes that
the EC failed to explain “in sufficient detail the findings and conclusions reached on all issues of fact
and law considered material by the investigating authorities”  as required by Article 12.2 of the ADA.
Moreover, the EC’s provisional Regulation and the provisional disclosure document thus do not
contain “sufficiently detailed explanations for the preliminary determination on injury”  as required
by Article 12.2.1.
4.169 Additionally, during Texprocil’s first injury hearing and in the subsequent post-hearing brief
filed by Texprocil151, detailed comments were made on behalf of the Indian exporters on, e.g.,
production data and employment data for the sample. However, the EC did not mention or commenton the production and employment data for the sample.  It follows that the EC failed to “refer to the
matters of fact and law which have led to arguments being accepted or rejected”  as required by
Article 12.2.1.
4.170 In summary, the EC acted inconsistently with Article 12.2.1 of the ADA.
6. Claim 18:  inconsistency with Article 12.2.2
6.1 The text of Article 12.2.2
4.171 Article 12.2.2 provides in relevant part that:
“A public notice of conclusion or suspension of an investigation in the case of an affirmative
determination providing for the imposition of a definitive duty . . . shall contain, or otherwise
make available through a separate report, all relevant information on the matters of fact and
law and reasons which have led to the imposition of final measures . . . In particular, the
notice or report shall contain the information described in subparagraph 2.1, as well as the
reasons for the acceptance or rejection of relevant arguments or claims made by the
exporters and importers . . .”  (Emphasis added)
6.2 Legal arguments relating to the claims relating to Article 12.2.2
4.172 Reference is made to section IV.C.5.2, above.  The three issues which were mentioned there
were similarly present during the definitive stage:
4.173 First, if the EC did not rely on companies outs ide the domestic industry in order to determine
injury, it did not explain this clearly in the definitive disclosure document or in the definitive
Regulation.
4.174 Second, the EC failed to explain why for many  injury factors it did not rely on the sample
which it had selected in agreement with the complainant, but reverted to the domestic industry or the
EU-15 producers instead.
                                                     
151 Annex 54.WT/DS141/R
Page 208
4.175  Third, the EC has at no point indicated or made clear why it relied on which industry level for
each injury factor. If there was any logical or proper motive behind this choice, it has not been made
known to the Indian exporters.
4.176  Fourth, the EC has never explained, made clear or indicated why it considered the sample that
was drawn representative.
4.177 India therefore believes that the EC failed to explain “the matters of fact and law and reasons
which have led to the imposition of final measures” .  It further failed to properly explain the
“information described in subparagraph 2.1” ; and failed to provide “the reasons for the acceptance
or rejection of relevant arguments or claims made by the exporters” . In each case, it acted
inconsistently with Article 12.2.2 of the ADA.
D. ARTICLES 3.4 AND 3.5:  FOR THE INJURY AND CAUSALITY DETERMINATIONS THE EC TOOK
INTO ACCOUNT OTHER THAN "DUMPED IMPORTS "
4.178 Claims 19 and 20 : for the purpose of the determinations required under Articles 3.4 and 3.5
the EC considered all imports of bed linen from India in the years preceding the investigation period
as ‘dumped’, even though no dumping was ever determined for these imports. This led to an incorrect
finding that ‘dumped imports’ from India caused material injury to the domestic industry.The EC further failed to properly explain its reasoning, and consequently acted inconsistently with
Article 12.2.1 ( claim 21 ) and 12.2.2 ( claim 22 ).
1. Facts
4.179 It is recalled that the complaint
152 contained an Annex 2 entitled “List of company closures” :
“COMPANY CLOSURES AND JOB LOSSES IN SIMPLE MAKING-UP OF BED
LINEN
GERMANY
1992
ERBA AG 681 jobs in total
8500 ERLANGEN (1 part in bed linen)
1993
Spinnerei und Weberei Pfersee 423 jobs
Augsburgerstrasse 9
D - 86157 AUGSBURG
Carl HECKING GmbH & Co 169 jobs
Up de Hacke 15-17
D - 48691 VREDEN
1994
Arnold KOCK GmbH & Co 39 jobs
Arnold-Kock-Strasse 2 has closed down its
D - 47565 STEINFURT department of bed linen production
                                                     
152 Please refer to Annex 6.WT/DS141/R
Page 209
Spinnerel und Weberelen ZELL-SCHÖNAU AG
Teichstrasse 4
7863 ZELL Stopped bed linen production
TOTAL 1.312 jobs
GREECE
June 1992
PIRAIKI - PATRAIKI S.A 234 losses estimated in the bed
linen production.
During the year 1992, 5 other companies had to reduce their operations with, as a result, the
loss of about 2,730 jobs.
1995
FILIATES Textiles n.a.
FRANCE
1990
HERITIERS DE GEORGES PERRIN 20 jobs
R.N.V.T. 33 jobs
SOLAXEN 45 jobs
(approx. 1.094 tons of production lost in bed linen)
1991
ETS. GERMAIN FRERES 17 jobs
TISSAGE ET FILATURE D'AUCHEL 43 jobs
HERITIERS GEORGES PERRIN 33 jobs
(approx. 1.348 tons of production lost in bed linen)1992
WALTER SEITZ PRODUCTION 38 jobs
SONEP S.A. in Baisieux (makers-up)
BRUNER VILLENBACHER in Cernay (makers-up)
1993
CLAEYS et Fils in Houplines (makers-up)
DESFONGES OLIVIER in Marcq en Baroeul (makers-up)
CANONNE in Saint-Aubert (makers-up)
SOMACO in Riorges (weavers)
WALTER-SEITZ (weavers)WT/DS141/R
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1994
CEDE SARL in Vitry-le-François (makers-up)
HARLE in Tergnier (makers-up)
1995
MDT DEVELOTTE in La Baule (converters)1996
SAVOIR FAIRE TEXTILE (converters)
CUSTOMAGIC in Halluin (converters)
TOTAL OF JOB LOSSES IN FRANCE: 448 (19 firmes)
ITALY
1991
TESSITURA GIORI 94 jobs
1992
CUSINI TOMMASO 53 jobs
SAPONARO }
ROSSI SIMEONE } 101 jobs lost
CARMINATI )        in these 4 companies
MAURI }
Companies having given up bed linen production
CLERICI E PASTORELLI
PIAZZA
The following company has suffered 30 job losses over the last years: ELIOLONA
TOTAL 279 jobs
UNITED KINGDOM1990
TAYLOR & HARTLEY FABRICS Ltd 60 jobs
EMBSEY (COURTAULDS) 89 jobs
1991
SMITH & NEPHEW TEXTILES Ltd -
CHATBURN 87 jobs
TOTAL 184 jobsWT/DS141/R
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1988/1991
8 finishing and simple making-up mills of  the COATS VIYELLA HOME FURMSHING Group
(among which 5 in HEMMING) - about 600 job losses.
PORTUGAL
1991
About 702 job losses in
different activity reductions. }
}
1992 } TOTAL: 1.365 jobs
COELIMA : restructuring with 663 job losses }
BELGIUM
N.V. SOLINTEX
Kortrijksestraat 387 - PB 134
B - 8500 KORTRIJK
This company first closed down the weaving mill, becoming a converter and later had to stop
also this unprofitable activity.
Production tonnage lost : 1.300 tons
179 job losses”  (Emphasis in original)
4.180 The Indian exporters argued from the beginning of the proceeding that their exports of bed
linen to the EC had not caused injury.  Such arguments were made in the submission on injury153,
during their first injury hearing on 13 January 1997, and in the post-hearing brief submitted on 6
February 1997.154
4.181 In its provisional Regulation the EC made a determination on injury and causality which in
relevant part reads as follows:
“F. INJURY
. . .
6. Situation of the Community industry
 (a) Production
(81) Total output of bed linen by producers in the Community fell by 9.6 per cent from
138,400 tonnes in 1992 to 125,100 tonnes in the investigation period. This fall in production
arose essentially through the closure of enterprises or their cessation of bed linen production
within the Community (see recital (91) below) . . .
Indeed, in the course of its investigation the Commission acquired evidence of 29 companies
other than the Community industry which ceased or reduced bedlinen production in the
                                                     
153 Annex 50.
154 Annex 54.WT/DS141/R
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Community between 1992 and the investigation period. It is estimated that total loss of
production amounted to at least 10,000 tonnes per annum.
The sales, employment and profits of companies which have since disappeared are not
included in the aggregated data for the Community industry, thus artificially improving the
apparent trends for the survivors.
(b) Sales by volume
(82) At the level of the total Community producers, sales by volume in the Community, as
measured by production minus exports, fell by 17 per cent from 124,400 tonnes in 1992 to
103,350 tonnes in the investigation period.
Sales by the sampled producers of the Community industry also declined, from 23,706 to
23,347 tonnes, a decrease of 1.5 per cent.
(c) Sales by value
(83) Sales by the Community industry rose by 4.2 per cent from ECU 428.6 million in 1992 to
ECU 446.6 million in the investigation period. Sales by the sampled producers also rose,
from ECU 280.6 million in 1992 to ECU 285.3 million (a rise of 1.7 per cent). It should be
noted that these rises in nominal terms do not take account of inflation and represent a fall in
real terms, since consumer prices in ecus ro se by 5.5 per cent over the same period for the
EU-15 countries. It should also be noted that these rises were overtaken by rises in the priceof raw cotton (see recital (88) below).
It should be noted that among the sampled producers it was observed that sales have been
maintained by seeking higher value market niches as the lower value, mass market items are
undercut by imports. This pattern is indicated by developments on prices (see recital (87)
below).
(d) Market share
(84) The market share by volume of producers at the level of the entire Community fell from
62.2 per cent in 1992 to 55.6 per cent in the investigation period. In that period the sampled
producers from the Community industry increased their market share slightly, from 10.7 per
cent to 11.3 per cent. The reason why the market share of survivors has slightly increased is
that they have taken over some of the sales of those which had not survived the competition
from dumped imports, particularly the sales of higher value niche products.
(85) An estimated analysis was done of market share by value. The patterns observed were
the same as for market share by volume: producers at the level of the entire Community lost
market share (from 77.8 per cent in 1992 to 72.0 per cent in the investigation period), while
the Community industry as a whole and sampled producers gained market share, from
22.4 per cent to 25.1 per cent and from 14.7 per cent to 16.0 per cent respectively.
. . .
(h) Conclusion on injuryWT/DS141/R
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(92) The Commission took into account all the economic indicators mentioned above in
determining whether or not the Community industry was suffering material injury. Account
was taken of the fact that the number of companies making up the Community industry was
reduced in comparison with the start of the injury investigation period . The production, sales,
employment and profits of companies which ha ve since disappeared are not included in the
aggregated data for the Community industry, thus improving the apparent trends for the
survivors.
. . .G. CAUSATION. . .
2. Effects of the dumped imports from the countries concerned
(96) The investigation of the Community industry showed as the main injury indicator the
unsatisfactory development of sales prices and the consequent declining profitability. It was
also established that the dumped imports were sold at prices which significantly undercut
those of the Community producers and in substantial and increasing quantities, reaching
25 per cent market share in the investigation period.
. . .
(98) It was observed among sampled producers that they had been obliged increasingly to
shift production and sales to high value niche markets in order to maintain production and
sales levels. The undercutting calculation provided evidence that this shift was caused by the
imports concerned. Undercutting margins were lower in the lower value qualities, indicating
that the imports significantly influence price levels in this market segment and have forced
down Community producers' prices. Where higher value items were imported the
undercutting margins were higher, indicating that imports of these qualities were not yet atsufficient volume to bring down Community prices to the same extent.
It is worth noting that the Commission has received indications from importers, from
Community producers and from suppliers of textile machinery to the exporting countries to
the effect that exporters in the countries concerned are increasingly moving to higher valueitems.
(99) Since price suppression and consequent decreasing profitability to inadequate levels
were the main indicators on which the Commission's finding of injury was based, and in view
of the coincidence in time between the dete rioration of the situation of the Community
industry and the significant increase of the dumped imports, it can be concluded that there
was a direct causal link between these imports and the material injury found.
. . .
4. Conclusion on causation
(109) As has been shown above, there is a direct causal link between the increased volume
and the price effect of the dumped imports and the material injury suffered by the CommunityWT/DS141/R
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industry. The direct link in this case is demonstrated by the existence of heavy undercutting
which can reasonably explain the significant incr ease in market share of the dumped imports
from 16.9 per cent in 1992 to 25.1 per cent in the investigation period and the corresponding
negative consequences on volumes and prices of sales of Community producers. In terms ofvolumes, Community producers' market share decreased from 62.2 per cent in 1992 to
55.6 per cent in the investigation period. This fall was not reflected at the level of individual
producers of the Community industry because they obtained sufficient benefit from the demise
of other Community producers to keep their sales volume relatively stable. However, as far as
the prices of the dumped imports are con cerned, they have had an evident impact on the
sampled producers, may of them being SMEs, whose profitability has fallen from 3.6 per cent
to 1.6 per cent. In this respect, the Commission noted that such a situation can cause
particular difficulty for SMEs given their lack of resources and the reluctance of banks to
finance any losses.
(110) The consequent impact of the low-priced dumped imports has to be considered at two
levels. Firstly, they have resulted in the exit of a significant number of firms with a
considerable number of jobs lost. This is an on-going process which is likely to continue if
dumping persists. Secondly, as to the surviving producers, they face continuing injury on two
fronts. For low-value products the injury is very heavy since they are gradually pushed out ofthe corresponding market segment. For higher-value products, these producers have done
considerably better but dumped imports are now pr ogressively targeting this segment with the
result that profitability is also falling in this respect . . .”  (Emphasis added)
4.182 The Indian exporters made substantial arguments following this determination.
155
4.183 In the definitive Regulation the EC provided the following explanations on the state of the
domestic industry:
“(40) Exporters from all the exporting countri es claimed that the Commission's analysis of
injury was defective in that it referred to the significant decline in total Community
production of bed linen in assessing the situation of the Community industry. They claimed inparticular that information concerning compan ies not included in the definition of the
Community industry or which no longer produce bed linen cannot be used to construe a
finding of material injury.
These claims were examined carefully. It should however be remarked that the principal basis
for the finding of material injury was the reduced profitability and price suppression of the
Community industry as observed among the sampled companies.
(41) In the assessment of injury pursuant to Article 3 of the basic Regulation, the Community
institutions have to assess the economic situation of the Community industry. This assessment
usually covers the analysis of a time period of four to five years as in the present case
('assessment period’). Such an assessment is commonly based on an analysis of the
complaining industry and not necessarily on companies accounting for the totality of
Community production on the ground that the situation of a major proportion of the
Community production is representative for it s totality. Such an assessment, however, also
has to take into account the structure and the nature of the industry under consideration. In
the present case this industry is characterized by a high number of operators, in many cases
small- and medium-sized companies, and by the fact  that it is a sector with relatively low
                                                     
155 Annexes 51 and 55.WT/DS141/R
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barriers to exit. The latter is mainly due to the fact that machinery can be sold or used for
other products relatively simply. This has the effect that material injury is likely to manifest
itself through the exit of economic operators within the assessment period.
Consequently, to limit the assessment of injury only to companies which are still operational
at the end of the assessment period (i.e. at th e time of the lodging of the complaint) and thus
able actively to support a complaint would mean that any injury caused to companies which
have closed down before this point in time would go unconsidered in the analysis.
Furthermore, it should be noted that this distortion could even be aggravated as the survivingcomplaining companies of the Community industry may have benefited, possibly only
temporarily, from the disappearance of othe r companies, causing their positive development
to be overestimated.
In the present case, it should be noted that 29 companies of the bed linen industry have closed
down or ceased production: that is to say,  that a substantial number of companies have
ceased operation. Furthermore, given the subs tantial price undercutting established, the
strong increase in the volumes of the imports concerned and their consequent rise in market
share, any relatively positive development of the complaining producers must be seen as
threatened in the absence of anti-dumping measures.” (Emphasis added)
4.184 During the consultations, India raised its concern that imports other than dumped imports had
been taken into account for the assessment of injury:156
“Mr Seth: Several provisions in Article 3 of the Agreement require that injury caused by
dumped imports be determined. Article 3.1 requires that
‘[a] determination of injury . . . shall . . . involve an objective examination of both (a) the
volume of the dumped imports and the effect of the dumped imports  on prices in the domestic
market for like products, and (b) the consequent impact of these imports on domestic
producers of such products.’
Similarly, Articles 3.2, 3.4, 3.5, 3.6 and 3.7 refer to ‘dumped imports’ as opposed to ‘all
imports of the product concerned’. The European Community has . . . included non-dumped
imports in its determination and this affects each and all of these provisions.
. . .”
4.185 During the second round of consultations the matter was raised again [see Annex 13].
2. EC practice
4.186 In EC practice, the injury determination consists  of two elements.  An injury (underselling (or
undercutting)) margin is calculated per investigated exporter. In Bed linen II the investigation period
[“IP”] covered the period from 1 July 1995 to 30 June 1996.157  This underselling margin is calculated
over the investigation period.
4.187  Second, for the determination of the impact of the “dumped imports”  on the domestic
industry, normally a reference is made to a 4-5 year period, ending with and including the
                                                     
156 The verbatim report of the first round of consultations is attached as Annex 11.
157 Provisional Regulation at recital (9).WT/DS141/R
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investigation period.  In the Bed linen II proceeding this period lasted from 1992 up to the end of the
investigation period.158
4.188 The EC implicitly considers all Indian exports to the EC during the investigation to have been
dumped.  This is standard practice: “The injury analysis concerning the examination of the volume
and price effects of the dumped imports will also take into consideration imports with no or de
minimis dumping margins . . .”159
4.189 The EC further assumes that all imports of  the like product in the years immediately
preceding the investigation period were dumped.  This also appears to be standard practice:
“[The Indian delegation] clarifies that India takes no issue with the EC practice to look at a
longer period. India’s problem is that the EC seems to automatically assume when assessing
the impact of ‘dumped imports’  on the domestic industry that all imports in the preceding
years are considered as dumped. Our second problem is that there were a number of product
types exported from India during the investigation period which were clearly not dumped.
The EC could not automatically without explanation consider these as dumped.
[EC]: You recognise that this is normal practice. I cannot deny there is an assumption
element. We make the dumping over the like produc t. On this basis we found that the dumping
determination covered all imports during the IP. We compensated for this by using WA-to-
WA comparison in the dumping margins.”
4.190 During the second round of consultations, the EC explained the ‘logic’ behind this practice:
“[EC]: The investigation showed that there was dumping and injury for exactly the same
twelve-month period. Of course, a longer peri od was used to compare data. This is a
safeguard for the parties involved, because you then have a proper picture.“
4.191 In effect, however, the EC considers the whole period starting in 1992 and ending with the
investigation period, and essentially looked at the differences between the situation in 1992 and theIP. Rather than putting the data on the situation of the domestic industry in the IP relief, the
determination on the state of the EC industry is made for the whole period 1992-IP.
4.192 In this context it is illustrative that in recital (92) of the provisional Regulation the EC refers
to this period as the “injury investigation period” , implying that the determination on the Community
industry was made over the period 1992-IP rather than over the IP.
3. Claims
4.193 Several claims follow from the facts as described above.
160
4.194 First, India believes that the EC practice to automatically consider as “dumped”  all imports of
bed linen from India in the years preceding the investigation period, is inconsistent with Article 3.4.
4.195 Second, India believes that the same set of facts also leads to a causality finding inconsistent
with Article 3.5.
                                                     
158 Ibid.
159 Müller, Khan, Neumann, EC Anti-Dumping Law—A Commentary on Regulation 384/96 at 189.
160 Claims pertaining to other issues involving Article 3.4 are discussed in sections IV.B and IV.C,
respectively.WT/DS141/R
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4.196 Third, in the provisional Regulation the EC has insufficiently explained the basis for its
finding that imports of bed linen from India ‘caused’ material injury to the domestic industry. This is
inconsistent with Article 12.2.1.
4.197 Fourth, in the definitive Regulation the EC has insufficiently explained the basis for its
finding that imports of bed linen from India “caused”  material injury to the domestic industry.  This
is inconsistent with Article 12.2.2.
4. Claim 19:  inconsistency with Article 3.4
4.1 The text of Article 3.4
4.198 Articles 3.1 to 3.5 of the ADA require that injury caused by dumped imports be determined.
Article 3.4 provides in relevant part that:
“The examination of the impact of the dumped im ports on the domestic industry concerned
shall include an evaluation of all relevant economic factors and indices having a bearing on
the state of the industry, including . . .”  (Emphasis added)
4.199 Throughout Article 3 the language is consistent: the injury to the domestic industry must have
been caused by “dumped imports” .  India already took issue with the EC’s practice to consider all
imports of bed linen from India during the investigation period as dumped (please refer to the claims
on Article 3.1, above).  The question now is whether “dumped imports”  include imports in the period
1992 up to, but not including the investigation period.
4.200 In the view of India, the plain meaning of the words “dumped imports”  is unequivocal:
imports determined to have been dumped.  In this context, Article 2.1 of the ADA is of relevance:
“For the purpose of this Agreement, a produc t is to be considered as being dumped, i.e.
introduced into the commerce of another country at less than its normal value, if the export
price of the product exported from one country to another is less than the comparable price,in the ordinary course of trade, for the like product when destined for consumption in the
exporting country.”  (Emphasis added)
4.201 Article 2.1 is not limited to “for the purpose of this Article” ; rather, the definition of
“dumped”  contained in it is also applicable to other Articles of the ADA.  In other words, imports in
Article 3 are only considered to be “dumped”  if they have been introduced into the commerce of the
EC at less than their normal value, if their export price is less than the comparable price, in the
ordinary course of trade, for the like product when destined for consumption in India.
4.202 Under Article 17.6(ii) of the ADA the Panel will interpret:
“the relevant provisions of the Agreement in accordance with customary rules of
interpretation of public international law. Where the panel finds that a relevant provision of
the Agreement admits of more than one permis sible interpretation, the panel shall find the
authorities’ measure to be in conformity with the Agreement if it rests upon one of thosepermissible interpretations.”WT/DS141/R
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4.203 However, in the clear language of the Agreement as interpreted in accordance with the
customary rules of interpretation of public international law “dumped imports”  would seem to mean
“dumped imports” , and not “dumped and non-dumped imports of the like product” .  The issue of the
second sentence of Article 17.6(ii) therefore does not arise in this context.
4.2 Legal arguments relating to the claims relating to Article 3.4
4.204 For the convenience of the Panel, the time flow of the events relevant for this claim is set out
as follows:
 1.1.1992 1.7.1995   30.6.1996   13.09.1996
———————+———————————-+—————————-+———————————+————->
begin “injury begin IP end IIP and IP   initiation
investigation period”  (IIP)
4.205 From the outset it must be made clear that no issue is taken with the practice of the EC to
consider the years immediately preceding the investigating period.  Indeed, in order to make a
meaningful injury and causality determination, it will be necessary for the EC to do so.
4.206 This is not the same thing as making one assessment for the whole “injury investigation
period” .  For example, the allegations contained in Annex 2 of the complaint (quoted above) virtually
all concerned companies which (as far as India can discern) terminated business or laid off staff in theperiod 1988 up to the investigation period. It is not excluded that such allegations may have a certain
role in the context of prima facie evidence and the standard of Article 5.2.
161  However, even if proven
true, they would not be evidence of injury caused by “dumped imports”  (i.e., by imports taking place
during the investigation period of 1 July 1995 to 30 June 1996.
4.207 In the injury determination the EC at several instances puts great emphasis on companies
allegedly disappeared from the EC market in the period 1992-IP.  Recital (81) of the provisional
Regulation mentions:
”evidence of 29 companies other than the Community industry which ceased or reduced
bedlinen production in the Community between 1992 and the investigation period. It is
estimated that total loss of production amounted to at least 10,000 tonnes per annum.”
4.208 The closest thing to ‘evidence’ (if such a distinguished word may be used) in the non-
confidential file indicative of this statement were precisely the allegations contained in Annex 2 of thecomplaint, and one letter from Eurocoton with further unproven allegations.
162  The Commission
subsequently noted that:
                                                     
161 This statement is not intended as recognising in any way that these allegations were correct,
factually true, or in any way relevant.
162 If the companies allegedly affected before 1992 as well as the pure weavers are discounted, this
leaves the following list of companies in the complaint that allegedly went (partially or totally) out of business:
1. Erba AG; 2. Spinnerei und Weberei Pfersee; 3. Carl HECKING GmbH & Co; 4. Arnold KOCK
GmbH & Co; 5. Spinnerei und Webereien Zell-Schönau AG; 6. Piraiki-Patraiki S.A.; 7. Filiates Textiles; 8.Walter Seitz Production; 9. Sonep S.A. in Baisieux (makers-up); 10. Bruner Villenbacher in Cernay (makers-
up); 11. Claeys et Fils in Houplines (makers-up); 12. Desfonges Olivier in Marcq en Baroeul (makers-up); 13.
Canonne in Saint-Aubert (makers-up); 14. Cede SARL in Vitry-le-François (makers-up); 15. Harle in Tergnier(makers-up); 16. MDT Develotte in La Baule (conve rters); 17. Savoir Faire Textile (converters); 18.
Customagic in Halluin (converters); 19. Cusini Tommaso; 20. Saponaro; 21. Rossi Simeone; 22. Carminati; 23.WT/DS141/R
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“[t]he sales, employment and profits of companies which have since disappeared are not
included in the aggregated data for the Community industry, thus artificially improving the
apparent trends for the survivors.”
4.209 This particular statement, if it is at all intelligible, would appear to imply that the Commission
has taken account of these 29 companies when making the evaluation of the state of the domestic
industry. This is very clear in recital (91) of the provisional Regulation:
“. . . In analysing data on the Community industry, account should be taken of the 29
companies other than the Community industry which ceased or reduced bed linen production
in the Community between 1992 and the inves tigation period (see recital (81)). The
associated job losses numbered over 2 400.”  (Emphasis added)
4.210 And in recital (92) ( “Conclusion on injury” ):
“The Commission took into account all the economic indicators mentioned above  in
determining whether or not the Community industry was suffering material injury. Account
was taken of the fact that the number of companies making up the Community industry was
reduced in comparison with the start of the injury investigation period. The production, sales,
employment and profits of companies which ha ve since disappeared are not included in the
aggregated data for the Community industry, thus improving the apparent trends for the
survivors.“  (Emphasis added)
4.211 This conclusion leaves no doubt that the alleged disappearance of the 29 companies was a
factor taken on board for the evaluation required under Article 3.4.
4.212 This line of reasoning was maintained in the definitive Regulation:
“(40) Exporters from all the exporting countri es claimed that the Commission's analysis of
injury was defective in that it referred to the significant decline in total Communityproduction of bed linen in assessing the situation of the Community industry. They claimed in
particular that information concerning compan ies not included in the definition of the
                                                                                                                                                                    
Mauri; 24. Clerici e Pastorelli; 25. Piazza; 26. Eliolona; 27.  Coelima; 28. N.V. Solintex, as well as the further
unexplained mention of “5 other companies had to reduce their operations with, as a result, the loss of about
2.730 jobs” . However, it must be noted that this summary is partially speculative, since the EC did not make
further evidence available on the matter and India thus does not know exactly which companies belonged to the29.In this context India notes the dictum in Korea—Anti-dumping duties on imports of polyacetal resins from the
United States, Report of the Panel, ADP/92 and Corr.1 of 2 April 1993 at § 254:
“For the reasons set forth in the preceding paragraphs , the Panel was of the view that it was unable to
ascertain from the text of the determ ination on what factual basis the KTC had found that the level of net profit
in 1989 was insufficient to enable the industry ‘to ma intain normal operations and development.’ While there
might have been relevant information before the KTC in this regard, the determination did not enable the Panelto determine how this information had been evaluated by the KTC in making this finding. The Panel recalled itsstatement in paragraphs 227 and 228 regarding the considerations by which it was guided in reviewing whetherthe KTC's determination was based on positive evidence. The Panel concluded that the KTC's finding that the
level of net profit in 1989 was not sufficient to pe rmit the industry ‘to maintain normal operations and
development’ was not adequately substantiated by positive evidence and was thereby inconsistent with Korea'sobligations under Article 3:1 of the Agreement.
The letter from Eurocoton is attached as Annex 80.WT/DS141/R
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Community industry or which no longer produce bed linen cannot be used to construe a
finding of material injury.
These claims were examined carefully. It should how ever be remarked that the principal basis for the
finding of material injury was the reduced profitability and price suppression of the Community
industry as observed among the sampled companies.
(41) In the assessment of injury pursuant to Article 3 of the basic Regulation, the Community
institutions have to assess the economic situation of the Community industry. This assessmentusually covers the analysis of a time period of four to five years as in the present case
('assessment period’). Such an assessment is commonly based on an analysis of the
complaining industry and not necessarily on companies accounting for the totality of
Community production on the ground that the situation of a major proportion of the
Community production is representative for it s totality. Such an assessment, however, also
has to take into account the structure and the nature of the industry under consideration. In
the present case this industry is characterized by a high number of operators, in many cases
small- and medium-sized companies, and by the fact  that it is a sector with relatively low
barriers to exit. The latter is mainly due to the fact that machinery can be sold or used for
other products relatively simply. This has the effect that material injury is likely to manifestitself through the exit of economic operators within the assessment period.
Consequently, to limit the assessment of injury only to companies which are still operational
at the end of the assessment period (i.e. at th e time of the lodging of the complaint) and thus
able actively to support a complaint would mean that any injury caused to companies which
have closed down before this point in time would go unconsidered in the analysis.
Furthermore, it should be noted that this distortion could even be aggravated as the surviving
complaining companies of the Community industry may have benefited, possibly only
temporarily, from the disappearance of othe r companies, causing their positive development
to be overestimated.
In the present case, it should be noted that 29 companies of the bed linen industry have closed
down or ceased production: that is to say,  that a substantial number of companies have
ceased operation. Furthermore, given the subs tantial price undercutting established, the
strong increase in the volumes of the imports concerned and their consequent rise in market
share, any relatively positive development of the complaining producers must be seen as
threatened in the absence of anti-dumping measures.” (Emphasis added)
4.213 As a preliminary remark, it would follow from previous GATT jurisprudence that India may
rely on the published notice to ascertain what factors led the EC to impose anti-dumping duties.163
                                                     
