RESTRICTED
WORLD TRADE G/ADP/W/60
G/SCM/W/69
ORGANIZATION 16November 1995
(95-3583)
Original: English Committee onAnti-Dumping Practices
Committee onSubsidies andCountervailing Measures
REPLIES FROM THE UNITED STATES CONCERNING QUESTIONS
POSED BYAUSTRALIA, CANADA, EC,HONG KONG, INDIA, JAPAN,
KOREA, NEW ZEALAND, NORWAY AND VENEZUELA CONCERNING THE
NOTIFICATION OFTHE UNITED STATES 'LAWS AND REGULATIONS1
Thefollowing communication, dated 22September 1995, hasbeen received from the
United States Trade Representative.
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I. Subsidies andCountervailing Measure ..................................................... 3
EC1-8(G/ADP/W/10-G/SCM/W/18) ..................................................... 3
EC9(G/ADP/W/10-G/SCM/W/18); NewZealand 6(G/ADP/W/3-G/SCM/W/11) -
Lesser Duty Rule............................................................................... 7
Canada (G/ADP/W/23-G/SCM/W/30) -Non-actionable Subsidies -Serious
Adverse Effects ................................................................................. 8
II. Conduct ofInvestigations ..................................................................... 8
Hong Kong 1(G/ADP/W/30-G/SCM/W/37); Venezuela I(G/ADP/W/40-
G/SCM/W/48) -Initiation Procedures ..................................................... 8
Canada (G/ADP/W/23-G/SCM/W/30) -Industry Support ............................. 9
Hong Kong 2(G/ADP/W/30-G/SCM/W/37) -Industry Support ..................... 10
Hong Kong 3(G/ADP/W/30-G/SCM/W/37) -Industry Support -Foreign Producers 11
Hong Kong 4(G/ADP/W/30-G/SCM/W/37) -Industry Support -Polling .......... 11
Hong Kong 5(G/ADP/W/30-G/SCM/W/37) -Industry Support -Sampling ....... 11
Hong Kong 6(G/ADP/W/30-G/SCM/W/37); Norway 2(G/ADP/W/33-
G/SCM/W/41) -Initiation Requirements .................................................. 11
Canada (G/ADP/W/23-G/SCM/W/30) -Petitions ....................................... 12
NewZealand 5(G/ADP/W/3-G/SCM/W/11) -Undertakings ......................... 13
Hong Kong 9(G/ADP/W/30-G/SCM/W/37) -AllOthers Rate...................... 13
Hong Kong 10(G/ADP/W/30-G/SCM/W/37) -Estimated All-Others Rate........ 13
Hong Kong 37(G/ADP/W/30-G/SCM/W/37) -Public Comments ................... 13
III. Anti-dumping Methodology .................................................................. 14
Korea 1(G/ADP/W/21-G/SCM/W/28) -EP&CEP................................... 14
Korea 11(G/ADP/W/21-G/SCM/W/28) -Affiliated Parties .......................... 14
1G/ADP/N/1/USA/1-G/SCM/N/1/USA/1 +Corr.1 andSuppl.1.G/ADP/W/60
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Japan 2(G/ADP/W/17-G/SCM/W/G/SCM/W/24) -Profit Deduction from CEP. 15
Korea 4(G/ADP/W/21-G/SCM/W/28) -FairComparison ............................ 16
Japan 3(G/ADP/W/17-G/SCM/W/24) -LOT Adjustment ............................. 16
Hong Kong 27(G/ADP/W/30-G/SCM/W/37) -LOT Adjustment .................... 17
Korea 10(G/ADP/W/21-G/SCM/W/28) -LOT Adjustment ........................... 18
Australia 4(G/ADP/W/6-G/SCM/W/14) -LOT Adjustment .......................... 18
Hong Kong 26(G/ADP/W/30-G/SCM/W/37) -CEPOffset .......................... 19
Hong Kong 28(G/ADP/W/30-G/SCM/W/37) -CEPOffset .......................... 19
Japan 4(G/ADP/W/17-G/SCM/W/24) -CEPOffset ................................... 20
Hong Kong 25(G/ADP/W/30-G/SCM/W/37) -Profit Adjustment .................. 21
Australia 5(G/ADP/W/6-G/SCM/W/14) -Indirect Selling Expenses ............... 21
Canada (G/ADP/W/23-G/SCM/W/30) -Restricted Sales ............................. 22
Canada (G/ADP/W/23-G/SCM/W/30) -Other Calculation Methods ................ 22
Australia 3(G/ADP/W/6-G/SCM/W/14); Hong Kong 34(G/ADP/W/30-
G/SCM/W/37) -Currency Conversion .................................................... 22
Hong Kong 8(G/ADP/W/30-G/SCM/W/37); Canada (G/ADP/W/23-G/SCM/W/30);
Hong Kong 8(G/ADP/W/30-G/SCM/W/37) -DeMinimis Margins ................. 22
Hong Kong 29(G/ADP/W/30-G/SCM/W/37) -Non-Market Economy Countries 23
Korea 6(G/ADP/W/21-G/SCM/W/28) -Allocated Profit ............................. 23
Korea 2(G/ADP/W/21-G/SCM/W/28); Venezuela VII(G/ADP/W/40-G/SCM/W/48) -
Start-up Period .................................................................................. 24
Hong Kong 33(G/ADP/W/30-G/SCM/W/37) -Start-up Costs ....................... 24
Korea 3(G/ADP/W/21-G/SCM/W/-28) -Generally Accepted Accounting Principles 25
Korea 7(G/ADP/W/21-G/SCM/W/28) -Ordinary Course ofTrade ................. 25
Hong Kong 31(G/ADP/W/30-G/SCM/W/37) -Constructed Value ................. 26
Hong Kong 32(G/ADP/W/30-G/SCM/W/37) -Constructed Value .................. 26
IV. Administrative Reviews ...................................................................... 27
Hong Kong 11,16&17(G/ADP/W/23-G/SCM/W/30); NewZealand 1
(G/ADP/W/3-G/SCM/W/11); Korea 5(G/ADP/W/21-G/SCM/W/28); Norway 1
(G/ADP/W/33-G/SCM/W/41) -DeMinimis Margins .................................. 27
Hong Kong 35(G/ADP/W/30-G/SCM/W/37); Venezuela VIII(G/ADP/W/40-
G/SCM/W/48) -Comparison ofIndividual Transactions toAverages ............... 27
Hong Kong 34(G/ADP/W/30-G/SCM/W/37); Australia 3(G/ADP/W/6-
G/SCM/W/14) -Exchange Rates ........................................................... 28
Hong Kong 24(G/ADP/W/30-G/SCM/W/37) -Negligible Imports ................. 29
Canada (G/ADP/W/23-G/SCM/W/30) -NewShipper Reviews ...................... 29
Canada (G/ADP/W/23-G/SCM/W/30) -NewShipper Reviews -Accelerated Schedule 30
Hong Kong 12(G/ADP/W/30-G/SCM/W/37) -Changed Circumstances Reviews 30
Canada (G/ADP/W/23-G/SCM/W/30) -Changed Circumstances Reviews ......... 31
Canada (G/ADP/W/23-G/SCM/W/30) -Five-Year (Sunset) Reviews ............... 31
Canada (G/ADP/W/23-G/SCM/W/30) -Five-Year (Sunset) Reviews ............... 31
Hong Kong 13(G/ADP/W/30-G/SCM/W/37) -Five-Year (Sunset) Reviews ...... 32
Hong Kong 14(G/ADP/W/30-G/SCM/W/37) -Likelihood ofContinuation or
Recurrence ofMaterial Injury ............................................................... 32
Hong Kong 15(G/ADP/W/30-G/SCM/W/37) -Likelihood ofContinuation or
Recurrence ofDumping ....................................................................... 32G/ADP/W/60
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V. Miscellaneous ................................................................................... 33
Canada (G/ADP/W/23-G/SCM/W/30); Japan 6(G/ADP/W/17-G/SCM/W/24);
Hong Kong 36(G/ADP/W/30-G/SCM/W/37) -Anticircumvention .................. 33
Canada (G/ADP/W/23-G/SCM/W/30) -Anticircumvention ........................... 33
NewZealand 4(G/ADP/W/3-G/SCM/W/11) -Anticircumvention ................... 34
Canada (G/ADP/W/23-G/SCM/W/30) -Implementation ofWTO Panel Decisions 34
Japan 5(G/ADP/W/17-G/SCM/W/24) -Identification ofNormal Value ........... 34
Hong Kong 30(G/ADP/W/30-G/SCM/W/37) -Multinational Corporations ....... 34
India 1/ADP/W/35-G/SCM/W/43) -ADArticle 15.................................... 35
I. Injury ............................................................................................. 35
Hong Kong 7b(G/ADP/W/30-G/SCM/W/37) -Magnitude oftheMargin ......... 35
Hong Kong 23(G/ADP/W/30-G/SCM/W//37) -Negligible Imports ............... 35
Hong Kong 21(G/ADP/W/30-G/SCM/W/37) -Threat ofMaterial Injury ........ 36
Australia 2(G/ADP/W/6-G/SCM/W/14); Korea 9(G/ADP/W/21-G/SCM/W/28);
Hong Kong 20(G/ADP/W/30-G/SCM/W/37); Japan 1(G/ADP/W/17-G/SCM/W/24);
Venezuela VI(G/ADP/W/40-G/SCM/W/48) -Captive Production .................. 36
European Community 5(G/ADP/W/46-G/SCM/W/54) -Captive Production ..... 36
European Community 6(G/ADP/W/46-G/SCM/W/54); Korea 8(G/ADP/W/21-
G/SCM/W/28); Hong Kong 22(G/ADP/W/30-G/SCM/W/37); Japan 7
(G/ADP/W/17-G/SCM/W/24); NewZealand 3(G/ADP/W/3-G/SCM/W/11) -
Cross-cumulation ............................................................................... 37
Australia 1(G/ADP/W/6-G/SCM/W/14); Canada 1&2(G/ADP/W/23-G/SCM/W/30);
Hong Kong 19(G/ADP/W/30-G/SCM/W/37); Venezuela II(G/ADP/W/40-
G/SCM/W/48) Causation ..................................................................... 38
Hong Kong 7,14&18(G/ADP/W/30-G/SCM/W/37) -Causation ................. 38
NewZealand 2(G/ADP/W/3-G/SCM/W/11) ............................................ 39
I. Subsidies andCountervailing Measures
1. Subsidies Agreement Country
EC1(G/ADP/W/10-G/SCM/W/18) Please explain what criteria theUSPresident applies "to
determine whether acountry hasassumed obligations withrespect totheUnited States." Which
countries arefalling under thecategories 2and3ofthisSection?
Answer:Oneofthemajorbenefitsofthe"singleundertaking"oftheUruguayRoundwastheelimination
ofmostofthedistinctions inobligations which previously existed among countries which onlywere
contracting parties totheGATT 1947 andthose which alsoweresignatories tothe1979 Agreement
onSubsidies andCountervailing Measures. Withtheenactment oftheURAA, theUnited States now
accords theinjury testinallCVD cases involving imports from WTO Members, agroup which
encompasses anincreasingly greater number ofourtrading partners asmore WTO accessions are
finalized.
However, anticipating thatthere maybecircumstances inwhich accession totheWTO might
bedifficult andlengthy forreasons unrelated totheobligations oftheSubsidies Agreement, the
United States wanted toprovide forthepossibility ofextending theinjury testtocountries which -
while notyetWTO Members -nonetheless haveassumed thesubstantive obligations oftheAgreement.G/ADP/W/60
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Neither thestatute northeSAAprovides additional, specific criteria fordetermining which countries
might fallwithin thissecond category ofinjury testrecipients, andthePresident hasnotyetmade any
suchdetermination. Asaresult, apartfromhaving todetermine thatthecountry hasassumed obligations
equivalent tothose oftheSubsidies Agreement, there isnofurther clarification which wecanprovide
atthepresent time.
Finally, assetforth intheSAA, page254,category 3covers countries which arenotWTO
Members butwithwhich theUnited States hastreaties thatrequire unconditional most-favoured-nation
treatment. AsofthedatetheSAA wassubmitted totheUSCongress, countries thatwould qualify
foraninjury testunder thiscategory were: Estonia, Latvia, Liberia, Lithuania, Saudi Arabia, and
Yemen. Ifandwhen these countries accede totheWTO, theywould beeligible foraninjury test
under category 1asWTO Members.
2. Treatment ofInternational Consortia
EC2(G/ADP/W/10-G/SCM/W/18) TheUSwillcumulate allsubsidies provided tothemembers
ofaninternational consortium bytherespective home countries. Isitpossible thattheaverage
countervailable subsidy found exceeds thesubsidy found toexistperunitofthesubsidized product
ofonecountry? Howwould thissquare withArticle 19.4SCM? Would production manufactured
within theUSalsobetaken intoaccount forthepurpose ofthecumulating calculation?
Answer: With respect tothefirsttwoquestions, section 701(d) wasadded totheUScountervailing
dutylawbytheOmnibus Trade andCompetitiveness Actof1988. Section 701(d) doesnotcontain
specific rulesregarding thecumulation ofsubsidies, butinstead grants theDepartment ofCommerce
discretion todevelop methodologies forapplying section 701(d). Because section 701(d) never has
beenapplied inanactual case, Commerce hasnotdeveloped suchmethodologies todate. However,
itisageneral principle ofUSlawthat,totheextent possible, statutes should beconstrued inamanner
consistent withtheinternational obligations oftheUnited States. Given thisprinciple, asamatter
ofUSlaw,anymethodologies applied byCommerce under section 701(d) would havetobeconsistent
withArticle 19.4. Moreover, wedonotperceive anyfacial conflict between section 701(d) and
Article 19.4.
With respect tothethirdquestion, wemustconfess thatwedonotunderstand thequestion.
Therefore, weaskthatthequestion berephrased.
3. Country-wide Subsidy Rate
EC3(G/ADP/W/10-G/SCM/W/18) TheUScandecide toapply asingle country-wide subsidy
ratetobeapplied toallexporters andproducers, incaseofsampling. CantheUSexplain whether
under itssystem itispossible thatacompany obtains ahigher CVD ratethanitssubsidy margin,
evenifthiscompany hasbeensubject toanindividual investigation? What procedural remedies
areforeseen inorder toprevent asituation arising thatwould conflict withArt.19.4SCM?
Answer Pursuant tosection 777A(e), therearethreemethods fordetermining a"countervailable subsidy
rate." Under thefirstmethod (section 777A(e)(1)), theDepartment ofCommerce individually
investigates anddetermines anindividual countervailable subsidy rateforeachknown exporter or
producer.G/ADP/W/60
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Under thesecond method (section 777A(e)(2)(A)), ifitisnotpracticable todetermine individual
rates forallexporters andproducers duetothelarge number ofexporters orproducers involved,
Commerce maydetermine individual subsidy ratesforareasonable number ofexporters orproducers
by(i)sampling, or(ii)examining those exporters orproducers accounting forthelargest volume of
thesubject merchandise thatcanreasonably beexamined. Under thismethod, those firms thatare
individually investigated receive their ownindividual subsidy rate, andthose firms thatarenot
investigated receive the"all-others" rate.Thus, theconflict envisioned bythequestion would notarise.
Finally, under thethirdmethod (section 777A(e)(2)(B)), ifitisnotpracticable todetermine
individual ratesduetothelargenumber ofexporters orproducers, Commerce maydetermine asingle
country-wide subsidy ratetobeapplied toallexporters andproducers. Asexplained intheSAA,
page271,under thismethod, Commerce would relyonaggregate dataandwould notconduct individual
investigations ordetermine individual countervailable subsidy rates. Thisapproach mostlikely would
beusedinsituations where there isanextremely large number ofexporters andwhere thesubsidy
programmes aresuchthattheamount ofthesubsidy canbemeasured based oninformation provided
bythegovernment. Incases where thisapproach hasbeenusedinthepast,suchasincases involving
agriculturalproductswheretherearetensofthousandsofindividualproducers,this"aggregate"approach
hasproven tobethemost efficient andfairapproach forallparties involved.
