 
  WORLD TRADE  
ORGANIZATION  TN/RL/GEN/28 
2 December 2004 
 (04-5247) 
Negotiating Group on Rules Original:   English 
 
  
PROPOSAL ON ISSUES RELATING TO THE DETERMINATION OF INJURY  
UNDER ARTICLE 3 OF THE ADA 
 
Communication from Brazil;  Chile;  Colombia;  Costa Rica;  Hong Kong, China;  Israel;  Japan;  
 
Korea, Rep. of;  Norway;  Singapore;  Switzerl and;  the Separate Customs Territory of Taiwan, 
Penghu, Kinmen and Matsu;  and Thailand  
 
 
 The following communication, dated 30 November 2004, is being circulated at the request of 
the Delegations of Brazil;  Chile;  Colombia;  Costa Rica;  Hong Kong, China;  Israel;  Japan;   Korea, Rep. of;  Norway;  Singapore;  Switzerla nd;  the Separate Customs Territory of Taiwan, 
Penghu, Kinmen and Matsu;  and Thailand. 
 
 The submitting delegations have requested that  this paper, which was submitted to the Rules 
Negotiating Group as an informal document (JOB(04)/ 183), also be circulated as a formal document. 
 
_______________ 
 
 
I. DESCRIPTION OF THE PROBLEMS  
A. M
ATERIAL INJURY  
(1) Definition of Material Injury : 
 
 Different authorities have app lied different thresholds for determining material injury and the 
determination of the existence of material injury by the same authority can differ from case to case.  
The only attempt at defining the magnitude of inju ry necessary to make an affirmative determination 
is contained in footnote 9 to Article 3 which refere nces “material” without further elaboration.  In 
order to ensure consistency among Members in applyi ng the injury standard of the ADA and to avoid 
imposition of antidumping measures in the absence of any meaningful extent of injury to the domestic 
industry, the definition of material injury should be clarified. 
 
(2) Determination of Material Injury:  
 
 As currently constructed, Artic le 3 is confusing in terms of  the relationship of the two 
determinations which must be made, namely that the domestic industry in the importing country must 
be injured and that the injury must be caused by the dumped imports.  The current ambiguity leaves 
open the possibility that the two concepts are mixe d thereby making it difficult to determine whether 
injury is viewed as a threshold issue separate from th e issue of the cause of the injury.  It could also 
allow the application of a lower st andard of injury in cases where the causal relationship between the 
injury and the imports may be strong, but the injury itself may not be material.  On the other hand, some authorities make separate and distinct de termination of injury and causation.  Without 
prejudging how authorities make their determinations of injury and causation, we believe that the 
existence of injury to the domestic industry in th e importing country is an essential element of any TN/RL/GEN/28 
Page 2  
 
 determination under Article 3 and that in the absence of the material injury, the strength of the causal 
relationship between dumped imports and any injury to the domestic industry is not relevant.  We 
believe that Article 3 should be clarified to make this clear. 
 
B. C
AUSATION  
(1) Injury Caused by Dumped Imports:  
 
 Article 3.5 is ambiguous in terms of the rela tionship between the injury being experienced by 
the domestic industry in the importing country and the dumped imports.  We believe that any 
ambiguity in the ADA should be e liminated by clarifying that dumped imports must, in and of 
themselves, apart from any other factors that may also be causing injury, be causing injury to the domestic industry in the importing country.  
(2) Correlation Analysis:
 