163 In Korea—Anti-dumping duties on imports of polyacetal resins from the United States, Report of
the Panel, ADP/92 and Corr.1 of 2 April 1993 at § 209  the Panel noted (in the context of the 1979 Anti-
Dumping Code) that:
“. . . Article 3 of the Agreement required investigating authorities to consider certain factors and to make
a determination based on positive evidence with regard to thes e factors. In the view of the Panel, effective review
under Article 15 of an injury determination against the standards set forth in Article 3 required an adequateexplanation by the investigating authorities of how they had considered and evaluated the evidence with regard tothe factors provided for in that Article. Interpreted in conjunction with Article 8:5, such an explanation had to be
provided in a public notice. An exp lanation of how in a given case in vestigating authorities had evaluated the
factual evidence before them pertaining to the factors to be considered under Article 3 clearly fell within the scopeof the requirement in Article 8:5 that authorities articulate in a public notice "the findings and conclusions reachedon all issues of fact and law considered material by the investigating authorities, and the reasons and basisWT/DS141/R
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4.214 The EC seems to assume without furthe r comment that less companies implies less
production.164  No further evidence has been provided that the alleged demise of these 29 companies
did in fact imply in each case a reduction of production.
4.215 The injury determination should not have taken account of injury allegedly caused by Indian
imports before the investigation period.  No dumping finding was ever made pertaining to imports of
Indian bed linen in the period from 1992 up to the investigation period; indeed, the first anti-dumping
proceeding concerning Bed linen was terminated and never led to such dumping (or injury) finding.There was therefore no basis in the ADA to consider such imports as having been “dumped” .  The EC
could not attribute the alleged closures and dismissals of the 29 companies in the period from 1992 up
to the IP to the “dumped imports”  during the IP, since these imports only occurred after the alleged
company closures.  The authorities’ establishment of the facts for the Article 3.4 determination was
thus not proper and the evaluation of those facts was not unbiased and objective.
4.216 For these reasons India believes that the EC acted inconsistently with Article 3.4.
5. Claim 20:  inconsistency with Article 3.5
4.217 Article 3.5 provides that the material injury determined on the basis of Article 3 must be
caused by the “dumped imports” :
“3.5 It must be demonstrated that the dumpe d imports are, through the effects of dumping , as
set forth in paragraphs 2 and 4, causing injury within the meaning of this Agreement. The
demonstration of a causal relationship betw een the dumped imports and the injury to the
domestic industry shall be based on an examination of all relevant evidence before the
authorities. The authorities shall also examine any known factors other than the dumped
imports which at the same time are injuring the domestic industry, and the injuries caused by
these other factors must not be attributed to the dumped imports. Factors which may be
relevant in this respect include inter alia the volume and prices of imports not sold at
dumping prices . . .”
(Emphasis added)
4.218 The reasoning developed in section 4, above, on the meaning of “dumped imports”  is equally
applicable for Article 3.5: India believes that the term “dumped imports”  in 3.5 has no meaning
differently from its equivalent in Article 3.4.  For the analysis of that term reference is thus made to
section 4, above.
4.219 There is, however, an additional element which must be noted: the words “through the effects
of dumping”  in Article 3.5 leave no doubt as to the emphasis on the dumped character of the imports.
Under EC practice as applied in the Bed linen II proceeding, this provision is robbed of its meaning.
                                                                                                                                                                    
therefor." This provision served the important purpose of transparency by requiring duly motivated public
decisions as the basis for the imposition of anti-dumping duties. In the view of the Panel, the purpose of thisprovision would be frustrated if in a dispute settlement proceeding under Arti cle 15 of the Agreement a Party were
allowed to defend a challenged injury determination by re ference to alleged reasons for such determination which
were not part of a public statement of reasons accompanying that determination . . .”
164 It would seem under the Commission’s logic that two companies merging but retaining their total
production quality would imply the loss of one company and thus a sign of injury. Although Indian exportersprotested against the automatic and unproven assumptions underlying the EC’s logic, this issue was merely metwith the quote from the definitive Regulation discussed above.WT/DS141/R
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4.220 India believes on this basis that the EC acted inconsistently with Article 3.5 by automatically
considering all imports of bed linen from India in the period 1992-30 June 1995 as “dumped” .
6. Claim 21:  inconsistency with Article 12.2.1
6.1 The text of Article 12.2.1
4.221 Article 12.2.1 was already discussed in the cont ext of India’s claim concerning Article 3.1.
6.2 Legal arguments relating to the claims relating to Article 12.2.1
4.222 It is recalled that in anti-dumping proceed ings the investigating authorities have a very
dominant position as far as knowledge of the facts is  concerned.  This is even more so in the EC,
where the European Commission is the only entity having access to all facts relating to the initiation.Only the EC authorities know what 29 companies were intended in the Regulation.
4.223 Article 12 fulfils in this context a crucial rôle to ensure a certain degree of transparency.  In
this context the dictum  of the Panel in Korea—Anti-dumping duties on imports of polyacetal resins
from the United States is recalled:165
“In the view of the Panel, the purpose of this provision would be frustrated if in a dispute
settlement proceeding . . . a Party were allowed to defend a challenged . . . determination by
reference to alleged reasons for such determination which were not part of a public statement
of reasons accompanying t hat determination . . .”
4.224 India may rely on the published Regulations and the disclosure documents to reflect the EC’s
determinations accurately.
4.225 There are two arguments why the EC failed to properly explain its determination.4.226 First, if the EC for the purposes of Articles 3.4 and 3.5 made its determination of material
injury only concerning the “dumped”  imports, there is nothing in the published Regulations or the
non-confidential file to show for it.  On the contrary, the Regulations seem to be clearly (partially)
based on injury caused before the investigation period (e.g., by imports not determined to have been
dumped).  If the EC did not rely on imports during the period 1992-30 June 1995 for its injury and
causality finding, this has not been explained in any comprehensible manner in the provisionalRegulation.
4.227 It follows that the EC, assuming arguendo  that it did not rely on  imports not determined to
have been dumped, has failed to explain this properly in the provisional Regulation or the provisional
disclosure, and therewith acted inconsistently with Article 12.2.1.
4.228 Second, in recital (89) of the provisional Regulation the EC observes that:
“The profitability of the sampled companies declined by more than 50  per cent between 1992
and the investigation period, from a figure of 3.6 per cent to 1.6 per cent of sales. This is wellbelow the figure of 5  per cent which can be regarded as a minimum level which was achieved
                                                     
165 Korea—Anti-dumping duties on imports of polyacet al resins from the United States, Report of the
Panel, ADP/92 and Corr.1 of 2 April 1993 at § 209.WT/DS141/R
Page 223
by these companies in 1991 when the dumped imports concerned were 30  per cent lower
than in the investigation period. It is also below profit levels achieved by importers, which
explains why certain producers have ceased production and switched to importing.”
4.229 There has never been any determination or even allegation that imports of bed linen from
India in 1991 were “dumped”  as defined in Article 2.1 of the ADA. Consequently, this statement is
suggestive but totally unproven, and does not meet the standards laid down in Article 12.2.1.
7. Claim 22:  inconsistency with Article 12.2.2
7.1 The text of Article 12.2.2
4.230 India recalls the text of Article 12.2.2:
“A public notice of conclusion or suspension of an investigation in the case of an affirmative
determination providing for the imposition of a definitive duty . . . shall contain, or otherwise
make available through a separate report, all relevant information on the matters of fact and
law and reasons which have led to the imposition of final measures or the acceptance of a
price undertaking, due regard being paid to the requirement for the protection of confidential
information. In particular, the notice or report shall contain the information described insubparagraph 2.1, as well as the reasons for the acceptance or rejection of relevant
arguments or claims made by the exporters and importers . . .”  (Emphasis added)
7.2 Legal arguments relating to the claims relating to Article 12.2.2
4.231 In their definitive disclosure comments the Indian exporters commented on the provisional
Regulation and disclosure document that:
“there is another falsifying factor. As the Commission will undoubtedly know, the EC textile
industry has gone through a major restructurisation process in the past years. This involved,
among others, the merger of many smal ler companies in more viable units.
If, four years ago, company A was purchased by  company B, the Commission’s logic seems to
be as follows: company A has disappeared, which is a sign of injury, notwithstanding the fact
that company B has expanded its production. Such ‘logic’, however, does not withstand
scrutiny.”
4.232 The reply in the definitive Regulation to this argument stressed that:
“(41) In the assessment of injury pursuant to Article 3 of the basic Regulation, the
Community institutions have to assess the econom ic situation of the Community industry. This
assessment usually covers the analysis of a time period of four to five years as in the presentcase (‘assessment period’). Such an assessment is commonly based on an analysis of the
complaining industry and not necessarily on companies accounting for the totality of
Community production on the ground that the situation of a major proportion of the
Community production is representative for it s totality. Such an assessment, however, also
has to take into account the structure and the nature of the industry under consideration. Inthe present case this industry is characterized by a high number of operators, in many cases
small- and medium-sized companies, and by the fact  that it is a sector with relatively low
barriers to exit. The latter is mainly due to the fact that machinery can be sold or used forWT/DS141/R
Page 224
other products relatively simply. This has the effect that material injury is likely to manifest
itself through the exit of economic operators within the assessment period.
Consequently, to limit the assessment of injury only to companies which are still operational
at the end of the assessment period (i.e. at th e time of the lodging of the complaint) and thus
able actively to support a complaint would mean that any injury caused to companies which
have closed down before this point in time would go unconsidered in the analysis.
Furthermore, it should be noted that this distortion could even be aggravated as the surviving
complaining companies of the Community industry may have benefited, possibly onlytemporarily, from the disappearance of othe r companies, causing their positive development
to be overestimated.
In the present case, it should be noted that 29 companies of the bed linen industry have closed
down or ceased production: that is to say,  that a substantial number of companies have
ceased operation. Furthermore, given the substantial price undercutting established, the
strong increase in the volumes of the imports concerned and their consequent rise in market
share, any relatively positive development of the complaining producers must be seen as
threatened in the absence of anti-dumping measures.”
4.233 The EC at no point addressed Texprocil’s point made in the comments
166 to the definitive
disclosure that the restructuring of the EC textile industry167 influenced the injury situation.
4.234 Moreover, the EC appeared to continue to consider imports of bed linen from India in the
period 1992-30 June 1995 as “dumped”  without elaborating on what basis it did so.  This is
inconsistent with Article 12.2.2 of the ADA since th e EC did not explain how injury caused in the
period 1992-30 June 1995 could have been caused by imports (allegedly) “dumped”  during the
investigation period.
                                                     
166 Please refer to Annex 60 at section 4.2.1.
167 It is further recalled that in its first submissi on on injury (Annex 50) Texprocil argued that:
“. . . the EC industry is in a state of change. Many companies have had to restructure themselves in the
last years as a result of increasing globalisation of production. A central factor in this process is the problem ofthe relatively high wages in Europe.
The restructuring had serious consequences for Europe. Commissioners Bangemann and Brittan
argued in their 1995 Communication on the impact of international developm ents on the Community's Textile
and Clothing Sector t hat ‘in textiles the rise in productivity . . . has been the main factor for the loss in
employment.’ That study strongly argued that labour costs are of fundamental importance for the
competitiveness of the EC industry. For instance, in 1993 the average hourly  wages in EC Member States varied
from 3.03 to 17.29 US$, while in India it was merely 0.27 US$ . . .”
The EC authorities never reacted to these comments.WT/DS141/R
Page 225
V. CLAIMS RELATING TO PROCEDURAL ISSUES
A. ARTICLE 5.3: THE EC DID NOT EXAMINE THE ALLEGATIONS IN THE
COMPLAINT BEFORE INITIATING THE ANTI-DUMPING PROCEEDING. SUCH
EXAMINATION WAS EVEN MORE IMPORTANT IN THE LIGHT OF EXISTINGCOUNTER-EVIDENCE
5.1 Summary: Article 5.3 requires the EC to examine the accuracy and adequacy of the
allegations in the complaint before initiating the anti-dumping investigation. There is nothing on
record to show that such examination was indeed performed ( claim 23 ). Moreover, the available
evidence from the Bed linen I anti-dumping proceedin g made such examination even more important.
Even though detailed arguments were presented by the Indian exporters on these issues, the EC failed
to properly explain its actions and reasoning, and consequently acted inconsistently with
Article 12.2.1 ( claim  24) and 12.2.2 ( claim 25 ).
1. Facts
5.2 In part I of this submission it was recalled that the Bed linen II proceeding had been preceded
by an earlier one, concerning the same product and also targeting ( inter alia ) India.  It is further
recalled that in the Bed linen I proceeding the EC industry virtually refused to co-operate with the
investigating authorities (at least, virtually no non-confidential summaries of their questionnaire
responses have been made available in the non-confidential file of that proceeding).
5.3 The time flow of events may be summarised as follows:
25 January 1994
     March 1994
10 July 1996
30 July 1996
13 September 1996Initiation Bed linen I
Submission of 41 questionnaire responses by Indianexporters
Termination of the Bed linen I proceeding because “[t]he
complainant Community producers formally withdrew the
complaint concerning imports of certain types of bedlinen
originating in India, Pakistan, Thailand and Turkey”
168
(a) Complaint by the original complainant, Eurocoton,
leading to the Bed linen II proceeding
Initiation of Bed linen II
5.4 The notice of initiation of the Bed linen II proceeding contained a rather terse statement on
the alleged dumping and injury:
“4. Allegation of injury
The complainant alleges and has provided evi dence that imports from Egypt, India and
Pakistan have increased significantly in absolute terms and in terms of market share, duringa period where the apparent consumption in the Community has decreased.
                                                     
168 Commission Decision of 9 July 1996 terminating the anti-dumping proceeding concerning imports
of certain types of bedlinen originating in India, Pakistan, Thailand and Turkey, OJ (1996) L 171/27 (Annex 5)at recital (4).WT/DS141/R
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It is further alleged that the volume and pr ices of the imported products have, among other
consequences, had a negative impact on the quantities sold and the prices charged by the
Community producers, resulting in substantial adverse effects on employment and the
financial situation of the Community industry.”
5.5 It may be noted that at no point in the notice of initiation (or indeed, in the published
Regulations or elsewhere) did the EC as much as mention that there had been a Bed linen I
proceeding.  Similarly, the complaint leading to the Bed linen II proceeding169 conveniently ‘forgot’
that an anti-dumping proceeding covering the same product and largely the same countries on thebasis of a complaint by the same entity had been terminated only twenty days before.
5.6 In their first submission on injury (Annex 50) the Indian exporters expressed their concerns
on the issue of prima facie evidence and the compatibility of the initiation with Article 5:
“1.2 The Commission should have taken into account all available evidence when deciding
on the initiation of the proceeding
Eurocoton appears to consider that the obligations under Articles 5.2, 5.3 and 5.8 of the
Agreement are fulfilled if the Commission allegations on dumping and injury in the complaint[sic]. Such a view, if shared by the Commission, seems formalistic and contrary to letter and
spirit of the Agreement.
A logical and literal reading of [Articles 5.2, 5.3 and 5.8 of the ADA]  leads to the following
conclusions:
1. The complainant must adduce evidence of (inter alia) injury in its complaint. This
evidence should relate to the matters summed up in points (i) through (iv) of Article
5.2. However, it is not necessary that the evidence in the complaint be ‘court-proof’;
it must be, so to speak, prima facie evidence.
2. The purpose of Articles 5.2, 5.3 and 5.8 is to avoid frivolous complaints. The
Commission is under an obligation, before the initiation of the proceeding, to
investigate whether the facts alleged are more than ‘[s]imple assertion,
unsubstantiated by relevant evidence.’
In order to avoid unnecessary harassment of exporters, it is mandatory that such
investigation takes place by the Commission, before the initiation.
3. If the Commission is informed by some other source than the complaint of facts
related to the injury question, it must take these into account: Article 5.3 provides
that ‘[t]he authorities shall examine the accuracy and adequacy of the evidenceprovided in the application to determine whether there is sufficient evidence to justify
the initiation of an investigation.’
Article 5.8 adds in relevant part that ‘[a]n application . . . shall be rejected . . . as
soon as the authorities concerned are satisfied that there is not sufficient evidence ofeither dumping or of injury to justify proceeding with the case.’ If, in other words, the
                                                     
169 The non-confidential summary thereof was made available in the non-confidential file at the time of
initiation.  No other relevant evidence on the alleged injury was made available in the non-confidential fileduring the time of initiation.WT/DS141/R
Page 227
Commission is satisfied, either before or during the proceeding, that there is no
factual basis to pursue the matter, it may not continue the initiation or pursuit of the
proceeding. Article 5.8 does not specify that the Commission should only take into
account such evidence as has been presented in the complaint; on the contrary, if theCommission has obtained information from other sources, it is under an obligation to
take this into account.
4. This means that, in such cases, the ev idence requirement for the complaint logically
is a relative one: if strong counter evidence exists, the evidence in the complaintbecomes ‘simple assertion, unsubstantiated by relevant evidence’, if the Commission
does not further check it before the initiation.
The question now arises, whether in the present case counter evidence or indications existed,
which obliged the Commission to check the allegations in the complaint. Texprocil isconvinced that such counter evidence was indeed available.
On 25 January 1994 the Commission initiated an anti-dumping proceeding concerning bed
linen from India, Pakistan, Thailand and Turkey. The complaint had been submitted by
Eurocoton.
The cooperation of Indian exporters was overwhelming; in contrast, the Community industry
refused to submit questionnaire responses, as a result of which Eurocoton had to withdraw
the complaint. The first bed linen proceeding was terminated on 10 July 1996.
As the Commission will be aware, even though the formal reason for the termination was the
withdrawal of the complaint, the actual caus e of the termination was the non-cooperation of
the Community industry.
It follows that, at least during the period starting from 25 January 1994 (initiation of the first
proceeding) up to the date of termination (10 July 1996) the Community industry did not
consider itself injured; at least, the absolute non-cooperation of the EC producers is a verystrong indication to that effect.
The fact that the second complaint was forma lly submitted after the termination, on 30 July
1996 cannot change this. The ‘data’ or allegations in the complaint do not refer to events
after the termination of the first proceeding; since there is a very strong indication that, up to10 July 1996 the Community industry did not suffer material injury from imports of bed linen
from India, all allegations in the complaint already appear disproved from the outset. Under
these circumstances, the Commission was under an obligation to carefully check, before
initiating the second proceeding, whether there was any serious evidence of injury (as
opposed to mere assertions in the second complaint).
There is no evidence in either the notice of initiation or the non-confidential [file] showing
that the Commission did in fact make this a priori check. It follows that the Commission
violated Articles 5.2, 5.3 and 5.8 of the Agreement as well as Articles 5(2) jo 5(3) and 5(7) of
the basic anti-dumping Regulation. Texprocil therefore respectfully requests the Commissionto terminate this proceeding since it is tainted with a procedural error which cannot be
repaired retroactively.”WT/DS141/R
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2. The complaint does not contain prima facie evidence of dumping and injury caused
thereby
. . .
The complaint has been based on little more than unsubstantiated allegations. First, the
complainant notes that ‘[i]t is worth noting that these countries have access to domestically
grown raw cotton . . .’ This, however, ignores that Indian producers have suffered from an
acute shortage of raw cotton through much of 1995, as is well-known.
Second, the non-confidential version of the complaint merely alleged price details in the
‘dumping calculation’, without giving any evidence. Since the complainant alleges that it has
obtained its information from publicly available sources, there is no reason why no non-
confidential version thereof (photocopies of the pages, etc., concerned) has been provided.Failure to do so makes the statements concerning the alleged dumping little more than
‘simple assertion, unsubstantiated by relevant evidence.’
Alternatively, in the event Eurocoton did submit  such information in the confidential version
of the complaint, Texprocil considers that this should have been ignored by the Commissionin accordance with Article 19 of the basic anti-dumping Regulation.
It follows that, apart from the violation of Ar ticle 5.2 of the Agreement in the context of the
previous proceeding (see above), that provision is also violated since no prima facie evidence
has been submitted in the complaint.”
5.7 The issue of prima facie evidence and the EC’s obligations under Articles 5.1, 5.2, 5.3 and 5.8
was subsequently raised during the injury hearing of 13 January 1997 but no answer was provided by
the EC authorities.  The post-hearing brief
170 which was subsequently filed therefore again put the
Indian exporters’ concerns on the record:
“The Commission should have taken into account all available evidence when deciding on the
initiation of the proceeding
Eurocoton appears to consider that the obligations under Articles 5.2, 5.3 and 5.8 of the
Agreement are fulfilled if the Commission checks the allegations on dumping and injury in the
complaint. Such a view, if shared by the Co mmission, seems formalistic and contrary to letter
and spirit of the Agreement . . .
1. The complainant must adduce evidence of (inter alia) injury in its complaint. This
evidence should relate to the matters summed up in points (i) through (iv) of Article
5.2. However, it is not necessary that the evidence in the complaint be ‘court-proof’;
it must be, so to speak, prima facie evidence.
2. The purpose of Articles 5.2, 5.3 and 5.8 is to avoid frivolous complaints. The
Commission is under an obligation, before the initiation of the proceeding, to
investigate whether the facts alleged are more than ‘[s]imple assertion,unsubstantiated by relevant evidence.’
                                                     
170 Annex 54.WT/DS141/R
Page 229
In order to avoid unnecessary harassment of exporters, it is mandatory that such
investigation takes place by the Commission, before the initiation.
3. If the Commission is informed by some other source than the complaint of facts
related to the injury question, it must take these into account: Article 5.3 provides
that ‘[t]he authorities shall examine the accuracy and adequacy of the evidence
provided in the application to determine whether there is sufficient evidence to justify
the initiation of an investigation.’
Article 5.8 adds in relevant part that ‘[a]n application . . . shall be rejected . . . as
soon as the authorities concerned are satisfied that there is not sufficient evidence of
either dumping or of injury to justify proceeding with the case.’ If, in other words, the
Commission is satisfied, either before or during the proceeding, that there is no
factual basis to pursue the matter, it may not continue the initiation or pursuit of theproceeding. Article 5.8 does not specify that the Commission should only take into
account of such evidence as has been presented in the complaint; on the contrary, if
the Commission has obtained information from other sources, it is under an
obligation to take this into account.
4. This means that, in such cases, the ev idence requirement for the complaint logically
is a relative one: if strong counter evidence exists, the evidence in the complaint
becomes ‘simple assertion, unsubstantiated by relevant evidence’, if the Commission
does not further check it before the initiation.
The question now arises, whether in the present case counter evidence or indications existed,
which obliged the Commission to check the allegations in the complaint with more care than
usual. Texprocil is convinced that such counter evidence was indeed available.
On 25 January 1994 the Commission initiated an anti-dumping proceeding concerning bed
linen from India, Pakistan, Thailand and Turkey. The complaint had been submitted by
Eurocoton. The product scope was identical to that of the current proceeding.
The co-operation of Indian exporters was overwh elming; in contrast, the Community industry
refused to submit questionnaire responses, as a result of which Eurocoton had to withdraw
the complaint. The first bed linen proceeding was terminated on 10 July 1996.
As the Commission will be aware, even though the formal reason for the termination was the
withdrawal of the complaint, the actual caus e of the termination was the non-cooperation of
the Community industry.
It follows that, at least during the period starting on 25 January 1994 (initiation of the first
proceeding) up to the date of termination (10 July 1996) the Community industry did not
consider itself injured; at least, the absolute non-cooperation of the EC producers is a very
strong indication to that effect.
The fact that the second complaint was forma lly submitted after the termination, on 30 July
1996 cannot change this. The ‘data’ or allegations in the complaint do not refer to events
after the termination of the first proceeding; since there is a very strong indication that, up to
10 July 1996 the Community industry did not suffer material injury from imports of bed linen
from India, all allegations in the complaint already appear disproved from the outset. UnderWT/DS141/R
Page 230
these circumstances, the Commission was under an obligation to carefully check, before
initiating the second proceeding, whether there was any serious evidence of injury (as
opposed to mere assertions in the second complaint).
There is no evidence in either the notice of initiation or the non-confidential file showing that
the Commission did in fact make this a priori check. It follows that the Commission violated
Articles 5.2, 5.3 and 5.8 of the Agreement as well as Articles 5(2) jo 5(3) and 5(7) of the basic
anti-dumping Regulation. Texprocil therefore respectfully requests the Commission to
terminate this proceeding since it is tainted with a procedural error which cannot be repairedretroactively.
1.3 The complaint does not contain prima facie evidence of dumping and injury caused
thereby
Article 5.2 of the Agreement provides in relevant part that a complaint must contain prima
facie evidence on, inter alia, dumping and injury.
The complaint has been based on little more than unsubstantiated allegations. First, the
complainant notes that ‘[i]t is worth noting that these countries have access to domesticallygrown raw cotton . . .’ This, however, ignores that Indian producers have suffered from an
acute shortage of raw cotton through much of 1995, as is well-known.
Second, the non-confidential version of the complaint merely alleged price details in the
‘dumping calculation’, without giving any evidence. Since the complainant alleges that it hasobtained its information from publicly available sources, there is no reason why no non-
confidential version thereof (photocopies of the pages, etc., concerned) has been provided.
Failure to do so makes the statements concerning the alleged dumping little more than
‘simple assertion, unsubstantiated by relevant evidence.’
Alternatively, in the event Eurocoton did submit  such information in the confidential version
of the complaint, Texprocil considers that this should have been ignored by the Commissionin accordance with Article 19 of the basic anti-dumping Regulation.
It follows that, apart from the violation of Ar ticle 5.2 of the Agreement in the context of the
previous proceeding, that provision is also violated since no prima facie evidence has been
submitted in the complaint.”(Emphasis in original, footnotes omitted)
5.8 Again, the Indian exporters received no reply to any of these arguments from the European
Commission.  The provisional Regulation contained merely a curt standard formula
171 stating that:
”The proceeding was initiated as a result of a complaint lodged on 30 July 1996 by the
Committee of the Cotton and allied Textile Industries of the European Communities
(Eurocoton), on behalf of Community producers representing a major proportion of
Community production of cotton-type bed linen. The complaint contained evidence of
dumping of the said product and of material injury resulting therefrom, which was considered
sufficient to justify the initiation of a proceeding.”172
                                                     
171 That this formula is included as a matter of standard reply can be seen if the examples of EC
determinations from the period 1996-1998 are compared. Fifteen such examples are attached as Annex 73.
172 Provisional Regulation at recital (2); emphasis added.WT/DS141/R
Page 231
5.9 Since in the view of the Indian exporters this standard formula did not reply to the specific
arguments and claims they had made, they repeated these at the next opportunity, in Texprocil’s
comments to the provisional disclosure.173  Texprocil further noted that:
“The Indian exporters have consistently argued that the anti-dumping proceeding suffered
from irreparable procedural deficiencies. The European Commission has not reacted to these
motivated concerns in either the disclosure document or the provisional duties Regulation.
In view of these facts, the failure of the Commission to even mention, motivate or discuss in
either the disclosure document or in the Regulation imposing provisional anti-dumping
measures their decision not to terminate the Bed linen proceeding for the reasons set out
above, is inconsistent with Article 12.2 of the Agreement.”
5.10 Neither in the definitive Regulation nor in the definitive disclosure document did the EC
institutions react or comment on these observations.
5.11 During the first round of consultations India again raised the matter:174
“1.3 Prima facie evidence
India believes that the initiation has taken place inconsistently with Article 5. Notably, India
believes Articles 5.2, 5.3 and 5.8 to be relevant . . .
In other words, before initiating the complaint, the investigating authorities must make a
proper determination as to the information be fore them, in order to determine whether
sufficient grounds exist for the initiation of an anti-dumping proceeding.
The requirements in Article 5.2, 5.3 and 5.8 are intended to avoid the initiation of anti-
dumping proceedings on the basis of frivolous complaints . . .
Let us consider the facts available to the EC at the time of initiation of Bed Linen II. The Bed
linen II proceeding was preceded by the Bed linen I proceeding, which covered exactly the
same product and largely the same countries. This first proceeding had been terminated after
the Community industry generally refused to co-operate with the European Commission.Under these circumstances the complainant was forced to withdraw the complaint, after
which Bed linen I was duly terminated.
Very shortly after the termination of Bed linen I the complainant brought a new complaint.
This was filed 20 days after the termination of the Bed linen I proceeding. As argued before,in the Bed linen I proceeding the domestic industry had failed and continuously failed to co-
operate with the administrative authorities. This fact was well-known to the European
Commission investigators, and is evidenced by the paucity of EC questionnaire responses in
the non-confidential file of the Bed linen I proceeding.
On 30 July 1996 the European Commission therefore had at least the following information:
— the complaint;
                                                     