AsforArticle 19.4, thisprovision merely prohibits authorities fromimposing countervailing
duties inanamount greater thantheamount ofsubsidy found toexist, calculated interms ofsubsidization
perunitofthesubsidized andexported product. Article 19.4doesnotaddress howtheamount of
thesubsidy isdetermined, andwedonotconsider thattherewould beanyconflict between thestatutory
provisions inquestion andArticle 19.4.
EC4(G/ADP/W/10-G/SCM/W/18) CantheUSexplain whyitexcludes from theweighted average
tocome toacountry-wide rate, theexporters forwhich azeroordeminimis ratewasfound?
Canitalsoexplain inmore detail what approaches maybeusedifallexporters have zeroorde
minimis rates?
Answer: Theexclusion ofexporters forwhich azeroordeminimis rateisfound applies onlytothe
calculation ofthe"all-others" rate. Anall-others ratewould becalculated toapply tonewshippers.
Also, insituations where theDepartment ofCommerce canconduct individual examinations ofsome,
butnotall,exporters orproducers, theall-others ratewould beapplied tothose exporters orproducers
whowerenotinvestigated. Thisapproach isbased ontheprovisions ofArticle 9.4oftheAnti-Dumping
Agreement. Given thesilence oftheSCM Agreement astohowcountervailing dutyratesshould be
calculated fornoninvestigated firms, theUnited States considered that,intheinterests ofconsistency,
transparency andpredictability, itwould bebesttousethemethodology setforthintheAnti-Dumping
Agreement.
Withrespect tothesecond question, ifthecountervailable subsidy ratesforinvestigated firms
areallzeroordeminimis ,theDepartment ofCommerce likely would issueanegative determination.
Otherwise, theDepartment ofCommerce likely would follow theguidance provided intheSAA,
page203,regarding thecomparable provision oftheanti-dumping law:Theexpected method insuch
cases willbetoweight-average thezeroanddeminimis margins andmargins determined pursuant
tothefactsavailable, provided thatvolume dataisavailable. However, ifthismethod isnotfeasible,
orifitresults inanaverage thatwould notbereasonably reflective ofpotential dumping margins for
non-investigated exporters orproducers, Commerce mayuseother reasonable methods.G/ADP/W/60
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4. Change inOwnership
EC5(G/ADP/W/10-G/SCM/W/18) Thissection preserves thepossibility fortheUStocontinue
tocountervail subsidies granted prior toprivatization (atarm'slength) atfullmarket value, as
theUShasdone inrecent steelcases. CantheUSexplain whether itconsiders thatinsucha
situation allrequirements ofthedefinition ofasubsidy (Article 1SCM) arefulfilled, i.e.afinancial
contribution and,mostimportant, abenefit tothecompany whose products willbecountervailed?
Answer Attheoutset, wemust notethatsection 771(5)(F) neither codifies noroverturns theprior
practice oftheDepartment ofCommerce withrespect towhatiscommonly referred toas"privatization".
Instead, astheSAA, atpage258,makes clear, section 771(5)(F) callsforacase-by-case approach
inrecognition thattheissueofprivatization "canbeextremely complex andmultifaceted". Therefore,
themostsignificant impact ofthisamendment willbetoforestall thedrawing ofsweeping theoretical
conclusions regarding privatization inisolation from theparticular factsofacase.
With respect tothequestion raised bytheEuropean Community, section 771(5)(F) doesnot
eliminate therequirement that,inorder forasubsidy toexist, there is(1)afinancial requirement;
and(2)abenefit isthereby conferred. However, thephrase usedinthequestion ("abenefit tothe
company whose products willbecountervailed") doesnotappear inArticle 1oftheAgreement, and
appears toreflect aninterpretative gloss ontheAgreement. Inourview, theAgreement doesnot
expressly address theissueofthecountervailability ofsubsidies provided toafirmthatlaterisprivatized.
Putdifferently, theAgreement doesnotexpressly address thequestion ofwhether theexistence of
abenefit mustconstantly bereexamined orwhether theexistence ofabenefit needbedetermined only
oncebased onthefactsastheyexistatthetimewhen afinancial contribution isfirstprovided.
5. DeJureSpecificity
EC6(G/ADP/W/10-G/SCM/W/18) TheUSomitted apartoffootnote 2toArticle 2SCM, which
deals withtheobjective criteria orconditions tobetaken intoaccount inadejurespecificity
determination. TheUSomitted "theeconomic nature andhorizontal application." Would itbe
possible toexplain this?
Answer: Given certain general conventions ofUSlegislative drafting, andinlightofthespecific
approach taken indrafting section 771(5)(A), itwasjudged tobeclearer toincorporate theparticular
language inquestion intheSAA, atpage260,rather thaninthestatute itself. However, because the
SAA constitutes "anauthoritative expression bytheUnited States concerning theinterpretation and
application" ofthestatute (seesection 102(d) oftheURAA), thelanguage inquestion willform, in
anyevent, partofanyanalysis bytheDepartment ofCommerce concerning "objective criteria and
conditions".
6. Notified Subsidy Programmes
EC7(G/ADP/W/10-G/SCM/W/18) CantheUSexplain what thesituation willbeifinan
investigation itcomes across asubsidy programme which hasnotbeen notified butthatfulfils
theconditions ofArticle 8.2SCM?
Answer Weassume thatthequestion refers tosection 771(5B)(E) oftheTariff Act,notsection
771(5)(E), which deals withbenefit conferred.
Pursuanttosection771(5B)(A),asubsidywillbetreatedasnoncountervailableiftheDepartment
ofCommerce determines inaninvestigation orreview thatthesubsidy meets allofthenormative criteriaG/ADP/W/60
G/SCM/W/69
Page7
setforthinsection 771(5B)(B), (C),or(D),asthecasemaybe.Thisisconsistent withthelastsentence
offootnote 35toArticle 10oftheSCM Agreement, andthecriteria setforth insubparagraphs (B),
(C),and(D)areconsistent withthecriteria setforth inArticle 8.2oftheAgreement. Because the
information relevant to"greenlight" status willbeinthehands ofthesubsidizing government, itwill
betheresponsibility ofthatgovernment toclaim non-countervailable status, andtheCVD questionnaires
oftheDepartmentofCommercewillcontainanappendixrequestingthesubmissionofcertaininformation
insituations where agovernment doesmake suchaclaim.
7. Injury Test
EC8(G/ADP/W/10-G/SCM/W/18) Thissection makes references tocountries "entitled toan
injury test." Willthisrequirement remain intherevised Regulations? Ifso,howwould theUS
reconcile thiswiththeprovisions under theSCM?
Answer: Pursuant tosection 701(c) oftheTariff Act,asamended bytheURAA, aninjury testexists
except inthecaseofmerchandise from acountry thatisnota"Subsidies Agreement country."
Section 701(b) oftheTariff Act,inturn,defines "Subsidies Agreement country" toinclude, interalia,
"aWTO member country." Inother words, under thestatute, merchandise imported from aWTO
Member willbeentitled totheinjury test.
Withrespect tosection 355.11(b) oftheCommerce Regulations, theDepartment ofCommerce
currently isengaged inarulemaking proceeding torevise itsCVD regulations inlightofthechanges
made bytheURAA. Given therequirements ofpublic notice andcomment under theUSAdministrative
ProceduresAct,itwouldbeprematuretospeculateastoexactlyhowthefinalregulationswillbeworded.
However, inlightofsection 701(c), wewould expect thatfinalregulations would continue toreflect
thefactthattheinjury testisprovided onlytomerchandise from those countries thatareentitled to
thattest. Nevertheless, asnoted above, under thestatute, WTO Members areentitled totheinjury
test,andanyfinalregulation issued would havetobeconsistent withthisstatutory directive.
8. Lesser Duty Rule
EC9(G/ADP/W/10-G/SCM/W/18);NewZealand6(G/ADP/W/3-G/SCM/W/11)WilltheUSimpose
anti-dumping/countervailing duties oflessthanthetotalamount ofthedumping/subsidy ifsuch
lesser dutywould beadequate toremove theinjury tothedomestic industry? (Article 19.2SCM)
Answer No.Section 701(a) andsection 706(a)(1) oftheTariff Actrequire thatduties beassessed
inanamount equal totheamount ofthenetcountervailable subsidy, anddoesnotprovide forwhat
iscommonly referred toasthe"lesser dutyrule". Inthisregard, wenotethatunder Article 19.2of
theSCM Agreement, theapplication ofalesser dutyruleisstated as"desirable," butisnotmandatory.
Theviews oftheUnited States onthisissue arewellknown, andwewillnotrepeat herepositions
thatwere articulated indetail during theUruguay Round negotiations. Wesimply willnotethata
proposal tomake theapplication ofthelesser dutyrulemandatory wasrejected during theUruguay
Round negotiations.G/ADP/W/60
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9. Non-Actionable Subsidies -Serious Adverse Effects
Canada (G/ADP/W/23-G/SCM/W/30) Section 281(e)(2)(E) oftheURAA allows theUSTR to
determine whatSection 301action should betaken where aMember maintaining asubsidy measure
which isallegedly causing serious adverse effects, blocks consensus intheCommittee. What is
theWTO basis forrecourse tosuchunilateral measures andwould recourse toSection 301not
beinconsistent with: (i)theDSU prohibition ofunilateralism; andii)theArticle 9requirement
forCommittee authorization ofcountermeasures?
Answer: First, theUnited States wishes tonotethatthequestion posed byCanada bears norelation
toUSimplementation ofthecountervailing dutyprovisions oftheAgreement onSubsidies and
Countervailing Measures, andrelates onlytangentially totheimplementation oftheAgreement.
However, insofar asthelegislative provision inquestion is"relevant" (Article 32.6) toanimportant
aspect ofthatAgreement, weoffer thefollowing comments.
Under certain circumstances, Article 9envisages thepossibility thataMember would be
authorized totakecountermeasures against another Member 's"greenlight" subsidy which iscausing
serious adverse effects toadomestic industry suchastocause damage which isdifficult torepair.
Inorder tobeabletoimplement thiscountermeasure authority, USlawrequires thatthere bespecific
statutory authority andsection 301oftheTrade Actof1974, asamended, wasthemostlogical statutory
vehicle available toaccomplish this.
Section 281(e)(2) oftheURAA wasdrafted toprovide anobjective andstructured basis for
aUSindustry which believes thatitissuffering serious adverse effects from agreenlight subsidy to
request theUnited States Government toinvoke theprovisions ofArticle 9andtolookintowhether,
infact,serious adverse effects have been caused. Thetimelines setforth inthelegislation were
specifically crafted soastoaccommodate those contained inArticle 9.Theprocedural, evidentiary
andlegalstandards contained inthestatute alsowillhelptoensure thatonlylegitimate, well-documented
claims provide thebasis foranArticle 9request bytheUnited States tothesubsidizing Member and,
ifnecessary, ultimately totheSubsidies Committee.
Inspecific regard tosection 281(e)(2)(E), there isnothing which requires action which would
beinconsistent witheither theSCM Agreement ortheDispute Settlement Understanding. Itprovides
thebasisindomestic USlawtogiveeffect totheprovisions ofArticle 9and,asadiscretionary statute,
section 301isentirely consistent withallrelevant provisions oftheWTO.
II. Conduct ofInvestigations
1. Initiation Procedures
Hong Kong 1(G/ADP/W/30-G/SCM/W/37); Venezuela I(G/ADP/W/40-G/SCM/W/48) Article 5.3
oftheWTO ADAgreement requires theimporting authorities toensure theaccuracy andadequacy
oftheevidence provided intheapplication forthedetermination ofwhether thereissufficient evidence
tojustify theinitiation ofaninvestigation. Section 732(c)(1)(A)(i)(p. 227)onlyrequires theUSto
examine theaccuracy andadequacy oftheevidence onthebasis ofsources readily available.
Moreover, itonlyrequires theUStodetermine "whether thepetition alleges theelements necessary
fortheimposition of[anADduty] andcontains [sic]reasonably available tothepetitioner supporting
theallegations" (emphasis added).G/ADP/W/60
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Question:Ifnosuchreadily-availablesourceexists,whatothersourceswouldtheUSadministering
authority explore? or,would theadministration simply takethepetitioner 'sword onitsface?
Why doestheUSlawprovide foramuch looser requirement thanArticle 5.3?
Answer: TheUSstandard isfullyconsistent withArticle 5.3,which provides simply thattheadequacy
andaccuracy ofevidence mustbedetermined. TheAgreement, however, provides nospecific standard
bywhich theevidence istobeevaluated. TheUSlawsimply provides astandard bywhich wewill
review evidence.
Sources thatarereadily available willvaryonacase-by-case basis anditisnotpossible to
speculate inadvance onthespecific sources thatmaybeavailable inagiven case.
2. Industry Support
Canada (G/ADP/W/23-G/SCM/W/30) Section 212oftheURAA onlyrequires polling "ifthepetition
doesnotestablish support ofdomestic producers orworkers accounting formore than50percentof
thetotalproduction ofthedomestic likeproduct". Inorder forapetition toestablish suchsupport,
would these domestic producers/workers havetoappear asco-petitioners onthefaceofthepetition
orwould anallegation oftherequired support inthebody ofthepetition suffice?
Answer: Ifapetition provides sufficient evidence thatdomestic producers orworkers accounting for
more than50percentofthetotaldomestic production ofthedomestic likeproduct expressly support
thepetition,Commercewilldetermine,onthebasisofevidencecontainedinthepetition,thatthepetition
isfiled"byoronbehalf ofthedomestic industry". There isnorequirement thattheindustry supporters
ofapetition must alsobepetitioners.
Canada (G/ADP/W/23-G/SCM/W/30) Pursuant tosection 212oftheURAA, theindustry support
thresholds forpetitions, asprescribed byArticle 5.4oftheADAgreement andArticle 11.4ofthe
SCM Agreement, arecalculated onthebasis ofsupport by"domestic producers orworkers".
Question 1:Howwould theUSadministering authority dealwiththesituation where anemployee
organization, which represents theworkers ofadomestic producer, supports apetition butthe
producer itself doesnot?
Answer: Ifmanagement ofafirmexpresses aposition indirect opposition totheviews oftheworkers
inthatfirm, Commerce willtreattheproduction ofthatfirmasrepresenting neither support fornor
opposition tothepetition.
Question 2:Ifworker support caneffectively neutralize producer opposition toapetition insuch
situations, howwould theUSadministering authority dealwith collusive behaviour between
producers supporting apetition (whocollectively donotsatisfy theindustry support requirements)
andmulti-producer employee unions, which isaimed atnegating opposition toapetition byother
producers intheindustry, thereby effectively depriving Article 5.4oftheADAgreement and
11.4oftheSCM Agreement oftheir intended effect?
Answer: Thisislargely aquestion offact,which would beaddressed fullyintheprocess ofaparticular
investigation. However, wewould liketomake clearthatunder nocircumstances willwedouble count
theproduction ofafirmwhose management andworkers bothsupport apetition.G/ADP/W/60
G/SCM/W/69
Page10
Canada (G/ADP/W/23-G/ADP/W/30) Does theright ofinterested parties, under Section 212of
theURAA, tocomment ontheissue ofindustry support prior totheinitiation ofaninvestigation
extend tothechoice ofanappropriate sampling technique where, because ofalarge number of
producers, sampling isusedtopolltheindustry.