 
 Members may take different approaches to determining whether there is a causal relationship 
between dumped imports and injury to the domestic industry in the importing country.  For example, in some cases authorities may rely heavily on qualit ative rather than quantitati ve factors or vary the 
weight given to one over the other.  In other cases, authorities may rely on sophisticated econometric 
models or economic theory developed in other areas of law, such as competition policy.  The one 
analysis which is easily performed by authoritie s and which the Appellate Body has endorsed is the 
so-called analysis of the correlation or coincide nce between imports, factor s other than imports and 
injury to the domestic industry.  While other analyses may affect the outcome of any individual case 
(for example, there may be a strong correlation betwee n imports and injury to the domestic industry in 
the importing country which is independent of a ny dumping but caused by a shift in consumer 
preference for the imported product over the domestic product for technological reasons), it is 
important both to encourage the use of correlation anal ysis and to ensure that it is applied in a uniform 
manner.   
We see two issues relating to traditional correla tion or coincidence analyses (i.e. does the 
volume or price trends of the dumped imports coincide or correlate with the injury to the domestic 
industry) which should be addressed in the ADA.  First, where there is not a correlation or only a 
weak correlation between volume or price trends of dumped imports and injury, authorities should 
have other compelling evidence which nevertheless  demonstrates the link between dumped imports 
and injury in order to make a finding that dumped imports are causing injury.  Second, where there is 
a correlation not only between dumped imports and in jury, but also between one or more other factors 
and injury, the non attribution analysis required in Article 3.5 becomes even more important and 
should be subject to even more exacting standards to avoid unwarranted finding that dumped imports are causing injury.   
 
(3) Non-attribution rule - Pricing Analysis
: 
  An additional area of concern regarding causation relates to th e pricing analyses undertaken 
by authorities and the extent to which these analyses can and do show price suppression and/or depression.  Of particular concern are situatio ns where multiple countries are involved in an 
investigation or there are multiple producers in the domestic industry and authorities undertake a pricing analysis exclusively based on average pri ces of imports or domestic products.  Use of 
averages can, in fact, mask the true pricing dynamics in the market and the source of pricing pressures 
on the domestic industry.  Such a problem can be  seen in the following two illustrative examples: 
 
• Example 1:  In the steel market of an importing country, low capital and raw material costs 
permitted so-called minimills to gain market share through aggressive pricing, while still  TN/RL/GEN/28 
 Page 3 
 
 
 maintaining adequate profit margins.  Arguably, these minimills were the price leaders in the 
market, not the imports.  Howeve r, unless one examined individual mill prices or average 
minimill prices separate from aver age prices of all domestic producers, this market dynamic was 
hidden.  The fact that average import prices were below average domestic prices was really not 
relevant in terms of the source of pricing pressure in that market.  If one separated the pricing of 
the segment of the domestic production gaining market share (i.e. minimills) from the segment 
losing market share (integrated mills) and compared the former with import prices, it would show that the lowest prices in the ma rket (and presumably those putting pressure on prices) were the 
prices of the minimills.  A comparison of averag e-to-average prices woul d hide this important 
fact.   
• Example 2:  In the domestic market of an importing country, one of the domestic producers 
promoted its aggressive pricing by providing its customers with comparative pricing for both the 
other domestic manufacturer and th e major import brand, showing that its prices are lower.  While 
a simple comparison of average domestic and im port prices may show some underselling by 
imports, this methodology masks the fact that the price leader in the market was that particular 
domestic producer and not the dumped imports. 
 
C. R
EASONED EXPLANATION  
The current ADA requires the authorities to stat e “reasons” for the final injury determination1, 
but does not explicitly require any type of explanation or explain what may constitute a reasoned explanation.  Without such an explanation, however, it is impossible to determine whether each of the relevant factors has been appropriately evaluate d, how the evaluation was undertaken, and how the 
authority reached its conclusion based on the analysis  of all factors.  The ADA should explicitly 
require that authorities provid e such an explanation.   
II. ELEMENTS OF A SOLUTION 
A. M
ATERIAL INJURY  
Proposal 1 :  Definition of Material Injury 
 
 The following definition should be added to Article 3:   
 
“The term ‘material injury’ means injury as demonstrated by an important and 
measurable deterioration in the overall operating performance of the domestic 
industry.” 
Explanation:  
  While Article 3.4 articulates the factors to be examined in determining the state of the domestic industry, it neither provides a benchmar k for determining injury nor a framework for 
analyzing the factors.  Similarly, while footnote 9 attempts to define injury, it does not do so either by 
specific reference to the factors in Article 3.4 or by establishing a framework for the analysis.  Finally, 
nowhere in Article 3 is there an  attempt to articulate a benchmar k against which to measure the 
existence or absence of injury.  Virtually all of  the factors mentioned in Article 3.4 reflect on 
operating performance of the industry alleged to be in jured.  Therefore, it is appropriate to define 
material injury by reference to the operating performance and a deterioration in the operating 
performance.   
 