173 Annex 51 at sections 1.2 and 2.
174 Annex 11.WT/DS141/R
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— the knowledge that in the period starting on 25 January 1994 (the date of initiation of
the Bed linen I proceeding) up to 20 days before the submission of the second
complaint, the Community industry en masse had refused to co-operate with the
complainant.
The Commission chose to simply ignore that there ever had been a Bed linen I proceeding
and initiated the second proceeding on that basis.
The fact that the second complaint was forma lly submitted after the termination, on 30 July
1996 cannot change this. The ‘data’ or allegations in the complaint do not refer to events
after the termination of the first proceeding; indeed, the complaint alleges that injury was
suffered exactly in the period when the EC indu stry refused to co-operate in an anti-dumping
proceeding concerning the same product from India. Since there is a very strong indication
that, up to 10 July 1996, the industry did not suffer material injury from imports of bed linenfrom India, these allegations in the complaint already appear disproved from the outset.
Under these circumstances, the hard fact of the non-cooperation of the Community industry
in the first proceeding did at least throw doubts upon the complainant’s allegations. The
European Commission should at least have considered whether the known facts from theprevious proceeding affected the quality of the prima facie ‘evidence’ in the complaint;
however, there is no evidence whatsoever in either the notice of initiation, the non-
confidential file, the Regulations imposing provisional and definitive anti-dumping duties, or
elsewhere that this issue has even been considered.
India would like to stress that it is not taking issue today with the EC’s determination in the
first Bed linen proceeding. The point we are making is, that at the time of the initiation of the
second case, the investigating authorities c ould not simply ignore there had been a first
proceeding covering exactly the period for which now injury was alleged. There is no
evidence in either the notice of initiation or elsewhere suggesting that the EC even considered
the previous proceeding, and why they—in spite of all evidence available—nevertheless
wished to continue with the initiation.
It follows that the European Community acted inconsistently with Articles 5.2, 5.3 and 5.8 of
the Agreement by initiating the anti-dumping proceeding on the basis of mere assertion,
unsubstantiated by relevant evidence.
This leads to our following questions:
14. Would the EC agree that Article 5.3 (and, possible, Article 5.8) of the Agreement requires
the EC to take account of all information available to, or in possession of, the investigating
authorities in order to determine whether a prima facie case for an initiation exists?
15. Would the EC agree that the non-confidential file of the first Bed linen proceeding, which
was terminated only shortly before the Bed linen II proceeding was initiated, was still
available to the investigating authorities?
16. Would the EC agree that the one and a half year period immediately preceding the
submission of the second complaint was roughly the period during which the first Bed linen
investigation was on-going?WT/DS141/R
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17. Would the EC agree that in Bed linen I the EC industry in large majority refused to co-
operate with the investigating authorities? Would the EC agree that this was a factor which
gave an importation indication whether the bed li nen industry in the EC considered itself
injured? Could the EC indicate which role the previous proceeding has played when decidingto initiate the second Bed linen proceeding?
[EC]: the EC will make detailed comments. In general, [the EC] cannot admit that the EC
industry did not co-operate in Bed linen I, rather there was a withdrawal of the complaint. In
any event [the EC] would admit that no co-operation would not necessarily mean no injury;there may be many reasons why producers do not co-operate, even if there is injury. In the
first Bed linen case no injury determination was made. The EC meticulously checked the
prima facie evidence.
[The EC] further notes that India received a copy of the non-confidential version of the
complaint.
1.4 Motivation of this issue
Mr Seth: Texprocil raised the procedural concerns discussed in 2.3, above, at every occasion
and stage of the proceeding.
India believes that this is not consistent with Article 12.2.1 (as far as the provisional duties
Regulation is concerned) and with Article 12.2.2 of the Agreement (as far as the definitive
duties Regulation is concerned).
18. Can the EC indicate where in the Regula tions imposing provisional and definitive anti-
dumping duties it has responded to the concerns of the Indian exporters in this regard, which
were expressed at several occasions throughout the administrative proceeding?
[EC]: Logically, once the case had been initiated, the issue of prima facie evidence no longer
was relevant.”
5.12 No further explanation on this issue has been given by the EC.
2. Claims
5.13 Three claims result from the events and facts described above.
5.14 First, the EC acted inconsistently with Article 5.3 of the ADA by not examining the
allegations in the complaint before the anti-dumping  proceeding was initiated. Especially in the light
of the events taking place before this proceeding was initiated this inconsistency becomes even more
pronounced.
5.15 Second, the EC acted inconsistently with Ar ticle 12.2.1 of the ADA by failing to explain its
determination in the provisional Regulation even though Texprocil had made very elaborate
arguments on this matter.
5.16 Third, the EC acted inconsistently with Arti cle 12.2.2 by failing to provide in either the
definitive Regulation or elsewhere the matters of fact and reasons which have led the EC to reject
Texprocil’s arguments and claims.WT/DS141/R
Page 234
3. Claim 23:  inconsistency with Article 5.3
3.1 The text of Article 5.3
5.17 Article 5.3 of the ADA provides as follows:
“The authorities shall examine the accuracy and adequacy of the evidence provided in the
application to determine whether there is suffic ient evidence to justify the initiation of an
investigation.”
5.18 The word “shall”  is obligatory and not qualified in any manner.  In the context of another
covered agreement the Appellate Body provided a clear interpretation of such mandatory language:175
"In our view, the ordinary meaning of the text of  Article 5.5 is clear. The chapeau of Article 5.5
clearly states that the schedule in the body of t hat provision is mandatory. The word used in the
chapeau is ‘shall’, not ‘may’. There is no qualifying language, and there is no language that
permits any method other than that set out in th e schedule in Article 5.5 as a basis for the
calculation of additional duties.”176
5.19 The same logic applies to Article 5.3 of the ADA.  Moreover, any other interpretation wouldmake the provision largely redundant.
5.20 The next word is “examine” .  This would imply action  on behalf of the investigating
authorities. Since it is the “evidence provided in the application”  which must be examined, it would
seem that such evidence can in itself never be the only element “to justify the initiation of an
investigation”
177
                                                     
175 Compare further EC—Measures Concerning Meat  and Meat Products (Hormones)(complaint by
Canada), Report of the Panel, WT/DS48/R/CAN of 18 August 1997 at § 8.169:
176 EC-Measures affecting the importation of certain poultry products, Appellate Body report 1998/3,
WT/DS69/AB/R of 13 July 1998, at § 165.
177 See in this respect also Guatemala—Anti-dumping investigation regarding portland cement from Mexico,
Report of the Panel of 19 June 1998:
“7.47 Guatemala's position on this issue is clear: if the information supplied in the application is all that is
reasonably available to the applicant as  required by Article 5.2, the investigating authority is justified in
initiating the investigation . . .7.49 We cannot accept Guatemala's arguments in this regard. In our view, the fact that the applicant has
provided, in the application, all the information that is ‘reasonably available’ to it on the factors set forth inArticle 5.2(i) - (iv) is not determinative of whether there is sufficient evidence to justify initiation. Rather,
Article 5.3 establishes an obligation that extends beyond a determination that the requirements of Article 5.2
are satisfied.7.50 . . . Article 5.3 . . . sets forth what the investigating authority is to do when confronted with anapplication; it must examine the a ccuracy and adequacy of the evidence in the application ‘to determine
whether there is sufficient evidence to justify the initiation of an investigation’. Thus, Article 5.3 is a
requirement imposed on the  investigating authority  . . . If the investigating authority were to determine that the
evidence and information in the application was not accurate, or that it was not adequate to support a
conclusion that there was sufficient evidence to justify initiation of an investigation, the investigating authoritywould be precluded from initiating an investigation.”  (Footnotes omitted).
The Appellate Body did not overturn the Panel report on this issue.WT/DS141/R
Page 235
5.21 Last, it follows from the words “to justify the initiation of an investigation”  that the
examination and determination required by Article 5.3 should occur before the initiation of the
proceeding.  This follows logically from the text; it follows equally from the logic of the anti-dumping
proceeding.  To hold otherwise would deprive Article 5.3 of any meaning.  This does not mean thatthe examination of the prima facie  evidence will be as thorough as the investigation after initiation.
For the purposes of Article 5.3 it is not necessary that the evidence in the complaint be found ‘court
proof’; but at least an examination, within the limits of what is reasonably possible, would seem
necessary.
3.2 Legal arguments relating to the claims relating to Article 5.3
5.22 There are two major relevant arguments here.
5.23 First, the investigating authorities, accord ing to their own published statements, did not
‘examine’ the allegations in the complaint on the state of the domestic industry before initiating the
anti-dumping investigation.  It is recalled that the notice of initiation stated that:
“The complainant alleges and has provided evidence that imports from Egypt, India and
Pakistan have increased significantly in absolute terms and in terms of market share, during
a period where the apparent consumption in the Community has decreased.
It is further alleged that the volume and pr ices of the imported products have, among other
consequences, had a negative impact on the quantities sold and the prices charged by the
Community producers, resulting in substantial adverse effects on employment and thefinancial situation of the Community industry.
5. Procedure for determination of dumping and injury
Having determined, after consulting the Advisory Committee, that the complaint has been
lodged by or on behalf of the Community industry and that there is sufficient evidence to
justify the initiation of proceedings, the Commission has commenced an investigationpursuant to Article 5 of Regulation (EC) No 384/96.”  (Emphasis added)
5.24 The complaint “alleged”  that “the volume and prices of the imported products have, among
other consequences, had a negative impact on the quantities sold and the prices charged by the
Community producers, resulting in substantial adverse effects on employment and the financialsituation of the Community industry” .  Contrary to the statements in the complaint on imported
volumes, where the complainant according to the notice of initiation “provided evidence” , there is
nothing on record suggesting that the European Commission has received, or indeed sought, evidence
on the state of the Community industry prior to initiation.
5.25 It transpires from the notice of initiation that the European Commission considered the
information (allegations) in the complaint “sufficient evidence to justify the initiation of proceedings” .
In any case, there is no indication that the investigating authorities “examine[d]” “the accuracy and
adequacy of the evidence provided in the application” .
5.26 It is submitted that, even if the EC did examine the evidence contained in the complaint (as
opposed to accepting Eurocoton’s allegations at face value as sufficient for initiation), then there is no
record published or in the file which suggests so.  In this respect, the panel report in Korea—Anti-WT/DS141/R
Page 236
dumping duties on imports of polyacetal resins from the United States provides useful guidance on the
necessity of transparency:178
”[t]he legal question raised by the references made by Korea to statements in the transcript
of the KTC’s meeting was . . . whether the Panel could properly review the injury
determination of the KTC by reference to considerations in the transcript which were not
included or referred to in the public statement of reasons given by the Korean authorities at
the time of imposition of the anti-dumping duties . . .
In the view of the Panel, effective review . . . of an injury determination . . . required an
adequate explanation by the investigating authorities of how they had considered and
evaluated the evidence with regard to the facto rs provided for in that article. Interpreted in
conjunction with Article 8:5, such an explanation had to be provided in a public notice . . .
This provision served the important purpose of transparency by requiring duly motivatedpublic decisions as the basis for the imposition of anti-dumping duties. In the view of the
Panel, the purpose of this provision would be frustrated if in a dispute settlement proceeding .
. . a Party were allowed to defend a challenged . . . determination by reference to alleged
reasons for such determination which were not part of a public statement of reasons
accompanying that determination . . . Furthermore, for a Panel to review a determination by
reference to considerations not actually reflected in a public statement of reasons
accompanying such determination would also be  inconsistent with the requirements of an
orderly and efficient conduct of the dispute settlement process . . .
Korea had also argued that, since the transcript was part of the administrative record of this
investigation, the Panel was under an obligation to consider it. However, the question of
whether the transcript was part of the administrative record of the investigation was not
decisive of whether the Panel was bound to take account of the transcript for purposes of
reviewing the reasons upon which the KTC had based its determination. The task of the Panel
was to review the consistency with the Agreement of the KTC’s injury determination in
Decision 91-6, not the administrative record upon which that determination was based. While
an examination of elements of the administrative record might be appropriate in order for aPanel to determine whether certain findings of  fact made by investigating authorities were
based on positive evidence of record, it was only the public notice issued pursuant to Article
8:5, not the administrative record per se, which was relevant as a statement of reasons. In the
case before the Panel, Korea had relied on the transcript not to provide evidence in supportof specific statements of a factual nature in the KTC’s injury determination but to furtherexplain the reasons for that determination.”  (Emphasis added)
5.27 These principles are of no less value in the Bed linen II proceeding.  If the EC would have
made a prima facie examination of the allegations on the state of the domestic industry contained in
the complaint, it would be up to the EC to notify  this, either in a published notice or through a report
made available to the Indian exporters separately.  The EC did neither, and India may thus rely on this
failure to conclude that, inconsistent with that provision, in fact no examination required by Article
5.3 was carried out.
5.28 Second, immediately before the initiation, th e investigating authorities did have more
information at their disposal than merely the comp laint.  Notably but not exclusively, the European
Commission could not have been unaware of the fact  that an anti-dumping proceeding concerning the
                                                     
178 Korea—Anti-dumping duties on imports of  polyacetal resins from the United States , ADP/92 of
2 April 1993 at §§ 199-213.WT/DS141/R
Page 237
same product scope and, to a large extent, the same targeted countries, on the basis of a complaint by the
same complainant had been terminated only twenty da ys before the submission of the complaint.  The
investigating authorities could not have been unaware that in that proceeding, which ran during most of
the investigation period of the Bed linen II proceed ing, co-operation by EC producers was absolutely
minimal.179
5.29 That the first proceeding was formally term inated because the complaint was withdrawn, is
besides the point—as the investigating authorities know or could know, that the complaint was only
withdrawn after it transpired  that it would be impossible to make an  injury finding since the EC industry
largely refused to co-operate.
5.30 It follows that, at least during the period starting on 25 January 1994 (initiation of the first
proceeding) up to the date of termination (10 July 1996), there was a strong indication that the EC
industry might not be considered injured since it even refused to support an initiated anti-dumpingproceeding.
180  The allegations of the EC industry in the second complaint largely covered the period
during which that same industry refused to co-operate.  While it is granted that this is not in itself a
fool-proof indication that no injury could exist, it is at least a strong indication which would have
warranted a further examination before the initiation of the Bed linen II proceeding.
5.31 India believes that, under these circumstances, the EC could not initiate the Bed linen II anti-
dumping proceeding without examining the prima facie evidence. By failing to do so, the EC acted
inconsistently with Article 5.3 of the ADA.
4. Claim 24:  inconsistency with Article 12.2.1
4.1 The text of Article 12.2.1
5.32 It is recalled that Articles 12.2 and 12.2.1 of the ADA provide in relevant part as follows:
“12.2 Public notice shall be given of any preliminary or final determination, whether
affirmative or negative . . . Each such notice shall set forth, or otherwise make available
through a separate report, in sufficient detail the findings and conclusions reached on allissues of fact and law considered material by the investigating authorities . . .
12.2.1 A public notice of the imposition of provisional measures shall set forth, or otherwise
make available through a separate report, sufficiently detailed explanations for the
preliminary determinations on dumping and injury  and shall refer to the matters of fact and
law which have led to arguments being accepted or rejected. Such a notice or report shall,
due regard being paid to the requirement for the protection of confidential information,
contain in particular:
(i) the names of the suppliers, or when this is impracticable, the supplying countries
involved;
(ii) a description of the product which is sufficient for customs purposes;
                                                     
179 This is evident from the non-confidential file (or rather, the lack of non-confidential questionnaire
responses submitted by the EC industry).
180 It may be noted that the notice of initiation of the Bed linen I proceeding provided that:
“If the required information and argumentation is not  received in adequate fo rm within the time limit
specified above, the Community authorities may make prelim inary or final fi ndings on the basis of the facts
available in accordance with Article 7 (7) (b) of Regulation (EEC) No 2423/88.”
(OJ (1994) C 21/9, attached as Annex 2).WT/DS141/R
Page 238
(iii) the margins of dumping established and a full explanation of the reasons for the
methodology used in the establishment and comparison of the export price and the
normal value under Article 2;
(iv) considerations relevant to the injury determination as set out in Article 3;(v) the main reasons leading to the determination.”
(Emphasis added)
5.33 First, it is noted that “determination”  in sub-paragraph (v) is in singular, in contrast to the
“preliminary determinations”  in the chapeau of the provision.  That would suggest that
“determination”  in sub-paragraph (v) should not be read as “preliminary determinations on dumping
and injury” ; had that been the intention of the drafters, then they would have used the plural form in
sub-paragraph (v) as well.
5.34 It would seem that “determination”  in sub-paragraph (v) refers to “preliminary or final
determination”  in Article 12.2.  In other words, under Article 12.2.1 the investigating authorities must
set out in the provisional and definitive Regulations “the main reasons leading”  to “the preliminary
or final determination” .
5.35 Logically, sub-paragraph (v) does not (only) aim at the dumping determination and the injury
determination.  If this were different, then the sub-paragraph would add nothing to sub-paragraphs
(iii) and (iv) of the same provision.  That would imply that sub-paragraph, in such an interpretation,
would be without meaning.  In this context the ut res magis valeat quam pereat  principle is recalled,
which the Appellate Body defined as follows: “[a]n interpreter is not free to adopt a reading that
would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility.”181
5.36 It would follow that sub-paragraph (v) aims (at least) at those determinations which areessential for the investigating authorities in order to impose anti-dumping measures.  That includes the
determination required under Article 5.3.
5.37 In this context it is further noted that—following the notice of initiation—the provisional
Regulation (and the disclosure document issued around the same time) is the first document in whichthe EC authorities could have explained their position on Article 5.3, and where the exporters had
expected to receive a reply to the arguments raised by them in this respect.  If the investigating
authorities would not be under any obligation to explain their Article 5.3 determination at the time of
the imposition of provisional anti-dumping measures, it would impair the effective possibilities for
exporting countries to raise such issues under Article 17.4, second sentence.
182
5.38 Second, the word “and”  in the chapeau of 12.2.1 must be noted between “sufficiently
detailed explanations for the preliminary determinations on dumping and injury”  and “shall refer to
the matters of fact and law which have led to arguments being accepted or rejected” .  In other words,
the limitation to preliminary determinations on dumpi ng and injury would not appear to be applicable
to the second part “shall refer to the matters of fact and law which have led to arguments being
                                                     
181 United States—Standards for Reformulated and Conventional Gasoline, AB–1996/1 of 29 April
1996, section IV. See further Yearbook of the International Law Commission  (1966), Vol. II at 219:
"When a treaty is open to two interpretations one of which does and the other does not enable the treaty
to have appropriate effects, good faith and the objects and purposes of the treaty demand that the former
interpretation should be adopted."
182 “When a provisional measure has a significant impact and the Memb er that requested consultations
considers that the measure was taken contrary to the provisions of paragraph 1 of Article 7, that Member mayalso refer such matter to the DSB.”WT/DS141/R
Page 239
accepted or rejected” . As argued above, Article 12.2.1 as a whole, and especially in view of its sub-
paragraph (v), does apply to the Article 5.3 determination as well.  A correct reading of Article 12.2.1
would thus seem to be that the provisional Regulation (or some other disclosed provisional document)
must refer to “the matters of fact and law which have led to arguments being accepted or rejected”  in
the context of Article 5.3 as well.
4.2 Legal arguments relating to the claims relating to Article 12.2.1
5.39 In anti-dumping proceedings the investigating au thorities have a very dominant position as far
as knowledge of the facts is concerned.  This is even more so in the EC, where the European
Commission is the only entity having access to all facts relating to the initiation. Article 12 fulfils in
this context a crucial rôle to ensure a certain degree of transparency.183
5.40 As noted above, virtually no information has been provided by the EC on the Article 5.3determination, if there was one.
5.41 Even though the Indian exporters brought Ar ticle 5.3 objections to the EC’s attention
throughout the proceeding repeatedly and in detail, the provisional Regulation merely contained the
standard formula stating that:
”The proceeding was initiated as a result of a complaint lodged on 30 July 1996 by the
Committee of the Cotton and allied Textile Industries of the European Communities
(Eurocoton), on behalf of Community producers representing a major proportion of
Community production of cotton-type bed linen. The complaint contained evidence of
dumping of the said product and of material injury resulting therefrom, which was considered
sufficient to justify the initiation of a proceeding.”184
5.42 As is clear from the evidence in Annex 73, this formula is not a reply to specific concerns andarguments raised by Indian exporters, but rather a standard formula inserted as a matter of course in
virtually all EC determinations.
5.43 There was no way for the Indian exporters to further check the veracity of the conclusions of
the investigating authorities.  Under such circumstances, the EC can hardly claim that it referred “to
the matters of fact and law which have led to arguments being accepted or rejected”  or that the
provisional Regulation or the provisional disclosure contained “the main reasons leading to the
determination” .
5.44 In summary, India believes that neither in the provisional Regulation nor in any other
document made available to the Indian exporters around the time of the provisional anti-dumping
measures the EC met the standards laid down in Article 12.2.1.
                                                     
183 In this context the dictum of the Panel in Korea—Anti-dumping duties on imports of polyacetal
resins from the United States, Report of the Panel, ADP/92 and Corr.1 of 2 April 1993 at § 209 is recalled:
“In the view of the Panel, the purpose of this pr ovision would be frustrated if in a dispute settlement
proceeding . . . a Party were allowed to defend a challe nged . . . determination by reference to alleged reasons
for such determination which were not part of a public statement of reasons accompanying that determination. . .”
184 Provisional Regulation at recital (2); emphasis added.WT/DS141/R
Page 240
5. Claim 25:  inconsistency with Article 12.2.2
5.1 The text of Article 12.2.2
5.45 The text of Article 12.2.2 differs somewhat from that of Article 12.2.1:
“A public notice of conclusion or suspension of an investigation in the case of an affirmative
determination providing for the imposition of a definitive duty or the acceptance of a price
undertaking shall contain, or otherwise make available through a separate report, all
relevant information on the matters of fact and law and reasons which have led to theimposition of final measures or the acceptance of a price undertaking, due regard being paid
to the requirement for the protection of confidential information. In particular, the notice or
report shall contain the information described in subparagraph 2.1, as well as the reasons for
the acceptance or rejection of relevant arguments or claims made by the exporters and
importers, and the basis for any decision made under subparagraph 10.2 of Article 6.”
(Emphasis added)
5.2 Legal arguments relating to the claims relating to Article 12.2.2
5.46 Even if the EC did not agree with the Indian exporters, it was still obliged to provide in the
definitive Regulation ”the reasons for the acceptance or rej ection of relevant arguments or claims
made by the exporters and importers” .
5.47 As noted in the facts’ description above, the EC did not react to the comments made by the
Indian exporters in connection with Article 5.3. The EC thus failed to explain its definitive findingconsistently with Article 12.2.2.
B. 
ARTICLE 5.4:  THE INVESTIGATING AUTHORITIES FAILED TO MAKE A STANDING
DETERMINATION IN CONFORMITY WITH ARTICLE 5.4
5.48 Summary: the EC acted inconsistently with Article 5.4 of the ADA by not making a proper
standing determination before the an ti-dumping proceed ing was initiated ( claim 26 ).
Even though detailed arguments were presented by the Indian exporters on these issues, the EC failedto properly explain its reasoning, and consequently acted inconsistently with Article 12.2.1 ( claim  27)
and 12.2.2 ( claim 28 ).
1. Facts
5.49 As discussed in section I, the complainant Eurocoton brought the complaint leading to the
Bed linen II proceeding on 30 July 1996.
185  Eurocoton is an association of producers’ associations. In
its complaint, Eurocoton noted that:
“[t]his complaint is submitted by EUROCOTON . . . on behalf of E.U. manufacturers which
accounted for 38 per cent on [sic] the 1995 total EUR 15 production of cotton-type wovenbed linen.
It should nevertheless be underlined that  EUROCOTON represents producers weavers-
makers-up of woven cotton-type bed linen, accounting for 53 per cent of the total EUR 15
cotton-type woven bed linen production. Producers representing 38 per cent of the total E.U.
                                                     
185 Please refer to Annex 6.WT/DS141/R
Page 241
production declared to be active complainants while 15 per cent are supporting the
complaint, but are not ready to cooperate actively to [sic] the inquiry. This means that
member companies of EUROCOTON accounting fo r 53 per cent of the total E.U. production
concerned are standing by the complaint. It is consequently quite impossible that producersaccounting for more than 50 per cent of the total E.U. production declare themselves against
the complaint. Indeed, EURO COTON made an inquiry among its  member Associations (see
enclosure 1 a) in order to evaluate the rate of effective support for this complaint. At the date
of completion of the inquiry, Member Associations which answered, supported all [sic] thiscomplaint and no one objected to the lodging of this complaint.
EUROCOTON attests that for this complaint, it represents 38 per cent of the above referred
EUR 15 production (see enclosure 1 b).
EUROCOTON’ statutes (see enclosure 1 c) entitle it to represent the complainant producers.
Consequently, EUROCOTON comp lies with representativity conditions provided for in
Article 5.4. of Council Regulation EC. 384/96 of 22/12/95 on protection against imports
countries not members of the European Community.”
5.50 The non-confidential version of the complaint made available to the Indian exporters
contained enclosures 1a and 1b, but not 1c.
5.51 Enclosure 1a ( “National associations members of Eurocoton” ) contained a list of the member
associations of Eurocoton. Enclosure 1b ( “Producers of the product in question represented by
Eurocoton (complainants)” ) contained a list of the following companies and associations:
Portugal (9 companies):
1. Coelima-Industrias Texteis, SA
2. Lameirinho-Industria Textil, SA
3. Foncar-Org. Ind. Comercial Textil, SA4. Antonio de Almeida & Filhos, LDA
5. Incotex-Ind. E com. De Texteis, LDA
6. Jocaritex-Industrias Texteis, LDA
7. Maria Helena Dantas
8. Ribeiro, Fernandes & Rocha, LDA9. Texteis Atma, SA;
Germany (11 companies):
10. Bierbaum Textilwerke GmbH & Co. KG
11. Luxorette Haustextilien GmbH
12. Günter Meckenholt Weberei und Ausrüstung GmbH
13. Wilh. Wülfing GmbH & Co. KG
14. Irisette GmbH
15. Erbelle GmbH16. Hch. Kettelhack GmbH & Co.
17. Curt Bauer GmbH
18. Damino GmbH
19. RZ Dyckhoff GmbHWT/DS141/R
Page 242
20. Fränkische Bettwarenfabrik GmbH;
Belgium (1 company):
21. Uco NV-Huishoudlinnen;
France (10 companies):
22. Ets Fremaux
23. Ets Hacot et Colombier
24. Hacot (Joseph et Cie)
25. Jalla SA-Nieppe
26. Mulliez Freres SA au Longeron
27. Vanderschooten28. Valrupt
29. Ets Claude
30. Ets Bera
31. Ets Gisele le Chayoux;
Italy (5 companies):
32. Bassetti SpA
33. Bossi SpA
34. Gabel Industria Tessile SpA35. Valman Srl
36. Zucchi SpA;
Spain (3 companies):
37. Estebanell y Pahisa SA
38. Hilados y Tejidos Puignero SA39. Textil Cano Segura (Texca Sesa);
Finland (4 companies):
40. Finlayson Sisustustekstiili Oy
41. Finnpile Oy
42. Marimekko Oy
43. Reikälevy Oy;
Austria (no companies):
44. Vereinigung Textilindustrie (Austrian Textile Industry Association)5.52 The last entity, Vereinigung Textilindustrie, is not a producer itself but merely the association
of Austrian producers.
5.53 The notice of initiation with which the anti-dumping proceeding was initiated
186 noted on the
issue of standing only that:
                                                     