Answer: Yes.
Hong Kong 2(G/ADP/W/30-G/SCM/W/37) Article 5.4oftheWTO ADAgreement requires that
thewritten complaint should besupported bydomestic producers expressing either support foror
opposition tothecomplaint. Footnote 14totheArticle provides thatemployees ofdomestic producers
ortheirrepresentatives maymake orsupport acomplaint. Insetting outthequantitative criteria on
determination ofindustry support, Sec.732(c)(4)(A)(p. 228)refers to"thedomestic producers or
workers".
Comment: Inthedetermination ofindustry support, theviews ofworkers willalsobetaken
intoaccount. Itispreferable tofurther clarify thesituation withtheUSThepossibility ofdouble
counting isaconcern.
Question 1:Does theterm "workers" refer tounions only orboth unions andindividual
employees?
Answer: Theviews oftheworkers maybesubmitted byunions, other employees organizations or
individual employees.
Question 2:Ifbothunions andindividuals mayexpress support fororobjection toapetition,
what would theadministration dotoavoid double counting incases where anemployee andthe
union representing himbothmake submissions?
Answer: Wewillnotdouble count production inanycircumstance. Thisissue isfactspecific and
willhave tobedetermined onacasebycasebasis inaccordance withourobligations under the
Agreements.
Question 3:Specifically, what would happen ifproducers opposed butunions orindividual
employees supported apetition?
Answer: Ifmanagement ofafirmexpresses aposition indirect opposition totheviews oftheworkers
inthatfirm, wewilltreattheproduction ofthatfirmasrepresenting neither support fornoropposition
tothepetition.
Question 4:What would happen when there areconflicting views between producer, individual
employee(s) and/or unions from thesame entity?
Answer: Wehavemade perfectly clear whatever wedoinindividual cases willbeconsistent with
ourobligations under theAgreements, andwewillnotdouble count. Specific fact-driven scenarios
would beaddressed fullyinaninvestigation.G/ADP/W/60
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Question 5:Iftheproducer andhisworkers bothmake submissions insupport ofapetition,
would theproduction ofthecorresponding entity becounted twice inconsidering the25per
cent-total-production threshold inSec.732(c)(4)(i)? [Ifyes,itmeans double counting. Inextreme
cases, apetition maypassevenifitonlygetssupport from entities actually accounting for13per
centofthetotalproduction ofthelikeproduct.]
Answer: Theviews ofmanagement andworkers representing thesame domestic production canbe
counted onlyonce.
Hong Kong 3(G/ADP/W/30-G/SCM/W/37) --Producers Related toForeign Producers Article 4.1
oftheWTO ADAgreement defines theterm"domestic industry" andprovides foranexception that
when producers arerelated totheexporters orimporters orarethemselves importers oftheallegedly
dumped product, the"domestic industry" maybeinterpreted asreferring totherestoftheproducers.
Thereisnospecificationonwhetherthe"related"producersshouldbeonthesupportingsideoropposing
sideconcerning thecomplaint. Section 732(c)(4)(B)(i)(p. 228), however, provides thatindetermining
industry support, theUSshalldisregard theposition ofsuchdomestic producers whooppose the
petition .
Question: Why doestheUSdisregard onlytheposition ofthose domestic producers whooppose
thepetition? How about theones whosupport thepetition? Will theyalsobeexcluded in
determining theindustry support? Ifnot,whynot?
Answer: Ourtreatment ofrelated parties isfully consistent withtheAgreements. Specifically,
Article 4.1(i) provides theadministering authority withtherighttoexclude producers whoarerelated
toexporters orwhothemselves areimporters inthedefinition ofdomestic industry.
Hong Kong 4(G/ADP/W/30-G/SCM/W/37) -Polling Sec.732(c)(4)(D)(i)(p. 229)stipulates thatif
thepetition doesnotmeetthe50percentstanding requirement, theUSshallpolltheindustry orrely
onother information inorder todetermine ifthere issufficient support forthepetition. Would the
USelaborate ondetails andconditions ofinvocation? What "other information" hasthe
administration inmind?
Answer: Thiswilldepend onthespecific factsofthecase. Forexample, industry trade association
datamayallow ustodetermine thelevelofindustry support forapetition.
Hong Kong 5(G/ADP/W/30-G/SCM/W/37) -Sampling Footnote totheArticle 5.4oftheWTO AD
Agreement provides forthecasethatwhen therearefragmented industries involving anexceptionally
large number ofproducers, theimporting authorities maydetermine support andopposition byusing
statistically valid sampling techniques. Sec.732(c)(4)(D)(ii)(p. 229)however allows fortheuseof
statistically valid sampling method topolltheindustry ifthere isalarge number ofproducers inthe
industry. Why doestheUSenact alessstringent criterion foradoption oftheuseofsampling
technique?
Answer: Thisisnotalessstringent criterion thanthatprovided bytheAgreement. Aswithall
provisions ofourlaw,itwillbeimplemented inamanner consistent withtheAgreement.
3. Initiation Requirements
Hong Kong 6(G/ADP/W/30-G/SCM/W/37); Norway 2(G/ADP/W/33-G/SCM/W/41) TheWTO
ADAgreement does notprovide thatthedetermination regarding industry support shall notbe
reconsidered afterthedetermination ofwhether toinitiate aninvestigation hasbeenmade. However,G/ADP/W/60
G/SCM/W/69
Page12
Sec.732(c)(4)(E)(p. 229)hassuchaprovision. What explanations canbeprovided inprecluding
reconsideration oftheindustry support?
Additionally, Norway askswhytheDepartment ofCommerce requires lackofinterest
onthepartof"substantially all"ofthedomestic industry.
Answer: Article 5.4mandates thataproceeding notbeinitiated without appropriate industry support.
Thequestionofindustrysupport,therefore,mustberesolvedconclusivelyattheoutsetoftheproceeding.
USlawisconsistent withthisrequirement. TheAgreement doesnotrequire orevensuggest thatthe
issue ofindustry support bere-examined afterinitiation.
Therequirements forindustry support apply onlytotheinitiation ofapetition. Thestandard
usedforrevocation isfullyconsistent withtheAgreement.
4. Petitions
Canada(G/ADP/W/23-G/SCM/W/30)HowdoestheUnitedStatesreconcilethestatutoryprohibition
placed onitsadministering authority, [byvirtue ofsection 211oftheUruguay Round Agreements
Act(URAA)], respecting theacceptance ofunsolicited oral/written communication prior toa
decision whether toinitiate aninvestigation, withArticle 5.3oftheADAgreement and11.3of
theSCM Agreement, given thatunsolicited communications maybearupon theaccuracy/adequacy
oftheinformation contained inthepetition?
Answer: Nothing inArticle 5.3oftheADAgreement or11.3oftheSCM Agreement suggests that
theadministering authority must solicit comment prior toinitiation.
Canada (G/ADP/W/23-G/SCM/W/30) Wenotethattheinterim regulations pertaining tothecontents
ofpetitions donotamend section 353.12(b)(3) ofthecurrent anti-dumping regulations orsection
355.12(b)(3) ofthecurrent countervailing dutyregulations, which appears toenvisage, among other
things, theavailability ofconcurrent section 301unilateral relief formatters thatarethesubject of
apetition and,therefore, within thepurview oftheWTO Agreement. Wewould appreciate
clarification oftheUSpolicy ontheavailability ofsection 301unilateral measures inrespect of
matters, such asalleged dumping orsubsidization, which arethesubject ofaWTO covered
agreement.
Answer: 19CFR Sections 353.12(b)(3) and355.12(b)(3) require thepetitioner toprovide certain
information onother traderelief which mayhavebeenrequested. Section 301relief isnotanavailable
remedy forinjurious dumping, norcanitbeusedasabasisforimposing unilateral duties. Inthecase
ofdisputes taken under Article 4or7oftheSCM Agreement, however, section 301provides avehicle
forinitiating adispute settlement proceeding. Italsoprovides domestic lawauthority forimposing
WTO authorized countermeasures iftheUSprevails inadispute andthedefending member failsto
implement thePanel report. URAA section 281(d).G/ADP/W/60
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5. Undertakings
NewZealand 5(G/ADP/W/3-G/SCM/W/11) Inregard tothepublic interest clause, wenotethatin
s.734(a)(2), theUSinmaking adecision whether ornottoterminate aninvestigation onthebasis of
anundertaking onaquantitative restriction, theadministering authority isrequired tobesatisfied the
termination isinthepublic interest, andaskwhat consideration theUShasgiven tomaintaining
asimilar requirement inrespect oftheimposition ofanti-dumping duties?
Answer: Weoppose apublic interest testforanti-dumping investigations.
6. AllOthers Rate
Hong Kong 9(G/ADP/W/30-G/SCM/W/37) Article 9.4oftheWTO ADAgreement setsoutthat
indetermining theADdutyrateforexporters orproducer notinitially selected inthesampling for
theinvestigation, theimporting authorities shalldisregard anyzeroanddeminimis margins and
margins established onthebasis ofthefactavailable .Sec.735(c)(5)(A)(p. 244), however, states
thatthedetermination oftheall-others rateisbased ontheweighted-average oftheestimated dumping
margins established, excluding anyzeroanddeminimis margins and"anymargins determined entirely
under Section 776" (i.e.determinations onthebasis ofthefactsavailable).
Question: Would theUSelaborate ontheimplication of"entirely"? What explanations canbe
provided fordetermining anall-others rateinamanner notprovided forintheWTO AD
Agreement?
Answer: Thisallows ustoinclude intheallothers ratethose margins which arebased largely onthe
exporter 'sowndata.
Hong Kong 10(G/ADP/W/23-G/SCM/W/30) -Estimated AllOthers ’RateSection 735(c)(5)(B)(p.244)
provides thatiftheestimated weighted average dumping margins established forallexporters and
producers individually investigated arezeroordeminimis margins, oraredetermined entirely under
Sec.776,theUSmayuseanyreasonable method toestablish theestimated all-others rateforexporters
andproducers notindividually investigated. WTO ADAgreement doesnotprovide forsuchprovisions.
Question: Would theUSconfirm that Sec. 735(c)(5)(B) would notbeapplicable inthe
circumstances where themargins established forallexporters andproducers individually
investigated arezeroordeminimis ?Inother cases where there arezero/deminimis margins and
margins based onbestinformation (ormargins based onbestinformation available only), what
explanations canbeprovided fordetermining anall-others rateinsuchamanner notprovided
fortheWTO ADAgreement? How would theUSensure thatsuchadetermination would be
consistent withitsobligations under theWTO ADAgreement?
Answer: Thisandother provisions ofthelawwillbeimplemented inamanner consistent withthe
Agreements. Ifallproducers andexporters investigated hadzeroordeminimis margins inthefinal
determination, theinvestigation willbeterminated asprovided insection 735(c)(2).
7. Public Comments
Hong Kong 37(G/ADP/W/30-G/SCM/W/37) Article 6.12oftheWTO ADAgreement requires the
authorities toprovide opportunities forrelevant industrial users ofthesubject product andfor
representative consumer organizations toprovide information relevant totheinvestigation regarding
dumping, injury andcausality. Itisnotapparent thattheUSstatute hasprovide suchopportunities.G/ADP/W/60
G/SCM/W/69
Page14
Sec.782(2)(g) (p.325)mayberelevant. Ithowever refers onlyto"other parties totheproceeding"
andconfines comments tothoseoninformation submitted. Moreover itdisregards comments containing
newfactual information.
Question: (1)What does"other parties totheproceeding" mean? (2)Would theUSconsider
comments notoninformation submitted andcomments containing newfactual information if
suchcomments arerelevant totheinvestigation? 3)Howwould theUSensure thatitsauthorities
would provide opportunities forindustrial users andrepresentative consumer organization to
provide information relevant totheinvestigation asrequired byArticle 6.12?
Answer: (1)Other parties totheproceeding isanyone whowishes tocomment. (2)Yes,theUSwill
consider suchinformation provided itisrelevant andtimely. (3)Section 777(h) ofthelawallows
industrial users andrepresentative consumer organizations tocomment ontheinvestigation.
III. Anti-Dumping Methodology
1. Export Price/Constructed Export Price
Korea 1(G/ADP/W/21-G/SCM/W/28) SAA (pp.152-153) notes about Section 772oftheLawas
follows: "Notwithstanding thechange interminology, nochange isintended inthecircumstance under
which export price (formerly "purchase price") versus constructed export price formerly "exporters '
salesprice" areused. Does thismean thenewterms export price and"constructed export price"
arepractically thesame astheoldterms "purchase price" and"exporters salesprice" respectively?
Answer: Yes,thenewterms arenotintended tochange thecircumstance under which export price
(formerly "purchase price") andconstructed export price(formerly "exporters 'salesprice") areused.
However, thenewlawhaschanged themethodologies forcalculating theexport price orconstructing
anexport price inaccordance withtheADAgreement.
2.Affiliated Parties
Korea 11(G/ADP/W/21-G/SCM/W/28) TheKorean Government would finally express itsconcern
withthedefinition ofan"affiliated party" intheUSlegislation. Asdefined under theStatement of
Administrative Action, thescope ofan"affiliated party" appears tobeoverly inclusive andvague.
Inthehopesofclarifyingwhatan"affiliatedparty"is,theKoreanGovernmenthaspreparedthefollowing
questions. Asaninitial point, theKorean Government would liketostress thatwithout further guidance
inregulations adopted toimplement thelegislation, thescope of"affiliated parties" intheUSlegislation
cannot bereasonably administered bytheCommerce Department andwillfailtomeettheAgreement 's
goalofincreasing transparency andfairness. Furthermore, vague standards willonlyresult inreporting
requirements thatareoverly inclusive andextremely burdensome.
Question: WilltheUnited States adopt benchmark suchasthose usedbytheUSSecurities and
Exchange Commission whereby majority ownership would leadtoapresumption ofcontrol and
ownership oflessthan20percentwould leadtoapresumption ofabsence ofcontrol?
Answer: Asexpressed intheAgreement "oneshould bedeemed tocontrol another when theformer
islegally oroperationally inaposition toexercise restraint ordirection overtheother." Thislanguage
hasbeenexplicitly incorporated intothenewlaw. Asthisdefinition indicates, therealities ofthe
marketplace arethatfactors other thandirect ownership mayplayasubstantial roleinthedetermination
ofcontrol. Apresumption based onabenchmark ofpercentownership mayormaynotbeappropriate.G/ADP/W/60
G/SCM/W/69
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Question: Regardless ofdegree ofownership, willtheUnited States nonetheless require objective
evidence ofactual control, i.e.evidence thatoneparty islegally oroperationally inaposition
toexercise restraint ordirection overtheother party?
Answer: Section 771(33)(G) defines affiliated parties onthebasis ofcontrol. Consistent withthe
Agreement, control exists ifoneperson islegally oroperationally inaposition toexercise restraint
ordirection overanother person. Under USlawanydetermination mustbesupported by"substantial
evidence upon theadministrative record".
Question: Even where control isestablished, willtheUnited States examine transactions between
theparties todetermine whether arm'slength prices exist?
Answer: Yes, Commerce willcontinue todisregard sales toaffiliated parties which cannot be
demonstrated tobeatarm'slength prices forpurposes ofcalculating normal value.
Question: When sales toadomestic affiliated party arefurther manufactured prior tosaleto
thefirst unaffiliated party, thus making them lesscomparable tomerchandise soldtothe
United States, willtheUnited States require thatsuchsalesbereported forpurposes ofreporting
normal value rather thanrelyonalternative matches (i.e., non-further manufactured sales or
constructed value) todetermine normal value?