                                                     
 
1  See Article 12.2.2 of the ADA. TN/RL/GEN/28 
Page 4  
 
  This proposal above seeks simply to clarify th at not just any deterioration in the operating 
performance of the domestic industry is sufficient  to warrant a determination that the industry is 
experiencing material injury.  Rather, the industry mu st be experiencing injury that is important and 
measurable in terms of its impact on the operating performance of the industry. 
 
In addition to the definition of “material injury” proposed above, an illustrative list of 
benchmarks regarding the determinations that Ar ticle 3 requires could be useful in providing 
authorities with specific guidelines and would make  determinations more pred ictable for exporters.  
Such a list could describe certain typical extreme situations in which authorities may not find that 
dumped imports are, through the effects of dumping, causing injury to the domestic industry (“per se 
rules”).  The illustrative list would also describe thos e situations in which ther e is a presumption of no 
injury, and authorities may not find injury in the abse nce of facts that are sufficient to overcome the 
presumption (“rebuttable presumptions”)
2.   
 
Proposal 2:   Determination of Material Injury 
  We would propose to amend Article 3.1 to clarify that, when the authorities examine whether 
the dumped imports cause material injury,
3 
 
• A determination of material injury shall be ba sed upon determinations of:  (1) whether the 
domestic industry in the importing country is experiencing material injury as defined by 
Proposal 1 above;  and (2) if the domestic industry is experiencing material injury as defined 
by Proposal 1 above, whether that injury is caused by the dumped imports under 
investigation.   
• A determination of whether the do mestic industry is experiencing material injury shall be 
based on positive evidence and an objective examination of all the factors bearing on the state of the industry including those enumerated in Article 3.4
4.   
• (As already incorporated in the current Article 3.1) a determination of whether the material 
injury to the domestic industry is caused by the dumped imports through the effects of 
dumping shall be based on positive evidence an d an objective examination of (a) the volume 
of dumped imports and the effect of the dumped imports on prices in the domestic market for 
the like product, and (b) the consequent impact of these imports on domestic producers of 
such products. 
 Explanation:
 
  These changes are intended to make explicit what  is implicit in the existing Article 3 of the 
ADA, namely that, in the case of material injury, the authorities have to demonstrate both that the 
domestic industry is experiencing material injury and that the dumped imports cause that injury.  
While virtually all authorities consider both inju ry and causation in their investigations and 
Articles 3.1, 3.2, 3.4, 3.5, and 3.6 deal with various aspects of the analysis of both injury and 
causation, Article 3 does not contain an explicit st atement anywhere of the overarching framework of 
an injury determination.  We believe clarifying th is framework will avoid future disputes and ensure 
more uniform approaches to the injury determination. 
                                                     
 
2 This idea has already been proposed by other Members (see “Proposals on Cost Saving in Anti-
Dumping Proceedings” (TN/RL/W/138, Submission from the European Communities and Japan)).  The FANs are willing to discuss further on this idea. 
3 The determination of threat of material injury and material retardation of the establishment of a 
domestic industry is not addressed in this proposal.  The FANs are willing to discuss those issues in a separate paper. 
4 Consequently, we would also propose inserting in the first sentence of Article 3.4 after the word 
“examination,” the following phrase: “the existence of injury and”.  TN/RL/GEN/28 
 Page 5 
 
 
 B. CAUSATION  
Proposal 3:   Injury Caused by Dumped Imports 
 
 We would propose adding the following phra se in the first sentence of Article 3.5 
immediately after the phrase “dumped imports”:  “i n and of themselves and apart from any other 
factors”.5 
 Explanation:
 