186 Please refer to Annex 7.WT/DS141/R
Page 243
“The Commission has received a complaint pursuant to Article 5 of Council Regulation (EC)
No 384/96 [footnote omitted] , alleging that imports of cotton-type bed linen originating in
Egypt, India and Pakistan are being dumped and are thereby causing injury to theCommunity industry.
1. Complaint
The complaint was lodged on 30 July 1996 by the Committee of the Cotton and Allied Textile
Industries of the European Union (Eurocoton).
. . .
5. Procedure for determination of dumping and injury
Having determined, after consulting the Advisory Committee, that the complaint has been
lodged by or on behalf of the Community industry and that there is sufficient evidence to
justify the initiation of proceedings, the Commission has commenced an investigation
pursuant to Article 5 of Regulation (EC) No 384/96 . . .”
187
5.54 In its first submission on injury and procedural matters188, Texprocil noted among others that:
“Eurocoton alleges that 38 per cent of EC producers support its complaint. However, among
this 38 per cent features the Vereinigung Textilindustrie, based in Vienna.189  T h i s
organisation is an association of producers and does not itself produce bed linen. It follows
that it should not be included in the tests of  Article 5(4) of the basic anti-dumping Regulation,
which clearly refers to producers and not to producers' associations.
. . . the opinion of producers' associations is irrelevant for the Article 5(4) test since this
provision explicitly refers to ‘Community producers’. It is not certain whether Eurocoton has
checked its standing with individual producers or with associations.
Second, even when Eurocoton alleges to have checked its standing with producers, it is up to
the Commission to verify this. It follows from Article 5(4) that the Commission is under an
obligation to check, before initiation of this proceeding, whether indeed Eurocoton's
allegation that it represents at least 25 pe r cent of the EC industry, is founded . . .”
5.55 Texprocil requested the Commission to make evidence available in the non-confidential file
attesting that the Commission did indeed check, prior to initiation of this proceeding, that the 25 per
cent test of Article 5(4) was reached, and in particular:
— how many companies in the Community produce bed linen other than Eurocoton members;
— whether companies alleged to support the complaint have indeed given a written statement to
this effect.
                                                     
187 Notice of initiation of anti-dumping proceedings concerning imports of cotton-type bed linen
originating in Egypt, India and Pakistan, OJ (1996) C 266/2.
188 Annex 50.
189 Complaint, non-confidential version, Annex 1b at 10.WT/DS141/R
Page 244
5.56 Well over two months after the submission of this brief (or nearly four months after the
initiation), Texprocil’s legal representatives were granted access to the non-confidential file at the
Commission’s unit dealing with complaints (letter from the European Commission attached as
Annex 58).  One day later the standing file was inspected (contents of that file attached as Annex 59).The time flow of the events can thus be summarized as follows:
 13.09.1996 25.10.1996 07.01.1997      08.01.1997
———+————-—+———————————————————————+——+————->
Initiation Injury submission Letter from EC Inspection non-conf.file
5.57 That file consisted of declarations of suppor t for the complaint emanating from the following
entities:190
Portugal:
1. Lameirinho-Industria Textil, SA;2. Incotex-Ind. E com. De Texteis, LDA;
3. Foncar-Org. Ind. Comercial Textil, SA;
4. Coelima-Industrias Texteis, SA;
5. Antonio de Almeida & Filhos, LDA;
Germany:
6. Bierbaum Textilwerke GmbH & Co. KG;
7. Günter Meckenholt Weberei und Ausrüstung GmbH;
8. Hch. Kettelhack GmbH & Co.;
9. Erbelle GmbH;10. Luxorette Haustextilien GmbH;
11. Wilh. Wülfing GmbH & Co. KG;
12. Curt Bauer GmbH;
13. Estella Ateliers (Fränkische Bettwarenfabrik GmbH);
14. Irisette GmbH;15. Damino GmbH;
16. RZ Dyckhoff GmbH;
France:
17. Syndicat Général de l’Industrie Cotonnière Française ( General syndicate of the French
Cotton Industry ), allegedly on behalf of:
— a company indicated as “K.F.” ;
18. Fédération française de l’Industry Cotonnière ( French Federation of the Cotton Industry) ,
allegedly on behalf of:— Ets Claude,
— Jalla SA-Nieppe,
                                                     
190 The European Commission later made a letter available from the Spanish Asociacion de impresarios
textiles de la Comunidad Valenciana (ATEVAL) to Eurocoton, alleging that five more Spanish companies “do
not explicitly oppose”  the proceeding (Annex 79). This letter to Eurocoton is dated 18 September 1996 ( i.e., five
days after the initiation).  There is no indication when it was submitted to the EC.WT/DS141/R
Page 245
— Hacot (Joseph et Cie),
— Ets Hacot et Colombier,
— Ets Fremaux,
— Vanderschooten,— Mulliez Freres SA au Longeron,
—E t s  B e r a ;
Italy:
19. Bossi SpA;
20. Zucchi SpA;
21. Gabel Industria Tessile SpA;
22. Valman Srl;
23. Bassetti SpA;
Spain:
24. Asociacion Industrial Textil de Proceso Algodonero ( Industrial Association of Cotton Process
Textile ), allegedly on behalf of:
— Estebanell y Pahisa SA,
— Hilados y Tejidos Puignero SA,
— Textil Cano Segura (Texca Sesa);
Austria:
25. Vereinigung Textilindustrie ( Austrian Textile Industry Association ), apparently on
behalf of itself. It did, however, provide info rmation on the total production of two of its
members;
Finland:
26. Reikälevy Oy;
27. Marimekko Oy;
28. Finlayson Sisustustekstiili Oy.
5.58 Although the above declarations had clearly been faxed the fax headers had unfortunately
been removed from all of them.
5.59 The non-confidential standing file further contained the statutes of Eurocoton, but not the
statutes of its national member associations.
5.60 The Commission did not argue and has never argued that Texprocil had ‘missed’ declarations
of support in the non-confidential file.
5.61 On 13 January 1997 Texprocil had a hearing on procedural, injury and miscellaneous issues.
During this hearing, Texprocil explained its concerns in great detail.  Notably, Texprocil argued thatthe mere allegation by a producers’ association could not, in its view, replace the standing
determination of Article 5.4.  Subsequent to the hearing, the post-hearing brief of 6 February 1997
192
set out in writing the arguments made by Texprocil during the hearing.  Notably, Texprocil argued in
                                                     
192 Annex 54.WT/DS141/R
Page 246
that submission several points of relevance to the standing determination, which are briefly
summarised as follows:
— First, the declaration of Reikalevy Oy of Finl and, made available over two months after the
date of initiation, is undated and consequently ought to be left aside as evidence that it had
come forth as supporting the complaint before the proceeding was initiated;
— Moreover, the Commission had provided no evidence whatsoever that it had made before
initiating the proceeding a determination of total EC production of bed linen (whichdetermination is logically necessary in order to perform the 25% test in Article 5.4);
— Texprocil further repeated its argument that Article 5.4 “clearly refers to producers and not
to producers' associations” . Texprocil believed that producers associations did not have the
right to bring complaints in their own right.  Moreover, declarations from such associations
would—in Texprocil’s view—not be an acceptable surrogate of producers’ support
declarations, as had been shown so clearly in the Bed linen I proceeding;
— Texprocil noted further that a large number of companies listed by Eurocoton as complainants
had not submitted a declaration of support before the initiation of the case.193  I n  f a c t  a
number of companies listed in the complaint as supporting the complaint had not provided
any evidence of their support nor had been included in the declaration of any producers
association.  It was therefore not clear whether the 25 per cent threshold laid down in Article
5.4 had been met;
― Furthermore, Texprocil took issue with the statements in the complaint that Eurocoton had 
apparently relied on the opinion of its member associations rather than assessing the support 
among producers;
― Then, Texprocil argued that a large number of complainants were not producers at all but
rather converters using outward processing arrangements in Asia or Central Europe.
Texprocil explicitly requested the Commission to check this point.
5.62 In the provisional Regulation the European Commission made the following comments:194
“E. COMMUNITY INDUSTRY
1. Definition of the Community industry
(52) After elimination from the list of companies included in the complaint of seven of them
found not to be complainants, the Commission found that the remaining companies
represented a major proportion of Community production of bed linen and satisfied therequirements of Article 5 (4) of the basic Regulation.
                                                     
193 Nor was any other evidence made available indicating such support.
194 It is recalled that Article 4(1) of the basic Regulation is worded almost identically to Article 4.1 of
the ADA. However, one big difference exists: in the basic Regulation, the domestic industry (“Communityindustry”) is linked with Article 5(4) (which largely corresponds to Article 5.4 of the ADA):
“For the purposes of this Regulation, the term ‘Co mmunity industry’ shall be interpreted as referring
to the Community producers as a whole of the like products or to those of them whose collective output of theproducts constitutes a major proportion, as defined in Ar ticle 5(4), of the total Co mmunity production of those
products . . .”  (Emphasis added)WT/DS141/R
Page 247
After initiation of the proceeding, a number of organizations representing exporters and
importers of bed linen from the countries co ncerned alleged that several of the producers
which made up the Community industry were also importing the dumped product from the
countries subject to the proceeding. In these circumstances, the Commission re-examined
whether, in the light of the provisions of Article 4(1)(a) of the basic Regulation, these
companies should be excluded from 'the Community industry.
(53) For the purposes of carrying out this reexamination, and in accordance with consistent
practice of the Community institutions, it appeared appropriate to determine whether those
companies were primarily producers in the Co mmunity with an additional activity based on
imports and merely supplementing their Community production, in order to be able to offer a
complete range of products, or whether they were importers with relatively limited additional
production in the Community.
(54) In all but one case, companies alleged to  be importing bed linen from the countries
concerned were among those selected in the sample of Community producers (see recitals
(58) to (61)). The Commission was therefore able to examine the extent of these imports
during the course of its on-the-spot verification visits. For all but one of these sampledcompanies, the investigation show ed that the imports of dumped products from the countries
concerned had accounted for less than 10  per cent of the turnover of the companies in
question in the period examined. It is therefore the opinion of the Commission that these
companies were not shielded from the effect s of dumped imports and that for the purposes of
Article 4 of the basic Regulation these companies may be considered along with the othercooperating producers, as belonging to the Community industry.
In the case of the one other sampled company, it was found that a higher proportion of its bed
linen sales in the investigation period were of Pakistani origin and also that only a minor part
of its sales were of its own production. It appeared in addition that the company's future
activity was likely to be further focused on imports. This company, whose core interests were
deemed clearly not to be in the production of  bed linen within the Community, was therefore
eliminated from the Community industry.
(55) Since all but one of the sampled companies alleged to be importing bed linen from the
countries concerned were found, on examination, not to be doing so in quantities sufficient to
warrant exclusion, it has been considered that  the allegations made by the exporters in this
regard were excessive and unreliable. Consequently, on the basis of the findings concerning
the sample, no exclusion of the one non-sampled company is warranted. This company
should, therefore, be retained in the definition of the Community industry. In any event, this
issue has no substantial influence on the question of the representativity of the Community
industry.
(56) Three other companies were eliminated. In one case the company was found no longer to
produce bed linen. In two other cases the companies did not respond to the requests for
information which were addressed, via Eurocoton and the national associations, to those
complainants which were not selected in the sample of Community producers, in order toobtain information on the Community industry as a whole.
(57) The remaining 35 companies, which cooperated with the enquiry and are located in
France, Germany, Italy, Spain, Portugal, Austria and Finland, represented a majorWT/DS141/R
Page 248
proportion of total Community production in the investigation period. These companies were
therefore deemed to make up the Community industry under the terms of Article 4(1) of the
basic Regulation.” (footnotes omitted)
5.63 The Commission did not further address Texprocil’s concerns beyond these remarks.
Specifically, the Commission did not address the questions:
— whether undated declarations made available nearly four months after the initiation could
serve as evidence that the company concerne d had indicated its support for the complaint
before  initiation;
— whether producers’ associations had the right to support a complaint in their own name;— whether producers’ associations have the right to support a complaint on behalf of producers,
but without providing evidence that they have checked with such producers;
— whether the complainants mentioned by Texprocil were producers or rather converters using
outward processing arrangements in Asia or Central Europe.
5.64 Texprocil filed comments on the provisional disclosure and the provisional Regulation.
195  It
also had a second hearing at the Commission.196  At every occasion Texprocil argued that the
evidence in the file did not suggest that a proper standing determination had been made before the
proceeding was initiated, and largely repeated the arguments on the unanswered issues mentioned
above.
5.65 In the ensuing definitive disclosure document197, the European Commission provided the
following comments on the standing issue:
“Exporters from all three exporting countrie s observed that the complainant Community
producers taken to be the Community industry made up just 34 per cent of total Community
production. They claimed that this showed that a majority of bed linen producers in theCommunity did not support the complaint and shou ld therefore be assumed not to be injured,
and that the Community industry was not therefore representative of total Community
production.
However, in response to the provisional measures only two Community producers expressed
opposition to the duties. The combined production of these two producers was less than one
third of the total production of the complainants. The Commission services therefore confirm
the finding that the 35 complainant companies represented a major proportion of total
Community production within the meaning of  Article 5(4) of the Basic Regulation.
Pakistani exporters also claimed that the Commission had not used the correct test in
determining whether Community producers which also import bed linen from the countries
concerned should be excluded from the Community industry (recitals (52) to (55) of the
provisional Regulation). By way of clarificat ion, the Commission services confirm that the
test used in recital (54) was whether bed linen imported from the countries concerned
                                                     
195 Annex 51.
196 Post-hearing brief attached as Annex 55.
197 Attached as Annex 56.WT/DS141/R
Page 249
accounted for 10 per cent of the turnover in bed linen of the companies in question, rather
than 10 per cent of total company turnover.
. . .In conclusion, the Commission services confirm both the finding that the 35 complainant
companies constitute the Community industry within the meaning of Article 4(1) of the Basic
Regulation and the sampling methodology applied.”
5.66 Texprocil filed comments on the definitive disclosure.
198  At this occasion it again brought
forward its concerns as to the standing determination, concerns which had not been allayed by the text
of the definitive disclosure document.
5.67 The definitive Regulation repeated the wording of the definitive disclosure document in
largely similar terms, with the exception of the second paragraph quoted above:
“(32) . . .However, in response to the provisional measures only two non-complainant Community
producers, which originally expressed no opinion to the Commission on the complaint,
expressed opposition to the duties. The combined production of these two producers was less
than one-third of the total production of the complainants. Throughout the proceeding,
therefore, the complainants represented considerably more than 50 per cent of the collective
output of those producers expressing either support for or opposition to the complaint.”
5.68 For the remainder Texprocil’s comments did not evoke any further response or reply from the
EC side.
5.69 The matter of standing was taken up and disc ussed at great length during both rounds of
consultations between India and the EC.  During the first round of consultations the Indian delegation
made a major effort in trying to understand how exactly the EC had proceeded in its standingdetermination.  For this purpose, India submitted a list of detailed questions to the EC delegation.
199
The questions with relevance to the standing determination are numbers 1-13.  The spokesman for theEC made the following observations:
200
“[EC]: the EC will of course try to provide a detailed answer, but will have to get back to the
file. In this case the complaint was lodged by  Eurocoton, representing national associations.
The EC was reasonably satisfied by the voting within Eurocoton. We will go through your
points and will give you a precise answer . . .
[T]he EC will answer question 4 later. As far as question 5 is concerned, it is his personal
view that it depends on the voting rules of the association. [The EC] is confident the
Commission checked these rules at the time . . .
[The EC] refers to the footnote to Article 5.4. He adds that, by the time of the injury
assessment, the EC should be certain of standing. Excluding a company can only happen
after the opening of the investigation.
                                                     
198 Attached as Annex 60.
199 Attached as Annex 10.
200 Verbatim report attached as Annex 11.WT/DS141/R
Page 250
. . .
Mr Seth: Third, one company –the Finnish company Reikälevy Oy-- submitted a declaration
of support which was undated. This means that, by the time the Indian exporters got access to
the non-confidential standing file, which was months after the initiation, they could not
ascertain when the declaration was filed. This leads to our following question:
6. Does the EC agree that undated declaration of support made available in the public filesome four months after the initiation cannot be considered as valid evidence in accordance
with Article 5.4 that the company expressed its support before the proceeding was initiated?
[EC]: I do not agree. I do not exclude that company. The internal rules of the association to
which this company belongs may make this matter irrelevant. . . .  We used the data of output
on basis of the data obtained from the associatio ns. The role played by the associations is on
behalf of the producers by virtue of their internal rules. . . [The EC] replies re question 11
that India is entitled to information enabling he r to satisfy that the standing determination has
been duly made before initiation. On question 12 he says he thinks that such information was
provided, but he will check this. On question 13, he would not deny this.
The EC adds that it would appear from the wording of the Regulation that the standing
determination was made before initiation. This  follows from the word  ‘re-examination’. The
concerns of India, which are matters of fact and law, have been fully addressed.”201
5.70 The European Commission promised to provide a written definitive reply to India’s questionswithin reasonable time.  Such reply was received on 1 October 1998.  The combined reply to
questions 1-18 was: “For discussion in a new round of oral consultations.”
5.71 During the second round of consultations the Indian delegation requested the EC to provide a
definitive answer to its queries.  Th e EC’s spokesman replied as follows:
202
“[EC]: I will set out our answer in one response. Standing rules must be met prior to the
initiation. We established that there was standing. We asked associations and companies, who
provided us with evidence that approximately 35 or 34 percent of the Community producers
supported the proceeding. We did not consider it necessary to obtain further support since we
already met the criteria.
As to our standing practice: either the associations or companies can come forth. The
associations can do it since they are acting on behalf of their members. Clearly, in case of
large numbers of companies it is not practi cal to obtain the support from each single
company. I note further that the Agreement itsel f allows sampling . . . All I can say about the
timing is that it was before the initiation. The names of the companies are named in the
complaint. There was obviously a process of contacts, but this went on before the initiation.
[T]he support from these companies was deduced from a combination of association and
individual declarations. We think this is  a reasonable process to establish support.
                                                     
201 As an explanatory note on the voting within Eurocoton, as is evident from the statutes of this
organisation, its members are producers associations. In other words, it would seem that the EC argued here thatthey relied on the support from producers’ associations.
202 Please refer to the verbatim report of the second round of consultations, attached as Annex 13.WT/DS141/R
Page 251
Mr Seth: You think that an association declaration can represent its members?
[EC]: Yes. A representative can act on behalf of companies.”
5.72 India received during the second round of consultations finally a sheet confirming which were
the seven companies listed in recital (52), and which were the 35 companies constituting the
Community industry (domestic industry).  This sheet is attached as Annex 61.
2. Commission practice
5.73 Contrary to some other jurisdictions such as Australia, Canada and the United States, the EC
does not describe in its published determinations or  elsewhere how it goes about determining standing
in cases with a large number of producers in the EC.  The notice of initiation contains at most a
standard phrase.203 This is regrettable, but perhaps not necessarily in violation of the ADA.  Some
indication about the process may be obtained from a European Commission draft document entitled
Guide on how to draft an anti-dumping complaint  with instructions to prospective complainants on
how to draft a complaint.204  This document explains that:
“21. Standard forms for expressing support can be delivered to the complainant, upon
request.
22. You may also comment on known producers, which do not support the complaint,
describing, where possible, how many there are, their names, their contact data and their
importance in Community production, and the reasons why they do not support the complaint.
23. It should be noted that the Commission verifies the representativeness of the Complainant
prior to the initiation of the proceeding.”
5.74 Before discussing the fact pattern in Bed linen II in detail, it may be noted by way of
background information that the support of EC producers for complaints filed by Eurocoton (the EC
industry association representing the complainants) was a problem in Bed linen I, in the Cottonfabrics-I and the Synthetic fabrics proceedings.  All these proceedings were initiated in 1994 pursuant
to complaints by Eurocoton; all of which targeted—among others—India; in all of them co-operation
of EC producers with the Commission was minimal.
5.75 It appears from the complaint (quoted above) that Eurocoton:
“made an inquiry among its member Associations . . . in order to evaluate the rate of effective
support for this complaint. At the date of completion of the inquiry, Member Associations
which answered, supported all this complaint and no one objected to the lodging of this
complaint.”
5.76 The non-confidential standing file contained a number of declarations of support from
companies and from producers’ associations, which in total mentioned 35 companies.
                                                     
203 By way of example, copies of the relevant pa rt of notices of initiation from other proceedings
opened around the same time as the Bed linen II proceeding are attached as Annex 74.
204 Annex 62. Although this document has existed formally as a ‘draft’, it appears to be used by the
Commission Services, or to India’s best knowledge at least reflect EC practice.WT/DS141/R
Page 252
5.77 During the consultations, two different replies were given by the EC. During the first round,
the EC stressed that Eurocoton had determined  the support for the complaint among its member
associations.  The only ‘evidence’ made available in the non-confidential file was the statement in the
complaint itself.
5.78 During the second round of consultations, the EC appeared to indicate that it had checked
standing by relying on the declarations in the non-confidential file. Although this point was raised at
every occasion, the EC has never denied or contradicted that some of these declarations were made by
producers’ associations. Indeed, as noted above, the EC clarified during the second round ofconsultations that “either the associations or companies can come forth. The associations can do it
since they are acting on behalf of their members.”  The EC delegation likened the submission of
support by a producers’ association to the representation of companies by lawyers.
3. Claims
5.79 Three claims flow from the events and facts described above.
5.80 First, the EC acted inconsistently with Article 5.4 of the ADA by not making a proper
standing determination before the anti-dumping proceeding was initiated.
5.81 Second, the EC acted inconsistently with Ar ticle 12.2.1 of the ADA by failing to explain its
provisional determination on standing, even though Texprocil had made very elaborate arguments on
this matter.
5.82 Third, the EC acted inconsistently with Arti cle 12.2.2 by failing to provide in either the
definitive Regulation or elsewhere the matters of fact and reasons which have led the EC to reject
Texprocil’s arguments and claims.
4. Claim 26:  inconsistency with Article 5.4
4.1 The text of Article 5.4
5.83 Before proceeding with the analysis of the argu ments, an analysis of the obligations contained
in Article 5.4 of the ADA would seem in order.   Article 5.4 of the ADA provides as follows:
“An investigation shall not be initiated pursuant to paragraph 1 unless the authorities have
determined, on the basis of an examination of th e degree of support for, or opposition to, the
application expressed13 by domestic producers of the like product, that the application has
been made by or on behalf of the domestic industry.14 The application shall be considered to
have been made ‘by or on behalf of the domesti c industry’ if it is supported by those domestic
producers whose collective output constitutes more than 50 per cent of the total production of
the like product produced by that portion of the domestic industry expressing either support
for or opposition to the application. However, no investigation shall be initiated whendomestic producers expressly supporting the application account for less than 25 per cent of
total production of the like product produced by the domestic industry.
—————————————————————————
13. In the case of fragmented industries involving an exceptionally large number of
producers, authorities may determine support and opposition by using statistically validsampling techniques.WT/DS141/R
Page 253
14. Members are aware that in the territory of certain Members employees of domestic
producers of the like product or representatives of those employees may make or support an
application for an investigation under paragraph 1.”205
5.84 Article 5.4 lays down a number of clear rules on how the investigating authorities mustdetermine whether standing exists.
5.85 As a first note, Article 5.4 essentially lays down two tests which may be paraphrased as
follows:
— a test whether at least 25 per cent of domestic producers expressly support the complaint
[hereinafter: “25 per cent test”]; and
— a test whether at least 50 per cent of all producers who made themselves known to the
investigating authorities support the complaint [hereinafter: “50 per cent test”].
No issue is taken in this proceeding with the 50 per cent test.5.86 Article 5.4 lays down very clear procedural requirements. First, it notes that “[a]n
investigation shall not be initiated”  unless the authorities have “determined” representativeness (also
referred to as standing determination).  India believes that the word “shall”  has an imperative
element.
206  It does not permit an interpretation as ‘should’, ‘could’ or ‘may’.  Second, the word
“determined”  would seem to require an explicit determination.
                                                     
205 For easy reference, we recall also the text of Article 5(4) of the basic Regulation:
“An investigation shall not be initia ted pursuant to paragraph 1 unless it has been determined, on the
basis of an examination as to the degree of support for, or opposition to, the complaint expressed by Communityproducers of the like product, that the complaint has been made by or on behalf of the Community industry. Thecomplaint shall be considered to have been made by or on behalf of the Community industry if it is supported bythose Community producers whose collec tive output constitutes more than 50  per cent of the total production of
the like product produced by that portion of the Comm unity industry expressing either support for or opposition
to the complaint. Ho wever, no investigation shall be  initiated when Community producers expressly supporting
the complaint account for less than 25  per cent of total production of the like product produced by theCommunity industry.
206 In this context India recalls the Appellate Body’s dictum in EC-Measures affecting the importation of certain
poultry products, Appellate Body report 1998/3, WT/DS69/AB/R of 13 July 1998, at § 165:
"In our view, the ordinary meaning of the text of Article 5.5 is clear. The chapeau of Article 5.5 clearly states thatthe schedule in the body of that provision is mandatory. The word used in the chapeau is ‘shall’, not ‘may’. Thereis no qualifying language, and there is no l anguage that permits any me thod other than t hat set out in the schedule
in Article 5.5 as a basis for the calc ulation of additional duties. Likewise, Ar ticle 5.5 clearly identifies the c.i.f.
import price of the shipment as the sole element to be compared with the trigger price in the calculation of the
additional duties. Article 5.5 stipulates that the amount of additional duties ‘shall be set’ on the basis of the
comparison of the c.i.f. import price of the shipment concerned with the trigger price. Thus, the ordinary meaningof the c.i.f. import price of the shipment is precisely that: the c.i.f. import price of the shipment . . . There is noauthority in the text of Article 5.5 for a Member to use any alternative to the c.i.f. import price, shipment-by-shipment, in the calculation of the additional duties imposed under this special safeguard mechanism.”
Compare further EC Measures Concerning Meat and Meat  Products (Hormones)(complaint by Canada), Report
of the Panel, WT/DS48/R/CAN of 18 August 1997 at § 8.169:
“Guided by the wording of Article 5.4, in particular  the words ‘should’ (not ‘shall’) and ‘objective’,
we consider that this provision of the SPS Agreement does not impose an obligation.”
Similar Hormones (complaint by USA), WT/DS26/R/USA of 18 August 1997 at 8.167.WT/DS141/R
Page 254
5.87 Second, it is evident that the determination mu st be made by the investigating authorities
(“unless the authorities have determined” ).
5.88 Third, Article 5.4 indicates how a determination of representativeness is to be made: “. . . on
the basis of an examination of the degree of support for, or opposition to, the application expressed by
domestic producers of the like product” .  This requires foremost an examination.  The determination
is to be made following  this examination.  This follows from the words “on the basis of”  in “have
determined, on the basis of an examination” .
5.89 Fourth, the examination must be made of “the degree of support for, or opposition to, the
application expressed” .  The support or opposition must have been “expressed” .  This implies, in
other words, a deliberate act on behalf of the entity  whose support is examined (the footnote to Article
5.4 is discussed below).
5.90 Fifth, Article 5.4 contains clear language whose  support is to be taken into account: “the
degree of support for, or opposition to, the application expressed by domestic producers of the like
product . . .”   The only entities whose support counts are domestic producers.207  In this context the
difference in language may be noted within the first sentence of Article 5.4: in order to determine
whether the application has been filed “by or on behalf of”  the domestic industry, an examination of
the support or opposition expressed by domestic producers is required.208  In other words, Article 5.4
foresees two actions from the side of the industry:
1) the filing of the complaint, which may be done by any entity; and
2) the expression of the support for the complaint, which must come from “the domestic
producers of the like product” .
                                                     
207 It is true that the footnote to Article 5.4 provides that: “ Members are aware that in the territory of
certain Members employees of domestic producers of the like product or representatives  of those employees may
make or support an application for an investigation under paragraph 1.”
This, however, deals with a situation not found in the EC but rather with the specific domestic
legislation of another WTO Member. This would consequently not seem to be relevant for the Bed linen II  case.
208 In this context India would foll ow the analysis of the words “ on behalf of ” in United
States—Imposition of anti-dumping duties on import s of seamless stainless steel hollow products from
Sweden , Report of the Panel (unadopted) of 20 August 1990, ADP/47 at § 5.9 (even though that
analysis was made in the context of the 1979 Anti-Dumping Code):
“5.9 The Panel noted the views expressed by Sweden and the United States regarding the meaning of
the term ‘on behalf of’ in the first sentence of Article 5:1 of the Agreement . . . The Panel considered that in itsordinary meaning this term was used to refer to a sit uation where a person or entity  acted on the part of another
involving the notion of agency or representation. Nothing in the text of Article 5:1 suggested that the drafters of
the Agreement had wished to attach a different meaning to this term; on the contrary, the fact that the term ‘on
behalf of’ appears in Article 5:1 as an alternative to ‘by’ underlines that this term must be interpreted inaccordance with its ordinary meaning. In the view of the Panel, the alternative for the requirement that apetition be filed ‘by’ the domestic industry affected cannot be a re quirement so loose as to allow a request to be
filed by some members of an industry simply claiming to be acting ‘on behalf of’ the rest of the industry. The
Panel concluded that ‘a written request . . . on behalf of  the industry affected’ implies that such a request must
have the authorization or approval of the industry a ffected before th e initiation of an investigation.”
This line of reasoning in the interpretation of “on behalf of”  was followed by the Panel in United
States—Anti-dumping duties on gray portland cement and cement clinker from Mexico, Report of the Panel
(unadopted) of 7 September 1992, ADP/82 at § 5.18-5.19.WT/DS141/R
Page 255
These two actions may take place at the same point in time. For example, if a complaint is issued
“by”  companies clearly accounting for more than one-quarter of the total of EC producers, the EC
authorities could reasonably conclude that the 25 per cent test is met.209  That factual situation,
however, did not occur in the Bed linen II proceeding.
5.91 The provision does not preclude that an entity other than a producer files a complaint “on
behalf of”  the domestic industry—but in such a situation an examination of the support or opposition
expressed by domestic producers  nevertheless remains called for. Indeed, although it is possible that
the complete domestic industry supports an anti-dumping proceeding (a situation which will normallymostly occur in cases where the number of domestic producers is very limited), in most anti-dumping
proceedings the entity filing the complaint will not itself constitute the complete domestic industry.
At least in EC practice, most anti-dumping complaints tend to be filed by trade organisations,
(allegedly) on behalf of the domestic industry.  The second and third sentences of Article 5.4 deal
with the concept “by or on behalf of the domestic industry”  by providing for the 50% test and the
25%, respectively.  In both cases, the support for the complaint must come from domestic producers
rather than from trade organisations or other entities not producing the like product.
5.92 Also, it is not argued in this context that a written declaration is the only method allowed by
the ADA in which a producer could express its support for the anti-dumping complaint.  It followsfrom the file, however, that the EC in the Bed linen II proceeding has relied on such written
declarations.  Moreover, the EC authorities have not argued that they sought or obtained the support
from producers in any other manner.
                                                     