Answer: Weunderstand yourquestion tobe-willtheUSrequire reporting offurther manufactured
downstream salesofalikeproduct tounaffiliated persons? Thenewstatute continues thepastpractice
ofpreferring theuseofhome market sales overconstructed value, andthere isnothing inthenew
lawwhich would change thesereporting requirements. However, issues suchasreporting requirements,
andappropriate matches willcontinue toberesolved onacasebycasebasis.
Question: WilltheUnited States establish ahighstandard fordetermining thatcontrol exists
innon-equity relationships sothatsuchsituations willbetheexception rather thantherule?
Answer: Decisions oncontrol willinclude anumber offactors --oneofwhich isequity ownership.
Decisions regarding control willdepend onthefactsofeachcaseandwillbefullyconsistent with
Article 4.
3.Profit Deduction from CEP
Japan 2(G/ADP/W/17-G/SCM/W/24) Article 2.4oftheAnti-dumping Agreement directs Members
tomake allowances for"cost, [sic]including duties andtaxes, incurred between importation andresale,
andforprofits accruing" when comparing normal value toconstructed export price. USlawmandates
thatthecalculation of"profits accruing" inconnection withUSsaleswillbebased onaformula which
includes profits associated withhome market andthirdcountry sales. (SeeSection 772(f))
Q1Although aliteral reading ofArticle 2.4oftheAnti-Dumping Agreement makes plain that
thereference to"profits accruing" refers toprofits associated withUSsales only, whywould
"profits" refer toactivities notassociated withsales intheUSunder USlaw?
Answer: Asrequired byArticle 2.4,USlawdeducts onlyprofits accruing (i.e,attributable) toactivities
between importation andresale. Toidentify theamount ofprofit which isattributable toselling activities
intheUnited States, USlawusestheratioofselling expenses incurred intheUStototalselling
expenses. Thisratioisapplied tothetotalprofit. Inthisway,theportion oftotalprofit which isactually
deducted from constructed export price isonlythatamount which isattributable toselling activitiesG/ADP/W/60
G/SCM/W/69
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intheUSTherefore, theprofit deducted isentirely attributable toactivities associated withsalesin
theUSconsistent withArticle 2.4.
Q2While USlawrequires thededuction ofprofit ontheconstructed export price, howisthe
profit onthesideofnormal value dealt with?
Answer: USlawdeals withprofit innormal value ascontemplated inArticle 2.4. Thatprovision
callsforthededuction ofprofit accruing between importation andresale when constructing theexport
price. Italsorequires anadjustment tonormal value when price comparability hasbeenaffected by
theconstruction oftheexport price. Insuchacase, Article 2.4requires thecomparison tobemade
atthesame level oftrade oranadjustment fordifferences inthelevel oftrade. TheUnited States
willquantify differences theleveloftradeadjustments bycomparing differences inprices atthedifferent
levels oftrade. These differences inprice between different levels oftrade willencompass different
expenses accruing atthedifferent levels, andbydifferent profits accruing. Thus, profit isaninherent
partofanyadjustment which theUnited States willmake tonormal value duetoadifference inthe
leveloftrade.
4.Normal Value
(a)FairComparison
Korea 4(G/ADP/W/21-G/SCM/W/28) TheWTO Agreement Article 2.4stipulates, "Afaircomparison
shallbemade between theexport priceandthenormal value". Forthispurpose, theAgreement 2.42
notes,
"theexistence ofmargins ofdumping during theinvestigation phase shallnormally
beestablished onthebasis ofacomparison ofaweighted average normal value with
aweighted average ofprice ofallcomparable export transactions orbyacomparison
ofnormal value andexport prices onatransaction-to-transaction basis."
Though theprovision contains theterm"during theinvestigation phase", itdoesn 'tmean theprinciple
isnotappropriate tothe"review phase". Rather, itisnatural thattheprinciple alsobeapplied tothe
"review phase" toattain thepurpose offaircomparison. However, SAA(p.173)says"thepreferred
methodology inreview willbetocompare average toindividual export price." [sic] Wethink the
USintention nottoapply theprinciple offaircomparison tothereview phase willnullify thepurpose
oftheWTO Agreement Article 2.4,especially because theUSassesses theamount oftheanti-dumping
dutyonaretrospective basis. What istheUSopinion onthis?
Answer: USlawisinaccordance withArticle 2.4.2, andneither modifies nornullifies thatprovision.
Rather, USlawreflects thenewspecificity oftheAgreement withrespect toinvestigations andcontinues
prior USmethodology forreviews. TheAgreement doesnotdealwithcomparison methodology for
reviews.
(b)Level ofTrade Adjustment
Japan 3(G/ADP/W/17-G/SCM/W/24) Under USlawconstructed export price isadjusted backto
anex-factory price bysubtracting profits andcosts. Thus, netUSprice isalways equivalent toan
ex-factory price atthewholesale level. Under USlaw,however, where thestarting price fornormal
value isatanadvanced levelofdistribution, normal value isadjusted backtothisexfactory levelonly
ifleveloftradeadjustment conditions aremet.Thus, while theadjustment toUSpricetotheex-factory
levelisautomatic, thedownward adjustment ofnormal value isconditional (SeeSection 773(a)(7)(A)).G/ADP/W/60
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Q1Since Article 2.4oftheAnti-dumping [sic]requires dueallowance andadjustments forprice
symmetry inallcircumstances, isnottheUSlawinconsistent withtheAnti-dumping Agreement
because theadjustment process isasymmetrical?
Answer: No,USlawfollows Article 2.4. Article 2.4states thatprofits andcostincurred between
importation andresale should bededucted fromtheresale priceandsalesshould normally becompared
atthesame leveloftrade. When salescannot bematched atthesame leveloftrade andwhen price
comparability hasbeenaffected, aleveloftrade adjustment should bemade tonormal value. Thus,
Article 2.4makes thisleveloftrade adjustment tonormal value conditional onafinding thatprice
comparability hasbeenaffected.
Consistent withtheAgreement, USlawattempts tomatch atthesame leveloftrade. Ifthis
isnotpossible andwedetermine thedifference inlevels oftradeaffects price comparability, wemake
aleveloftrade adjustment. Moreover, when theleveloftrade cannot bequantified, weprovide a
CEPoffset. Thisgoesbeyond therequirements oftheagreement inthattheCEPoffset isprovided
irrespective ofwhether ornotleveloftrade isshown toaffect price comparability.
Finally, toclear amisconception -first, USlawdoesnotdeduct allprofits andcosts from
theUSresale priceusedtoconstruct anexport price, but,asrequired byArticle 2.4,onlythose incurred
between importation andresale. Finally, theconstructed export pricemayormaynotbeanex-factory
price.
Q2Where intheAnti-dumping Agreement doestheU.lawfindsupport forthisdouble standard?
Answer: There isnodouble standard. TheUSlawfollows Article 2.4,which callsfordeduction
forprofit andexpenses toconstruct anexport price. Under theAgreement, ifprice comparability
hasbeenaffected, alevel oftrade orother adjustment must bemade. InthecaseofCEP, USlaw
seeks tocompare prices atthesame leveloftrade. Ifthatisnotpossible, theleveloftrade adjustment
orother dueallowance ismade.
Hong Kong 27(G/ADP/W/30-G/SCM/W/37) Article 2.4oftheWTO ADAgreement provides that
a"faircomparison shallbemade between theexport priceandthenormal value" andthedueallowance
shallbemade fordifferences which affect pricecomparability including, interalia,differences inlevel
oftrade. Sec.773(a)(7)(A) (p.298)provides forlevel-of-trade adjustment. Ifthedifference inlevel
oftrade:
(i) involves theperformance ofdifferent selling activities; and
(ii) isdemonstrated toaffect price comparability, based onapattern ofconsistent price
differences between sales atdifferent level oftrade inthecountry inwhich normal
value isdetermined (emphasis added)."
Comment: Sec.773(a)(7)(A) unjustifiably limits thescope forlevel-of-trade adjustment which
onlyapplies when thedifferent levels under consideration areintheforeign market, notwhen they
areintheUSmarket. Thisviolates theobligations under Article 2.4oftheWTO ADAgreement
requiring afaircomparison.
Question: What explanation canbeprovided fortherestrictions onthescope forlevel-of-trade
adjustments inviolation ofArticle 2.4? Forinstance, when allsales intheexporting country
aremade toendusers, therequirement ofSec.773(a)(7)(A)(ii) cannever bemetandthere will
notbeanyleveloftrade adjustment intheestablishment ofthenormal value. IfUSsales areG/ADP/W/60
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made both todistributors andtoends users (with aconsistent price difference), howwould a
faircomparison bemade between distributor salesintheUSandend-user sales intheexporting
country, without alevel-of-trade adjustment inestablishing thenormal value?
Answer: Thestatute atsection 773(a)(1)(B) requires normal value, whenever practicable, tobe
established atthesame leveloftrade astheexport price, thusobviating theneedforaleveloftrade
adjustment. Where there isabona fidedifference inthelevels oftrade anditseffect onprice can
bequantified, United States lawrequires thatanadjustment bemade. Normally thisadjustment will
bebased onacomparison ofsalesofthesame product bythesame company atthetwolevels inthe
home market. Where suchacomparison cannot bemade, however, themeasurement ofthelevelof
tradedifference maybemade, withappropriate adjustment, byreference toother products, other time
periods orother producers. Finally, where theamount ofthelevel oftrade difference cannot be
quantified, theconstructed export price offset ofsection 773(a)(7)(B) maybeused.
Korea 10(G/ADP/W/21-G/SCM/W/28) Under newstatue oftheLaw, where thefunctional difference
affects pricecomparability butthedataavailable donotformanappropriate basisforthedetermining
aleveloftradeadjustment under section 773(a)(7)(A)(ii), Commerce willmake aCEPoffset adjustment
under section 773(a)(7)(B). Butthisadjustment isjustlimited forCEPwhile theWTO Agreement
Article 2.4specifies that"Ifinthese cases price comparability hasbeenaffected, theauthorities shall
"orshallmake dueallowance aswarranted under thisparagraph". How willbeEPsales treated in
theabove caseintheUSregulation?
Answer: Asweunderstand yourquestion, youareasking howleveloftrade andtheleveloftrade
adjustment willbehandled inthecaseofexport price sales. Adjustment forleveloftrade willalso
bemade inthecaseofexport price where itisappropriate. Wewillfirsttrywhenever practicable,
tomatch normal value withthesame level oftrade astheexport price, thusobviating theneedfor
aleveloftrade adjustment. Where there isabonafidedifference inthelevels oftrade, United States
lawrequires thatanadjustment bemade. Normally thisadjustment willbebased onacomparison
ofsalesofthesame product bythesame company atthetwolevels inthehome market. Where such
acomparison cannot bemade, however, themeasurement oftheleveloftradedifference maybemade,
withappropriate adjustment, byreference toother products, other timeperiods orother producers.
Australia4(G/ADP/W/6-G/SCM/W/14);HongKong27(G/ADP/W/30-G/SCM/W/37)Underparagraph
773(a)(7)(A), itwould appear thatanadjustment fortheleveloftrade canonlybemade where the
twolevels oftrade inquestion actually existinthecountry inwhich thenormal value isdetermined.
How isthisconsistent withtherequirement ofArticle 2.4oftheAnti-Dumping Agreement to
make afaircomparison atthesame leveloftrade?
Answer: Thisprovision ofthelawisconsistent withtheAgreement. Thestatute atsection 773(a)(1)(B)
requires normal value, whenever practicable, tobeestablished atthesame leveloftrade astheexport
price, thusobviating theneedforaleveloftrade adjustment. Where there isabona fidedifference
inthelevels oftrade, United States lawrequires thatanadjustment bemade. Normally thisadjustment
willbebased onacomparison ofsalesofthesame product bythesame company atthetwolevels
inthehome market. Where suchacomparison cannot bemade, however, themeasurement ofthe
leveloftrade difference maybemade, withappropriate adjustment, byreference toother products,
other timeperiods orother producers. Finally, where theamount oftheleveloftradedifference cannot
bequantified, theconstructed export price offset ofsection 773(a)(7)(B) maybeused.
(c)CEP OffsetG/ADP/W/60
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Hong Kong 26(G/ADP/W/30-G/SCM/W/37) Article 2.4oftheWTO ADAgreement requires afair
comparison between theexport price andthenormal value. Inthecaseofaconstructed export price,
Sec.772(d)(D) (p.294)provides fordownward adjustments bytheamount ofallUSexpenses incurred,
including indirect selling expenses. Tocompensate forthis,19CFRSec.353.56(b)(2) of1994provides
fora"circumstance-of-sale" adjustment byareduction ofindirect selling expenses intheestablishment
ofthenormal value, butonlyuptotheamount deducted from theUSprice, regardless oftheactual
amount ofindirect expenses incurred onthesaleintheexporting country. Sec.773(a)(6)(C)(iii) (p.
298)provides foradjustment dueto"other differences inthecircumstances ofsale".
Comment: Toensure afaircomparison required byArticle 2.4,theindirect selling expenses
intheexporting member should bededucted intheestablishment ofthenormal value, aslongasthe
nature oftheexpenses isthesame ofthenature ofthatdeducted intheestablishment oftheconstructed
export price. There arenojustifications forthecurrent CFR tocaptheamount ofthededuction in
thenormal value adjustment. Itisnotclear whether therelevant CFR would beamended tobring
itintoconformity oftheWTO ADAgreement. Itisalsonotclear about theapplication ofSec.
773(a)(6)(C)(iii) andwhether thisprovision willhelp. Inanycase, theabsence ofanyUSstatutory
provisions ensuring acircumstances-of-sale adjustment made tothenormal value reflecting the
comparable deductions fromtheUSpricecould amount toaviolation ofthefaircomparison requirement
inArticle 2.4.
Question: Why does theUSstatute notprovide foranadjustment made tonormal value to
compensate forthecomparable deductions fromtheUSprices toensure afaircomparison required
byArticle 2.4?Howwould Sec.773(a)(6)(C)(iii) beapplied? Isthecaponthesubject adjustment
made tothenormal value provided forin19CFR Sec.353.56(b)(2) stillinforce? Would this
provision beamended tobring itintoconformity withtheWTO ADAgreement?
Answer: TheUSstatute doesprovide foranadjustment tonormal value tocompensate, where price
comparability hasbeenaffected, forthedeductions from theUSprices toensure afaircomparison
required byArticle 2.4.Thatadjustment iscarried outbymeans oftheleveloftrade provision, or,
ifthedifferences inlevels oftrade cannot bequantified, bytheconstructed export priceoffset. Thus,
19CFR Sec.353.56(b)(2) (1994), which formerly carried outasimilar function bymeans ofa
circumstance-of-sale adjustment isnolonger relevant. Notethatunder thenewstatute, asspecified
byArticle 2.4,indirect selling expenses areonlydeducted totheextent incurred intheUnited States.
Therefore, where theconstructed export price offset isused, itissubject toasimilar limitation.
Hong Kong 28(G/ADP/W/30-G/SCM/W/37) When export price isconstructed asprovided forin
Article 2.3oftheWTO ADAgreement, Article 2.4provides thatallowances forcostsandforprofits
accruing should alsobemade andthattheauthorities shallestablish thenormal value ataleveloftrade
equivalent tothelevel oftrade oftheconstructed export price, orshallmake dueallowance. Sec.
773(a)(7)(B) (p.298), therefore, provides forareduction inthenormal value bytheamount ofindirect
selling expenses incurred intheexporting country bycapsuchareduction bytheamount deducted
from theUSprice made under Sec.773(a)(7)(1)(D) (p.294).