  The demonstration of causal relationship betwee n dumped imports and injury to the domestic 
industry requires further clarification.  Article 3. 5 requires the authorities to demonstrate “that the 
dumped imports are, through the effects of dumping as  set forth in paragraphs 2 and 4, causing injury 
within the meaning of this Agreement”.  Article 3.5 further sets out the so-called non-attribution 
requirement whereby authorities must not attribute in jury from other factors to injury from dumped 
imports, obviously requiring that the injury from dumped imports must be analyzed separately from injury from other factors.
6  In order to fulfil this non-attri bution requirement, it follows that the 
authorities must analyze the causal relationship fo cusing on the injurious effects that the dumped 
imports alone have on the domestic industry. 
 
 In order to eliminate future disputes and en sure consistent application of Article 3, any 
ambiguity in terms of the relationship of the dumped  imports to the injury being experienced by the 
domestic industry should be removed.  
Proposal 4:
  Correlation Between Dumped Imports and Injury 
 
 We would propose two changes to Article 3.5 in order to address the most basic analysis 
which should be undertaken in determining whet her dumped imports are causing injury to the 
domestic industry.  First, we would propose that a new sentence be added after the second sentence in 
Article 3.5 as follows: 
 
“If the authorities can find neither a strong correlation7 between a significant increase 
in dumped imports and the injury to the domestic industry nor a strong correlation between a significant price undercutting by the dumped imports and the injury to the domestic industry, the authorities shall presume that there is no causal relationship 
between dumped imports and injury, unless the authorities clearly demonstrate, based 
                                                     
 
5 In order to make it clear that the “demonstration of a causal relationship” in the second sentence of 
Article 3.5 refers to the demonstration amended by this proposal, we would also propose that the term “a causal 
relationship” in the second sentence of Article 3.5 be amended to read “such causal relationship.” 
6 In this context, we would point to the following statements the by the Appellate body in  US – Hot 
rolled Steel : “...the particular methods and approaches by which WTO Members choose to carry out the process 
of separating and distinguishing the injurious effects of dumped imports from the injurious effects of the other 
known causal factors are not prescribed by the  Anti-Dumping Agreement .” and “We recognize, therefore, that it 
may not be easy, as a practical matter, to separate and distinguish the injurious effects of different causal 
factors.  However, although this process may not be easy, this is precisely what is envisaged by the non-
attribution language.  If the injurious effects of the dumped imports and the other known factors remain lumped together and indistinguishable, there is simply no means of knowing whether injury ascribed to dumped imports 
was, in reality, caused by other fact ors.  Article 3.5, theref ore, requires investigating authorities to undertake the 
process of assessing appropriately, and separating and distinguishing, the injurious effects of dumped imports from those of other known causal factors.” 
7 This does not prescribe any specific methodology that the authorities have to use in order to show “a 
strong correlation”. TN/RL/GEN/28 
Page 6  
 
 on other evidence, that there neverthele ss exists a causal relationship between 
dumped imports and injury.” 
In addition, we would propose that a new sentence be added at the end of Article 3.5 as follows: 
 
“In the presence of a strong correlation be tween a factor or factors other than the 
dumped imports and the injury to the domestic industry, authorities shall presume that 
there is no causal relationship between the dumped imports and injury, unless 
authorities clearly demonstrate, based on other evidence, that the dumped imports, in 
and of themselves and apart from any other factors, are causing injury.” 
Explanation:
 