209 In this respect the Panel report must be noted in United States—Imposition of anti-dumping duties
on imports of fresh and chilled Atlantic salmon from Norway, Report of the Panel adopted on 27 April 1994,
ADP/87: 
“358. The Panel then turned to the question of the duty incumbent on investigating authorities to ensure thattheir actions with regard to the treatment of written requests for the initiation of anti-dumping investigations wereconsistent with their obligations under Article 5:1. The Panel considered that, in light of the requirement inArticle 5:1 that a written request be by or on behalf of the industry affected and contain certain evidence, the
investigating authorities could not, consistently with Article 5:1, initiate investigations automatically in response to
any written request received. The requirements of Article 5:1 clearly implied a duty for the authorities to evaluate
each such written request to ascertain whether it contained the required information, and to screen out those
requests that failed to provide it. The investigating aut horities therefore had to evaluate whether a written request
for the initiation of an investigation was made "on behalf of" the industry affected . . .
360. The Panel noted that the Agreement did not provide precise guidance as to the procedural steps to be
taken for such an evaluation, and considered that the question of how this requirement is to be met depends on the
circumstances of each particular case. In the Panel's view, this question, or in this case the steps the United States
was required to take as a prerequisite to initiating an investigation, had to be eval uated on the basis of the
information before the investigating authorities at the time of the initiation decision. The Panel examined whether
in the case before it the United States had taken such steps as could reasonably be considered sufficient to ensure
that the written request for initiation of an investigation had been made with the authorization or approval of the
industry affected.
361.  . . . The written request for the initiation of an anti-dumping investigation had been made with a legal
certification as to its accuracy and completeness . It had been submitted by twenty-one firms  representing well over
the majority of all domestic production of Atlantic salmon . . .”In this case, the co mplainant did provide a legal certification guar anteeing that the inform ation on standing was
correct.”  (Emphasis added, footnotes omitted)
In this respect it is further relevant that the language of Article 5.4 of the ADA is considerably more
stringent than the language of Article 5.1 of the 1979 ( “An investigation to determine the existence, degree and
effect of any alleged dumpi ng shall normally be initiated upon a written request by or on behalf of the industry
(as defined in Article 4) affected” ), which was at issue in Salmon.WT/DS141/R
Page 256
4.2 Legal arguments relating to the claims relating to Article 5.4
5.93 India has a number of arguments why the determination of representativeness made by the EC
does not meet the requirements laid down in Article 5.4, as analysed above.
5.94 First, it appears from the file that the EC has accepted a statement from at least one
producers’ association (the Austrian association Vereinigung Textilindustrie) that it supported the
complaint in its own name, and has added the produc tion volume of the members of this association
to that of the complainants.  Indeed, it is not certain whether the 25% test would still be met if theoutput of the members of the Austrian association were deducted.
5.95 If there has been any further check of the veracity of this statement, no record of it has been
made available.  The only response by the EC on the concerns raised by Texprocil in this regard was
the curt statement in the provisional Regulation that “the remaining companies represented a major
proportion of Community production of bed linen and satisfied the requirements of Article 5(4) of the
basic Regulation.”
210   At the definitive stage the EC institutions simply ignored Texprocil’s
arguments.  During the consultations the EC indicated orally that a declaration by a producers’
association was valid in its opinion for the purposes of expressing support for the application.
5.96 India believes that, while it is possible for an association of producers to file a complaint, it
would not be possible for a producers’ association to substitute its support for that of its member
companies.  While acknowledging that Article 17.6(ii) of the ADA provides a certain space for
different interpretations, this space only exists if “a relevant provision of the Agreement admits of
more than one permissible interpretation” .  In the case of Article 5.4, however, the interpretation
according to customary rules of interpretation is perfectly clear.  In an interpretation “in accordance
with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its
object and purpose”211 “domestic producers”  are to be interpreted as ‘domestic producers’.
5.97 The argument used by the EC during the consultations that the rôle of the association in
expressing support is comparable to that of a lawyer representing a company is instructive in this
regard, in that it is false.  At least in EC anti-dumping practice (and probably in most jurisdictions) foreach new anti-dumping proceeding lawyers have to show a power of attorney from the company (on
the company’s letterhead, dated and signed) they purport to represent—no matter how longstanding
the relation between the company and the lawyer.   Indeed, the Commission will often insist on
receiving the original (as opposed to a faxed copy) document for its files.
5.98 India believes that the procedural error of accepting and relying on a declaration of support
“on behalf of”  a producers’ association without further checking whether the member companies of
the association did indeed support the complaint
212, cannot be repaired retroactively.213
5.99 Second, it appears from the file that the EC accepted producers’ associations’ declarations“on behalf of”  producers, without these producers having ever confirmed their support to the
                                                     
210 Recital (52).
211 Article 31(1) of the 1969 Vienna Convention on the Law of Treaties.
212 It has never been alleged by the EC during ei ther the administrative proceeding or during the
consultations that such a check was ever made. Even if it was, no record has been made available from which
such a check would transpire.
213 In this context guidance may be found in the GATT panel report on United States—Imposition of
anti-dumping duties on imports of seamless stainless steel hollow products from Sweden, Report of the Panel
(unadopted) of 20 August 1990, ADP/47 at § 5.20.WT/DS141/R
Page 257
investigating authorities before the initiation of the proceeding.214,,215  This concerns the French and
Spanish producers’ association declarations, and the (alleged) expressed support of the following
companies:
France:
— Ets Claude,
— Jalla SA-Nieppe,
— Hacot (Joseph et Cie),— Ets Hacot et Colombier,
— Ets Fremaux,
— Vanderschooten,
— Mulliez Freres SA au Longeron,
—E t s  B e r a ;
Spain:
— Estebanell y Pahisa SA,
— Hilados y Tejidos Puignero SA,— Textil Cano Segura (Texca Sesa).
5.100 As far as the EC has argued that the statutes of the producers’ associations allow them to
represent their members, it is believed that this misses the point.  As argued above, a producers’
association may surely file a complaint.  The issu e here, however, is not whether such an association
has the right to file a complaint, but rather whether it can replace individual producers in expressing
support for it.  It follows from the analysis above that it cannot.  In the terms of the analogy noted
before by the Commission during the consultations: a lawyer cannot represent his client in issuing on
behalf of that client a power of attorney to himself.
5.101 Moreover, as far as the EC would mean with its argumentation that it could trust that the
producers’ associations or Eurocoton have checked st anding, this would in effect imply the ‘catering
out’ of the standing determination to the complainan t.  It would seem that this would be hard to
reconcile with the wording of Article 5.4, which clearly requires “the authorities”  to determine
representativeness.  Eurocoton, its member associations or any other private party do not constitute
“the authorities” .
5.102 The EC’s acceptance of declarations from associations without further verifying these is not
excused by the large number of exporters.  The ADA foresees for a clear procedure in cases where the
number of exporters is large.  If the EC considered that the number of alleged EC complainants was
too large to make it practical to examine the expressed support of each individual producer, it could
have resorted to the option contained in the footnote to Article 5.4:
                                                     
214 Even if they would have, no record has ever been made available nor has it been alleged in any way
by the EC in the administrative proceeding or during the consultations. Furthermore, India believes that it isentitled to rely on the non-confidential file made available by the investigating authorities.
215 The notice of initiation is not even clear whether the complaint was submitted “by”  the domestic
industry or “on behalf of”  the domestic industry:
“Having determined, after consulting the Advisory Committee, that the complaint has been lodged by
or on behalf of the Community industry and that ther e is sufficient evidence to  justify th e initiation of
proceedings, the Commission has commenced an investiga tion pursuant to Article 5 of Regulation (EC) No
384/96.”  (Emphasis added) (OJ (1996) C 266/2 at 5).WT/DS141/R
Page 258
“In the case of fragmented industries involving an exceptionally large number of producers,
authorities may determine support and opposition by using statistically valid sampling
techniques.”
5.103 As a factual matter, it is noted that during the administrative proceeding the EC authorities
have never argued that this footnote was applied in the Bed linen II proceeding.  Only during the
second round of consultations the EC delegation referred to it briefly, apparently as an indication that
the EC’s practice in the Bed linen II proceeding might be covered by it.
5.104 In this respect it must be noted that the footnote refers to “statistically valid sampling
techniques” .  Quite apart from no evidence being on file of any sampling technique ever having been
used by the EC for the determination of representa tiveness, it would seem that a sample taken from
the membership of the member associations of Eurocoton would not give a statistically valid pictureof the domestic producers of bed linen in the EC.  This is all the more so now that the standing for this
proceeding according to the EC was at best little over 34 per cent (rather less than the 53 per cent
alleged by Eurocoton in its complaint) of Community producers.  Consequently, a large number of
producers would thus seem to have never been asked their opinion on the complaint.
5.105 As a last issue, the question arises whether the procedural error committed before the
initiation has been repaired retroactively by French  and Spanish companies co-operating with the EC.
We believe it has not.  The wording of Article 5.4, as analysed above, would seem to be quite clear.
We further note the text of Article 1 of the ADA:
“An anti-dumping measure shall be applied only under the circumstances provided for in
Article VI of GATT 1994 and pursuant to investigations initiated1 and conducted in
accordance with the provisions of this Agreement. The following provisions govern the
application of Article VI of GATT 1994 in so far as action is taken under anti-dumping
legislation or regulations.
————
Footnote 1. The term ‘initiated’ as used in this Agreement means the procedural action by
which a Member formally commences an investigation as provided in Article 5.”
(Emphasis added)
5.106 An anti-dumping duty may only be imposed if the investigation has been initiated and
conducted in accordance with the ADA.  The footnote to Article 1 even specifically clarifies thatArticle 5 (and thus 5.4) is very much relevant in this context.  Since the standing determinations in the
Bed linen II proceeding were made inconsistently with Article 5.4 of the ADA, the anti-dumping duty
has been imposed inconsistently with Article 1 (a nd, for that matter, Article VI of GATT 1994).  The
language of Article 1 is imperative: “shall be applied only
”.216  There is no qualifying language in
Article 5.4 of the ADA.  Procedural defects at the time of initiation cannot be repaired retroactively.217
                                                     
216 In this context the Panel’s conclusions in Korea—Anti-dumping duties on imports of polyacetal
resins from the United States may be noted (Report of the Panel, ADP/92 and Corr.1 of 2 April 1993 at § 210):
“. . . for a panel to review a determination by reference to considerations not actually reflected in a
public statement of reasons accompanying such determination would also be inconsistent with the requirements ofan orderly and efficient conduct of the dispute settlement process . . . A full and public statement of reasons
underlying an affirmative determination at the time of that determination enabled Parties to the Agreement to
assess whether recourse to the dispute settlement mechanism . . . was appropriate and provided a basis for adelimitation of the object of such dispute settlement proceedings. In this connection the Panel noted that, in light ofthe wording of the public notice given by the Korean authorities at the time of the imposition of the anti-dumpingWT/DS141/R
Page 259
5.107 Additionally, the purpose of Article 5.4 is to avoid undue harassment of exporters by
frivolous initiations (such as, for example, occurred by the initiation of the first Bed linen
proceeding).  This purpose would be defeated if the investigating authorities would be allowed toinitiate an anti-dumping proceeding without making a proper determination of representativeness in
order to subsequently attempt to obtain the necessary support for the proceeding.  In this context,
India can only concur with the EC’s assessment in Brazil—Imposition of provisional and definitive
countervailing duties on milk powder and certain types of milk from the EEC:218
“The EEC disagreed with Brazil's position that th is dispute involved only procedural issues and
that any procedural errors committed by Braz il were harmless. The EEC considered that
substantive rights under the Agreement coul d not be effectively guaranteed if minimum
procedural requirements were not respected. Mo reover, the EEC pointed out that its complaint
also related to Brazil's non-compliance with su bstantive requirements in Article 6 of the
Agreement regarding the determination of  the existence of material injury.”  (Emphasis added)
5.108 Last, it may be noted that Article 3(8) of the Dispute Settlement Understanding provides a
strong presumption that an infringement of a covered agreement implies a case of nullification or
impairment.  India believes that the standing determination in the Bed linen II proceeding does notmeet the criteria of Article 5.4 and as such, impaired or nullified India’s rights under the WTO
Agreement.
5. Claim 27:  inconsistency with Article 12.2.1
5.1 The text of Article 12.2.1
5.109 Mutatis mutandis  the same logic applies as noted in section V.A.4.1, above: “determination”
in sub-paragraph 12.2.1(v) is in singular, in contrast to the “preliminary determinations”  in the
chapeau of the provision.  That would suggest that “determination”  in sub-paragraph (v) refers to
“preliminary or final determination”  in Article 12.2.  In other words, under Article 12.2.1 the
investigating authorities must set out in the provisional and definitive Regulations “the main reasons
leading”  to “the preliminary or final determination” .  Logically, sub-paragraph (v) aims also at those
determinations essential for the investigating authorities in order to impose anti-dumping measures,
including the determinations on representativeness required under Article 5.4.
5.110 Since the provisional Regulation (and the provisional disclosure document) is the first
document in which the EC authorities explain their position on standing, the exporters may expect toreceive a reply there to any arguments raised by them  in this respect.  If the investigating authorities
would not be under any obligation to explain their standing determination at the time of the
                                                                                                                                                                    
duties, Parties to the Agreement and ex porters affected by these measures had no reason to believe that the injury
determination of the KTC was based on considerations not reflected in that notice.”  (footnote omitted)
Again reference is made to the Appellate Body’s dictum in EC—Measures affecting the importation of certain
poultry products, AB-1998-3, WT/DS69/AB/R of 13 July 1998 at § 165:
“The chapeau of Article 5.5 clearly states that the schedule in the body of that provision is mandatory.
The word used in the chapeau is ‘shall’, not ‘may’. There is no qualifying language, and there is no language
that permits any method other than that set out in the schedule in Article 5.5 as a basis for the calculation ofadditional duties.”
217 Similar logic (in the context of the 1979 Anti-Dumping Code) in United States—Imposition of anti-
dumping duties on imports of seamless stainless steel hollow products from Sweden, Report of the Panel
(unadopted) of 20 August 1990, ADP/47 at § 5.20.
218 Report of the Panel adopted on 28 April 1994, SCM/179 and Corr.1 at § 205.WT/DS141/R
Page 260
imposition of provisional anti-dumping measures, it would impair the effective possibilities for
exporting countries to raise such issues under Article 17.4, second sentence.219
5.111 Second, the word “and”  in the chapeau of 12.2.1 must be noted between “sufficiently
detailed explanations for the preliminary determinations on dumping and injury”  and “shall refer to
the matters of fact and law which have led to arguments being accepted or rejected” .  In other words,
the limitation to preliminary determinations on dumping and injury  would not appear to be applicable
to the second part “shall refer to the matters of fact and law which have led to arguments being
accepted or rejected” . As argued above, Article 12.2.1 as a whole, and especially in view of its sub-
paragraph (v), does apply to the standing determin ation as well.  A correct reading of Article 12.2.1
would thus seem to be that the provisional Regulation (or some other disclosed provisional document)
must refer to the matters of fact and law which have led to arguments being accepted or rejected”  in
the context of standing as well.
5.2 Legal arguments relating to the claims relating to Article 12.2.1
5.112 In anti-dumping proceedings the investigating au thorities have a very dominant position as far
as knowledge of the facts is concerned.  This is even more so in the EC, where the European
Commission is the only entity having access to all facts relating to standing.  Article 12 fulfils in thiscontext a crucial rôle to ensure a certain degree of transparency.  In this context the dictum  of the
Panel in Korea—Anti-dumping duties on imports of polyacetal resins from the United States is of
relevance:220
“In the view of the Panel, the purpose of this provision would be frustrated if in a dispute
settlement proceeding . . . a Party were allowe d to defend a challenged . . . determination by
reference to alleged reasons for such determination which were not part of a public statement
of reasons accompanying t hat determination . . .”
5.113 In the provisional Regulation imposing anti-dumping duties on Indian bed linen the
explanation on the determination of representativeness was, to put it charitably, brief:
“(52) After elimination from the list of compan ies included in the complaint of seven of them
found not to be complainants, the Commission found that the remaining companies
represented a major proportion of Community production of bed linen and satisfied the
requirements of Article 5(4) of the basic Regulation.“
5.114 No word was spent in the provisional Regulation or the provisional disclosure document on
the issues raised above—even though the Indian e xporters had brought them to the EC’s attention
throughout the proceeding repeatedly and in detail.
5.115 Apart from the information made available in the non-confidential file, there was no way for
the Indian exporters to further check the veracity of the conclusions of the investigating authorities.
Under such circumstances, the EC can hardly claim that it referred “to the matters of fact and law
                                                     
219 “When a provisional measure has a significant impact and the Memb er that requested consultations
considers that the measure was taken contrary to the provisions of paragraph 1 of Article 7, that Member may
also refer such matter to the DSB.”
Article 7.1 explicitly refers to Article 5, which includes Article 5.4.
220 Korea—Anti-dumping duties on imports of polyacet al resins from the United States, Report of the
Panel, ADP/92 and Corr.1 of 2 April 1993 at § 209.WT/DS141/R
Page 261
which have led to arguments being accepted or rejected”  or that the provisional Regulation or the
provisional disclosure contained “the main reasons leading to the determination” .
5.116 In summary, India believes that neither in the provisional Regulation nor in any other
document made available to the Indian exporters around the time of the provisional anti-dumping
measures the EC met the standards laid down in Article 12.2.1.
6. Claim 28: inconsistency with Article 12.2.2
6.1 The text of Article 12.2.2
5.117 The text of Article 12.2.2 differs somewhat from that of Article 12.2.1:
“A public notice of conclusion or suspension of an investigation in the case of an affirmative
determination providing for the imposition of a definitive duty or the acceptance of a price
undertaking shall contain, or otherwise make available through a separate report, all
relevant information on the matters of fact and law and reasons which have led to the
imposition of final measures or the acceptance of a price undertaking, due regard being paid
to the requirement for the protection of confidential information. In particular, the notice or
report shall contain the information described in subparagraph 2.1, as well as the reasons for
the acceptance or rejection of relevant arguments or claims made by the exporters and
importers, and the basis for any decision made under subparagraph 10.2 of Article 6.”
6.2 Legal arguments relating to the claims relating to Article 12.2.2
5.118 Even if the EC did not agree with the Indian exporters, it was still obliged to provide in the
definitive Regulation ”the reasons for the acceptance or rej ection of relevant arguments or claims
made by the exporters and importers” .
5.119 As noted in the facts’ description above, the EC did react on issues raised in the connection
with the scope of the domestic industry.
5.120 However, even though the Indian exporters again filed arguments in response to the
provisional disclosure and the provisional Regulation, there was absolutely no reaction to or even a
denial of the arguments and claims made by Indi an exporters in connection with Article 5.4.  The EC
thus failed to explain its definitive finding consistently with Article 12.2.2.
VI. CLAIMS RELATING TO INDIA'S STATUS AS A DEVELOPING COUNTRY
A. ARTICLE 15:  THE INVESTIGATING AUTHORITIES FAILED TO CONSIDER POSSIBILITIES OF A
CONSTRUCTIVE REMEDY EVEN THOUGH INDIAN EXPORTERS HAD STRESSED THE IMPORTANCE
OF THE BED LINEN INDUSTRY TO INDIA
6.1 Summary: the EC acted inconsistently with Article 15 of the ADA by not exploring
possibilities of a constructive remedy and by not even reacting to arguments from Indian exporters
pertaining to Article 15 ( claim 29 ).
Even though detailed arguments were presented by the Indian exporters on these issues, the EC failed
to properly explain its reasoning, and consequently acted inconsistently with Article 12.2.1 ( claim 30 )
and 12.2.2 ( claim 31 ).WT/DS141/R
Page 262
1. Facts
6.2 In its injury submission221 Texprocil drew attention to India’s status as a developing country:
“Among all the countries targeted by this proc eeding, India has by far the lowest per-capita
income. GDP per capita is one of the three criteria used by the United Nations in determining
the Least Developed Country (LDC) status. In 1971 the UN General Assembly established the
list of LDCs. Lower and upper cut-off points of per-capita GDP were established at US$356
and US$427 respectively, and then manufacturing share of GDP and literacy rate for the
country were factored into the formula.
While Texprocil realises that India is not listed as an LDC, India's 1993 per capita GDP of
US$270 was not only below the lower cut-off point for LDCs, but was also much lower than
the per capita GDP of all countries in this proceeding, as shown by table 7:
Table 7: GNP per capita (US$, estimates)
India Egypt Pakistan
270 (1993) 730 (1992)  410 (1992)
Source: CIA World Factbook
Article 15 of the Agreement provides that:
‘[i]t is recognized that special regard must be given by developed country Members to the
special situation of developing country Members when considering the application of anti-
dumping measures under this Agreement. Possibi lities of constructive remedies provided for
by this Agreement shall be explored before applying anti-dumping duties where they would
affect the essential interests of developing country Members.’
The textile industry is one of the most important economic engines of the Indian economy. The
country is highly dependent on the textile industry as a source of employment and
development.
Texprocil respectfully requests that the Commission takes into account the spirit behind these
special considerations while determining any injury caused by the allegedly dumped imports,and in any subsequent action it may take or suggest.”
6.3 During the first injury hearing the importance of the bed linen industry to the Indian economy
was stressed and in the subsequent post-hearing brief
222 the point was repeated.
6.4 Notwithstanding India’s request on the basis of Article 15, the EC did not once in the
provisional Regulation, the provisional disclosure or anywhere else in the file even mention India’s
status as a developing country, let alone consider or comment on possibilities of constructive
remedies.  Even though Indian exporters had repeatedly stressed the great importance of the bed linen
and textile industry to India’s economy, the EC did not once contact the Indian exporters or the Indiangovernment to explore the possibilities of constructive remedies before applying the provisional anti-
dumping duties.
                                                     
221 Attached as Annex 50.
222 Attached as Annex 54.WT/DS141/R
Page 263
6.5 In its comments to the provisional disclosure, Texprocil therefore reminded the EC:223
“Texprocil recalls for the record its arguments concerning India’s status as a developing
country as presented to the Commission. Texprocil notes that both in the disclosure document
and in the provisional duties Regulation the Commission has failed to address these issues.”
6.6 The EC was similarly reminded during the second injury hearing and in the second post-
hearing brief.224
6.7 Nevertheless, the definitive disclosure document and the definitive Regulation also failed toeven mention India’s status as a developing country, let alone make any determination or any
consideration on the issue of Article 15.  The EC again failed to contact the Indian exporters or the
Indian government to explore the possibilities of constructive remedies.
6.8 During the first round of consultations India raised the issue and the following discussion
took place:
“Mr Seth: The words ‘must be given’ in Article 15 would seem to be mandatory. While Article
15 does not per se require the EC to make special concessions to developing countries such
as India in each case, it does lay down an obligation at least to consider (‘special regard’)
the ‘special situation of developing country Members’. It is accepted that such special regard
does not affect the calculation of dumping and injury per se. Nevertheless, the words ‘when
considering’ would imply that the EC, afte r having determined that dumping and injury
caused thereby are present, must make a separate determination on the effects of anti-
dumping measures to India’s situation as a developing country.
. . .[EC]: The EC is convinced that special regard has been given. . . .”
6.9 The EC did not elaborate on its answer in its letter of 1 October 1998.6.10 During the second round of consultations India reverted to the issue:
“Mr Seth: I move now on to question 115. Let me recall our conviction that the words
‘special regard must be given . . . to the speci al situation of developing country Members’ in
Article 15 of the Agreement would seem to be  mandatory. While Article 15 does not per se
require the EC to make special concessions to developing countries such as India in each
case, it does lay down an obligation at least to consider (‘special regard’) the ‘special
situation of developing country Members’.
. . .[EC]: We maintain that the requirement was respected. . . . Article 15 is a difficult piece,
particularly in the Anti -Dumping Agreement.”
6.11 In its letter of 29 June 1999225 the EC provided the following written answer to question 115:
                                                     
223 Attached as Annex 51.
224 Attached as Annex 55.WT/DS141/R
Page 264
“Question 115
Can the EC indicate where in the provisional or definitive Regulations it has considered
giving special regard to the special situation of India as a developing country Member?
It was pointed out that while specific concessi ons made to Indian firms in view of their
location in a developing country were not spelled out in the published Regulations, the firms
concerned were granted special treatment in a number of ways.  The preparation of simplifiedquestionnaires for exporters, the acceptance of responses beyond the stated deadline and
consequent granting of co-operator status, and the individual treatment of newcomers despite
the case having been based on sampling, are all examples of special consideration.
Last but not least, discussions on undertaking [sic] took place and this has to be considered
as complying with obligations even if these did not result in measures in the form of
undertakings.”
2. Claims
6.12 Three claims flow from the events and facts described above.
6.13 First, the EC acted inconsistently with Article 15 by failing to explore possibilities of
constructive remedies before imposing anti-dumping duties, even though India had clearly argued that
the textile industry, and with it the bed linen industry, is of essential interest to the Indian economy.
6.14 Second, the EC acted inconsistently with Ar ticle 12.2.1 of the ADA by failing to indicate in
the provisional Regulation or in any other report made available to the Indian exporters at the time of
the imposition of provisional measures why it refused any constructive remedy based on Article 15, or
how it responded to its obligations under the second sentence of Article 15.
6.15 Third, the EC acted inconsistently with Articl e 12.2.2 of the ADA by failing to indicate in the
definitive Regulation or in any other report made available to the Indian exporters at the time of theimposition of definitive measures why it refused any constructive remedy based on Article 15, or how
it responded to its obligations under the second sentence of Article 15.
3. Claim 29:  inconsistency with Article 15
3.1 The text of Article 15
6.16 Article 15 provides that:
“It is recognized that special regard must be given by developed country Members to the
special situation of developing country Members when considering the application ofanti-dumping measures under this Agreement. Possibilities of constructive remedies provided
for by this Agreement shall be explored before applying anti-dumping duties where they
would affect the essential interests of developing country Members.”
                                                                                                                                                                    
225 Attached as Annex 14.WT/DS141/R
Page 265
6.17 Article 15 provides for two different issues:
1. The first sentence of this provision concerns the appropriateness of the “application of
anti-dumping measures”  in view of the fact that the targeted country is a developing country
Member.  The issue is here that, once dumping and injury have been determined, when
deciding whether anti-dumping measures should be imposed, developed countries should take
into account the developing country status of the targeted country.
2. The second sentence deals with the case where “essential interests”  of developing
countries are at issue.  The language here is more direct.
6.18 As a first observation, the two sentences are not linked ( e.g., “. . . under this Agreement and
possibilities of constructive . . .” ); this is logically so.  In other words, the words “It is recognized
that”  of the first sentence do not refer to the second sentence. This is clear since otherwise the second
sentence would read as follows:
“It is recognized that possibilities of constructive remedies provided for by this Agreement
shall be explored before applying anti-dumping duties where they would affect the essential
interests of developing country Members.”
6.19 This, however, would not make much sense, among others because of the word “shall”  which
would have read ‘should’ if the permissive meaning implied in “It is recognised that”  was applicable
to the second sentence.
6.20 Let us then look at the meaning of each of the two sentences.
6.21 First the first sentence.  The key words here are “special regard”  and “when considering” .  It
transpires from the text that the relevant moment when the first sentence comes into play is when
there is a determination of dumping and injury caused thereby.  The importing country authorities
then have to determine whether these findings, as well as any other elements relative to the case226,
would militate in favour of imposition of anti-dumping measures or not.  The first sentence ofArticle 15 states a preference that the special situation of developing countries should be an element
to be weighted when making that evaluation.
6.22 The first sentence does not seem to create a rock-solid legal obligation.  This follows from the
opening words “ It is recognized that . . .”  and the wording “special regard must be given” .  The first
sentence thus contains a statement of preferred policy.  This conclusion would seem reinforced by
Article 17.6(ii) second sentence, of the ADA.
 227
6.23 The text and spirit of the second sentence differs considerably from that of the first sentence.
To start with, the object of the sentence ( “essential interests of developing country Members”)  would
seem to be more direct than the—rather vague— “special situation”  of developing country members
mentioned in the first sentence.
6.24 The obligations in the second sentence are accordingly stricter: “Possibilities . . . shall be
explored . . .”.  There is no “It is recognized that”  here—the second sentence contains very clear
                                                     
