RESTRICTED
WORLD TRADE G/ADP/W/267
G/SCM/W/277
ORGANIZATION 25January 1996
(96-0271)
Original: English Committee onAnti-Dumping Practices
Committee onSubsidies andCountervailing Measures
REPLIES TOQUESTIONS POSED BYJAPAN1CONCERNING
THE NOTIFICATION OFCANADIAN LAWS AND REGULATIONS2
Thefollowing communication, dated 11January 1996, hasbeenreceived fromthePermanent
Mission ofCanada.
_______________
1. Re.Constructed Export Prices: Section 25oftheSpecial Import Measures Act(SIMA)
provides foraprofit deduction from constructed export price. Section 22oftheSpecial
Import Measures Regulations provides forseveral methods forcalculating theprofit
deduction from constructed export price. When thestandard calculations arenotpossible,
paragraph 22(c) oftheRegulations explains that"profit willbeanamount equal to7.4
percentoftheprice atwhich thegoods weresoldbytheimporter" :
(a) What isthereasonable basis forsetting 7.4percentoftheprice asprofit?
(b) How cantheCanadian government guarantee that7.4percentwillnotexceed
theprofit thatwould berealized intheordinary course oftrade?
Weare,infact,re-visiting paragraph 22(c) [andparagraph 17(c)] oftheRegulations inthe
finalization ofourregulations andexpect todelete thecurrent reference tothe7.4percentofsale
price methodology. Weexpect thefinalRegulations tobepublished inearly 1996.
2. ReCross-Cumulation: Subsection 42(3) oftheSIMA provides thattheTribunal maymake
anassessment ofthe"cumulative effect ofthedumping orsubsidizing ofgoods" .Section
38oftheRegulations allows fordumping andsubsidy investigations tobejoined.
(a) DoesCanadaacknowledgethatcross-cumulationoftheinjuriouseffectsofdumping
andsubsidizing isnotauthorized bytheA-DAgreement?
(b) Ifnot,whereintheA-DAgreementdoesCanadafindsupportforcross-cumulation?
TheWTO ADandSCM Agreements donotpreclude cross-cumulation. Inthisregard, while
Articles 3.3oftheA-DAgreement and15.3oftheSCM Agreement, address cumulation within
Agreements, theyaresilent ontheissueofcumulation between Agreements, (i.e.,cross-cumulation).
1G/ADP/W/97-G/SCM/W/106.
2G/ADP/N/1/CAN/2-G/SCM/N/1/CAN/2.G/ADP/W/267
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Indetermining whether silence ontheissue ofcross-cumulation should beconstrued aspermissive
orprohibitive ofcross-cumulation, onemustapply a"ruleofreason" approach andconsider thepurpose
ofthese related Agreements -i.e.,toprovide aremedy against unfair trade practices causing injury
toadomestic industry. Todenyaremedy where thecumulative effect ofdumping andsubsidy practices
isinjury toadomestic industry would frustrate thepurpose ofthese Agreements. Viewed inthislight,
silence should beinterpreted aspermissive ofcross-cumulation. Thisview issupported, interalia,
bythefactthat, regardless ofwhether caused bydumping, subsidizing orboth, there isasingle price
effect which isthecause ofinjury tothedomestic industry.
3. Re.Sales Quantities: Article 2.4oftheA-DAgreement requires thatcomparison bemade
atthesame "level oftrade" .Sales arenotrequired tobeinsimilar quantities, although
"dueallowance shall bemade ineachcase, onitsmerits, fordifferences which affect price
comparability, including differences inquantities, ....andanyother differences which are
alsodemonstrated toaffect price comparability." Under paragraph 16(1)(e) oftheSIMA,
"ifthequantity ofgoods soldtotheimporter inCanada issmaller thanthesmallest quantity
oflikegoods soldbytheexporter foruseinthecountry ofexport, thesales oflikegoods
shall bethose sales oflikegoods thatareinthesmallest quantity soldbytheexporter for
such use." Thus, theCanadian lawappears topreclude anyenquiry astowhether
difference inquantities actually affect price comparability asrequired bytheA-D
Agreement. Instead, theCanadian lawseems toassume thatcomparisons ofsimilar
quantities willleadtocomparisons atthesame ormost similar level oftrade possible.
Please clarify.
Thequestion appears toconfuse theseparate concepts of"level oftrade" and"quantity" as
theypertain tonormal value determination under Canadian law.
Section 15oftheSIMA requires, among other things, that: (i)normal value bebased onthe
saleoflikegoods bytheexporter topurchasers inthecountry ofexport "who areatthesame or
substantially thesame trade levelastheimporter" ;and(ii)thatthesaleoflikegoods be"inthesame
orsubstantially thesame quantities asthesaleofgoods totheimporter".
Section 15oftheSIMA mustbereadinconjunction withsubsection 16(1) oftheAct,which
stipulates therules thataretobefollowed ifoneormore oftheconditions setoutinsection 15,
(including theconditions pertaining to"level oftrade" and"quantities" ),cannot besatisfied.
Inthisregard, paragraphs 16(1)(d)and(e)relate onlytothecomparable quantities aspect of
section 15andaddress situations where likegoods soldbytheexporter inhishome market, atthe
sameorsubstantially thesameleveloftrade, arenotsoldinthesameorsubstantially thesamequantities
asthesaleofgoods totheimporter.
Thequantity adjustments setoutinparagraphs 16(1)(d)and(e)arepresupposed tobeatthe
same trade level.
