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Scope of product under consideration in anti-dumping investigations

By Bhargav Mansatta  

‘Product under consideration’ (PUC) in an anti-dumping investigation is the imported product which is alleged as being dumped in the domestic market of the investigating country. To this end, Article 2.1 of the Anti-dumping Agreement (ADA) provides as below:    
“For the purpose of this Agreement, a product is to be considered as being dumped, i.e. introduced in to the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country.”    

When the export price of the identified PUC is lower than its normal value then it is characterized as dumping and the product is called as the dumped product. Article 2.4.2 of the ADA explains how domestic investigating authorities must proceed in establishing ‘the existence of margins of dumping’, i.e. it explains how dumping is to be established in an anti-dumping investigation. It provides in relevant part as below:    
“Subject to the provisions governing fair comparison in paragraph 4, the existence of margins of dumping during the investigation phase shall normally be established on the basis of a comparison of a weighted average normal value with a weighted average of process of all comparable export transactions or by a comparison of normal value and export prices on a transaction to transaction basis…”    

There is no specific provision in the ADA concerning the selection, description, or determination, of a PUC. The ADA does not provide any guidance with regard to identification of PUC.    

When the alleged dumped product is capable of production or is available in different types and models, domestic industry while filing the petition for initiating anti-dumping investigation, to avail maximum protection, often seeks to include all product types and models within the scope of PUC. The problem arises at the time of imposition of anti-dumping duty in cases where there is considerable difference in the price and physical characteristics of different product types and models which form part of single PUC.      

In EC – Bed Linen (see end note 1), the EC defined PUC as bed linen of cotton-type fibres, pure or mixed with man-made fibres or flax, bleached, dyed or printed. Bed linen included bed sheets, duvet covers and pillow cases, packaged for sale either separately or in sets. The EC calculated separate margins of dumping for separate model types to apply the ‘zeroing methodology’. In the zeroing methodology, the EC compared weighted average normal value with the weighted average of export price for each model type separately within the PUC instead of PUC as a whole. It arrived at negative dumping margin for certain model types. While adding up the amounts it had calculated as ‘dumping margins’ for each model, it ‘zeroed’ the negative dumping margins which were arrived at with respect to certain model types. Thereafter, it added positive dumping margins and zeroes to determine the overall margin of dumping for the PUC.      

The WTO Appellate Body (AB) observed that having defined the product at issue as it did, the EC was bound to treat that product consistently thereafter in accordance with that definition. Article 2.4.2 does not provide for the establishment of ‘the existence of margins of dumping’ for types or models of the product under investigation but the product that is subject to investigation (see end note 2).      

The foregoing observation was made by the AB while holding the ‘zeroing’ methodology as being inconsistent with ADA.   The AB based on the interpretation of Article 2.4.2 held the methodology adopted by the EC as inconsistent with ADA. The interpretation of the AB with regard to Article 2.4.2 will not only render zeroing as inconsistent but will also prevent members from imposing different rates of anti-dumping duty for different type of models by adopting multiple averaging.
 
The observation in EC-Bed Linen case came for consideration before the AB in United States - Softwood Lumber (see end note 3). The AB clarified that multiple averaging is not per se prohibited under Article 2.4.2 and the reasoning of the AB in EC-Bed Linen case should not be read as prohibiting that practice. The AB did not rule on multiple averaging in EC-Bed Linen case as it was not an issue before it. However, it disagreed with the United States’ argument that Article 2.4.2 of ADA refers to comparison at sub-group levels and that it does not address the issue of how the results of such comparison are to be aggregated.        

The AB observed that investigating authority may undertake multiple averaging to establish margins of dumping for a product under investigation but they are not ‘margins of dumping’ within the meaning of Article 2.4.2, they are only intermediate calculations. It can form the basis for determining final dumping margin for the PUC as a whole. Thus, as per Article 2.4.2, investigating authority has to necessarily establish margins of dumping for the product as a whole (see end note 4).      

The AB also found the basis for its determination in Article 2.1 of the ADA which provides for determination of dumping of a product. In addition, it referred to Articles 6.10, 9.2 of the ADA and Article VI:2 of GATT 1994. Article 6.10 provides that the investigating authority shall determine an individual margin of dumping for each known exporter or producer concerned of the product under investigation. Article 9.2 of ADA and Article VI: 2 of GATT 1994 provide for imposition of anti-dumping duty on the imported product i.e. PUC.        

In many cases, investigating authorities in EU, India, U.S. and other jurisdictions tend to use the flexibility provided under the ADA while determining the scope of PUC. However, considering the foregoing interpretation, heterogeneity amongst the products within the PUC may invite practical difficulties at the time of imposition of duties. Overtly broad PUC may result in imposition of anti-dumping duty which is not appropriately attributable to each product type within the PUC. Also, the entire subsequent investigation hinges on the identified PUC. Determination of ‘like product’, price comparison, evaluation of information and the like will depend on PUC.        

In EC-Salmond (see end note 5), Norway argued that internal homogeneity within the PUC is mandatory under the ADA. Norway stated that if cars and bicycles are treated as one product under investigation then it would not be known whether some or all of the products are dumped. The Panel while rejecting the argument noted as below (see end note 6):    
“We are not persuaded by Norway's extreme example.  Any grouping of products into a single product under consideration will have repercussions throughout the investigation, and the broader such a grouping is, the more serious those repercussions might be, complicating the investigating authority's task of collecting and evaluating relevant information and making determinations consistent with the AD Agreement.”        

Thus, from the foregoing analyses of the WTO disputes, it can be summarized that there is little doubt regarding the flexibility provided to investigating authorities in identifying the PUC, but before exercising their discretion regarding the scope of PUC, investigating authorities have to be mindful of the repercussions and complications which the overtly broad PUC may create in subsequent stages of the investigation process. Excessive heterogeneity among the products covered under the PUC may result in a determination which may fall foul of other provisions of the ADA.

End notes:
1.  Appellate Body Report, European Communities – Anti-dumping duties on imports of cotton-type bed linen from India, WT/DS141/AB/R, 1 March 2001
2.   Id, para. 52
3.   Appellate Body Report, United States – Final dumping determination on softwood lumber from Canada, WT/DS264/AB/R, 11 August 2004
4.   Id, para. 96 to 98
5.   Panel Report, European Communities – Anti-dumping measure on farmed salmon from Norway, WT/DS337/R, 16 November 2007
6.   Id. para. 7.58  

[The author is a Senior Associate, International Trade Division, Lakshmikumaran & Sridharan, New Delhi, India]
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