226 For example, under EC anti-dumping law, the investigating authorities must make a separate
determination whether the imposition of anti-dumping measures would be in the Community interest.
227 Similar the EC in Cotton yarn at § 576. Note that the EC—correctly—limited the qualification to the
first sentence, not to the whole provision.WT/DS141/R
Page 266
language.  The logic of the Appellate Body, developed in the context of another covered agreement,
similarly applies here:
“The word used . . . is ‘shall’, not ‘may’. There is no qualifying language, and there is no
language that permits any method other than that set out in the schedule in Article 5.5 as a
basis for the calculation of additional duties.”
6.25 It follows that the second sentence, when regarded in the context of the Agreement, lays down
clear obligations.  First, there must ipso facto  be a determination (or assessment) whether the essential
interests of the developing country concerned may be involved.  This determination must have been
made “before applying anti-dumping duties” , i.e., after a determination of dumping and injury caused
thereby have been made, but before the imposition of (provisional) anti-dumping duties.
6.26 Then the investigating authorities are required to explore possibilities of constructive
remedies “provided for by this Agreement” .  These last words would seem to indicate that the remedy
may consist of, among others, the non-imposition of anti-dumping measures, or an undertaking.
6.27 As to the timing of the ‘exploration of possibilities of constructive remedies’, these “shall”  be
explored “before applying anti-dumping duties” .  In the EC context this means before provisional
anti-dumping duties are imposed.
3.2 Legal arguments relating to the claims relating to Article 15
6.28 The first issue is whether the EC did in fact give special regard to India, and whether this
alleged special treatment—even if factually corre ct—is relevant under Article 15 (section 3.2.1).  The
next issue is what the EC shoul d have done under Article 15 (3.2.2).
3.2.1 The alleged special treatment granted by the EC
6.29 During the two rounds of consultations between  India and the EC, the latter pointed to the
following issues it believed to be applications of Article 15:
(a) the questionnaires used were allegedly more simple than those used in other proceedings;(b) the EC was supposedly more flexible with India when accepting submissions outside the
deadline;
(c) a special newcomers’ provisi on was adopted in the definitive  Regulation allowing newcomers
to obtain the sample duty even though such a ne wcomers’ provision is not foreseen in the EC
basic anti-dumping Regulation;
(d) handloom products were excluded from the scope of anti-dumping duties.
6.30 (a) the questionnaires used: the questionnaire for exporters used in the Bed linen II proceeding
is attached as Annex 63.  It can be seen that it is mutatis mutandis  similar to a recent questionnaire used
for anti-dumping proceedings against OECD Members (Hungary, Poland, Mexico; see Annex 64).  Itcan also be seen that it is very similar to a ques tionnaire as used against Taiwan (see Annex 65), clearly
a very developed country.  Although there are some  minor differences between the questionnaires (in
some cases caused by the different product and trade channels involved), it requires imagination to
consider the Bed linen II questionnaire as less exacting than the questionnaires used for developedWT/DS141/R
Page 267
countries.  This is easily demonstrated by comp aring the Bed linen II questionnaire with the other
questionnaires mentioned.  Indeed, if one compares the questionnaire for Bed Linen  with one used in a
recent proceeding against Taiwan (Annex 66), it would appear that in fact the latter one is more
straightforward, and not vice versa .  In summary, the EC’s argument is factually incorrect.
6.31 Even if the EC’s reply during the consultations we re factually true, it would be an interpretation
that is, to put it mildly, surprising in view of the EC’s argumentation before the Cotton yarn panel:228
“The EC argued that any obligati on contained in the first sent ence of Article 13 only arose at
the time of consideration of imposition of measur es. The word ‘measures’ clearly limited the
obligation to the stage following conclusion of  an investigation. Article 10 of the Agreement
referred to ‘Provisional measures’. The first sentence of Article 10:1 confirmed that the
obligation under Article 13 only arose after an investigation. Article 10:2 defined what
provisional measures could consist of.”
6.32 Moreover, the Panel in EC—Cotton yarn esse ntially followed the interpretation propagated
by India in this case:
“585. The Panel was of the view that Article 1 of the Agreement provided the context for
Article 13. Article 1 provided that anti-dumping duties could not be applied prior to
determination of dumping, material injury and a causal link between the two. In addition, the
words ‘where they would affect the essential interests of developing countries’ establish the
condition under which this obligation becomes operative. Clearly this condition could only be
ascertained subsequent to the determination of the amount of the anti-dumping duty to be
applied in order to know whether the impositi on of the anti-dumping duty would affect the
essential interests of developing countries. This made clear that the second sentence of
Article 13 gave rise to an obligation to consider the possibility of adopting constructive
remedies after determination of dumping, materi al injury and a causal link between the two.”
6.33 India believes the reasoning of the Cotton yarn Panel on the timing aspect to be convincing.
In other words, Article 15 does not have regard to treatment during the determination of dumping and
injury, but rather comes into play once the investig ating authorities have determined that dumping and
injury exist.  Logically, the issue of allegedly ‘simplified’ questionnaires could not even arise under
Article 15, since the questionnaires are issued and replied to before dumping can be determined.
6.34  (b) alleged flexibility with deadlines: To begin with, India is not aware of any (special)
flexibility with deadlines in th e Bed linen proceeding, and the Commission’s statements during the
consultations thus appear to be factually incorrect.
6.35 The two cases where companies (Giraffe Inte rnational and Nidhi Exports) made themselves
known to the Commission somewhat after the d eadline clearly disprove the allegation.  The
Commission informed both companies that the Commission's services were unable to consider both
companies as co-operating exporters,
                                                     
228 EC—imposition of anti-dumping duties on imports of cotton yarn from Brazil, ADP/137 of
4 July 1995 at § 579. It is noted that the text of Article 13 of the 1979 Anti-Dumping Code is almost identical to
that of Article 15 of the ADA:
“It is recognized that special regard must be given by developed countries to the special situation of
developing countries when considering the application of anti-dumping measures under this Code. Possibilities
of constructive remedies provided for by this Code shall be explored before applying anti-dumping duties wherethey would affect the essential interests of developing countries.”WT/DS141/R
Page 268
“[a]s the deadline relating to sampling provided for in the notice of initiation has already
passed and the companies to be included in the sample have been both selected and
informed”229
6.36 Although India acknowledges the right of the in vestigating authorities to ignore information
submitted after reasonable deadlines, by the same token it is noted that the EC, by availing of this
right, cannot claim it has shown special consideration for the Indian companies concerned.
6.37 The sampled companies requested an extension of the deadline on the basis of Article 6.1.1
because the companies had shown good cause and such an extension was practicable for the
investigation authorities.  The extension was not granted because the companies concerned are located
in a developing country (relevant correspondence a ttached as Annex 68) but on the condition that the
companies would make an effort to submit the questionnaire responses as soon as possible.  As far asIndia is aware, all sampled companies submitted their questionnaire responses within the—revised—
deadline.  It is thus hard to see how the investig ating authorities in the Bed linen II proceeding would
have been more flexible, and clear that the EC’s cl aims that it was exceptionally flexible with deadlines
is not borne out by the factual situation.
6.38 Moreover, similarly to the point argued under (a), even if the EC’s argument would be factually
correct ( quod non ), it would be irrelevant since the issue of deadlines arises only before dumping is
determined, not at the stage of the application of anti-dumping measures.
6.39 (c) special newcomers’ provis ion: Under EC anti-dumping law,  the possibility of a newcomer
review is not foreseen in cases where the exporters have been sampled.230  This leads to patently unfair
situations for companies commencing exporting after the investigation period, since they are subjected
beyond their will to the (high) residual anti-dumping duty.  In recent years, in Regulations in
proceedings involving sampling the EC therefore incl udes as a matter of standard practice a clause on
the following lines:
“Where any new exporting producer from the countries concerned provides sufficient
evidence to the Commission that
— it did not export to the Community the products described in Article 1(1) during the 
investigation period . . .,
— it is not related to any of the exporters or producers in the exporting country which 
are subject to the anti-dumping measures imposed by this Regulation,
— it has actually exported to the Community the products concerned after the 
investigation period on which the measures are based, or it has entered into an 
irrevocable contractual obligation to export a significant quantity to the Community,
then the Council, acting by simple majority on a proposal submitted by the Commission after
consulting the Advisory Committee, may amend Article 1(3) by adding that new exportingproducer to the list in Annex I.” (Article 3 of the definitive Bed linen Regulation)
6.40 Three well-informed authors further confirm the logic behind the clause:
 231
                                                     
229 Letters to both companies attached as Annex 67.
230 Article 11(4), last sentence, of the EC basic anti-dumping Regulation.
231 Müller, Khan, Neumann, EC Anti-Dumping Law—A Commentary on Regulation 384-96 , Wiley
1998, page 354 at § 11.74.WT/DS141/R
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“. . . the unavailability of both Article 11(3) and (4) could lead to injustices. In order
to deal with such situation, the Counc il adopted an amendment to a regulation
imposing definitive anti-dumping duties in a case where sampling had been used, the
effect of which is to allow the regulation to be amended after the Commission hasverified the applicant’s newcomer status, so as to add the newcomer to the list of
parties subject to the average duty.”
232
6.41 Moreover, the special newcomer clause is not only used in cases of developing countries.  For
example, a similar provision was used in Flat wooden pallets from Poland  (where the provisional
Regulation was even especially amended for it after its adoption)233 and—in a slightly different
form—in Farmed Atlantic salmon from Norway .234  The Commission’s reply would thus seem to be
factually incorrect—unless Norway qualifies as a developing country.
6.42 (d) handloom pr oducts: the argument that the exclusion of handloom was based on
developing country considerations is factually incorrect and not supported by the published definitive
determination:
“B. PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT
1. Requests for exclusion from the proceeding
. . .
(7) As regards the request to exclude handloom products, while the use of different
production methods is not in itself a reason relevant to the definition of the like product, it
was found that handloom items had physical charac teristics different from those of other bed
linen, notably through a less regular and looser weave. This difference led to a different
consumer perception of handloom products whic h was reinforced by the fact that handloom
products are often sold through particular sales channels such as charity shops which are not
available to Community producers.
Consequently it was concluded that handloom pr oducts should be excluded from the scope of
the proceeding and, therefore, these products should be exempted from the payment of the
duties if accompanied by a certificate of handl oom origin (see Annex II to this Regulation)
issued by the appropriate authorities of the exporting country.”
6.43 The issue of handloom exclusion was discussed under the heading ‘like product’—as indeed,
the European Commission did during the investigation.
6.44 The reason given by the Commission for the exclusion is that handloom items “had physical
characteristics different from those of other bed linen” .  The Regulation does not even once mention
India’s status of a developing country, let al one discuss it in the context of handloom products.
6.45 In summary, neither the provisional nor the definitive Regulation, nor the disclosure
documents or any other report made available to the Indian exporters contains any determination,
examination or consideration on India’s special stat us as a developing country, on the importance of
                                                     
232 Footnote in original: “OJ No L 48, 19.2.97, p. 1—cotton yarn from Brazil and Turkey/ newcomer
(Council) and OJ No L 50, 20.2.97, p. 1—cotton yarn  from Brazil and Turkey/ newcomer (Commission).”
233 See OJ (1997) L 225/11-12 and OJ (1997) L 324/6, respectively (attached as Annex 75).
234 OJ (1997) L 267/15 (relevant excerpt attached as Annex 76).WT/DS141/R
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the bed linen and textile industry to the Indian economy and India’s special interests in the matter
(even though arguments pertaining to this had been made), or on any possible special remedies to take
account of such situation.
3.2.2 The EC’s obligations under Article 15 in the Bed linen II proceeding
6.46 The applicability of Article 15 arises once the investigating authorities have determined that
dumping and injury caused thereby exist, and before they apply provisional anti-dumping measures
(“before applying anti-dumping duties” ).
6.47 Indian exporters had clearly argued that the textile industry, and the bed linen industry, is of
vital importance to its economy.  In its injury submission Texprocil noted that “ [t]he textile industry is
one of the most important economic engines of the Indian economy. The country is highly dependent
on the textile industry as a source of employment and development.”  This point was further stressed
during Texprocil’s first injury hearing.
6.48 In this context the conclusions of the Cotton yarn Panel may be recalled:
“583. The Panel noted that a precondition for the obligation in the second sentence was that
the application of anti-dumping measures ‘would affect the essential interests of developing
countries’. Brazil had argued that cotton yarn was a strategic industry for Brazil, and that,
therefore, application of anti-dumping dutie s would be of immense importance to its
economy. The Panel was of the view that ‘essential interests’ was defined by its context, like
the phrase ‘special situation of developing countries’ in the first sentence of Article 13. ThePanel considered that the essential interests of a developing country which could be affected
by the imposition of anti-dumping duties could include a strategic industry dependent on
export trade. If cotton yarn was such an industry in Brazil, the essential precondition to the
activation of the particular obligation contained in the second sentence of Article 13 was
satisfied.”
6.49 Similarly, the bed linen industry was thus an essential interest for India. Nevertheless, there is
no record that the EC even tried to determine whether this was so.
6.50 Once they had determined that dumping and injury caused thereby existed, the EC authorities
were then under an obligation ( “shall be” ) to ‘explore’ the possibilities of constructive remedies.  To
‘explore’ means “to search through or into”
235, “to investigate in a systematic way; to examine”236,
to “inquire into; investigate thoroughly” .237  This would require positive action by the EC authorities,
and presume a genuine and demonstrated willingness to consider the possibilities of constructive
remedies.
6.51 The constructive remedies must be “provided for by this Agreement” .  That would seem to
imply a possible constructive remedy—apart from a decision not to impose any anti-dumping
duties—would be an undertaking as provided by Article 8 of the ADA.  The Indian exporters were
only informed that dumped imports causing injury had been found after the imposition of provisional
anti-dumping measures.  Since the Indian exporters could only be aware of the dumping and injuryfindings after the imposition of anti-dumping measures, it is not reasonable to interpret the secondsentence of Article 15 as requiring Indian exporters to take the initiative for an undertaking, to the
                                                     
235 Webster’s New Collegiate Dictionary , 1975, attached as Annex 69.
236 Webster’s II New Riverside Dictionary , 1984, attached as Annex 70.
237 The Concise Oxford Dictionary of Current English , ninth edition, 1995, attached as Annex 71.WT/DS141/R
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extent that an undertaking would have been a possibility of a constructive remedy.  Logically, it
follows that in accordance with Article 8.5, an undertaking (or any other constructive remedy
provided by the ADA) should have been suggested by the EC authorities before the imposition of
provisional anti-dumping duties, or at least, that the EC should have investigated the possibilities for
such constructive remedy.  However, there is nothing on file suggesting that the EC authorities even
remotely considered, investigated or explored an undertaking or any other constructive remedy at the
time.
6.52 It is noted here that the Indian exporters, after the provisional anti-dumping measures were
imposed, did in fact sound out the Commission Services on their willingness to negotiate an
undertaking.238  The Commission’s immediate reaction was negative, in view of the large number of
product types.239  No serious discussion ever took place on the subject of the organisation or
feasibility of an undertaking, nor was such discussion  ever initiated, promoted, or stimulated by the
EC authorities.  In view of this reaction, the Indi an exporters abandoned their efforts to work out an
undertaking proposal.
6.53 It follows that the EC, by patently failing to explore the possibilities for a constructive remedy
provided by the ADA before imposing provisional anti-dumping measures, and/or by even failing to
make any determination whether the Indian bed linen industry was an essential interest to India, actedinconsistently with Article 15 of the ADA.
4. Claim 30:  inconsistency with Article 12.2.1
4.1 The text of Article 12.2.1
6.54 It is recalled that Articles 12.2 and 12.2.1 of the ADA provide in relevant part as follows:
“12.2 Public notice shall be given of any preliminary or final determination, whether
affirmative or negative . . . Each such notice shall set forth, or otherwise make available
through a separate report, in sufficient detail the findings and conclusions reached on all
issues of fact and law considered material by the investigating authorities . . .
12.2.1 A public notice of the imposition of provisional measures shall set forth, or otherwise
make available through a separate report, sufficiently detailed explanations for the
preliminary determinations on dumping and injury  and shall refer to the matters of fact and
law which have led to arguments being accepted or rejected. Such a notice or report shall,
due regard being paid to the requirement for the protection of confidential information,contain in particular: . . .
(v) the main reasons leading to the determination.”
6.55 As noted in section 1, the Indian exporters made arguments on the issue of Article 15.  These
arguments were completely ignored by the EC in the provisional Regulation as well as in the
provisional disclosure.
                                                     
238 Relevant correspondence attached as Annex 72.
239 That concern compares oddly with the EC’s ea gerness one year later in the second Unbleached
cotton fabrics proceeding, in which the EC made great efforts to try to conclude a minimum price undertaking
with Texprocil on unbleached cotton fabrics—even though the number of product types and exporters was far
greater in that proceeding than in Bed linen II. The relevant pages from the amendment to the definitive
disclosure document as well as a fax from the European Commissioin regretting Texprocil’s inability toconclude undertakings in the Unbleached cotton fabrics II proceeding are attached as Annex 77.WT/DS141/R
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4.2 Legal arguments relating to the claims relating to Article 12.2.1
6.56 The EC has nowhere in the provisional Regulation or elsewhere in the file referred to or
commented on its obligations under Article 15. The EC either did not consider its obligations under
Article 15 material, or failed to explain in any detail its findings and conclusions thereon.
6.57 Although the Indian exporters made argume nts on the issue of Article 15, the EC nowhere
referred to “the matters of fact and law which have led to arguments being accepted or rejected” .
6.58 It follows that the EC acted inconsistently with Article 12.2.1 of the ADA.
5. Claim 31:  inconsistency with Article 12.2.2
5.1 The text of Article 12.2.2
6.59 Article 12.2.2 provides in relevant part that:
“A public notice of conclusion or suspension of an investigation in the case of an affirmative
determination providing for the imposition of a definitive duty . . . shall contain, or otherwisemake available through a separate report, all relevant information on the matters of fact and
law and reasons which have led to the imposition of final measures or the acceptance of a
price undertaking, due regard being paid to the requirement for the protection of confidential
information. In particular, the notice or report shall contain the information described in
subparagraph 2.1 . . .”
5.2 Legal arguments relating to the claims relating to Article 12.2.2
6.60 The EC continued to fail to react to the Indian exporters’ arguments concerning Article 15,
even though Texprocil had raised the matter again in its comments to the provisional disclosure.  For
the same reasons as indicated in section VI.A.4.2 the EC acted inconsistently with Article 12.2.2 of
the ADA.
VII. CONCLUSIONS AND REQUESTS
A. CONCLUSIONS
7.1 The claims set forth in Parts III, IV, V and VI, above, affect the anti-dumping measure from
different angles.  India believes that the anti-dumping proceeding leading up to the definitive anti-dumping duties on bed linen from India should never have been initiated to begin with (initiation
claims).  After the initiation, the EC authorities ac ted inconsistently with the rules on procedure, on
the dumping determination, and on the injury determination.  Finally, when the EC imposed
provisional anti-dumping measures, it further tainted the proceeding by acting inconsistently with
Article 15 of the ADA.  The Regulations imposing provisional and definitive anti-dumping duties onbed linen from India are thus irretrievably tainte d with violations of the ADA and should never have
been imposed.
7.2 As a second note the seriousness of these anti-dumping duties may be considered.  Notably,
the EC’s interpretation and application of Articles 2.2 and 2.2.2
240 led to dumping margins where
                                                     
240 This is without prejudice to the other claims made by India in this submission.WT/DS141/R
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there either should have been none, or only very moderate ones.  All dumping margins for India
except one241 can be fully attributed to the excessive and for Bed Linen completely unreasonable
profit margin of over 18 per cent that was used in the constructed normal values.242  The high
dumping margins led to anti-dumping duties up to 24.7 per cent for the sampled companies and 24.7per cent for non-co-operating companies.
B. REQUESTS
7.3 For the above reasons India respectfully requests the Panel to:
1) find that the EC has acted inconsistently with the ADA as per the claims above and
which can be summarised as follows:
• The initiation of the proceeding against Bed Linen from India by the EC is
inconsistent with Articles 5.3 and 5.4 of the ADA;
• The initiation of the proceeding against Bed Linen from India by the EC is
inconsistent with Article 12.1 of the ADA;
• The EC neither initiated nor conducted its anti-dumping proceeding against Bed
Linen from India in accordance with the provisions of the ADA and therefore theinitiation and the consequent application of a definitive anti-dumping measure
violates Article 1 of the ADA;
• The imposition of provisional and definitive anti-dumping measures by the EC
on Bed Linen from India is inconsistent with Articles 2, 2.2, 2.2.2, 2.2.2(ii), and
2.4.2 of the ADA;
• The imposition of provisional and definitive anti-dumping measures by the EC
on Bed Linen from India was inconsistent with Articles 3, 3.1, 3.4, 3.5, 3.6, and
6 of the ADA;
• The imposition of provisional and definitive anti-dumping measures on Bed
Linen from India by the EC was inconsistent with Articles 12.2, 12.2.1, and12.2.2 of the ADA.
• The imposition of provisional and definitive anti-dumping measures on Bed
Linen from India by the EC was inconsistent with Article 15 of the ADA.
7.4 Accordingly, India respectfully requests that the Panel  
                                                     
241 The dumping margin for Anglo-French.
242 All six other dumping margins for India did not exceed 17 per cent.  Clearly, any use of a
‘reasonable’ profit margin ( i.e. any profit margin lower than the excessive 18.65 per cent), such as had been
suggested countless times during the proceeding, would have led to lower dumping margins.WT/DS141/R
Page 274
2) Recommend that the EC bring Regulation No 2398/97 of 28 November 1997
imposing a definitive anti-dumping duty on imports of cotton-type bed linen originating in, inter alia ,
India into conformity with the ADA and GATT 1994; and
3) Suggest that, in the light of the numerous outcome-decisive violations of the ADA,
the EC immediately repeal the Regulation imposing definitive anti-dumping duties
and refund anti-dumping duties paid thus far.WT/DS141/R
Page 275
ANNEX 1-2
REQUEST FOR A PRELIMINARY RULING BY INDIA
(11 April 2000)
India herewith respectfully requests a preliminary ruling of the Panel with respect to certain
purported documentary evidence provided by the European Communities (EC) in its First Written
Submission. India refers to Exhibit EC-4 of  the submission of EC:  the document titled "Summary of
declarations of support (per country) to indust ry complaint in EC anti-dumping proceeding."
India wishes to note, for the record, that this document has never been made available to
India, or otherwise referred to, at any stage prior to this point in time.  In particular, the EC has never
mentioned or referred to this document during the course of the anti-dumping investigation, nor
during the consultation phase preceding the request for establishment of the present Panel.
India recalls that the standing has been a central issue throughout the anti-dumping
investigation leading to the imposition of anti-dumping duties on cotton-type bed linen from India,
and later, during this dispute settlement proceeding.  At each stage the Indian exporters, and later the
Indian Government, have requested clarifications from the EC as to how the standing requirements of
the Anti-Dumping Agreement (ADA) had been met. Despite this, the EC has never before produced
Exhibit EC-4, nor made any reference to its existence, nor produced the " number of exchanges in the
process of verification of standing " to which footnote 1 of Exhibit EC-4 refers.  In addition, Exhibit
EC-4 appears to contradict some of the (written) in formation provided by the EC in the course of the
administrative proceeding and in the context of this dispute settlement proceeding.
For these reasons, India respectfully requests that the exact status of Exhibit EC-4 be
established, namely:  when it was finalized, for what purpose. In the light of the above, India
considers that it has good cause, in accordance with paragraph 13, to request this preliminary ruling atthis stage.WT/DS141/R
Page 276
ANNEX 1-3
RESPONSE OF INDIA TO PRELIMINARY RULINGS
REQUESTED BY THE EUROPEAN COMMUNITIES
CONTENTS
Page
1. "That India’s claims regarding Article 1, Article 3.6 and Article 6 are dismissed"............................... 276
2. "That India’s claim regarding Article 3.4 is dismissed because India has
failed to clearly identify this issue in the request for the establishment ofthe Panel in violation of Article 6.2 DSU" ..................................................................................... ....... 277
3. "That India’s Claims 2, 5, 8 (in part), 9, 11 (in part), 12, 15 (in part), 17, 19
(in part), 21, 24, 27, 29 (in part), and 30 are excluded from the scope of the proceedings." ................. 278
4. "That the verbatim reports of the consultations submitted as evidence by
India are inadmissible an d will be disregarded" ................................................................................ .... 279
5. "That the document submitted by India as Annex 49 is not part of
these proceedings"............................................................................................................. .................... 279
India understands that the EC is seeking five preliminary rulings in paragraph 46 of its first
submission.  In accordance with point 13 of the working procedures India would like to respond as
follows to the EC’s request for preliminary rulings:
1. "That India’s claims regarding Article 1, Article 3.6 and Article 6 are dismissed"
1.1 As regards Article 1 of the Anti-Dumping Agreement (ADA), India accepts that it has not
made any separate claims.  Article 1 is a general provision requiring Members to abide by the
provisions of the ADA while applying GATT Article VI and in conducting anti-dumping
investigations.  Therefore, India considers that a finding of violation of Article 1 of the ADA
automatically follows from the inconsistencies with the other Articles of the ADA and Article VI ofthe GATT 1994.  In India’s view Article 1 of ADA does not therefore need to be mentioned
separately in the request for consultations since the rights of defense of the EC have in no way been
prejudiced;
1.2 As regards Article 3.6, India has included the entire Article 3 in its request for establishment
of the Panel.  Therefore, Article 3.6 is within the terms of reference of the Panel.  However, in a spirit
of co-operation India does not seek a ruling from the Panel on Article 3.6;
1.3 As regards Article 6, India assumes that the EC is referring to claim 14 and claim 16.
1.3.1 As far as claim 16 is concerned, India doe s not agree that this claim be dismissed.
According to India it has been absolutely clear ever since the administrative
procedure, the request for consultations, the discussions during the consultations, and
the written procedure during the consultations, that India has been concerned with the
EC’s actions as regards Articles 6.10 and 6.11.  Indeed, from the discussions duringthe consultations the claims under this Article were not unknown to the EC at all.
Claim 16 is linked to India’s claims regarding the selection of the sample in
connection with Article 3.  Accordingly claim 16 in the First Submission could notWT/DS141/R
Page 277
have been a surprise for the EC and dire ctly follows from claim 15.  Claim 16 forms
part of the context of the provisions that have been violated.1   Moreover, India does
not consider that the EC’s rights of defense to have been infringed at all.  In this
regard India also refers to the ruling of the Appellate Body in the proceeding
concerning Korean Safeguard measures on Dairy products2 at 131:  The EC has in the
present case not demonstrated that its ability to defend itself in the course of the Panel
proceedings has been prejudiced.  On the contrary, the EC has had ample time and
opportunity to respond to this claim, especially since the alleged inconsistencies were
pointed out in detail during the consultation process;
1.3.2 As far as claim 14 is concerned, it is clarified that this claim forms part of an
argument in support of claim 13 and addresses a further aspect of the matter.3   It is
recalled that claim 13 was explicitly mentioned in paragraph 15 of the request for the
establishment of the Panel;
2. "That India’s claim regarding Article 3.4 is dismissed because India has failed to clearly
identify this issue in the request for the establishment of the Panel in violation of
Article 6.2 DSU"
2.1 India rejects the suggestion of the EC that India has failed to clearly identify a "claim" under
Article 3.4 in its request for the establishment of the Panel.  India assumes that in light of
paragraph 11 of the EC’s submission, the EC is in paragraph 46 only referring to claim 19.  I.e., India
assumes that the EC is not referring to India’s claims 11 and 15.  If that were the case, India wouldstrongly object to such contentions since these claims were clearly identified in paragraphs 15 and 14,
respectively, of the request for the establishment of the Panel.
2.2 As far as India’s claim 19 itself is concerned, this claim was clearly identified in paragraph 13
of the request for the establishment of the Panel.  Paragraph 13 of the request for the establishment of
the Panel clearly mentions "Contrary to the wording of Article 3 [and especially Article 3.5] of the
ADA . . .".  Clearly, the reference to Article 3 includes Article 3.4.  The word ‘especially’  does not
exclude other sub-paragraphs of the Article, which are also at issue for the claim in question.  India
also refers to the Appellate Body Report in Bananas,4  which held that it is sufficient to mention
Articles [for example, Article 3].  It is therefore not necessary to cite each paragraph or sub-
paragraph, or each claim thereunder, of an Article.
2.3 Moreover, India also refers to the ruling of the Appellate Body in the proceeding concerning
Korean Safeguard measures on Dairy products5 at 131.  In this ruling the criterion was espoused
whether it had been demonstrated that the ability to defend itself in the course of the Panel
proceedings had been prejudiced.  Since the EC itself has commented in substance and in detail on
claim 19 in its section V.12, paragraphs 343 through 350, the EC has in fact explicitly demonstratedthat its rights of defense have not been prejudiced.
                                                     
