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Anti-dumping duty on ‘unknown’ exporters

By Bhargav Mansatta      

In anti-dumping investigations, ‘all others’ rate is intended to cover exporters who have not participated. Two categories of exporters can actually form part of the ‘all others’ rate i.e. ‘known’ exporters who failed to participate and ‘unknown’ exporters who did not participate in the anti-dumping investigation. As a matter or practice, anti-dumping duty is generally applied on the ‘non-participating’ exporters without further distinguishing between known and unknown exporters. This is true not only for investigating authority in India but for several other countries including EU and China. A practice may generally be believed to be correct and may not be objected very often, but this by itself is no proof of consistency of such measure with the WTO obligations. Thus, it is of importance to understand the WTO obligation in this regard.    

Article 6.8 and Para 1 of the Annex II of the Anti-dumping Agreement (ADA) which provides for the imposition of the ‘all others’ rate, reads as below:    
“In cases in which any interested party refuses access to, or otherwise does not provide necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available. The provisions of Annex II shall be observed in the application of this paragraph.”    

Annex II, paragraph 1 reads:    
“As soon as possible after the initiation of the investigation, the investigating authorities should specify in detail the information required from any interested party, and the manner in which that information should be structured by the interested party in its response.  The authorities should also ensure that the party is aware that if information is not supplied within a reasonable time, the authorities will be free to make determinations on the basis of the facts available, including those contained in the application for the initiation of the investigation by the domestic industry.”    

It is normally understood that the above provisions authorize the member countries to apply ‘facts available’ to exporters who do not participate in the investigation process including the exporters who were not known to the investigating authority.      

The Appellate Body in the case of Mexico – Anti-dumping Measures on Rice, [WT/DS295] had the opportunity to interpret the above provisions. In this case, the Mexican investigating authority sent the public notice of initiation and a questionnaire to two known exporters and to the United States embassy in Mexico City.  Two exporters as well as an industry association appeared of their own initiative and received a questionnaire. The investigating authority ultimately used facts available against all exporters apart from the four that received the questionnaire.  The Appellate Body held that the second sentence of paragraph 1 of Annex II of the Anti-dumping Agreement requires that an exporter shall be given the opportunity to provide the information required by the investigating authority before the latter resorts to facts available that can be adverse to the exporter's interests. An exporter that is unknown to the investigating authority, and therefore not notified of the information required of it, is denied the opportunity to provide the information (end note 1).      

There should be little room for doubt after the aforesaid finding that ‘all others’ rate of anti-dumping duty cannot be applied on facts available basis to exporters who are not known to the authority or from whom no information was requested thereby.      

However, the issues surfaced again, when in calculating the anti-dumping rates, the investigating authority in China applied "facts available" to exporters/producers that were "unknown" to it.  This was challenged by the United States in the recent case concerning China – AD CVD duty on GOES [WT/DS/414]. The report in Mexico case was re-invoked by the Panel. China argued that in the case of Mexico – Anti-Dumping Measures on Rice the Appellate Body was faced with the situation wherein there were many other known exporters, including the members of the rice association that appeared in the investigation, and that this was not the case before MOFCOM, where there were no other known exporters/producers. However, the Panel rejected the argument and reinforced its understanding of the provision contained Article 6.8 and Annex II of the Anti-dumping Agreement.      

The Panel observed that the second sentence of paragraph 1 of Annex II of the Anti-dumping Agreement conditions the use of facts available. Only when an interested party is aware that necessary information is not supplied by it within a reasonable time, the investigating authority will be free to resort to facts available. Further, given that the unknown exporters were not notified of the "necessary information" required of them, it cannot be concluded that ‘they refused access to or failed to provide the information’ as per Article 6.8 (end note 2). Further, it was also clarified that the requirement under Article 6.8 and the second sentence of paragraph 1 of Annex II is legally distinct from the general notice requirement stemming from Article 6.1 and the first sentence of paragraph 1 of the Annex II of the ADA.      

Article 6.1 provides as below:    
“All interested parties in an anti-dumping investigation shall be given notice of the information which the authorities require and ample opportunity to present in writing all evidence which they consider relevant in respect of the investigation in question.”      

According to the Panel, a general public notice of initiation which is published by the investigating authority will not meet the requirement of Article 6.8. While nothing may prevent the exporters from coming forward voluntarily pursuant to such a notice, there is no corresponding obligation in the Anti-dumping Agreement on the exporters to do so.      

The decision of the Panel is likely to create practical difficulties for investigating authorities in as much as there is no guidance in the Anti-dumping Agreement as to how to determine margin of dumping for such ‘unknown exporters’. Article 6.10 read with Article 9.4 of the ADA provides for calculation of anti-dumping duty rates in a situation wherein the investigating authority were to resort to sampling method. China argues that these provisions lay down a general objective regarding the calculation of rates for unknown exporters.The panel however found it difficult to accept that a general objective even though inferred from the provision of Article 6.10 and Article 9.4 of the ADA could actually override the specific obligations under Article 6.8.      

The Panel itself acknowledges the lacuna in the agreement. However, it noted that Article 6.8 and Annex II are very explicit regarding the conditions that must exist before an investigating authority may resort to facts available.  The existence of a lacuna in the Anti-dumping Agreement does not mean that the conditions should be ignored in order to fill the gap (end note 3). Unless the Appellate Body reverses the jurisprudence so far developed while deciding the issue in appeal (end note 4), there can be no further room for ambiguity as far as the scope of Article 6.8 and Annex II of the Anti-dumping Agreement is concerned. Investigating authorities are not permitted to cover ‘unknown exporters’ within the ambit of ‘all others’ rate. The investigating authorities are required to revisit their current practices and modify the same in line with the interpretations given by the Panel.         

End notes:

1. Appellate Body Report, Mexico – Anti-Dumping Measures on Rice, paras. 259-260
2. Panel Report, China – AD-CVD on GOES, para. 7.387
3. Panel Report, China – AD-CVD on GOES, para. 7.390
4. The Panel Report was not adopted as China has filed appeal against it  

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