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INJURY DETERMINATION IN ANTIDUMPING LAW

CHANG CAN

DOCTOR OF JURIDICAL SCIENCE

CITY UNIVERSITY OF HONG KONG

FEBRUARY 2012

CITY UNIVERSITY OF HONG KONG

香港城市大學

Injury Determination in Antidumping Law

反傾銷法中的損害問題研究

Submitted to

School of Law 法學院

in Partial Fulfillment of the Requirements for the Degree of Doctor of Juridical Science

法學博士學位

By

Chang Can 常粲

February 2012

二零一二年二月

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Abstract

Of the two necessary conditions for imposing antidumping duties (Dumping

and Injury), the provisions concerning injury leave more latitude to the

administrators of the antidumping law. Therefore, to restrain the abuse of

antidumping measures effectively, attention should be concentrated on the

injury determination mechanism. Concerning how to conduct an injury

determination, this thesis performs the analysis from the following aspects,

which formed separate chapters: basic principles and elements of an injury

determination, determination of the causal link, special considerations for the

“threat of material injury” and “material retardation” standards.

Within each chapter, in the first place, the thesis summarizes the specific

requirements for the injury determination based on Article 3 of the Antidumping

Agreement and interpretation thereof by the relevant authority, for example, the

WTO Panel/Appellate Body. Secondly, the thesis would find out some common

problems while examining whether the injury determination conducted by the

WTO member states conforms to the above requirements. Finally, the thesis

proposes feasible solutions to tackle these problems and puts forward a positive

reformation scheme in accordance with the philosophy of the WTO system.

The basic principles and elements for an injury determination have been

elaborated by the content of the Anti-dumping Agreement (hereinafter the

“ADA”) together with interpretations by the WTO Panel/Appellate Body.

Although the analytic method of antidumping reports may substantially differ

among the WTO member states, they have enacted similar antidumping law

provisions to Article 3 of the Antidumping Agreement and implemented

consistent procedures. Therefore, the space for abuse and the flexibility

endowed to the investigating authority is limited, though problems still exist,

especially for the developing countries.

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This thesis pointed out that “causal link” is a determinative factor for an injury

investigation; however, in most countries the causation determination was not

conducted in a satisfactory way. The causation threshold under the current

Antidumping Agreement is relatively low which would leave a hole in

embankment and connived at the flood of the antidumping measures.

Furthermore, in many circumstances the investigating authority has confused

“Causality” with “Correlation”. This thesis advocates a further strengthening of

the causation standard.

The “threat of material injury” standard, which is not frequently applied, is a

preventive mechanism permitting the investigating authority to act before actual

injury of domestic industries happened. The nature of this standard indicated

that any conclusion made as to the anticipated injury can only be based on

assumptions and any decision is nothing more than speculation in absence of a

refined analysis. Especially when economic situation deteriorates, this standard

is easy to be manipulated by protectionists to shelter the vulnerable domestic

industry from the outside competition. Therefore, this thesis suggested that this

standard be subject to stricter and more detailed rules.

The “material retardation” standard is discussed and relied on by few countries

for the antidumping investigation. Based on an exhaustive study on relevant

antidumping reports issued by the pioneer users, this thesis discussed the

following questions: (1) how to define a domestic industry is established or not;

(2) how to examine whether material retardation has occurred where the data on

the economic factors may be unavailable due to the relatively short time the

domestic producer has been in existence; (3) how to take into consideration a

special factor “viability of the industry” for the causation determination. In this

way, this thesis generalizes a legislative framework and a balanced way for

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enforcing the retardation standard.

To sum up, in light of the nature of antidumping law, the reformatory direction

for the injury determination is to restrict abuse of antidumping measures by

promulgating detailed rules and implementing strict procedures. Specifically

speaking, the first priority is to strengthen the causation threshold, directly or

indirectly by requiring the investigating authority to adopt some particular

methodology (for example, the “but for”/ “if not” test). For the “threat of

injury” and “material retardation” standards, on one hand, as the relevant

provisions of the Antidumping Agreement are far from enough to provide a

clear guideline, detailed road maps need to be drew for an easy application,

especially for the developing countries; on the other hand, strict procedural

rules should be prescribed in advance to prevent future misuse of these two

standards.

Acknowledgement Firstly, and most importantly, I would like to express my heartiest gratitude to my supervisor, Professor Guiguo Wang, whose guidance, comments and suggestions were of great help for this thesis. I am also greatly indebted to him for introducing various methodologies to do legal research and proper approaches for professional thesis writing, which is of endless benefit to my future studies. Special thanks should be given to Professor Gu, Dr.Guan and Professor Park for their comments on the thesis, which are insightful and invaluable. In addition, I would like to thank Mr. Yang Yi, Director of Bureau of Industry Injury Investigation, Ministry of Commerce of The PRC, who provided useful viewpoints on the antidumping practice. Likewise, I want to thank Mr. Robert A. Rogowsky, Director of Operations of United States International Trade Commission (USITC) who kindly answered questions troubled me for a long time and the USITC staffs who mailed piles of documents from the USA to HK. Thanks also go to the officials of the European Commission for helping to find dozens of relevant antidumping reports. A sincere thank you is also due to School of Law, City University of Hong Kong for the sound research environment and academic support provided by all the staffs without which completion of this thesis would have been impossible. Finally, I am deeply indebted to my parents for their everlasting love, support and encouragement over these years.