Comment: Inthecaseofaconstructed export price, thelevel-of-trade adjustment toestablish
anormal value istomeettheoverriding requirement ofafaircomparison under Article 2.4.Capping
theamount tobededucted hasnopolicy orlegalbasis under WTO ADAgreement andisaviolation
ofthefaircomparison requirement.G/ADP/W/60
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Question: Whyistheamount ofdeduction pursuant toalevel-of-trade adjustment capped? How
could afaircomparison beachieved when thecapped amount isnotsufficient forthenecessary
deduction tobemade toestablish anormal value atthesame level oftrade oftheconstructed
export price?
Answer: Theadjustment made pursuant tothelevel-of-trade provision isnotcapped. TheUnited States
willnormally compensate forthereduction made toarrive atconstructed export price, ifprice
comparability hasbeenaffected, bymeans ofaleveloftrade adjustment which isinnowaylimited
inamount. Itisequal tothedifference between prices atthetwolevels oftrade inthehome market.
Only where suchaleveloftrade adjustment cannot bequantified willtheUnited States resort tothe
deduction described inSec.773(a)(7)(1)(D). Thisprovision limits thededuction ofindirect selling
expenses fromnormal value because thededuction ofselling expenses usedtodetermine aconstructed
export priceislimited (i.e.,selling expenses areonlydeducted toconstruct anexport pricetotheextent
theyareactually incurred intheUnited States). Indeed, themethodology would begreatly skewed
ifselling expenses deducted inconstructing anexport price were limited tothose incurred inthe
United States, while selling expenses deducted from normal value were unlimited.
Japan 4(G/ADP/W/17-G/SCM/W/24) Article 2.4oftheAnti-dumping Agreement specifically directs
members tomake "due allowances" toensure thatprice comparisons aresymmetrical. USlaw
contemplates adownward adjustment toconstructed export priceforselling expenses. However, there
isnoparallel andunconditional provision authorizing adownward adjustment tonormal value. Rather,
thedownward adjustment tonormal value iscapped bytheamount oftheadjustment toconstructed
export price. (SeeSection 773(a)(7)(B)).
Q1Upon which Article intheAnti-dumping Agreement dose[sic]theUSbaseitsdecision to
capthededuction tonormal value?
Answer: Article 2.4requires theautomatic deduction fromthepriceusedtoconstruct anexport price
ofallexpenses incurred between importation andresale. Article 2.4recognizes thatthisdeduction
ofselling expenses andprofit mayaffect thelevels oftradebecause thelevels oftradeoftheconstructed
export price andnormal value maybedifferent. Ofcourse anydifference inprice mustbereflective
ofsome difference inexpenses andresulting profit. Where thedataintheexporting country is
insufficient toquantify anadjustment tothenormal value toaccount forthedifference inLOTbetween
normal value andCEP, USlawgrants thededuction ofindirect expenses fromnormal value. differences
inlevels oftrade aredifficult toquantify, USlaweliminates thedifferences inexpenses bymeans of
adeduction from normal value.
Thededuction ofindirect selling expenses fromnormal value islimited because thededuction
ofselling expenses fromconstructed export price islimited (i.e., selling expenses areonlydeducted
toconstruct anexport pricetotheextent theyareincurred intheUS). Indeed, themethodology would
begreatly skewed ifselling expenses deducted when constructing anexport pricewerelimited tothose
incurred intheUS,while selling expenses deducted from normal value were unlimited.G/ADP/W/60
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Q2Assuming there isnobasis intheAnti-dumping Agreement forthisasymmetry, what isthe
legal orpolicy theory for"capping" theselling expense deduction from normal value?
Answer: Wedonotagree withyourassumptions thatthere isaninconsistency withtheAgreement.
(d)Profit Adjustment
Hong Kong 25(G/ADP/W/30-G/SCM/W/37) Article 2.4oftheWTO ADAgreement requires afair
comparison between theexport priceandnormal value. Toensure that,thecomparison shallbemade
atthesame leveloftrade anddueallowance shallbemade onitsmerits fordifferences which affect
pricecomparability. Sec.772(d)(3) (p.294)provides forthededuction ofprofits, arising fromfurther
manufacturing, selling anddistribution activities performed byanaffiliated party intheUS,fromthe
constructed export price. Butnocomparable adjustment ismade intheestablishment ofthenormal
value.
Comment: Suchamechanism, inourviews, violates Article 2.4oftheWTO ADAgreement.
Question: What explanations canbeprovided forsuchaviolation?
Answer: There isno"violation". USlawisexplicitly inaccordance withArticle 2.4,anddeals with
profit innormal value asspecified inArticle 2.4.Thatprovision requires thededuction ofprofit incurred
between importation andresale ofthesalesprice usedasthebasis forconstructing anexport price.
Thatprovision alsospecifies thatsuchadeduction shallrequire anadditional deduction fromnormal
value onlywhere pricecomparability hasbeenaffected. Where pricecomparability hasbeenaffected,
theadjustment which Article 2.4prescribes isanadjustment totheleveloftrade ofthenormal value.
TheUnited States willmeasure differences inlevels oftrade bydifferences inprices atthedifferent
levels. These differences inprice between different levels oftrade arecaused bydifferent expenses
being incurred atthedifferent levels, andbythedifferent profit orlossresulting. Thus, profit isan
inherent partofanyadjustment which theUnited States willmake tonormal value duetoadifference
intheleveloftrade.
(e)Indirect Selling Expenses
Australia 5(G/ADP/W/6-G/SCM/W/14) Under paragraph 773(a)(7)(B), itwould appear thatanoffset
maynotalways beallowed forhome market indirect selling expenses though there isprovision for
aconstructed export price offset intheform ofanadjustment fortheleveloftrade, though itwould
belimited bytheleveloftheUSindirect selling expenses deducted tocalculate theconstructed export
price. WilltheUSAadminister thisprovision inamanner consistent withtheobligation toprovide
afaircomparison andsoallow aexport price offset all[sic]cases?
Answer: Wewilladminister thisaswellasallother provisions ofourlawinamanner consistent with
ourobligations under these agreements. Article 2.4onlyrequires theUnited States toremove indirect
selling expenses, when constructing theexport price, totheextent theyareincurred intheUnited States.
Article 2.4specifies that,ifremoval ofthese indirect expenses, along withdirect expenses andprofit,
hasaffected price comparability, thentheappropriate response isaleveloftrade adjustment.G/ADP/W/60
G/SCM/W/69
Page22
(f) Restricted Sales
Canada (G/ADP/W/23-G/SCM/W/30) Section 353.43(c) ofthecurrent regulations authorizes the
Secretary, inthecalculation offoreign market value toadjust theprice of"restricted sales" as
appropriate. What are"restricted sales" andwhat isthenature oftheprice adjustment
contemplated?
Answer: Thestatutory language towhich thisregulation relates hasbeendeleted inthenewlaw.
Weexpect thatthisregulation willbenotbeincluded intheregulations currently being developed.
Thesection, which hadbeenintheregulations formany years, addresses situations inwhich theprice
formerchandise maynotappropriately reflect itsvalue because ofsome restriction placed upon the
sale. Because theUnited States hasnever usedthisprovision, nomethodology forthisadjustment
hasbeendeveloped.
(g) Other Calculation Methods
Canada (G/ADP/W/23-G/SCM/W/30) Section 353.44(c) ofthecurrent regulations gives theSecretary
discretion touseanyothermethod forthecalculation offoreign market value which thesecretary deems
appropriate, werehe/she isoftheopinion thatneither a"weighted average" nor"preponderant price"
approach isappropriate. Why isthisprovision considered necessary andwhat other methods are
envisaged?
Answer: TheUnited States iscurrently redrafting itsregulations toreflect changes brought about by
theURAA. When theregulatory process hasbeencompleted itisexpected thatthisregulation will
bedeleted inlightofthenewprice comparison requirements under section 777A(d). Specifically,
thisregulation maybeaffected bysection 777A(d) oftheURAA dealing withtheuseofaverages or
individual prices incomparing export price withnormal value.
5. Currency Conversion
Australia 3(G/ADP/W/6-G/SCM/W/14); Hong Kong 34(G/ADP/W/30-G/SCM/W/37) Paragraphs
773(a)(6) and777A(d) allow foradifferent approach tothecalculation ofanti-dumping duties for
administrative reviews when compared totheinitial investigation, inrespect ofthetreatment ofsustained
movements inexchange ratesandofthecomparison between export price andnormal value. How
isthisconsistent withArticles 2.4.1 and2.4.2, respectively, oftheanti-dumping Agreement?
Answer; TheUSlawonthispoint explicitly parallels theAgreement. With respect totheprice
averaging requirement inArticle 2.3.2 andcertain aspects oftheexchange raterequirements contained
in2.4.1, theAgreement specifies thattheyapply onlytoinvestigations. Concerning exchange rates,
Article 2.4.1 requires fluctuations tobeignored inallcases, but,intheevent ofasustained movement
ofexchange rates, theauthorities mustallow exporters asixtydaylagonlyinthecaseofinvestigations.
Thedetails ofthecurrency conversion methodology which willbeusedbytheUnited States willbe
thesubject ofregulations nowbeing drafted.
6. DeMinimis Margins
Hong Kong 8(G/ADP/W/30-G/SCM/W/37); Canada (G/ADP/W/23-G/SCM/W/30) Article 5.8of
theWTO ADAgreement defines thatadumping margin isdeminimis ifitislessthan2percent,
expressed asapercentage oftheexport price. However, asdefined inSec., 733(b)(3)(p. 232), a
weighted average dumping margin isdeminimis ifitislessthan2percentadvalorem ortheequivalent
specific rateforthesubject merchandise.G/ADP/W/60
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Comment: Thisisdifferent from, andmayormaynotbeconsistent with(depending onthe
magnitude ofthe"specific rate"), thedefinition inArticle 5.8oftheWTO ADAgreement.
Question: Isthe2percentadvalorem equivalent tothe2percentoftheexport price asstipulated
bytheWTO ADAgreement? Why doestheUSprescribe analternative criterion notspecified
intheWTO ADAgreement indetermining deminimis margins? Would theUSelaborate under
what circumstances would theadministration assign aspecific ratetoamerchandise andwhat
isthemechanism todecide onthemagnitude oftherate? Would theUSconfirm thatadumping
margin would bedetermined asdeminimis once itislessthan 2percentoftheexport price,
regardless what thespecific rateis?
Answer: Thisprovision isdesigned toapply tosituations inwhich theduties arenotassessed onan
advalorem basis butwhere aspecific rateisusedinstead. Thisprovision ensures thatnoADduty
iscollected when thedutyisexpressed asaspecific rateofduty(e.g., 2cents perkilogram) when
thedutyequivalent advalorem islessthan2percent. Thus, theUnited States willconfirm thata
dumping margin inaninvestigation would bedetermined tobedeminimis ifitislessthan2percent
oftheexport price, regardless ofwhatthespecific rateis.
7. Non-Market Economies
Hong Kong 29(G/ADP/W/30-G/SCM/W/37) Article 18.1oftheWTO ADAgreement prohibits
countries fromtaking action against dumping ofexports byaMember except inaccordance withthe
provisions oftheAgreement. TheWTO ADAgreement doesnotdraw adistinction between market
andnon-market economies andcontains noseparate provision applicable tonon-market economies
only. Sec.773(c)(p. 300)provides forspecial rules fortheestablishment ofthenormal value ofa
product exported fromanon-market economy. Suchrulesarenotfound intheWTO ADAgreement.
Question: What explanations canbeprovided forallowing theUStotakeanti-dumping action
inrespect ofanon-market economy Member notinaccordance withtheprovision oftheWTO
ADAgreement, incontravention ofArticle 18?
Answer Section 773(c) isconsistent withArticle 18.1. Thesecond Supplementary provision of
paragraph 1ofArticle VIofAnnex IoftheGATT explicitly recognizes thespecial difficulties inmaking
apricecomparison formerchandise fromnon-market economy countries. Thesupplementary provision
acknowledges thatitmaybeinappropriate toperform acomparison using domestic prices ofcountries
inwhich thestatehasasubstantially complete monopoly ontrade andwhere prices arefixed bythe
state. Article 2.7oftheADAgreement acknowledges thevalidity ofthissupplementary provision.
8. Constructed Value/Cost ofProduction
(a) Allocated Profit
Korea 6(G/ADP/W/21-G/SCM/W/28) Section 772(d) oftheLawstipulates thattheprofit allocated
totheexpenses intheUSshallbereduced from theprice usedtoestablish constructed export price.
Also, SAA (p.154)says"theprofit tobededucted from thestarting price intheUSmarket willbe
calculated bymultiplying thetotalprofit bythepercentage obtained bydividing totalUSexpenses byG/ADP/W/60
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Page24
totalexpenses". However, Article 2.4oftheWTO Agreement doesnotsayprofits allocated should
bededucted, butsaysallowances forprofits accruing should bemade. Therefore, the"allocated profit"
mentioned inSAA should belimited to"profits accruing" mentioned intheWTO Agreement. (see
thefollowing example) [Table Omitted.] What istheUSopinion onthis?
Answer: Asrequired byArticle 2.4,USlawdeducts only"profits accruing" between importation
andresale. TheAgreement issilent onhowtocalculate theprofit accruing.
Toidentify theamount ofthetotalprofit which hasaccrued duetotheselling activities inthe
United States, USlawcalculates theratioofselling expenses incurred intheUStototalselling expenses.
Thisratioisapplied tothetotalprofit. Inthisway,theportion oftotalprofit which isactually deducted
from constructed export price isonlythatamount which accrues duetoselling activities inthe
United States. Therefore, theprofit deducted isentirely attributable toactivities associated withsales
intheUnited States.
With regard tothechart, theUnited States isnotinaposition toaddress suchhypotheticals.
(b) Start-Up
Korea2(G/ADP/W/21-G/SCM/W/28);VenezuelaVII(G/ADP/W/40-G/SCM/W/48)-Start-UpPeriod
Section 773(f)(1)(C)(iii) oftheLawstipulates, "thestart-up period endsatthepoint atwhich thelevel
ofcommercial production" andSAA (p.166)notes, "production levels willbemeasured based on
units processed". Wethink itisinappropriate todecide thepoint atwhich thestart-up period ends
solely bythestandard ofproduction. Webelieve theUSshould consider other factors suchascost
andprofit todecide thepoint (atwhich thestart-up period ends). Also, wethink theUSshould make
themeaning of"thelevelofcommercial production" clearer.
Answer: TheAgreement provides thattheadjustment tocostforstart-up istobemade "for
circumstances inwhich costs [...]areaffected bystart-up operations" butprovides noguidance on
whatstart-up isorwhen itends. TheUnited States believes themostappropriate basisfordetermining
thestart-up period iswhen thestart-up operation hasreached commercial production. Todetermine
whenacompanyreachescommercialproductionlevelsCommercewillconsiderfirsttheactualproduction
experience ofthemerchandise inquestion. Asindicated insection 773(f)(1)(C)(iii), "thelevel of
commercial production" willbedetermined onacase-by-case basis depending onthemerchandise,
producer, orindustry concerned.
Astart-up adjustment isnotappropriate when costsareaffected byasloworunprofitable market
orother factors unrelated tothestart-up operations which mayincrease perunitcosts.