Moreover, section 15expressly permits adjustments relating toprice comparability. Inthis
respect, sections 3and4oftheRegulations, specifically provide foradjustments totheprice oflike
goods totakeintoaccount differences inquantities between those solddomestically andthose sold
totheimporter inCanada.G/ADP/W/267
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4. Re.properly documented complaints (PDCs): Article 5.2oftheA-DAgreement requires
information onprices inboththehome andexport markets tobeincluded inthecomplaint.
Paragraph 32(1)(a) oftheSIMA setsforth therequirement ofaPDC. Thislanguage is
defined insubsection 2(1)oftheAct. Section 37oftheRegulations elaborates ontheuse
ofthephrase PDC butdoesnotmake explicit reference toinformation onprices, which
isdescribed inArticle 5.2(iii)oftheA-DAgreement. What guarantees arethere that
theCanadian government willrequire theinclusion ofinformation onprices inthe
complaint?
Section 37oftheSpecial Import Measures Regulations onproperly documented complaints
mustbereadinconjunction withthedefinition of"properly documented "insubsection 2(1)ofthe
SIMA .Inthisregard, therequirement toprovide suchevidence asisreasonably available tothe
complainant concerning prices, asrequired byArticle 5.2(iii) oftheA-DAgreement, willcontinue
toexist byvirtue ofparagraph (a)andsubparagraph (b)(i) ofthestatutory definition of"properly
documented".
Information onselling prices inboththehome andexport markets isrequested intheRevenue
Canada questionnaire which isusedbyacomplainant inthepreparation ofacomplaint.
5. Re.Self-Initiation: Article 5.6oftheA-DAgreement provides thatifagovernment wants
toinitiate aninvestigation without anapplication, (i.e., self-initiation), itshall proceed
onlyifthere is"sufficient evidence ofdumping, injury andcausal link".Article 5.6further
provides thattheevidentiary requirement forself-initiation isthesame astherequirement
toinitiate byapplication under Article 5.2.However, subsection 31(1) oftheSIMA allows
theDeputy Minister toself-initiate aninvestigation where there isevidence (a)thegoods
have been dumped orsubsidized, and(b)thatdiscloses areasonable indication thatthe
dumping orsubsidizing hascaused injury orretardation oristhreatening tocause injury.
Does a"reasonable indication" mean thattheself-initiation ofaninvestigation mustrequire
theinclusion ofinformation specified inanapplication asrequired byArticle 5.2ofthe
A-DAgreement?
Subsection 31(1) ofSIMA, which onlyallows theDeputy Minister ofNational Revenue to
self-initiate where theDeputy Minister hasevidence: (i)thatthegoods havebeendumped orsubsidized;
and(ii)thatdisclosesareasonableindicationofinjuryandcausality,isentirelyconsistentwithArticle5.6
oftheA-DAgreement.
Regarding thereference inArticle 5.6toevidence described inArticle 5.2,clearly notallof
therequirements inArticle 5.2oftheA-DAgreement would berelevant inthecontext ofself-initiation,
[e.g., Article 5.2(i) pertaining totheidentity oftheapplicant andthecontents ofapplications made
onbehalf ofadomestic industry].
However,thoserequirementsinArticle5.2thatarerelevanttotheissuesofdumping/subsidizing,
injury andcausality referred toinArticle 5.6,andforwhich information isavailable, would formthe
basis foradecision bytheDeputy Minister whether ornottoself-initiate aninvestigation.G/ADP/W/267
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6. Re.Sales intheHome Market: Paragraph 16(1)(c) oftheSIMA provides thatifthere
arenotenough sales bytheexporter inthehome market intheordinary course oftrade,
theCanadian authorities may look tosales "byother vendors ....forthepurpose of
determining thenormal value ...." TheA-DAgreement doesnotspecifically allow forthe
useofsales byavendor other thanthevendor under investigation todetermine normal
value aspartofthecalculation ofthedumping margin. There aredangers incalculating
dumping margins onanormal value which hasnoconnection atalltosales orcosts of
theexporter subject toinvestigation:
(a) Onwhat basis doesCanada justify thecomparison ofsales ofanother vendor in
theexporting country 'smarket tosales bythevendor under investigation inthe
Canadian market?
TheSIMA makes every effort tobasenormal values onprices inthehome market, which
generally tendtobetter reflect actual normal values. Inthisregard, section 15oftheActbases normal
value oncomparable home market salesintheordinary course oftradewhile subsection 16(1) stipulates
theapplicable rules where oneormore oftheconditions insection 15cannot besatisfied. Insuch
cases, section 15oftheActauthorizes appropriate adjustments fordifferences affecting price
comparability.
Theuseofsalesofanother vendor inthehome market isconsistent withArticle 2.1ofthe
A-DAgreement, which onlyrefers totheprice ofthelikeproduct when destined forconsumption
intheexporting country anddoesnotindicate thatsuchsalesnecessarily havetobemade bytheexporter
ofthegoods toCanada.
Thisprovision isnormally usedwhere thereisarelationship between theexporter andproducer.
Insuchcases, wewould typically usedomestic salesbytheproducer todetermine thenormal value
oftheexported goods.
(b) Does theuseofother vendor sales notcontradict themandate ofArticle 2.2of
theA-DAgreement tousesales inathird country market orconstructed value?
Theuseofother vendors doesnotcontradict theprovision inArticle 2.2forbasing normal
value onsalestoathirdcountry oronconstructed value, since the"other vendors" concept fallswithin
theambit ofArticle 2.1.
TheSIMA alsoprovides forthethird country andconstructed value methods described in
Article 2.2oftheA-DAgreement where normal value cannot bedetermined onthebases ofsalesin
thehome market under section 15oftheAct.