 
 It is not the intention of this proposal to establish any particular methodology which must be 
followed in determining whether there is a “strong correlation” or a sufficient causal relationship 
between dumped imports and injury to the domestic industry.  Indeed, authorities may use various 
methods to arrive at their conclusions.  However, th e most basic analysis, an analysis virtually always 
performed by authorities, is whether or not there is  a correlation between volume or price of dumped 
imports and the injury being experienced by the domestic industry.  Furthermore, authorities usually 
analyze whether there is a similar or stronger correlation between another factor or factors and the 
injury being experienced by the domestic industry.  It  is simple to perform a nd, while not conclusive 
on the issue of causation, offers a simple analytic tool on which to base a mo re detailed quantitative or 
qualitative analysis.    
Given the importance of correlation analysis in  the process and to ensure more consistent 
application of this tool in investigations, the propo sal seeks to provide some guidance as to how this 
tool should be applied.  The proposal does not prevent authorities from using other analytic 
techniques nor does it require authorities to make determinations based wholly or partially on a 
correlation analysis.  If th ere is not a strong correlation
8 between volume or price of the dumped 
imports and injury to the domestic industry, the lik elihood of a causal relationship between the two is 
remote.  Furthermore, if the correlation between other factors and the injury to the domestic imports is 
as strong as or stronger than the correlation be tween dumped imports and the injury to the domestic 
industry, there should be a rebuttable presumption th at there is no causal relationship between dumped 
imports and injury to the domestic industry.  Proposal 5:
  Non-attribution requirement:  Injury caused by one or more domestic producers 
 
 We would propose including in Article 3.5 a sentence as follows: 
 
“Authorities shall examine the possible impact  that certain domestic producers of the 
like product have on the state of the domest ic industry. In particular, authorities shall 
examine the impact of the sales volume and the prices of domestic producers of the 
like product to determine whether there is a significant price undercutting or 
depression caused by the price of one or mo re domestic producers of the like product, 
and shall not attribute injury caused by such price undercutting or depression to 
dumped imports.” 
                                                      
8 The analysis of simultaneity between volume or price trends of the dumped imports and trends of 
indices having a bearing on the state of the domestic industry plays an important role in this analysis.  TN/RL/GEN/28 
 Page 7 
 
 
 Explanation:  
 
 An essential element of the causation analys is is whether or not imports have adversely 
affected the prices in the domestic market of th e importing country.  However, the non-attribution 
requirement of Article 3.5, while admittedly only i llustrative, does not include in other factors the 
pricing by one or more domestic producers.  Hence,  authorities have tended to analyze average import 
prices against average domestic prices, so that th e effects of competition among domestic competitors 
are often overlooked.  Given that pricing is a ce ntral issue in any injury  investigation and that 
competition between domestic produ cers, particularly in situations  where these producers supply the 
overwhelming majority of the domestic market, can af fect prices as much or more than imports, it is 
appropriate to ensure that the effect of the price set by price leader domes tic producers on domestic 
prices as a whole are analyzed and that the effects of such price setting within the scope of 
competition between domestic producers ar e not attributed to dumped imports.9  This proposal is 
intended to address this issue. 
 
C. REASONED EXPLANATION  
Proposal 6 :  Adequate and Reasoned Explanation in Determination 
 
Add a new provision to the Agreement to state explicitly that authorities must provide an 
adequate and reasoned explanation for all determina tions made pursuant to Article 3, including an 
explanation of how each of the relevant factors have been evaluated and how the authorities reached 
its conclusion. 
Explanation:  
The ADA should be clarified to state explicitly that authorities must arrive at a “reasoned 
conclusion” in all Article 3 determinations.  Th e “adequate and reasoned explanation,” requirement 
would clarify the information an authority must pr ovide in order to demonstrate that its conclusion 
was “reasoned.” 
__________ 
  
 
                                                      
9 We note that similar problems would arise in a case where certain imports at non-dumped prices (for 
example, certain imports from third countries) act as price leaders and the source of pricing pressures in the 
domestic market, in which analyzing average import prices from all third countries on an aggregate would mask 
and overlook the effect of such certain imports. We believe that such problems are already addressed by Article 3.5 which includes “the volume and prices of imports not sold at dumped prices” in the list of “other 
factors”. The FANs are open to discussing whether the Agreement should address such problems in the same 
explicit manner as our proposal above. 