Hong Kong 33(G/ADP/W/30-G/SCM/W/37) -Start-Up Costs Article 2.2.1.1 oftheWTO AD
Agreement provides that,forthepurposes ofdetermination ofdumping, costs shallbeadjusted when
theyareaffected bystart-up operations. Sec.773(f)(1)(C)(ii) however, allows Commerce tomake
anadjustment forstart-up costs onlyif-
(i) theinvestigated company isusing newproduction facilities orisproducing anew
product thatrequires substantial additional investment; and
(ii) production levels arelimited bytechnical factors associated withtheinitial phase of
commercial production.G/ADP/W/60
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Comment:ThereisnolegalbasisintheWTOADAgreementtolimittheadjustmentforstart-up
costsunder certain circumstances only. Theexhaustion ofsuchcircumstances inthelawsunjustifiably
excludes otherreasonable circumstances thatcanqualify foradjustments forstart-up costs. Forinstance,
thedevelopment ofanewsoftware product maybebased onexisting resources notrequiring substantial
additional investment. Alsostart-up operations arenotnecessarily limited bytechnical factors.
Question: Onwhat legal authority doestheUSlimit theadjustment forstart-up costs required
bytheWTO ADAgreement tocertain circumstances only? What explanations canbeprovided
toexclude other circumstances, notprovided intheUSlaws, thatcanqualify foradjustments
forstart-up costs?
Answer: TheAgreement neither defines start-up nordefines when itisover. TheUSlawprovides
areasonable andpractical interpretation ofthese terms.
(c) Generally Accepted Accounting Principles
Korea 3(G/ADP/W/21-G/SCM/W/28) Section 773(f)(1)(A) oftheLawseems tobeconsistent with
theWTO Agreement because itstipulates, "Costs shallnormally becalculated based ontherecords
oftheexporter ofproduct [sic-"orproducer"] ofthemerchandise, ifsuchrecords arekeptinaccordance
withthegenerally accepted accounting principles oftheexporting country (ortheproducing country,
where appropriate) andreasonably reflect thecosts associated withtheproduction andsaleofthe
merchandise".
However, SAA(p.164)shows theUSintention tomake theexporters usegenerally accepted
accounting principles oftheUSinstead ofthegenerally accepted accounting principles oftheexporting
country saying "Indetermining whether acompany 'srecords reasonably reflect costs, Commerce will
consider USgenerally accepted accounting principles employed bytheindustry inquestion."
Whatisthestandardforneglectingtheexportingcountry'sgenerallyacceptedaccountingprinciples
infavour ofUSaccounting principles?
Answer: Consistent withArticle 2.2.1.1 oftheAgreement, section 773(f)(1)(A) ofUSlawprovides
foruseofacompany 'srecords keptinthenormal course ofbusiness ifthose records aremaintained
inaccordance withlocal GAAP andreasonably reflect thecosts associated withtheproduction and
saleofthemerchandise. Bothconditions must bemetunder boththeAgreement andUSlaw.
TheuseofUSgenerally accepted accounting principles bytheUSindustry inquestion isone
ofseveral possible factors theDepartment ofCommerce mayconsider indetermining whether the
producer 'sorexporter 'srecords reasonably reflect thecosts associated withtheproduction andsale
ofthemerchandise.ThestandardfordeterminingwhenaproducingcountriesGAAPdoesnotreasonably
reflect costs willdepend onthefactsofeachparticular case.
(d) Ordinary Course ofTrade
Korea 7(G/ADP/W/21-G/SCM/W/28) SAA (p.168)says"section 773(e)(2)(A) establishes SG&A
expenses andprofit onlyonamounts incurred andrealized inconnection withsales intheordinaryG/ADP/W/60
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Page26
course oftradeoftheparticular merchandise inquestion." Wethink theterm"Intheordinary course
oftrade" mentioned above should havethesame meaning asthesame term"intheordinary course
oftrade" mentioned intheWTO Agreement Article 2.2.1 asastandard fordetermining normal value.
What istheUSopinion onthis?
Answer: Thetermordinary course oftrade isnotdefined intheAgreement. Article 2.2.1 provides
onlyoneexample ofsaleswhich areoutside theordinary course oftrade, specifically saleswhich are
outside theordinary course oftrade byreason ofprice.
(e) Constructed Value
Hong Kong 31(G/ADP/W/30-G/SCM/W/37) -Constructed Value Article 2.2.2 oftheWTO AD
Agreement provides that"theamounts foradministrative, selling andgeneral costsandforprofits shall
bebased onactual datapertaining toproduction andsalesintheordinary course oftrade ofthelike
product bytheexporter orproducer under investigation".
Sec.773(e) (p.302)provides thattheconstructed value ofimported merchandise shallbethe
sumoftheproduction costand"theactual amounts incurred andrealized bythespecific exporter or
producer being examined intheinvestigation orreview forselling, general andadministrative expenses
andforprofits, inconnection withtheproduction andsaleofaforeign likeproduct, intheordinary
course oftrade, forconsumption intheforeign country "(emphasis added [byHong Kong]).
Comment: Thephase [sic]"forconsumption intheforeign country" hasnoplace intheWTO
ADAgreement andunnecessarily restricts thebasisofcalculating theamounts forSGAcostsandfor
profits. Thisviolates Article 2.2.2.
Question: Why doestheUSunjustifiably restrict thescope ofcalculating theamounts forSGA
costs andforprofits tothatpertaining tothe"consumption intheforeign country" inviolation
ofArticle 2.2.2? What explanations canbeprovided?
Answer: Limiting thecalculation ofselling, general andadministrative ("SG&A") expenses andprofit
tosalesforconsumption inthehome market isconsistent withArticle 2oftheAgreement. Dumping
isdefined inArticle 2.1oftheAgreement asoccurring when aproduct is"introduced intothecommerce
ofanother country atlessthanitsnormal value". Normal value isfurther described as"thecomparable
price, [...],forthelikeproduct when destined forconsumption intheexporting country ".(emphasis
added). Article 2.2oftheAgreement provides thatonlywhen exporting country prices cannot beused,
thirdcountry prices orconstructed value maybeused, establishing astrong preference forexporting
country data. Insuchsituations, itcould besaidthatthethirdcountry price orconstructed value is
asurrogate fortheexporting country price. Thus, basing theSG&A expense andprofit calculations
onsalesforconsumption intheexporting country isthemostappropriate andlogical approach -because
thepurpose ofthecalculation istoarrive atasurrogate value forwhattheexporting country price
should havebeen.
Hong Kong 32(G/ADP/W/30-G/SCM/W/37) Article 2.2.2(ii) oftheWTO ADAgreement doesnot
restrict, forthebasis oftheweighted average, theactual amounts tothose incurred andrealized in
theordinary course oftrade. Sec.773(e)(2)(B)(ii) (p.302)injects therequirement of"inordinary
course oftrade".
Comment: Therestriction hasnolegal basis intheWTO ADAgreement andamounts toa
violation ofArticle 2.2.2(ii).G/ADP/W/60
G/SCM/W/69
Page27
Question: Why doestheUSintroduce such arequirement notprovided forintheWTO AD
Agreement?
Answer: Thisprovision isfullyconsistent withArticle 2.2.2. Thechapeau provides forcalculating
profits onsales ofthelikeproduct byanindividual exporter orproducer under investigation inthe
ordinary course oftrade. Theordinary course oftrade provision logically applies whenever using
individual company dataforthelikeproduct (asopposed toaggregate data). Thisisthecasein
Article 2.2.2 (ii).
IV. Administrative Reviews
1. DeMinimis Margins
Hong Kong 11,16&17(G/ADP/W/23-G/SCM/W/30); NewZealand 1(G/ADP/W/3-G/SCM/W/11);
Korea 5(G/ADP/W/21-G/SCM/W/28-G/SCM/W/35); Norway 1(G/ADP/W/33-G/SCM/W/41)
Article 18.3oftheWTO ADAgreement states theprovisions oftheWTO ADAgreement shallapply
toinvestigations, andreviews ofexisting measures. Thisincludes theuseof2percentdeminimis
dumping margin asanindicator forthetermination ofanADcase. Unlike other provisions on
preliminary andfinaldeterminations (Sections 733and735), thereisnomention inSec.751(a) (p.252)
thatthedeminimis dumping margin of2percentwillapply orotherwise intheperiodic review of
ADduties.
Comment: It'sveryimportant toclarify thiswiththeUStopreclude thepossible abuse of
review investigations bytheUS.
Question: Would theUSclarify whether provisions onpreliminary andfinaldeterminations as
specified inSecs. 733and735,suchasthe2percentdeminimis dumping margin, apply inthe
periodic reviews ofADduties? Ifnot,whynot?
Answer: Anumber ofprovisions oftheAgreements require aspecific methodology forinvestigations
butprovide noguidance concerning reviews.
Article 18.3oftheADAgreement isatransition rulewhich determines which investigations andwhich
reviews willbegoverned bythenewAgreements, rather thanbytheprevious GATT Codes. Itdoes
notrequire thatallprovisions which apply toinvestigations alsoapply toreviews, andisirrelevant
totheanalysis athand.
Article 5.4callsfordeminimis margins ofnolessthan2percentwithrespect totheapplication
("petition") andtheinvestigation while permitting adifferent deminimis levelduring thereview phase.
2. Comparison ofIndividual Transactions toAverages
HongKong35(G/ADP/W/30-G/SCM/W/37);VenezuelaVIII(G/ADP/W/40-G/SCM/W/48)Article2
oftheWTO Agreement requires that"afaircomparison shallbemade between theexport price and
normal value". Article 2.4.2 requires thedumping margins during theinvestigation phase beestablished
onthecomparison ofnormal values andprices normally onalike-with-like basis, i.e.,either weighted
average-to-weighted average ortransaction-to-transaction comparison. Article 18.3provides thatthe
provisions oftheWTO ADAgreement "shall apply toinvestigations andreviews ofexisting measures".
Theterm"investigation phase" inArticle 2.4.2 therefore refers bothtothe"original" investigation
phase andthe"review" investigation phase. Article 9.3provides that"theamount oftheanti-dumping
dutyshallnotexceed themargin ofdumping established under Article 2".G/ADP/W/60
G/SCM/W/69
Page28
Sec.777A(d)(2)(p. 316)provides that,forreviews, "when comparing export prices ...of
individual transactions totheweighted-average price ofsalesoftheforeign likeproduct, [Commerce]
shalllimititsaveraging ofprices toaperiod notexceeding thecalendar month thatcorresponds most
closely tothecalendar month oftheindividual export sale".
Comment: TheUSlawunjustifiably limits suchweighted average-to-weighted average or
transaction-to-transaction comparisons tooriginal ADinvestigations anddoesnotmake itcover the
subsequent reviews. Thisviolates theobligations under Articles 2.4.2 and18.3. Theimposition of
ADduties notbased onsuchcomparisons violates Article 9.3aswell. TheUS'logic isinherently
flawed astheUSallows cumulation, permitted byArticle 3.3oftheWTO ADAgreement in
"investigations", inreviews asprovided forinSec.752(a)(7). Suchdiscriminatory application ofthe
WTO ADAgreement provisions between original investigations andreviews isunreasonable and
unjustified.
Question: Why istheapplication ofaweighted average-to-weighted average ortransaction-to-
transaction comparison limited tooriginal ADinvestigations only? Why does itnotcover
subsequent reviews, asrequired byArticle 18.3oftheWTO ADAgreement? What explanation
canbeprovided forsuchviolations ofArticles 2.4.2, 9.3and18.3?
Answer: There isnoviolation ofArticles 2.4.2, 9.3or18.3. Withrespect tothecomparison between
export price andnormal value, Article 2.4.2 states that"theexistence ofmargins ofdumping during
theinvestigation phase [emphasis added] shallnormally beestablished onthebasis ofacomparison
ofaweighted average normal value withaweighted average ofprices ofallcomparable export
transactions orbyacomparison ofnormal value andexport prices onatransaction totransaction basis".
Thus, theprovision at777A(d) isconsistent with2.4.2 incomparing export price tonormal value in
thatfashion ininvestigations, while continuing, at777A(d)(2), topermit comparison ofexport prices
ofindividual transactions totheweighted average price ofsaleoftheforeign likeproduct.
Article 18.3simply specifies which investigations andwhich reviews willbegoverned bythe
newAgreements, rather thanbytheprevious GATT Codes. Itdoesnotrequire thatallprovisions
which apply toinvestigations alsoapply toreviews, andindeed some provisions ofthenewAgreements
provide fordifferent treatment forreviews andinvestigations. Thus, there isnoviolation ofArticle
18.3innotapplying theprovisions ofArticle 2.4.2 toreviews. Nordoestheprovision at777A(d)
forcomparison ofindividual export prices toaweighted average normal value constitute aviolation
oftheprinciple inArticle 9.3oftheADAgreement. Article 9.3states thattheamount ofdumping
duties should notexceed themargin ofdumping under Article 2.Aswehavestated themethodologies
utilized under ourlawareconsistent withArticle 2.
Furthermore, withrespect tothecomment regarding theuseofcumulation inbothinvestigations
andreviews, thisapproach innowayconflicts withtheutilization ofdifferent methodologies for
comparing export price tonormal value ininvestigations andreviews. Article 3.3simply states that
acountry maycumulate fortheinvestigation stage. Therefore theUShasthediscretion tocumulate
inboththeinvestigation andreview phases.
3. Exchange Rates
Hong Kong 34(G/ADP/W/30-G/SCM/W/37); Australia 3(G/ADP/W/6-G/SCM/W/14) Article 2.4.1
oftheWTO ADAgreement provides forexchange raterequirements. Article 18.3oftheWTO AD
Agreement provides thattheprovisions oftheWTO ADAgreement "shall apply toinvestigations and
reviews ofexisting measures". Regarding theADAgreement 'sdailyrateandhedging requirements,
Sec.773A(a)(p. 304)applies in"ananti-dumping proceeding", atermencompassing bothinvestigationsG/ADP/W/60
G/SCM/W/69
Page29
andreviews. However, regarding the60-day period forexporters toadjust prices, Sec.773A(b) (p.304)
applies onlyin"aninvestigation".
Comment: Itisdoubtful about whether Sec.773A(b) applies toreviews aswell.
Question: Would theUSclarify whether Sec.773A(b) applies toreviews aswell, asrequired
byArticle 18.3? Ifnot,what explanations canbeprovided forsuchaviolation oftheWTO AD
Agreement?
Answer: Article 18.3isatransition rulewhich determines which investigations andwhich reviews
willbegoverned bythenewAgreements, rather thanbytheprevious GATT Codes. Itdoesnotrequire
thatallprovisions which apply toinvestigations alsoapply toreviews. Other provisions ofthenew
Agreements provide fordifferent treatment forreviews andinvestigations. Thus, thereisnoviolation.
Section773A(b)doesnotapplytoreviews.Withrespecttothetreatmentofsustainedmovements
inexchange rates, Article 2.4.1 states that"inaninvestigation [emphasis added], theauthorities shall
allow exporters atleast60daystohaveadjusted theirexport prices toreflect sustained movements
duringtheperiodofinvestigation[emphasisadded]".ThetreatmentintheUSimplementinglegislation
is,thus, specifically recognized bytheADAgreement.
4. Negligible Imports
Hong Kong 24(G/ADP/W/30-G/SCM/W/37) Article 18.3oftheWTO ADAgreement stipulates that
"theprovisions ofthisAgreement shallapply toinvestigations, andreviews ofexisting measures".
Therefore, thenegligible imports provisions asstated inArticle 5.8oftheWTO ADAgreement shall
alsoapply toreviews. However, Sec.771(24)(A)(i) (pp.288-289) limits theapplicability ofthe3per
centnegligible import volume tooriginal ADinvestigations onlybutnotthesubsequent reviews.
Comment: Thisviolates theWTO ADAgreement. "Negligible imports" isoneoftheindicators
forimmediate termination ofanADinvestigation. Itistherefore necessary toensure ittobeapplied
alsotoreviews.
Question: What explanation canbeprovided forsuchaviolation?