1 Panel Report in United States  – Anti-Dumping Act of 1916 , 31 March 2000, WT/DS136/R at 6.22
through 6.28.  At the very least, claim 16 forms part of an argument in support of the specific claim mentioned
in paragraph 14 of the request for the establishment of the Panel and addresses a different aspect of the matter.
2 Appellate Body Report in Korea – Definitive Safeguard Measure On Imports Of Certain Dairy
Products, 14 December 1999, WT/DS98/AB/R.
3  See also Panel Report in United States – Anti-Dumping Act of 1916 , 31 March 2000, WT/DS136/R at
6.22 through 6.28.
4 Appellate Body Report in EC – Regime for the Importation, Sale, and Distribution of Bananas, 9
September 1997, WT/DS27/AB/R.
5 Appellate Body Report in Korea – Definitive Safeguard Measure On Imports Of Certain Dairy
Products, 14 December 1999, WT/DS98/AB/R.WT/DS141/R
Page 278
3. "That India’s Claims 2, 5, 8 (in part), 9, 11 (in part), 12, 15 (in part), 17, 19 (in part), 21,
24, 27, 29 (in part), and 30 are excluded from the scope of the proceedings."
3.1 As a preliminary remark India notes that while it has made certain arguments regarding the
provisional Regulation it has always been clear that the definitive Regulation is the specific ‘measure’
at issue [see paragraph 2 of First Submission of India].  The fact that the definitive Regulation is themeasure at issue does not limit the nature of arguments and claims that can be made.  India notes that
the EC posits in footnote 9 that "in accordance with EC law and practice, aspects of the text of the
provisional regulation are adopted by references in the definitive regulation.   In so far as there is any
difference between the texts of the two regulati ons, that of the definitive regulation prevails."   India
shares this view and as there is agreement between the parties, this view automatically entails that
aspects of the provisional regulation can be challenged in the context of the definitive regulation:
• Therefore, India does not seek a ruling from the Panel on claims 2, 5, 9, 12, 17, 21, 24, 27,
and 30, it being understood that the EC’s view expressed in footnote 9 entails that aspects ofprovisional Regulation endorsed at the definitive stage, can be challenged in the context of the
definitive Regulation;
• India strongly disagrees to exclude claim 11 [even in part].  The claim itself clearly only
relates to the Definitive Regulation [although the text of India’s first submission may include
discussion of aspects of the Provisional Regulation where there is no difference between the
Definitive and Provisional Regulation].  As pointed out by the EC in its footnote 9, the text of
the Provisional Regulation is endorsed in the Definitive Regulation and is therefore not
different at the definitive stage.  The arguments  may still relate to the Provisional Regulation
since the claim itself is clearly directed at the definitive measures.  Finally, and in any event,as the AB noted in Guatemala-Cement  "This requirement to identify a specific anti-dumping
measure at issue in a panel request in no way limits the nature of the claims that may be
brought concerning alleged nullification or impai rment of benefits or the impeding of the
achievement of any objective in a disp ute under the Anti-Dumping Agreement.";
6
• India strongly disagrees to drop claim 15 [even in part] for the same reasons mentioned
directly above [India’s response to EC’s request for preliminary ruling on claim 11];
• India agrees not to seek a ruling on claim 8 as regards the infringement of Article 3.6;
• India does not agree to exclude claim 19:  As mentioned under point 2 above, paragraph 13 of
the request for the establishment of the Panel clearly identifies Article 3 and this also includes
Article 3.4.
• India does certainly not agree to exclude clai m 29.  Claim 29 relates to the EC’s obligations
towards developing country Members and was clearly identified in the request for the
establishment of the Panel.  India deplores that even at this stage the EC is trying to evade its
obligations towards developing country members, as unfortunately also happened throughout
the entire administrative proceeding.  Article 15 is important to India and to all developing
countries.  The fact that arguments in the context of claim 29 may relate to the provisional
measures as far as the timing element is concerned does not mean that aspects of the
provisional measure cannot be challenged in the context of the definitive measure.  Claim 29
is therefore maintained;
                                                     
6 Appellate Body Report in  Guatemala – Anti-Dumping Investigation Regarding Portland Cement
From Mexico, 2 November 1998, WT/DS60/AB/R.WT/DS141/R
Page 279
4. "That the verbatim reports of the consultations submitted as evidence by India are
inadmissible and will be disregarded"
4.1 As a preliminary observation India stresses the absolute accuracy of the verbatim reports
which were drafted by two authors taking notes and were subsequently proof-read by members of the
Indian delegation present during the consultation process.  These reports are therefore neitherunreliable nor pointless at all.  Indeed, most aspects of the consultation process as recorded in the
reports can also be found back in the written an swers of the EC.  While it is perhaps unusual to
present verbatim reports as an Exhibit in a First Submission, India was left with no other choice:  the
reports bear witness to the lack of respect on the part of the EC for the basic objective of the
consultation process, which is to seek an amicable solution.  India therefore disagrees with the EC’s
requested ruling number 4.
5. "That the document submitted by India as Annex 49 is not part of these proceedings"
5.1 India disagrees.  The EC’s position would imply that documents that were not published
could not serve as evidence, even though they were communicated to interested parties and formed
the basis for EC determinations;
5.2 Secondly, India notes that ex point 3 of the working procedures, all information submitted to
the panel shall be kept confidential.  Point 3 also provides that nothing shall preclude a party to a
dispute from disclosing statements of its own positio n to the public, which in fact has not happened in
this case;
5.3 Last, the allegation of breach of confidentiality is not at issue because the document submitted
by India as Exhibit 49 is submitted with the explicit written approval of the producer concerned [see
India Exhibit-81];
5.4 In light of the above, the question of breach of confidentiality does not arise and India
respectfully submits to the Panel to dismiss the ruling requested by the EC;
5.5 Respectfully, India would also take this opp ortunity to briefly comment on a view espoused
by the US in its third party submission on this issue.  In footnote 2 the US states that it " . . . is of the
view that it is not clear that this document demonstrates any inconsistency on the part of the EC."   In
the opinion of India however, the inconsistency is  clear.  When comparing the calculations of
Annex 49 and paragraph 3.158 of its first submission, the respective columns "dump total" and"dumping result"  are the equivalent of each other.  In the calculations of Annex 49 however the
"dump total" serves as the numerator for the determination of the dumping margin and thereby
effectuates the genuine weighted average comparison.  In paragraph 3.158, however, one "extra step"
is performed before effectuating the comparison and calculating the dumping margin.  This "extra
step" is the zeroing of the amounts of negatively dumped models.  This extra step, not foreseen in theADA, therefore distorts the genuine weighted average comparison.  When compared with the Bed
Linen-II proceeding, Annex 49 therefore demonstrates different applications of the weighted average
calculation methods between various proceedings;  in the view of India this shows an inconsistency
on the part of the EC.
Note:  India does not comment on possible other rulings requested but not explicitly specified in
paragraph 46.  India reserves its rights to comment on any other rulings requested but not specified in
paragraph 46 and its silence on such possible other requests should not be taken as acceptance.WT/DS141/R
Page 280
ANNEX 1-4
ORAL STATEMENT AND CONCLUDING REMARKS OF INDIA
FIRST MEETING OF THE PANEL
(10-11 May 2000)
CONTENTS
Page
I. INTRODUCTION ................................................................................................................. .............. 282
II. BACKGROUND OF THE CASE ...................................................................................................... 283
III. INITIA TION................................................................................................................. ....................... 283
1. Article 5.3: No 5.3 examination (Claim 23).................................................................................. 2 83
2. Article 5.4: Defective standing determination (Claim 26) ............................................................ 285
IV. DUMPING..................................................................................................................... ....................... 287
1. Article 2.2: The profit must be ‘ reasonable’  (Claim 4) ................................................................ 287
2. Article 2.2.2: Incorrect application (Claim  1) .............................................................................. 288
3. Article 2.4.2: Incorrect interpretation of all weighted average export transactions;
main rule and exceptions cannot be mixed (Claim 7) ................................................................... 290
V. INJURY....................................................................................................................... ......................... 291
1. Article 3.1: Failure to examine only dumped transactions (Claim 8)............................................ 291
2. Article 3.4: Failure to evaluate all factors (Claim 11)................................................................... 291
3. Article 3.4: Picking and choosing of the domestic industry for injury
determination (Claim 15) ....................................................................................................... ....... 293
4. Articles 6.10 and 6.11: No statistically valid sampling (Claim 16)............................................... 2955. Dumped imports before I.P. (Claim 19)........................................................................................ 295
6. Article 3.5: No consideration of other factors (Claim 20)............................................................. 296
VI. ARTICLE 15: NO DEVELOPING COUNTRY STATUS (Claim 29) ........................................... 296
VII. ARTICLE 12.2.2: NO/INSUFFICIENT EXPLANATIONS (Claims 3, 6, 10, 13,
18, 22, 25, 28, AND 31) ........................................................................................................ ................ 297WT/DS141/R
Page 281
Preliminary Rulings Requested by EC
India refers to its written answers as provided last Friday, 5 May 2000 which set out its
position in detail.
Nevertheless, India welcomes this opportunity to briefly comment on the EC preliminary
rulings requested by EC.  India has noticed that at most points in time, rather than replying to the
substance of arguments raised, the EC side-tracks into generalizations and deviates attention from the
core of India’s arguments.
As an example of this side-tracking, India would like to highlight the example of Article 1.
EC has requested a dismissal of India’s claim under Ar ticle 1.  However, it is India’s view that this
Article lays down a general principle as indicated by its title.  It obligates Members to conduct anti-dumping investigations in accordance with the provisions of the ADA and to apply AD measures in
accordance with GATT Article VI.  Even if this Article were not specifically mentioned in an anti-
dumping panel request, violation of any ADA provision automatically constitutes a breach of this
Article as well.  In this light, the EC’s argument is moot.
Other examples concern Articles 2, 3.4, 6, a nd 15, each alone and in conjunction with
Article 12.  The EC is not entering into a specific debate, as it had ample opportunity to do, but rather
trying to avoid the issues.
Detailed arguments on these Articles and their respective claims will be set forth in India’s
first Oral Statement as regards substantive matters.
Preliminary Ruling Requested by India
India first of all objects to the assertion that its claim is inadmissible.  India is not merely
expressing its lack of understanding.  Instead, India has posed two specific queries as regards the
status of the document Exhibit EC-4: when was it established  and for what purpose.  India requests
the Panel to use its investigative powers to establish a conclusive reply to these questions.
The date of establishment of the document is important since the EC communicated in writing
on 29 June 1999 [Exhibit India-14] in its answers to the written questions by India that "only those
companies which showed express support for the complaint . . . were considered as complainants . . .
and included in the non-confidential standing file."  Other declarations that were not considered in the
standing determination were not placed on the file.
By contrast, the EC now suggests in recital (99) of its First written submission, that it has
relied on data  of the eight French producers which were not on file to reach the 34 per cent which it
says to have relied on for initiation [EC recital (100)].
The information now contained in Exhibit-EC-4 is therefore contradictory if it was relied
upon at the time of determination of standing.  And this document cannot have been relied upon for
the standing determination if it was established after 29 June 1999.
For similar reasons India also objects to the suggestion of the EC that the document does not
contain new evidence: at no point in time prior to the EC submitting Exhibit-EC-4 to the Panel did
India know of the inclusion of the declarations of support of eight French producers in the standingWT/DS141/R
Page 282
determination, which were never included in the non-confidential file in the first place.  In view of the
above, the EC must clarify the following:
What is the status of the document?  In case the document only summarizes [ "recapitulative
table"] the level of support for the complaint amongst the producers then why are there no details
concerning the production output of each producer, which presumably formed the basis for thecountry-wise sub-totals?
When was Exhibit EC-4 finalized [date] and for what purpose.
Substantive Issues
I. INTRODUCTION
1. India wishes to extend its sincere appreciation to you all for the difficult task ahead.  Some of
the claims in the case before you are complicated and may require much of your time and efforts in
the coming months.  Others are relatively straightforward.  We offer you our full co-operation.
2. In the course of this oral statement, we will summarize and explain our claims.  We will also
orally present a first rebuttal of the arguments made by the EC in its first submission to the Panel.
3. Our oral statement is divided into six parts:
• Background of the case (II);
• Initiation claims ( III);
• Dumping claims (IV);
• Injury and causation claims (V);
• Developing country status claims (VI); and
• Explanation claims (VII).
4. As we have already submitted our comments on the EC’s request for preliminary rulings in
writing, we will not at this stage reiterate these comments.
5. As a last observation in this introductory part, we wish to bring to your attention that India is
aware that two previous GATT panels (Swedish steel and Mexican cement) which held against the
importing country authorities on initiation claims, did not address the other claims made by theexporting countries in these disputes, on the ground that the defective initiation constituted a fatal
error which could not possibly be repaired and wa s therefore outcome-decisive.  These holdings were
correct under the GATT system and equally apply under the WTO system.  However, the dispute
settlement framework of the WTO involves an additional dimension: the appeals procedure before the
Appellate Body.  With this in mind, if the Panel agre es with India, as we hope it would, on any of the
initiation claims or other outcome-decisive decisions
1,  India requests that the Panel nevertheless also
rule on the other claims pursued by India in this proceeding, in case the EC were to appeal the
outcome-decisive findings of the Panel.
                                                     
1 But decisions which could be overturned by the Appellate Body on appeal.WT/DS141/R
Page 283
II. BACKGROUND OF THE CASE
6. Allow us to recall, Mr Chairman, that the matter under dispute was in fact the second anti-
dumping proceeding targeting Bed Linen  from India.  The first Bed Linen  proceeding had to be
terminated due to lack of co-operation on the part of the EC producers.  In fact, this second Bed Linen
proceeding may also be viewed from the larger perspective of four other cases brought by the
European trade association Eurocoton  , all of which were terminated due to defects of some sort
which surfaced during these respective proceedings.  These cases are commonly referred to as:
Synthetic  Fabrics, Cotton Fabrics, Unbleached Cotton Fabrics I, and Unbleached Cotton Fabrics II .
India firmly believes that even this Bed Linen II  should have been terminated if the EC had acted
consistently with the rules of the ADA.  India has been involved in a large number of anti-dumping
investigations initiated by the EC.  However, at no  point has India been so firmly convinced that the
rules of the Agreement have been so repeatedly and systematically violated and the results so unfair
as in this Bed Linen II  proceeding.
7. Paramount standing problems were ignored and/or not addressed.  It appears that the EC was
determined to " find" dumping and did so by using an extravagant profit margin of over 18 per cent
and by using questionable calculation techniques in the "weighing process."  Most of the obligatory
injury factors to be examined were systematically ignored.  Those injury factors that were relied upon
were chosen from various sources, depending on the preferred outcome.  On this basis it was thenassumed that imports during the preceding years were also dumped and had also caused injury.
Finally, in applying measures, the EC chose to ignore the repeated pleadings from India that,
notwithstanding the serious deficiencies of this proceeding, it was prepared to explore constructive
remedies.
III. INITIATION
1. Article 5.3: No 5.3 examination (Claim 23)
8. India recalls that the Bed Linen  II complaint was a so-called back-to-back complaint, which
was filed 20 days after the previous case had been terminated because of withdrawal by Eurocoton of
its first Bed Linen complaint.  Although not stated in the notice of termination, the immediate reason
for the withdrawal of the Bed Linen I  complaint was an overwhelming lack of cooperation from the
EC industry (up until the termination of the case on 10 July 1996), as was clear from the non-
confidential file.  This was known by all, a fact which is also evident from the third party submission
filed by Egypt.  India considers that, against this specific background, the obligation upon the EC to
examine the accuracy and adequacy of the evidence in the application was all the more acute.
9. India strongly rejects the argumentative statements by the EC that India is arguing for an
‘eccentric ’ interpretation of the word ‘examine’ [point 54] or that its interpretation of the word
‘examine’ is ‘so vague as to be useless’ [point 49].
10. The situation is much more straightforward than th at.  It is clear from the very text of the EC’s
notice of initiation, that there was no examination whatsoever.  This simply is a fact.  It is recalled that
the relevant part of the EC notice of initiation states that:
"It is further alleged that the volume and prices of the imported products have,
among other consequences, had a negative impact on the quantities sold and the
prices charged by the Community producers, resulting in substantial adverse effectsWT/DS141/R
Page 284
on employment and the financial situation of the Community industry."   [Emphasis
added].
11. From the plain meaning of this statement, and juxtaposed with the preceding paragraph in the
notice of initiation which stated that "the complainant alleges and has provided evidence" [emphasis
added]  on other matters, it is crystal clear from the record that the EC did not examine this aspect at
all.
12. In this connection India also rejects the statement contained in paragraph 55 of the first
submission of the EC where the EC claims that "The Community authorities . . . have no interest in
initiating investigations that are likely to fail for lack of evidence reached a positive conclusion."  It is
ironic to read such bold statements when India had recently been subjected to Synthetic Fabrics,
Cotton Fabrics, Bed Linen I , all of which  failed exactly for lack of evidence.
13. The EC did not examine whether the volume and prices of the imported products had, among
other consequences, had a negative impact on the quantities sold and the prices charged by theCommunity producers, resulting in substantial adverse effects on employment and the financial
situation of the Community industry.  Rather, the EC accepted these allegations at face value and
chose to initiate on that basis.
14. The Article 5.3 examination must be clear from the (published) record of the proceeding, i.e.
the notice of initiation.  The EC cannot hide behind the fact that, in addition to the fact thatexamination is required, the notice of initiation should also contain information on six specifically
enumerated factors. These factors under Article 12.1.1 are clearly different and should follow  the
examination [Article 12.1: ‘When the authorities are satisfied’ ].
15. Indeed, to the extent that the EC claims that it did in fact examine the evidence
[paragraphs 68-70] -- although the EC implicitly ack nowledges to have failed to publish the result of
these findings -- India observes that the EC’s statements are confusing if not contradictory:
- Paragraph 68 mentions that the previous investigation might have indicated that
injury did not occur, in which case this information would not be material;
- However, in paragraph 69 the EC states that the previous investigation did contain
indications that there was injury, and therefore did help to take the decision to initiate
[paragraph 70].
16. It therefore appears that evidence has only been  examined to the extent that it may have
pointed towards injury, an establishment of the fact s which can hardly be said to be ‘unbiased and
objective’.
17. For these reasons, India requests the panel to rule that there was no examination by the EC of
the allegations in the application that the volume and prices of the imported imports had, among other
consequences, a negative impact on the quantities sold and the prices charged by the Community
producers resulting in substantial adverse effects on employment and the financial situation of the
Community industry.WT/DS141/R
Page 285
2. Article 5.4: Defective standing determination (Claim 26)
18. As a factual matter, India objects to the EC’s insinuation2  that India had suggested that EC
officials falsified records and deceived the exporters in a fraudulent attempt to demonstrate that they
complied with WTO rules.  However, two facts stand out:
• The non-confidential file, supposedly containing the producers’ declarations of support, was
only made available nearly four months after the initiation of the proceeding.
• The file contained copies of faxed declarations of support from which the fax headers had
been removed, preventing interested parties in the proceeding from objectively judging andacknowledging the proper chronology of events.
19. India notes that, to this day, the EC has not contested these facts and has at no stage attempted
to give any explanation.
20. To the contrary, and making matters even worse, India now notes a new fact emanating from
the EC’s first submission.  In that submissio n, the EC has now provided a new document Exhibit
EC-4 suggesting that, in addition to the declarations that were  contained in the non-confidential file,
there had been other  declarations from eight French producers which were taken into account to
determine standing.  These eight declarations were never made available in the non-confidential file.
This newly offered evidence appears to be in direct contradiction with the second written reply of the
EC during the consultation process: " Only those companies which showed express support for the
complaint . . . were considered as complainants at the stage of initiation, and included in the non-
confidential standing file.  Certain declarations of "passive support", also received before the
initiation, were not considered in the standing determination, and therefore not  placed on the file."
[Emphasis added; Exhibit India-14, page 263].
21. It should be noted moreover that, as a factual matter, it remains extremely doubtful whether
the 25 per cent threshold was ever met::  34 per cent3  minus the eight French producers which were
never on record leaves a mere 26.7 per cent.  From this 26.7 per cent one must remove three
producers, whom the EC did not accept as belonging to the ‘Community Industry'.4   If these three
producers merely represented 0.6 per cent each5  even then the 25 per cent test has not been met.
22. Turning now from the factual to the legal aspects of India’s claim, India recalls that there
were three types of entities involved:
                                                     
2 EC first submission, at paragraph 83.
3 Assuming, for the sake of argument, that the total production of all producers in the EC is not higher
than the figure used by the EC in its calculations.
4 The 35 which, according to the EC’s own words, are also the same companies as those that brought
the complaint); See rec 52 jº rec 57 PR, jº point 308 EC first submission jº list of 35 producers handed over
during process of consultations.  The three produces not belonging to these 35, according to EC, are Foncar
(Portugal), Luxorette (Germany), and Erbelle (Germany).
5 In view of absence of producer-specific output in EC Exhibit-4, India is prevented from checking the
actual impact that the exclusion of these three producers has had on the standing determination.  However, thefive Portuguese producers allegedly represented 12.7 per cent which at a simple average would imply 2.54 per
cent for Foncar.  The 11 German producers allegedly represented 8.7 per cent, which at a simple average would
imply 1.58 per cent for Luxorette and Erbelle.  Together these three producers would represent 4.12 per cent,which, if subtracted from the 26.7 per cent brings the alleged support to merely 22.58 per cent.WT/DS141/R
Page 286
• Eurocoton , the European trade association, initially allegedly representing 38 or 53 per cent of
bed linen production [page 3 of the complaint is ambiguous  (India Exhibit-6, page 80)];
• National associations , members of Eurocoton ;
• Producers  allegedly represented by Eurocoton and, now, allegedly accounting for some 34
per cent [See EC Exhibit-4].
23. India recalls that Article 5.4 requires a determination , before initiation, that domestic
producers  expressly supporting the application account for at least 25 per cent of total domestic
production.  GATT panels (Swedish steel; Mexican cement) have consistently held that the failure to
properly determine standing before initiation is a fatal error which cannot be cured retro-actively later
on in the proceeding.
24. The declarations of support in the non-confidential file came partially from the producers
identified in the complaint and partially from national textile industry associations, in the case of
France, Spain and Austria, acting on behalf of producers in their countries.
25. Firstly India contends that it is unacceptable under Article 5.4 that European or national trade
associations issue declarations of support to themselves: the declarations of support must emanate
from individual producers, according to the plain meaning of Article 5.4 and according to the obvious
purpose behind Article 5.4: the prevention of the filing of frivolous complaints.  India recalls that
Article 5.4 contains clear language as to whose support is to be taken into account: "the degree of
support for, or opposition to, the application expressed by domestic producers of the like product."
Alternatively, if the group of producers is very large,  the footnote to Article 5.4 offers the alternative
of sampling.  India notes that the EC chose not to invoke this available possibility of sampling in this
case.
26. To be sure, India does not contest, and has never contested, that a trade association can file an
application on behalf of its members.  However, India recalls that the support for the application must
be expressed   by domestic producers.   The EC interpretation that a trade association can issue support
declarations to itself defeats the very purpose of Article 5.4, and this all the more so because,
according to the EC’s interpretation of Article 5.3, the authority does not even have to examine the
accuracy and the adequacy of the evidence in the complaint.
27. Secondly, India therefore respectfully requests the panel to use its investigative powers to
determine whether the declarations of support from the producers [and, for completeness’ sake, the
national textile industry associations] were received by the EC prior to the initiation  of the
proceeding, as is required by Article 5.4.  India stresses that this is an outcome-decisive issue and that
in the EC system of confidentiality of information [and the ad hoc removal of the fax headings in this
case], India as of today is not in a position to establish the exact chronology of events.
28. The above two points raised by India are very  straightforward; the EC, however, obfuscates
their simplicity by side-tracking into discussions about degree of proof6,  and interpretation of the term
‘on behalf of'.7   In the view of India, these discussions are beside the point.
                                                     
6 EC first submission, at paragraphs 84-89.
7 EC first submission, paragraphs 90-97.WT/DS141/R
Page 287
29. To the extent that it is suggested that Articl e 6 should be considered in the determination of
standing, India rejects these suggestions.  Article 6 explicitly deals with issues ‘throughout’ the
investigation, i.e. explicitly after the standing determination has been made and after the proceeding
has been initiated.  At issue here however is what the authorities must do prior to the initiation of the
proceeding .
IV. DUMPING
30. Let us now turn to dumping issues: As regards the dumping calculation India recalls that there
are three Articles that are at the core of the dumping claims: Article 2.2, Article 2.2.2 (ii), and
Article 2.4.2.
1. Article 2.2: The profit must be ‘ reasonable’  (Claim 4)
31. At the heart of the claim as regards Article 2.2 is the  question whether the principle of
‘reasonable’ is an over-arching requirement, instructing the whole of Article 2.2, or whether any profit
determined in accordance with the further specifics of Article 2.2.2 is in se reasonable?
32. India is strongly convinced that a profit arrived at under the methods foreseen under
Article 2.2.2 is not automatically  reasonable.  The word ‘reasonable’ in the chapeau of 2.2 instructs
the whole Article as an independent requirement, both as regards the method and its result.  India
categorically and strongly denies the EC ’s suggestion that the methods in 2.2.2 (i) and 2.2.2 (ii) are
‘evidently formulae that produce reasonable solutions’ [paragraphs 181].  Indeed, what if the EC hadcalculated a profit of 1000 per cent for one producer--would this also automatically be reasonable?
33. Let us also have a look to the facts at hand.  The Indian producers have always maintained--
and this fact has never been challenged by the EC--that Bombay Dyeing is a peculiar company in
India possessing an established position in the market for over one-hundred years.  The facts of the
case bear this out.  By way of illustration, however, India herewith wishes to show some photographsas well as sample evidence which bear out this statement.
34. India rejects the contention that no evidence was ever presented witnessing that the profit of
Bombay Dyeing was anomalous.  Countless times during the proceeding has this patent fact been
brought to the attention of the attention of the EC.
35. In this connection India also rejects the EC’ s br ushing off of India’s argument that a profit is
unreasonable simply because it is higher than that obtained in other countries [point 188].  The point
is not and has not been that the profit so determined for India was a bit higher than in other countries
[implied by EC paragraph 188].  The point was that the profit determined for and used in the
calculations for India was three times higher than that of any other profit found to exist in the
proceeding.
36. As regards EC’s paragraph 190 India first of all rejects the statement that "India does not
attack the methodology adopted by the EC authorities. "  It is clear that the second argument of the
first claim of India, pertaining to Article 2.2.2(ii), challenges the EC’s very methodology [III.A.4.2 of
India’s first submission] of determining profit based on profitable sales only.
37. The EC then obfuscates the issue between a normal profit "incurred and realized" and the
profit "calculated and determined" for dumping purposes.  In this connection India recalls that the
three respective profit margins of Bombay Dyeing were overall  4.66 per cent, 12.09 per centWT/DS141/R
Page 288
"incurred   and realized  on Bed Linen", and 18.65 per cent " determined  on profitable sales only of Bed
Linen".  Now that the EC argues that this 18.65 per cent profit of Bombay Dyeing was perfectly
representative [paragraph 190], it may be recalled that the quantity of its profitable sales was only half
of its total domestic sales [page 374 India Exhibit-24].
38. Indeed, the EC even states that there is "not hing to suggest that other companies selling in
India could not have obtained profits similar to th ose of Bombay Dyeing" [Point 190].  India points
out that it was the EC itself which refused to include Standard Industries, which along with Bombay
Dyeing was the largest seller on the domestic market, in the main sample [paragraphs 3.9, 3.10, 3.11,
3.12, and 3.13 of India’s first submission].  From the very beginning India’s suggestions in this regard
were not taken into account.
39. Moreover, to suggest that the inclusion of data of another producer would have had little
effect [again paragraph 190] is not borne out by the facts.  As the EC knows, Bombay Dyeing and
Standard Industries were the largest sellers on the domestic market [see India’s first submissionparagraph 3.3].  Since the EC failed to investigate Standard Industries, its potential impact is
unknown.
40. India recalls one important precedent from the Panel Report on Audio Tapes in Cassettes.  In
that report the Panel held at paragraph 393 that it "did not consider that an amount for profit was by
definition reasonable simply because [it met the relevant criteria]".
8   Although that Panel Report was
not adopted at the time, India nevertheless considers its logic instructive and convincing.
41. Finally, India recalls the EC’s own observations in paragraphs 135 through 152, most
explicitly 152.  In these paragraphs the EC suggests and stresses that the basic principle stems from
the chapeau of Article 2.2 [paragraph 152] and that Article 2.2 seeks to avoid outcomes that would be
distorted [paragraph 145].  Clearly, when the EC considers that the chapeau should override the sub-
paragraphs for the ‘ordinary course of trade’ principle, it cannot suddenly take a different view when
it comes to the notion of ‘reasonable’ which is at least as basic as the former.
2. Article 2.2.2: Incorrect application (Claim  1)
42. In relation to Article 2.2.2 there are three arguments that have been put forward:
• The text of Article 2.2.2 (ii) itself is evidently in the triple plural: weighted average, amounts,
and exporters or producers;
• The text of Article 2.2.2 (ii) itself mandates the use of amounts  "incurred and realized" and
not amounts  "determined";
• Option (ii) follows option (i).
43. As regards the first argument of this claim India does not deny that, in general terms, words in
the plural could sometimes contain references to the singular as well.  In this connection India has
never meant to defy common sense.  However, India believes that the text of Article 2.2.2(ii) is very
explicit in referring to a triple   plural .  Moreover, in the current case the interpretation of
Article 2.2.2(ii) allowing the use of one peculiar producer has led to a result which clearly is
                                                     