Answer: There isnoviolation oftheAgreement. Article 18.3isatransition rulewhich determines
which investigations andwhich reviews willbegoverned bythenewAgreements, rather thanbythe
previous GATT Codes. Itdoesnotrequire thatallprovisions which apply toinvestigations alsoapply
toreviews, andindeed other provisions ofthenewAgreements provide fordifferent treatment for
reviews andinvestigations. Specifically, Article 5.8oftheADAgreement andArticle 11.9ofthe
SCM Agreement callsfortheapplication orinvestigation tobeterminated iftheauthorities determine
thatthevolume ofdumped imports isnegligible; nosimilar requirement ismade forreviews. Thus,
there isnoviolation.
5. NewShipper Reviews
Canada (G/ADP/W/23-G/SCM/W/30) Section 353.22(h)(3) oftheinterim anti-dumping regulations
andsection 355.22(j)(3) oftheinterim countervailing dutyregulations, onthetiming ofanewshipper
review, (i.e., thecalendar month beginning afterthesemi-annual anniversary month iftherequest
forthereview ismade during thesix-month period ending withtheendofthesemi-annual anniversary
month), would appear tobeinconsistent withtheaccelerated initiation requirement inArticle 9.5ofG/ADP/W/60
G/SCM/W/69
Page30
theWTO Anti-Dumping Agreement andArticle 19.3oftheSubsidies Agreement. Wewould appreciate
clarification ofthisapparent inconsistency.
Answer: Sections 353.22(h)(3) and355.22(j)(3) oftheinterim regulations require newshipper reviews
tobeinitiated attheendofthemonth following the6-month anniversary dateoftheorder, oratthe
endofthemonth oftheannual anniversary dateoftheorder, whichever arrives earlier afterthedate
oftherequest fornewshipper review. Itisaccelerated intworespects: firstitprovides forthepossibility
forrequesting areview every sixmonths asopposed totwelve months; secondly thereview isshorter
thanaregular review (9months asopposed totwelve months inaregular review).
Thisfully comports withArticle 9.5oftheADAgreement andArticle 19.3oftheSCM
Agreement which provide thatnewshippers reviews beinitiated andcarried outonanaccelerated basis
compared tonormal dutyassessment andreview proceeding intheimporting country.
Canada (G/ADP/W/23-G/SCM/W/30) -Accelerated Schedule Section 353.22(h)(7) oftheinterim
anti-dumping regulations andsection 355.22(j)(7) oftheinterim countervailing dutyregulations, which,
inexceptional circumstances, allows forcumulative time-limits of450daysfortheconduct ofnew
shipper reviews, would appear tobeinconsistent withtherequirement inArticle 9.5oftheWTO Anti-
Dumping Agreement thatsuchreviews beconducted onanaccelerated basis, compared tonormal duty
assessmentandreviewproceedings.Wewouldappreciateclarificationofthisapparentinconsistency.
Answer: Newshippers willhavetheopportunity torequest reviews earlier thanregular reviews and
thereviews willbecompleted more quickly. Specifically, sections 353.22(h)(7) and355.22(j)(7) of
theinterim regulations statethat,ingeneral, Commerce willcomplete newshipper reviews within
270daysofthedateofinitiation ofthereview. Section 353.22(c) states that,ingeneral, Commerce
willcomplete normal reviews within 365daysafterthelastdayoftheanniversary month. Therefore,
newshipper reviews willbecarried outonanaccelerated basis ascompared tonormal reviews. In
extraordinarily complicated cases, Commerce maycomplete newshipper reviews within 450daysof
thedateofinitiation. Similarly, ifitisnot"practicable tocomplete thereview" within 365days, normal
reviews maybecompleted within 545daysafterthelastdayoftheanniversary month. Still,exceptional
newshipper reviews willbecarried outonanaccelerated basis ascompared toexceptional normal
reviews.
6. Changed Circumstances Reviews
Hong Kong 12(G/ADP/W/30-G/SCM/W/37) 12-Burden ofPersuasion Article 11.2requires areview
uponrequest byanyinterested partysubmitting positive information substantiating theneedforareview.
Sec.751(b)(3) (p.255)requires aninterested partytobeartheburden ofpersuasion withrespect
towhether there arechanged circumstances sufficient towarrant suchrevocation.
Comment: TheWTO ADAgreement doesnotrequire theinterested party tobeartheburden
ofpersuasion, which isonerous andunreasonable.
Question: Whatexplanationcanbeprovidedforsuchanonerousrequirementontheinterested
party?
Answer: Article 11.2oftheADAgreement doesnotaddress theissue ofburden ofpersuasion in
changed circumstances reviews. Thus, section 751(b)(3) isinnowayinconsistent withArticle 11.2.G/ADP/W/60
G/SCM/W/69
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Section 751(b)(3) issensible implementation ofArticle 11.2since itplaces ontheparty inpossession
oftherelevant information theobligation present theinformation inapersuasive manner.
Canada (G/ADP/W/23-G/SCM/W/30) Section 751(b)(1) oftheTariff Actof1930, asamended by
section 220oftheURAA, provides, uponrequest byaninterested party, forreviews offinalaffirmative
anti-dumping/countervailingdutyordersorsuspensionagreementswheretheinformation"showschanged
circumstances sufficient towarrant areview ofsuchdetermination oragreement". However, section
751(b)(4) prohibits suchreviews within 24month ofthedateofpublication ofnotice ofthedetermination
oragreement "intheabsence ofgoodcause shown ".What information mustbeprovided, inaddition
toevidenceofchangedcircumstancessufficienttowarrantareviewofadeterminationoragreement
inorder toestablish "good cause "forareview within the24-month period?
Answer: Article 11.2oftheADAgreement callsforauthorities toconduct achanged circumstances
review "provided thatareasonable period oftimehaselapsed since theimposition ofthedefinitive
anti-dumpingduty,uponrequestbyaninterestedpartywhichsubmitspositiveinformationsubstantiating
theneedforareview." TheDepartment 'spractice hasbeentoconsider 24months asthe"reasonable
period oftime" before which itwould benormally notconduct achanged circumstances review,
especially inviewofthefactthatreviews under section 751(a) areavailable onanannual basis. The
information which mustbeprovided isafactspecific question which mustbemade onacase-by-case
basis.
7. Five-Year (Sunset) Reviews
Canada (G/ADP/W/23-G/SCM/W/30) HowdoestheUnited States reconcile theadverse conclusion,
which isdrawn pursuant tosection 751(c)(4)(B) oftheTariff Actof1930asamended byURAA,
when aforeign producer orgovernment elects nottoparticipate intheDepartment ofCommerce 's
review, withi)Article 11.3oftheADAgreement andArticle 21.3oftheSCM Agreement, which
clearly intend theonus ofproof tobeontheparty opposing theexpiration ofananti-dumping
orcountervailing dutyorder; and(ii)thepositive obligation imposed oninvestigating authorities
byArticle 11.3oftheADAgreement and21.3oftheSCM Agreement to"determine" whether
expiration ofadutywould likely leadtoacontinuation/recurrence ofdumping/subsidizing and
injury?
Answer: Theburden remains ontheadministering authority tomake adetermination whether revocation
ofthecountervailing oranti-dumping dutyorder would belikely toleadtoacontinuation orrecurrence
ofdumping oracountervailable subsidy, asthecasemaybeandinjury.
Justaswithanydetermination ofdumping orsubsidization andinjury, theauthorities must
beabletoobtain information from producers andforeign governments (when relevant) particularly
when thatinformation isinthesolepossession oftheforeign governments andproducers.
Canada (G/ADP/W/23-G/SCM/W/30) Indetermining whether material injury islikely tocontinue
orrecur, section 221oftheURAA requires theUSITC to"consider thattheeffects ofrevocation or
termination maynotbeimminent, butmaymanifest themselves onlyoveralonger period oftime".
Thiswould appear tobeinconsistent withthe"likely to"standard inArticle 11.3oftheADAgreement
andArticle 21.3oftheSCM Agreement. Ifsucheffects arenotclearly foreseen andimminent,
itwould seemmore appropriate thattheorder beallowed toexpire andanewinvestigation initiated
onlyifandwhen theeffects manifest themselves oversuchalonger period oftime.
Answer: Section 752(a)(5) ofUSlawisnotinconsistent withthe"likely to"standard oftheADand
SCM Agreements. Rather, itmerely provides guidance onwhatisneeded tomeetthatstandard. NeitherG/ADP/W/60
G/SCM/W/69
Page32
ofthearticles citedrequires thatthelikelihood ofinjury be"imminent." Thelikelihood ofcontinuation
orrecurrence ofmaterial injury standard isnotthesame asthestandards formaterial injury andthreat
ofmaterial injury, although itcontains some ofthesame elements. Under thethreat ofmaterial injury
standard,theCommissiondecideswhetherinjuryisimminent,giventhestatusquo.Underthelikelihood
standard, theCommission must decide thelikely impact inthereasonably foreseeable future ofan
important change inthestatus quo-therevocation ortermination ofaproceeding andtheelimination
ofitsrestraining effects onvolumes andprices ofimports. A”reasonably foreseeable time”willvary
fromcase-to-case, butnormally willexceed the“imminent ”timeframe applicable inathreat ofinjury
analysis."
Hong Kong 13(G/ADP/W/30-G/SCM/W/37) Sec.751(c)(2)(B) (p.256)requires submission by
interested parties ofastatement regarding thelikely effects ofrevocation oftheADduties.
Comment: Suchasubmission should notbenecessary unless anduntilthedomestic industry
requests areview andtheimporting authorities determine toinitiate areview.
Question: Why doestheUSrequire such asubmission without regard toanyrequest for
areview orotherwise?
Answer: Article 11.3provides twomethods bywhich theadministering authority mayinitiate asunset
review, onemethod isbyasubmission bythedomestic industry andtheother isontheadministering
authority 'sowninitiative. Thelatter isthemethod utilized under USlaw. Itshould benoted that
nosubmissions arerequired priortoinitiation. Itisonlyafterinitiation thatsubmission ofinformation
isrequired.
Hong Kong 14(G/ADP/W/30-G/SCM/W/37) -Likelihood ofContinuation orRecurrence ofMaterial
Injury Article 3.5oftheWTO ADAgreement requires thatinjury becaused bydumped imports.
Sec.752(a)(1) requires theCommission toconsider the"impact ofimports", among other things, in
reviews. Considerations ofvolume (Sec. 752(a)(2), p.261), price (Sec. 752(a)(3), p.261), industry
(Sec. 752(a)(4), p.261)andcumulation (Sec. 752(a)(7), p.262)similarly referto"imports" only.
Comment: TheCommission should notconsider theimpact ofundumped imports inreviews.
Question: Would theCommission beallowed toconsider theimpact ofundumped imports in
reviews?
Answer: Inasunset review, thefirstinquiry which mustbemade iswhether dumping would belikely
tocontinue orrecur. IfCommerce findsthatdumping isnotlikely tocontinue orrecur, thentheorder
willbeterminated. IfCommerce finds thatdumping islikely tocontinue orrecur itisonlythenthat
theITCwillconsider thequestion ofwhether injury islikely tocontinue orrecur.
Hong Kong 15(G/ADP/W/30-G/SCM£/W/37) -Likelihood ofContinuation orRecurrence ofDumping
Inproviding totheCommission themagnitude ofthedumping margin forthedetermination oflikelihood
ofcontinuation orrecurrence ofdumping, Commerce isallowed tochoose themargin determined in
theoriginal investigation (Sec. 752(c)(3), p.264).
Comment: Itisonlyreasonable tousethemargin determined inthemostrecently completed
review.G/ADP/W/60
G/SCM/W/69
Page33
Question: Why isCommerce allowed tochoose thedumping margin oftheoriginal investigation
andinwhat circumstances willitdoso?
Answer: Themargin intheoriginal investigation istheonlyavailable calculated ratethatreflects the
behaviour ofexporters andforeign governments without thediscipline ofanorder orsuspension
agreement inplace. Inother words, thisrategenerally would provide thebestestimate ofthelikely
dumping margin iftheorder isrevoked.
Incertain instances, amore recently calculated ratemaybemore appropriate. Forexample,
ifdumping margins have declined tozeroandvolumes have remained steady orhave increased,
Commerce mayconclude thatdumping isnotlikely torecur.
V. Miscellaneous
1. Anticircumvention
Canada (G/ADP/W/23-G/SCM/W/30); Japan 6(G/ADP/W/17-G/SCM/W/24); Hong Kong 36
(G/ADP/W/30-G/SCM/W/37) Inviewofthefactthatthere wasnoprovision withrespect toanti-
circumvention intheADAgreement, wewould appreciate clarification oftheWTO basis forthe
detailedanti-circumventionrelatedamendmentsinsection230oftheURAAregardingmerchandise
completed/assembled intheUnited States andcompleted/assembled inother foreign countries?
Answer: TheUnited States believes thattheprevention ofcircumvention ofanti-dumping and
countervailing duties isconsistent withboththeletter andthespirit ofArticle VIoftheGATT 1994
andtheAnti-Dumping andtheSCM Agreements. Article VIoftheGATT clearly establishes theright
ofaMembertoimposeanti-dumpingorcountervailingdutiesinordertocounteracttheeffectsofdumped
orsubsidized imports found tobecausing injury. Thisrightwould beundermined ifduties could be
evaded bythesimple actofshifting assembly operations ofminimal ornocommercial significance
tothecountry ofimportation ortoathirdcountry, acircumstance made more likely bytheincreasing
globalization ofinternational production. Itisawellestablished principle ofcustoms legislation that
authorities maytakeaction toprevent theevasion ofvalidly imposed duties andthatsubstance should
prevail overtheform ofatransaction.
Inourview, theMinisterial Decision onAnti-Circumvention merely serves toreinforce the
validity ofanti-circumvention measures under Article VI.Itrecognizes theexistence oftheproblem
ofcircumventionandthedesirabilityofuniformanti-circumventionrules.Quiteobviously,theMinisters'
viewthatharmonization ofpractices isdesirable carries theclearimplication thatitislegitimate for
Members totakeactions todealwiththisveryproblem.
Canada(G/ADP/W/23-G/SCM/W/30)WouldachangeintheHarmonizedSystemtariffclassification,
(i.e.,atthesix-digit level), resulting from further processing/assembly besufficient torender the
process ofassembly/completion intheUnited States oranother foreign country not"minor or
insignificant" forpurposes ofanti-circumvention?
Answer: Achange inthetariffclassification under theHarmonized Tariff Schedules oftheUnited States
would notnecessarily, ofitself, render theprocess ofassembly orcompletion intheUnited States or
another foreign country notmajor orsignificant. TheDepartment would havetotakeintoaccount
theparticular factsandcircumstances surrounding theallegation ofcircumvention inaparticular case.G/ADP/W/60
G/SCM/W/69
Page34
NewZealand 4(G/ADP/W/3-G/SCM/W/11) With regard toanti-circumvention (s.781), what is
thebasis onwhich theUSconsiders theextension ofanti-dumping duties todifferent products
ortodifferent countries, without establishing thatthegoods actually imported aredumped and
causing injury, isconsistent withtheAgreement?
Answer: Sections 781(a) and(b)ofUSlawrequire thatthemerchandise soldintheUnited States
thatisthesubject ofacircumvention inquiry beofthesame classorkindasthemerchandise thatis
thesubject ofanorder forittobedetermined tobewithin thescope ofsuchanorder. Thus, the
Department doesnotextend anti-dumping duties toproducts ortodifferent countries, butclarifies that
thescope oftheexisting order encompasses products which havebeenthesubject ofanaffirmative
anticircumvention inquiry. Because anorder already exists astothatproduct from thatcountry, the
determinations bytheDepartment ofsales atless-than-fair value andbytheInternational Trade
Commission ofinjury havealready beenmade. Furthermore, theDepartment doesconsult withthe
ITCtodetermine whether theproducts arethesame likeproducts.