8  Copy of relevant part attached as India Exhibit-81.WT/DS141/R
Page 289
"unreasonable" both in terms of Article 32 of the Vienna Convention, as well as in terms of the
hierarchically superior Article 2.2.
44. India also wonders how it is possible that a result arrived at under a method categorized under
option (ii) could be reasonable when, if the sa me calculation method would have been used but
categorized under option (iii), the result would have been considered illegal [because it exceeds
normally realized profits of all other producers].
45. As far as the second argument concerning amounts "incurred and realized" are concerned,
India first of all objects to the suggestion that it ha s not considered the context, object and purpose of
the provision [EC paragraph 135].  However, it is clear from the Vienna Convention that the terms of
a treaty in its ordinary meaning are the first source of interpretation.  India has therefore rightfully
considered the text of the provision.
46. Indeed, to improperly graft the concept of "ordinary course of trade" onto Article 2.2.2 (ii) has
several flaws as a matter of treaty interpretation:
• First the initial sentence of Article 2.2.2 chap eau explicitly includes the concept "ordinary
course of trade."  This first sentence of this chapeau however is grammatically distinct from
the second sentence that serves as the chapeau  for the remainder of this provision.  The
concept "ordinary course of trade" is therefore not properly considered to be part of the
remaining text of this provision.  This is different from the concept of ‘reasonable’ which
does not form part of the chapeau of 2.2.2, but is an overarching concept engraved in
Article 2.2 and thereby instructing the whole of Article 2.2;
• Second, the drafters of Article 2 were quite careful to insert the concept "ordinary course of
trade" in precisely those places where they intended the concept to apply.  The decision not toinclude the concept in Article 2.2.2(ii) must therefore be given meaning when interpreting this
language;
• Third, the EC’s interpretation gives no significance to the important distinction between the
language and the option set forth in Article 2.2.2 chapeau  based on "actual data" and the
language of the option set forth in Article 2.2.2(ii) based on "actual amounts incurred and
realized".
47. The EC tries to bolster its own flawed interpretation by providing two hypothetical scenarios
in paragraphs 145 and 146.  In paragraph 145 no amounts for profits are realized so it is hard to see
how in the absence of profits these amounts [nil?] could be used.
48. In paragraph 146, the EC provides a hypothetical example which firstly suggests that if for
other producers an amount for profits is used that is lower than that of ‘company A’, it wouldautomatically imply that this is unreasonable.  This  implied reference to the  ‘perverse’  end-result
[because it would be lower than the amount for producer A in question] contrasts unfavourably with
the EC’s stubborn unwillingness to re-consider the extreme profit of over 18 per cent for Bombay
Dyeing, which resulted from the EC’s actual interpretation and application of Article 2.2.2(ii).
49. Secondly, if indeed the actual text of 2.2.2(ii) would be applied to the facts at hand, the result
is not as bizarre as paragraph 146 of the EC submission seeks to suggest.  Suppose that, for other
producers the EC would indeed have properly applied 12.09 per cent profit [the amount "incurred andWT/DS141/R
Page 290
realized" ] instead of 18.65 per cent, the dumping margins could in similar vein be expected to have
been approximately 6.56 per cent lower, as follows:
Anglo-French: 18.1 per cent;
Bombay Dyeing: 7.7 per cent [not affected];
Madhu: 10.4 per cent;
Omkar: 7.6 per cent;Prakash: Nil.
50. Clearly the above result would have been more ‘reasonable’ than the current "bizarre" [see
EC recital 144] dumping margins which resulted from the imputed 18.65 per cent profit.
51. In sum, it would appear that the EC has acted contrary to Article 2.2.2 on the above counts.
3. Article 2.4.2: Incorrect interpretation of all weighted average export transactions; main rule
and exceptions cannot be mixed (Claim 7)
52. India reiterates its concern that allowing the offset within models but not between models
contradicts the plain meaning of Article 2.4.2.  The EC’s interpretation disregards the word ‘all’ in the
context of  ‘all comparable export transactions.’  ‘All’ is apparently taken to mean by EC practice
only the transactions that are dumped, not those transactions involving models that are not dumped.
53. Moreover, India respectfully submits that the alternative option contained in Article 2.4.2
allows the authorities to compare a weighted average normal value with individual export prices, in
case of a ‘pattern of export prices.’  Such pattern could exist, for example, in a case where three
models would appear very much dumped while two would appear very much non-dumped.  However,
in the view of India, the ADA does not allow the mixing of the main rule and the invocation of the
exceptions.  Either the main rule is applied or the exceptions are invoked on the basis of an explicit
finding of existence of a pattern of export prices.
54. As far as Article 2.4.2 is concerned, India considers the arguments of the EC unconvincing.
The fact remains that no genuine  ‘weighted average’  on the export side is being effectuated: while
normal value is always considered at the ‘weighte d average’ level, the ‘export prices’ are sometimes
‘zeroed’ and therefore not considered at their ‘weighted average’ level.
55. The ‘eccentric’ interpretation of the EC which for certain models imputes ‘zero’ instead of
‘weighted average’ is tantamount to skewing the proper weighted average by essentially adjusting
some prices, but not others.
56. The offsetting of dumped with non-dumped transactions within models [ intra -model
offsetting], but not between models [ inter -model zeroing], is also illogical as shown in the Annex to
this Statement.
57. The spirit of the provision should also be kept in mind.  Article 2.4.2 was introduced in the
Uruguay Round of negotiations to address specific concerns, including the fact that exporters should
not be put in an unfair situation due to skewed calculation techniques, and to effectuate a genuinely
fair comparison as per Article 2.4.
58. Finally, India further rejects the introduction by the EC of Article 9.4, which deals with the
duty for the non-sampled co-operating exporters.  It is clear that it is not the sampling dutyWT/DS141/R
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calculation, but the operation of Article 2.4.2 which is  the Article towards India’s claim is directed.
The fact that a sampling duty could under certain specific circumstances be higher by the exclusion of
zero or de minimis  dumping margins is not at issue.  No claims have been raised with respect to
Article 9.4.  Indeed, as the EC points out in the first sentence of paragraph 209: "The process of
determining a (single) dumping duty from these margins is a separate one, which does not fall within
the express terms of Article 2.4.2.".
V. INJURY
1. Article 3.1: Failure to examine only dumped transactions (Claim 8)
59. India considers that the failure of the EC to examine dumped transactions only for the purpose
of the injury determination in the Bed Linen II proceeding is inconsistent with Articles 3.1, 3.2, 3.4,
3.5 of the ADA.
60. India first of all objects to the suggestion by the EC that India’s interpretation has "moved
beyond complexity into confusion"  [paragraph 221].  In this connection it is unfortunate that the EC is
quoting selectively from the Vienna Convention: There is a real question here stemming from the
discernible plain meaning of the language of th e Article: the words "dumped imports" have been
referred fifteen times in Article 3 alone.
61. If the EC authorities find that some imports are dumped and others are not, then they must
distinguish between the two while ma king the injury determination.  In this connection India disagrees
with the statement that "it is not possible to isolate the effects of individual transactions in a single
product market.  The market situation is determined by the overall impact imports"  [sic, recital 227].
Based on the detailed dumping calculations it must have been clear to the EC how much of the Indian
exports had been dumped.
62. India further disagrees with the suggestion that the ASCM contains a parallel provision in this
context [paragraph 231].  Dumping is by its nature company-specific and can therefore clearly differ
between companies within a country while subsidies stem across the board from the Government.
[This is not to say that for other purposes there could not be parallels between the ASCM and the
ADA].
63. In short, allowing some "dumped"  imports to taint all imports from a company and, indeed, a
country skews, the fundamental injury analysis of Article 3.  The core analysis of Article 3.1 and 3.2
requires the assessment of the volume and price impact of "dumped" imports only.
2. Article 3.4: Failure to evaluate all factors (Claim 11)
64. The EC failed to evaluate all injury factors mentioned in Article 3.4 of the ADA for its
determination on the state of the domestic industry.  Particularly, the EC did not evaluate the
following twelve [of eighteen] factors:
• Productivity;
• Return on investments;
• Utilization of capacity;
• Factors affecting domestic prices;WT/DS141/R
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• The magnitude of the margin of dumping;
• Actual effects on cash flow;
• Potential negative effects on cash flow;
• Inventories;
• Wages;
• Growth;
• Ability to raise capital;
• Ability to raise investments;
Thus the EC acted inconsistently with Article 3.4.
65. Firstly, India would like to recall the intrinsically contradictory nature of the defences put
forward [paragraph 249] by the EC against this claim from India.  At the outset the EC suggests that it
has evaluated all the factors.  Simultaneously however  the EC also claims [EC’s third line of defense]
that such evaluation of all factors is not necessary.  A defense which is irrelevant in case the EC had
evaluated all factors.
66. Secondly, India is perplexed by the statement contained in EC submission at paragraph 262
that it is apparently up to the exporters to suggest factors to the EC which it otherwise might forget to
evaluate and examine.  Apparently the EC beli eves that the Indian exporters should have guessed ,
before imposition of measures, that the EC was only going to rely on two injury factors in its
examination.  For that reason the exporters should, on the basis of such speculative guesswork , have
pointed out to the EC that there are at least 16 other factors which are relevant under the ADA and
should be examined.
67. In this connection India recalls that the purposes of Article 3.4 is to ensure an unbiased and
objective injury analysis, which is mandatory as per the Article. Evaluation of the factors is required
in every case, although such consideration may lead the investigating authority to conclude that a
particular factor is not probative in the circumstances of a particular industry and therefore is not
relevant to the particular determination.9
68. Similarly, the Panel in Korea  Resins  concluded that the investigating authority could not
focus solely on factors supporting a conclusion that the domestic industry is encountering difficulties,
while disregarding other factors.10
69. Contrary to what the EC seems to suggest in its paragraph 289, the Panel in HFCS  did not
make its decision based on simplistic reliance on an inappropriate precedent.  As the third partysubmission of the United States emphasizes, the parties to that dispute fully argued the issue to the
panel, citing GATT anti-dumping determinations such as Korea Resins .
70. Article 3.4 specifies the 18 relevant factors and indices which shall at least be evaluated to
examine the impact of the dumped imports on the domestic industry.  Moreover, this list is not
                                                     
9 Mexico--HFCS, WT/DS132/R, 28 January 2000.
10 Korea-Resins , ADP/92 and of 2 April 1993.WT/DS141/R
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exhaustive.  The EC observes in paragraph 265 that  "to insist that the listed factors must be evaluated
in all circumstances, would be to require the evaluation of a factor that has already been found to be
irrelevant, which is nonsense" .  However, this reasoning is illogical: how can investigating authorities
determine that a factor is not relevant if it is not examined/evaluated?  How can interested parties
know that the authority has evaluated such fact ors, if nothing is published.  In EC’s logic,
investigating authorities should first determine on which relevant factors/indices they will rely upon,
and then examine only their importance.  Such an approach makes a mockery of Article 3.4.
71. Regarding the EC’s observation in paragraph 274 that "the domestic producers are the best,
and sometimes the only source of informa tion on the factors relevant to injury" , India questions the
accuracy of this statement.  The statement is hard to reconcile with the EC’s practice in the Bed linen
proceeding where three ‘levels’ were examined depending on the factor in question as described in
paragraph 62 of the provisional Regulation, confirmed by the definitive Regulation.
72. As far as the EC’s argument regarding ‘or’ is concerned [EC paragraph 282], India recalls that
Article 6.3 of the Tokyo Round ASCM was virtually identical in wording, and contained exactly the
same ‘or’ issue.11   In fact the EEC argued in Brazil--CVD on Milk:
"125. . . . that in carrying out an objective examination required under Article 6:1 of
the Agreement, the investigating authorities were obliged to consider the criteria and
indicators laid down in Articles 6:2 and 6:3. Therefore, an essential element of a
review of whether a determination of material injury was in conformity with the
standard of Article 6 was an examination of whether the factors set forth in
Articles 6:2 and 6:3 had been properly considered, though Article 6 did not prejudge
the weight to be assigned to each factor.12   However, in this case, the data on the
elements contained in Article 6:3, such as on consumption, market shares, productionor prices, had not been provided by Brazil at the time of its definitive determination.
Moreover, despite the EEC having had earlier requested data on these aspects from
Brazil, the first time the EEC received such data was when Brazil submitted the
information on these aspects to the Panel."  (Emphasis added).
The EC thus advocated exactly the same interpretation as is being argued by India in the present case.
The EC’s present defense therefore is simply not credible.
3. Article 3.4: Picking and choosing of the domestic industry for injury determination
(Claim 15)
73. The first submission of India contains three arguments showing the inconsistency in the injury
determination:
                                                     
11 “The examination of the impact on the domestic industry concerned shall include an evaluation of all
relevant economic factors and indices having a bearing on the state of the industry such as actual and potential
decline in output, sales, market share, profits, productivity, return on investments, or utilization of capacity;factors affecting domestic prices; actual and potential negative effects on cash flow, inventories, employment,wages, growth, ability to raise capital or investment and, in the case of agriculture, whether there has been anincreased burden on Government support programmes. This list is not exhaustive, nor can one or several ofthese factors necessarily give decisive guidance.”
12 [Footnote in original]: To support its point that the question of whether the determination of injury
was based on positive evidence was distinct from the question of the weight to be accorded to the facts beforethe investigating authorities, the EEC cited the report of the panel on "United States - Salmon", paragraph 260.WT/DS141/R
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• The EC explicitly determined that the domestic industry consisted of 35 companies [the
complainants according to the EC], but relied in  its injury determination on companies outside
this group of 35;
• The EC chose a sample from the domestic industry, but it did not consistently rely on it;
• The EC chose to rely on different ‘levels’ of industry for different injury indices without any
apparent reason other than goal-oriented ‘picking and choosing of injury’.
74. India maintains that the arguments put forward by the EC do not refute the claims made by
India in its First Submission at all .  Moreover, India objects to the newly introduced concept by the
EC [as far as we understand it] that within one and the same single investigation a Member may use
either of the alternative definitions of the domestic industry contained in Article 4.1 of the ADA,
suited to its needs.  Such innovative ‘right’ of picking and choosing the most desirable definitionwhenever a choice is available runs contrary to the concepts of consistency fairness and predictability.
One may also wonder how such innovative approach fits with Article 17 (6) (i) which provides that
establishment of the facts must be proper and the evaluation must be unbiased and objective.
75. In paragraph (57) of the provisional Regulation, subsequently endorsed, the EC noted that:
"The remaining 35 companies, which cooperated with the enquiry and are located in
France, Germany, Italy, Spain, Portugal, Austria and Finland, represented a major
proportion of total Community production in the investigation period. These
companies were therefore deemed to make up the Community industry under the
terms of Article 4 (1) of the basic Regulation."  (Emphasis added).13
76. In paragraph 317 of its first submission the EC reiterates that its finding of injury is not based
on the EC producers as a whole but on the Community industry.  For this purpose the EC quotes
recital (40) of the Definitive Regulation.  The Definitive Regulation refers back to the samplecompanies.  The sample however contained at least one company [Luxorette] that does not belong to
the Community industry.  The EC is therefore cont radicting itself: how can EC say that it is not
looking outside the Community industry when, for the purpose of analyzing the situation of the
Community industry, It has relied on a sample which consists of companies not part of the
Community industry?
14
77. In paragraph 318 of its first submission the EC suggests that "India’s arguments appear to rest
on the notion that all factors . . . must indicate injury."  For the record, India denies having ever relied
on such notion.
78. As regards the sampling, India maintains that once the EC selected a sample from the
domestic industry, it was not entitled to subsequently deviate from that sample in order to find injury.
                                                     
13 This finding was confirmed in paragraph 34 of the definitive Regulation. If--notwithstanding this
explicit determination--other companies were also part of the domestic industry, the provisional and definitiveRegulations suffer at least from an Article 12 problem.
14 The German company Luxorette formed, at least acco rding to the Provisional Regulation, part of the
17 sampled producers.  This company Luxorette however did not form part of the 35 producers comprising the
Community industry, at least according to the list of 35 producers provided in writing during the consultations.
[Furthermore, two more companies formed part of the original sample of 19 producers.  Both companies did
later no longer belong to the sample; one of these however did continue to form part of the CommunityIndustry.]WT/DS141/R
Page 295
India notes that the EC does not deny having looked at information outside the sample.  India rejects
the implications put forward by the EC [paragraphs 326-327] that once it had selected a sample it
could still use information outside the sample if available.  Such approach distorts the very purpose of
a sample and cannot, contrary to what the EC suggests in its paragraph 327, be considered ‘unbiased
and objective’ at all.
79. As regards the ‘picking and choosing’ of the preferred level in order to establish injury India
notes that the EC does not deny the facts as summarized by India.  Indeed, the EC even seems to
acknowledge that it has used various injury factors from the preferred level so long as this would
support an injury determination.  India underlines that such an approach cannot be considered
unbiased and objective by any stretch of imagination.
4. Articles 6.10 and 6.11: No statistically valid sampling (Claim 16)
80. As pointed out in its response to the preliminary rulings requested by the EC, India is of the
opinion that its claim regarding sampling is duly before the Panel because the rights of defense of theEC have not been impeded, as these claims were discussed during entire course of the proceedings
and the consultations.
81. India underlines that for a sample to be statistically valid it must fairly represent the entire
underlying population from which the sample was taken.  India contends that to take a sample only
from the pool of the complaining domestic producers does not meet the requirements of a ‘statistically
valid’ sample.  Alternatively, however, in case the sample is supposedly taken to represent only the
Community industry, i.e. the complaining producers as the EC seems to argue, then it should not have
contained companies from outside that industry.15
5. Dumped imports before I.P. (Claim 19)
82. India considers the assertion of the EC contained in its paragraph 343 where it now denies
having ever considered as "dumped" all imports of bed linen from India in the years preceding the
investigation period as factually incorrect.  In this connection India recalls, to give just one example,
paragraph 67 of the provisional Regulation, endorsed by the definitive Regulation, which states:
"dumped imports from the three countries  concerned increased from 33,825 tonnes in
1992 to 46,656 tonnes during the investigation period i.e. an increase of
12,831 tonnes or 38 per cent. During the same period their market share increased
from 16.9 per cent to 25.1 per cent"  [emphasis added].
In the light of this India is surprised to read paragraphs 344 and 345 of the EC’s first submission,
which contradict its statements in the Official Journal on this point.  Clearly, India is not ‘in
confusion’ at all [EC paragraph 345] but is merely relying on the text of the published Regulation.
83. Accordingly, India reiterates that the EC practice to automatically consider as ‘dumped"  all
imports of bed linen from India in the years preceding the investigation period, is inconsistent with
Article 3.4.  In particular, EC could not attribute the alleged closures of the 29 companies in the
period from 1992 up to the I.P. to the "dumped imports" during the I.P., since these imports occurred
only after the alleged company closures.
                                                     
15 The company Luxorette was part of the sample but did not belong to the Community industry.WT/DS141/R
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84. Second, the statements contained in paragraphs 346 through 350 contradict and try to explain
away the EC’s very own injury analysis as published in the Official Journal.  In this connection India
refers for example to recitals (91) and (92) of the Provisional Regulation, maintained in recitals (40)
and (41) of the Definitive Regulation.  The statements now made by the EC in its first submission,
alleging for example that India’s arguments are "misplaced" [paragraph 348], are completely
contradicted by the published statements in the Official Journal.
6. Article 3.5: No consideration of other factors (Claim 20)
85. India believes that the EC acted inconsistently  with Article 3.5 by automatically considering
all imports of bed linen from India in the period 1 January1992 - 30 June 1995 as "dumped"  and
thereby causing injury "through the effects of dumping" .
86. For the same reasons as explained by India above under claim 19, the statements of the EC
contained in paragraph 352 are not borne out by the facts.  The Regulations imposing provisional and
definitive duties are clear and form the basis on which this dispute is to be adjudicated.  The clearlanguage of these Regulations cannot be waived away by suggestive statements that India’s claim is
based on a "misunderstanding of the EC’s practice"  [EC paragraph 354].
VI. ARTICLE 15: NO DEVELOPING COUNTRY STATUS (Claim 29)
87. India briefly recalls the objective of Article 15 ADA.   This specific Article of the ADA tries
to take care and addresses the different market mechanisms applicable between the various countriesin the world.  For this purpose "special regard " must  be given by developed country Members to the
"special situation" of developing country Members.
88. Unfortunately however the EC chose to ignore this  Article altogether.  The EC did not explore
any possibility for any constructive remedy at all and did not even take the trouble to address requests
made by Indian exporters throughout the proceeding.  During the consultations, the EC replied thatthe EC had in fact accorded special treatment to Indian exporters in three manners:
• Simplified questionnaires;
• Acceptance of responses beyond stated deadlines;
• Individual treatment of newcomers.
In its first submission, India has proven this alleged "special treatment" to be factually incorrect.
Moreover, as already pointed out by India in its first submission: even if the EC would have done so
these would not have constituted constructive remedi es.  Accordingly the EC did not pursue its earlier
arguments in its first submission.
89. Instead the EC now argues that the Indian exporters missed the deadline for offering an
undertaking.  Again, unfortunately, this statement is factually incorrect, as India Exhibit-72 shows.
90. Furthermore, Article 15 clearly puts the initiative for exploring constructive remedies with the
importing country authority, as the third party submission of Egypt also argues.WT/DS141/R
Page 297
91. India regrets that the EC has completely and blatantly ignored its obligations under Article 15.
The issue does not only affect India, but all developing country members alike, all of whom are
looking with anticipation to the Panel ruling on this important issue.
VII. ARTICLE 12.2.2: NO/INSUFFICI ENT EXPLANATIONS (CLAIMS 3, 6, 10, 13, 18, 22,
25, 28, AND 31)
92. Those familiar with anti-dumping and injury determinations in other jurisdictions, notably the
United States and Canada, are often surprised at the scarcity of information provided in public
determinations issued by the EC authorities.  Contrary to, for example, the practice of the Commerce
Department in the United States of addressing specific comments raised by parties in a section
following the findings of the authorities, determin ations in the EC are full of standard phraseology
(see notably notices of initiation) and summaries of selective EC findings.
93. The EC tries to brush aside the concerns raised by India on the ground that the importing
country authorities have discretion to decide which matters of fact and law, arguments and claims arerelevant  within the meaning of Article 12.2.2 and that the arguments made by the Indian exporters in
the course of the proceeding were not relevant.  Obviously, such line of reasoning would give the
administering authorities carte blanche  to reproduce only supposedly ‘favorable’ findings and to
simply ignore arguments adverse to its case.  Such interpretation is illegal and unwarranted and
constitutes a violation of Article 17.6 (i).
94. Furthermore, the structure of India’s first subm ission, which was designed on purpose to show
the close linkage between key arguments and insuff icient explanation by the EC, negates the EC’s
apparent conclusions that India’ s claims and arguments were irrelevant for purposes of application of
Article 12.2.2.  The following table shows once more that on each of India’s substantive claims, the
EC provided either no or extremely cursory information on public record:
Substantive claims Explanation
claims
1-Article 2.2.2 3 Recital 18 addresses only 1 of 3
arguments, and very summary
4-Article 2.2 reasonable 6 Recital 18 does not address claim
8-All imports dumped 10  Not addressed
11-3.4 factors 13 Not addressed
15-3.4 picking and choosingdomestic industry18 Four arguments raised not addressed
20-Pre-IP imports 22 Not addressed
23-5.3 examination 25 Not addressed
26-5.4 standing determination  28 Not addressed
28-15-developing country 31 Not addressed
95. To sum up, the explanation in the definitive Regulation, which incorporates parts of the
provisional Regulation suffering from the same defects, was self-serving and the EC failed to address
virtually all of the claims and arguments made by Indian exporters in the proceeding. In view of this
systematic and repeated pattern of ignoring claims and arguments made by Indian exporters in the
proceeding, India requests the Panel to send a strong message to the EC:  that self-serving
explanations which do not address the claims and arguments made by exporters in the course of theproceeding do not meet the standards of Article 12.  The most recent example of non-transparency ofWT/DS141/R
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EC proceedings is the reluctance, even today, to give the exact date of exhibit EC-4 and producer
specific data in that exhibit.
ANNEX ON EC INTERPRETATION OF ARTICLE 2.4.2Situation 1: One Model A
Date Normal value Export price Difference
1 May 50 50 0
10 May 100 100 0
20 May 150 150 0
30 May 200 200 0
Agreed between all Members:
Weighted average-to-weighted average:
125 (50+100+150+200/4) – 125 (50+100+150+200) = 0
Situation 2: Four different models A, B, C, D:
Date Normal value Export price Difference
1 May-Model A 50 50 0
10 May-Model B 100 100 0
20 May-Model C  150 150 0
30 May-Model D 200 200 0
Inter-model zeroing:
[India’s method: Weighted average-to-weighted average: 125-125=0]
Transaction by transaction-to-transaction by transaction:
[Model A: 50-50=0
Model B: 100-100=0
Model C: 150-150=0
Model D: 200-200=0]
EC method, as applied in Bed Linen : Weighted average normal value to transaction by transaction
export price
Model A: 125-50=75
Model B: 125-100=25Model C: 125-150=-25=0
Model D: 125-200=-75=0
100/500x100=20 per centWT/DS141/R
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The EC has managed to find a dumping margin of 20 per cent
Concluding Remarks
Mr. Chairman, the complexity of the legal and factual issues involved in this case are by now
no doubt clear. Yet, despite this complexity and the fact that the case was initiated nearly four yearsago, all that the Indian exporters targeted in this proceeding have sought, has been the right to fairly
and properly defend their interests as envisaged in the Anti-Dumping Agreement. Unfortunately,
Mr. Chairman, from the time of initiation, through to the provisional and definitive findings and
during the consultation process, it has been exactly this expectation of fairness, transparency and
accountability which has been totally denied to the Indian exporters, by the EC authorities.
The ADA imposes an obligation on investigating authorities to observe a minimum degree of
transparency with respect to the methodology and ev idence relied upon by the investigating authority;
to provide access to meaningful and timely  information on issues such as standing and injury; and, in
the case of a developing country such as India, it  also obliges the investigating authority to explore
constructive remedies before the application of anti-dumping measures.
This has been provided to ensure that anti-dumpi ng investigations are carried out in a fair and
transparent manner, and so as to  allow the targeted exporters a genuine chance to evaluate and
comment upon the quality, accuracy and probative value of the evidence on the basis of which the
investigating authority intends to make its determination
Unfortunately, this was not done.  On several key, outcome-decisive elements, EC’s approach
to the whole matter has been somewhat reminiscent of the phrase  ‘you’ll just have to take our word
for it.’
For instance, was there sufficient support among the EC producers to justify the initiation of
this case? Yes, according to the EC, but the expo rters had to wait for four months following the
initiation before the non-confidential file was shown to them. Why? We don’t know. Did the EC
satisfy itself that this support met the prescribed threshold and that it was expressed by the domestic
producers prior  to the initiation of the proceeding? Yes replied the EC but in spite of repeated
requests did not produce the full copy of the faxed declarations of support, a practice they presumablyfollow in all anti-dumping investigations; did not give company wise production data; and did not
include copies of expression of support from eight French companies in the confidential file, while
enclosing all other similar expressions of support. And yet they say that the prescribed threshold of
support was met before the initiation of the investigation.
Did the EC examine the accuracy and adequacy of the allegations in the complaint prior to
initiation? Yes, assures the EC and confirms that it read the complaint, and did apparently measure theallegations in the complaint against an internal, unknown standard of ‘credibility.’ Even though EC
does not elaborate upon  this standard of ‘credibility’ it argues that this so called examination
apparently bridges the gap between mere conjecture or allegation on the one hand, and persuasive
prima facie  evidence on the other hand, which proves both the adequacy and accuracy of the
complaint.
Did the EC examine all the injury factors mandated under Article 3.4 of the ADA? First the
EC says that it is under no obligation whatsoever to examine all the listed injury factors, contrary to
certain laid down jurisprudence. Later, it contends that it nonetheless undertook this exercise, firstWT/DS141/R
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determining, though we don’t know, how what it cons idered ‘relevant,’ and then evaluating only those
relevant factors- while at the same time continuing to affirm that it examined all listed injury factors.
Mr. Chairman, unfortunately, this is not an exhaustive list. EC appears to have carried this
approach throughout the present proceeding.
Mr. Chairman, we sincerely believe that justice was neither done, nor seen to be done in this
case. The ADA spells out the obligations which the investigating authority must adhere to, obligations
which are designed to provide fairness, equity and transparency, obligations which are designed to
protect the trade interests of developing countries. Unfortunately EC failed to meet its obligations. We
ask the Panel to so find and to ensure that justice is finally done.