2. Implementation ofWTO Panel Decisions
Canada (G/ADP/W/23-G/SCM/W/30) What specific provisions havebeenmade inUSlawforthe
timely implementation ofdispute settlement Panel andAppellate Body recommendations dulyadopted
bytheDispute Settlement Body?
Answer: Sections 123(g) and129oftheURAA dealwithresponses toadverse WTO panel reports.
Thetwoprovisions involve similar procedures: Section 123(g) concerns achange inanyagency (other
thantheITC) regulation orpractice required asaresult ofaWTO ruling, while Section 129deals
withspecific AD/CVD cases. Bothinvolve extensive consultation among andbetween theUSTrade
Representative,theCongress-inparticular,theHouseWaysandMeansandSenateFinanceCommittees,
theCommerce Department (assuming thecaseconcerns aCommerce decision), andtheITC(assuming
thecaseconcerns anITCdecision --butonlyunder Section 129). Timeframes foraction areincluded
inbothSections 123(g) and129andwillvary, depending upon thecase. These twosections permit
timely implementation.
3. Identification ofNormal Value
Japan 5(G/ADP/W/17-G/SCM/W/24) Article 2.2indicates thateither salesfromafactory initshome
market, toanappropriate third country, orcostofproduction should beusedfornormal value.
Article 2.2,however, doesnotauthorize theuseofsalesmade from aseparate (butrelated) factory
located inaseparate country asabasis fornormal value. TheUSMNC (special ruleforcertain
multinational corporations) provision, however, directs theCommerce Department touseanormal
value notauthorized under theAnti-Dumping Agreement. (SeeSection 773(d)). Given thedefinition
ofnormal value inArticle 2.2,howistheMNC provision inUSlawconsistent withArticle 2.2?
Answer: ThenewMNC provision hasbeenrarely usedsince itsimplementation in1973andthenew
lawsimply adjusts theprovision tothechanges inthenewAgreement.
4. Multinational Corporations
Hong Kong 30(G/ADP/W/30-G/SCM/W/37) Sec.773(d) (p.301) provides guidelines forthe
determination ofthenormal value oftheproducts produced bymultinational corporations which
simultaneously havesimilar production facilities inanother country orcountries. Thisisamodified
version ofanexisting clause inUSADlawandhasnothing todowiththeWTO ADAgreement.G/ADP/W/60
G/SCM/W/69
Page35
Question: Would thisSpecial Rule forCertain Multinational Cooperation [sic]incur additional
burden onrespondents? Besides reporting itsowntransaction data, isarespondent required
toprovide information onthetransactions performed byother facilities inthesame group
producing theforeign likeproduct inathird country? When theUSadministration getsallthe
information, howisthenormal value ofthesubject merchandise adjusted "byreference tothe
normal value atwhich theforeign likeproduct issoldinsubstantial quantities from oneormore
facilities outside theexporting country"?
Answer: Because thisprovision ofthestatute hasnever beenextensively useditisdifficult tospeculate
ontheburden ortheexact information which must besupplied. Concerning thelastquestion on
adjustments tonormal value, thestatute requires theadministering authority toadjust "forthedifference
between thecostofproduction (including taxes, labour, materials, andoverhead) oftheforeign like
product produced infacilities outside theexporting country andcostofproduction oftheforeign like
product produced infacilities intheexporting country, ifsuchdifferences aredemonstrated toits
satisfaction." Section 773(d)(3).
5. ADArticle 15
India 1(G/ADP/W/35-G/SCM/W/43) Request clarification ontheUSposition concerning Article 15
oftheADAgreement.
Article 15doesnotcreate anaffirmative obligation tocreate special ordifferential rules for
developing country members. Article 15simply states "[p]ossibilities ofconstructive remedies provided
forbythisAgreement shallbeexplored before applying anti-dumping duties ...".ThisArticle was
carried overfromtheTokyo Round Code, andtheUnited States willcontinue toimplement itslaws
consistent withthisArticle.
VI. Injury
1. Magnitude oftheMargin
Hong Kong 7b(G/ADP/W/30-G/SCM/W/37) Doesn ’tUSlawfailtostress margin analysis, asthe
WTO rules require?
Answer: Section 771(7)(C)(iii)(V) oftheAct(p.83)requires theUSITC, inconsidering theimpact
ofsubject imports inananti-dumping investigation, toconsider themagnitude ofthemargin ofdumping.
Thisfullyimplements Article 3.4oftheADAgreement. Furthermore, theUnited States disagrees
withHong Kong'scharacterization ofArticle 3.4as“stressing" margins analysis. Article 3.4merely
liststhemagnitude ofthemargin ofdumping as1ofapproximately 15factors theinvestigating authority
should evaluate ifrelevant.
2. Negligible Imports
Hong Kong 23(G/ADP/W/30-G/SCM/W/37) Would theUSclarify that[under section 771(24)(A)
oftheAct(p.92)]imports thatarenotlessthan3percentofthevolume ofallsuchmerchandise can
beconsidered negligible?
Answer: Art.5.8oftheADAgreement doesnotrequire Members toexamine whether imports that
exceed the3percentthreshold maybenegligible.G/ADP/W/60
G/SCM/W/69
Page36
3. Threat ofMaterial Injury
Hong Kong 21(G/ADP/W/30-G/SCM/W/37) Isthelanguage insection 771(7)(F)(i)(IV) (p.84)
directing theUSITC toexamine, inter alia, whether subject imports "are likely tohave" a
suppressing ordepressing effect ondomestic prices" consistent withtherequirement ofArticle 3.7
oftheADAgreement thatimports areentering atprices that“willhave”asuppressing or
depressing effect?
Answer: Section 771(7)(F)(i)(IV) deals withoneofthefactors tobeconsidered withrespect toa
determination ofthreat ofmaterial injury: "whether imports ofthesubject merchandise areentering
atprices thatarelikely tohaveasignificant depressing orsuppressing effect ondomestic prices, and
arelikely toincrease demand forfurther imports." Thissection isintended tobeconsistent with
Article 3.7(iii) oftheADAgreement: "whether imports areentering atprices thatwillhaveasignificant
depressing orsuppressing effect ondomestic prices, andwould likely increase demand forfurther
imports". Astheabove sentence indicates, “willhave”and“likely ”areinterchangeable inArticle 3.7.
The"arelikely tohave" language recognizes the"predictive nature" ofathreat determination.
Thisimplements therequirement ofArticle 3.7oftheADAgreement that"[t]he totality ofthefactors
considered mustleadtotheconclusion thatfurther dumped exports areimminent andthat,unless such
action istaken, material injury would occur".
4. Captive Production
Australia 2(G/ADP/W/6-G/SCM/W/14); Korea 9(G/ADP/W/21-G/SCM/W/28); Hong Kong 20
(G/ADP/W/30-G/SCM/W/37); Japan 1(G/ADP/W/17-G/SCM/W/24); Venezuela VI(G/ADP/W/40-
G/SCM/W/48) What justification under theAnti-Dumping Agreement exists forthe"captive
production"provision,whichitarguesessentiallydisregardsthat"product"fordeterminingmarket
share andthefactors affecting thefinancial performance ofthedomestic industry?
Answer: Article 4.1oftheADAgreement defines domestic industry asthe"domestic producers as
awhole ofthelikeproducts orthose ofthemwhose collective output oftheproducts constitutes amajor
proportion ofthetotaldomestic production ofthose products." The"captive production provision",
section 771(7)(c)(iv) (page 83),doesnotrequire that"captively produced" product bedisregarded for
purposes ofdetermining market share andfactors affecting financial performance. Itmerely directs
thatthe"primary focus" bedirected ontheproduct soldinthemerchant market ifthevarious
requirementsofthisprovisionaresatisfied.Captivelyproducedproductisstillincludedintheassessment
oftheindustry 'scondition.
Thebasis forthisanalysis istherecognition that,insuchacaptive production situation, the
imports compete primarily withsalesofthedomestic likeproduct inthemerchant market, notwith
theinventory internally-transferred forprocessing intoadownstream article different from thelike
product. Further, Art.3.4oftheADAgreement requires an"evaluation ofallrelevant economic
factors" having abearing onthestateoftheindustry. Thefactthatthere ismore direct competition
between dumped imports andthedomestic likeproduct inthemerchant market isa"relevant economic
factor" which theAgreement requires tobeconsidered.
European Community 5(G/ADP/W/46-G/SCM/W/54) Inrelation tocaptive production, thenewlaw,
under certain conditions, gives theITCthepossibility ofassessing themarket forthegoods under
investigation byexcluding captively usedquantities. Dothesame rules apply forgoods imported
byrelated importers andfurther processed intodifferent likeproducts? Ifyes,isthedecisionG/ADP/W/60
G/SCM/W/69
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toexcludecaptivelyusedquantitiesbyimportersmadeindependentlyfromthedecisiononexclusion
withregard todomestic?
Answer:Thedeterminationwhethertoapplythe“captiveproduction”provisionsatsection771(7)(C)(iv)
oftheTariff Actof1930, asamended, focuses ontowhom “domestic producers ”sellortransfer the
“domestic likeproduct ”andthemanner inwhich the“domestic likeproduct ”isusedintheproduction
ofdownstream articles. Consequently, thedetermination onwhether toapply a“captive production ”
analysis willdepend onthecharacteristics ofarticles produced intheUnited States.
Applicationofthe“captiveproduction”provisiondoesnotprovidefortheCommissiontoexclude
anyquantities ofthedomestic likeproduct from itsdefinition ofthedomestic industry. Instead, the
statute states thatwhen theCommission determines the“captive production ”provision isapplicable,
it“shallfocus primarily onthemerchant market forthedomestic likeproduct ”indetermining market
share andthefactors affecting thedomestic industry ’sfinancial performance. Inanalysing market
share inthemerchant market, theCommission would consider salesofthedomestic likeproduct in
themerchant market, salesofsubject imports inthemerchant market, andsalesofnonsubject imports
inthemerchant market.
Additionally, incases inwhich thecaptive production provision applies, theCommission will
determine theextent towhich theimports ofthesubject merchandise byarelated party aresoldin
themerchant market orcaptively consumed bytherelated party importer intheproduction ofa
downstream article. Imports which aresoldinthemerchant market willbeincluded intheimport
penetration ratioforthemerchant market. Imports which arecaptively consumed bytherelated party
importer forprocessing intoadownstream article willbeincluded intheimport penetration ratiofor
themerchant market onlyiftheimports compete withsalesofthedomestic likeproduct. Ifsuchimports
donotcompetewithsalesofthedomesticupstreamlikeproductinthemerchantmarket,theCommission
willinclude suchimports inthetotalimport share oftheindustry ’stotalproduction, butnotinthe
importpenetrationratioforthemerchantmarketorinanyothercalculationinwhichdomesticproduction
isexcluded.
5. Cross-Cumulation
European Community 6(G/ADP/W/46-G/SCM/W/54); Korea 8(G/ADP/W/21-G/SCM/W/28);
Hong Kong 22(G/ADP/W/30-G/SCM/W/37); Japan 7(G/ADP/W/17-G/SCM/W/24); NewZealand
3(G/ADP/W/3-G/SCM/W/11) Onwhat basis under theAnti-Dumping Agreement would the
United States cumulate injury inanti-dumping andcountervailing investigations?
Answer: Section 771(7)(G) oftheTariff Act(p.85)permits cross-cumulation ofimports simultaneously
subject toADandCVD investigations. Cross-cumulation isnotinconsistent withtheSCM Agreement
andtheADAgreement. BothArt.3.4oftheADAgreement andArt.15.4oftheSCM Agreement
require that"allrelevant economic factors" beconsidered inassessing theimpact ofimports. The
presence ofother dumped orsubsidized imports inthedomestic market isclearly aneconomic factor
relevant totheassessment oftheeffects ofdumped orsubsidized imports onanindustry.G/ADP/W/60
G/SCM/W/69
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6. Causation
Australia 1(G/ADP/W/6-G/SCM/W/14); Canada 1&2(G/ADP/W/23-G/SCM/W/30); Hong Kong
19(G/ADP/W/30-G/SCM/W/37); Venezuela II(G/ADP/W/40-G/SCM/W/48) HastheUnited States
implemented therequirement ofArt.3.5oftheADagreement thatnational authorities must not
attribute injury caused byfactors other than dumped imports todumped imports, andmust
examine suchother factors?
Answer: Thecausation standard inArticle 3.5oftheWTO ADAgreement isnotsubstantively different
thanitspredecessor provision inthe1979 Code. USlawandpractice wasfullyincompliance with
the1979 Code andlikewise isfullyconsistent withtheWTO Agreement. Thelegislative history of
the1979 Trade Agreements Actprovides thatthere mustbeasufficient causal linkbetween dumped
orsubsidized imports andtherequisite injury, andthatinformation willbeconsidered thatindicates
thatharm iscaused byfactors other thandumped orsubsidized imports. SeeS.Rep.No.249,96th
Cong., 1stSess. 58,75(1979). TheSAA fortheUruguay Round Agreement specifically carries
forward thislegislative history.
OnlyifCommerce makes afinalaffirmative determination ofsalesatlessthanfairvalue will
theCommission make afinalinjury determination. Moreover, theCommission doesnotinclude in
itscalculation ofimport volumes sales made byproducers whoarefound bytheDepartment of
Commerce nottohavemade salesatlessthanfairvalue. Thus, theCommission doesnotconsider
undumped imports inconsidering thevolume ofthesubject merchandise.
Indeed, theGATT 1947 Panel Report intheNorwegian Salmon casefound thattheUSITC
neednotisolate theinjury caused byother factors from injury caused byunfair imports. ADPanel
Rep. atPar.555(30November 1992); SCM Panel Rep. atPar.321(4December 1992). Rather,
theCommission hassatisfied theAgreement where itsufficiently demonstrates thatthedumped imports
arecausing injury within themeaning oftheAgreement where itexamines other factors toensure that
itisnotattributing injury from other sources tothesubject imports.
Given thatArticle 3.5oftheADAgreement and15.5oftheSCM Agreement have not
substantively changed thecausation standard fromthatprovided inthe1979 Tokyo Round Code, the
United States 'injury analysis asreviewed inNorwegian Salmon continues tobeinfullconformity
withourWTO obligations.
Hong Kong 7,14&18(G/ADP/W/30-G/SCM/W/37) askquestions about theterminology inseveral
oftheinjury provisions intheUSstatute seeking assurances thattheCommission cannot attribute
injury to"undumped" imports.
Answer: Theinjury provisions intheUSstatute generally aremeant torefertoimports ofthesubject
merchandise forwhich Commerce hasmade anaffirmative determination ofsalesatlessthanfairvalue.
Injury provisions concerning preliminary ITCdeterminations obviously cannot refertothose dumped
imports, however, because Commerce hasnotmade apreliminary determination atthetimeofthe
ITC'spreliminary determination.G/ADP/W/60
G/SCM/W/69
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7. Other
NewZealand 2(G/ADP/W/3-G/SCM/W/11) Asks theUStoclarify which goods areconsidered in
finaldeterminations ofmaterial injury. (773(b)(1)).
Answer: Section 773(b)(1) (p.102)addresses which salesintheexporting country 'shome market will
beconsidered forpurposes ofdetermining normal value ifsuchsalesarefound tobemade atlessthan
thecostofproduction. Nosales made intheexporting country 'shome market areconsidered for
purposes ofmaking aninjury determination. Only salesoftheclassorkindofmerchandise subject
toinvestigation which aresoldintheUnited States areconsidered forpurposes ofaninjury
determination. Section 731oftheTariff Actof1930, asamended.