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Table of Content

ABSTRACT ............................................................................................................................... I

ACKNOWLEDGEMENT......................................................................................................... I

TABLE OF CONTENT............................................................................................................. I

ABBREVIATION ................................................................................................................... IV

CHAPTER ONE FEATURES OF ANTIDUMPING RULES AGAINST GLOBALIZATION ...................................................................................................................1

1. EVOLUTION OF ANTIDUMPING LAWS ...............................................................................2 1.1 Genesis of Antidumping Law in the Early 20th Century.........................................2 1.2 GATT/WTO Rules Negotiations and Corresponding Trade Policies ......................5

2. DUMPING AND INJURY DETERMINATION OF CURRENT ADA ..........................................10 2.1 Dumping ...............................................................................................................10 2.2 Injury.....................................................................................................................11

2.2.1 Incorporation and Development of Injury Rules ...................................................... 12 2.2.2 The Meaning of “Injury” and “Material” ................................................................. 13 2.2.3 Types of Injury ............................................................................................................. 18 2.2.4 Non-Mandatory Rules ................................................................................................. 20

2.3 Importance of Injury Determination in the Decision-making Process..................33 3. PRESENT ANTIDUMPING LAW：TRADE LIBERALIZATION OR PROTECTIONISM...............35

3.1 Application Trend of Antidumping Measures ........................................................35 3.2 Nature of Domestic Antidumping Laws.................................................................37 3.3 Possible Reform of ADA .......................................................................................41

CHAPTER TWO PRINCIPLES OF INJURY DETERMINATION AND MATERIAL INJURY ....................................................................................................................................46

1. THE OBJECT OF INJURY ..................................................................................................47 1.1 Like Product..........................................................................................................47

1.1.1 Product under Consideration...................................................................................... 49 1.1.2 Factors Determining the Like Product....................................................................... 56

1.2 Domestic Industry .................................................................................................61 1.2.1 Scope of Domestic Industry......................................................................................... 61 1.2.2 Related Domestic Producer and Regional Domestic Industry ................................. 62 1.2.3 The Definition of “Producer”...................................................................................... 64

1.3 The Debate and Proposals in Doha Round Concerning “Like Product” and “Domestic Industry” .........................................................................................................65

2. PRINCIPLES AND ELEMENTS OF INJURY ANALYSIS..........................................................72 2.1 “Objective Examination” and “Positive Evidence”.............................................72

2.1.1 Definitions and Characters of “Positive Evidence” and “Objective Examination” 74 2.1.2 Rules in Operation ....................................................................................................... 75

2.2 Elements of Injury Analysis...................................................................................91

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2.2.1 Definition of “Dumped Products” .............................................................................. 91 2.2.2 Volume of Dumped Products and Effect of Dumping on Price ................................ 97 2.2.3 Impact of Dumping on Domestic Industry............................................................... 109

2.3 Countries’ Viewpoints on Injury Determination Principles in Doha Round .......123 2.4 Countries’ Practice .............................................................................................124

CHAPTER THREE CAUSAL LINK AS A DETERMINATIVE FACTOR..................126

1. REQUIREMENTS FOR CAUSATION TEST UNDER THE ADA.............................................128 1.1 Preliminary Analysis of Causal Link according to Article 3.2 and 3.4...............129 1.2 Further Examination according to Article 3.5 ....................................................133

1.2.1 “Through the Effects of Dumping” .......................................................................... 133 1.2.2 Examination of Any Other Known Factors ............................................................. 134 1.2.3 Non-Attribution ......................................................................................................... 144

2. VARIATIONS IN COUNTRY PRACTICE ............................................................................149 2.1 Standards adopted by Countries and Conformity Examination ..........................150

2.1.1 USA ............................................................................................................................. 151 2.1.2 EU................................................................................................................................ 159 2.1.3 Canada ........................................................................................................................ 163 2.1.4 South Africa................................................................................................................ 166

2.2 Factors other than Dumping...............................................................................166 2.2.1 Client Shift for Non-Price Consideration................................................................. 167 2.2.2 Demand Decline and Cost Increase .......................................................................... 173 2.2.3 Non-Subject Imports ................................................................................................. 174 2.2.4 Limited Competition between Subject Product and Domestic Product ................ 176 2.2.5 Nature of the Product ................................................................................................ 178 2.2.6 Internal Cause of the Domestic Industry ................................................................. 179

2.3 Methodology .......................................................................................................190

CHAPTER FOUR THREAT OF MATERIAL INJURY.................................................197

1. THREAT CONSIDERATION UNDER ADA ........................................................................197 1.1 Prediction of Threat Events.................................................................................198

1.1.1 “Change in Circumstances” Restricted by “Foreseen and Imminent”.................. 198 1.1.2 Factors to be Considered ........................................................................................... 202

1.2 Assessment of Consequential Injury ...................................................................210 1.3 The Obligation of “Special Care” ......................................................................214 1.4 Causation Determination....................................................................................215

2. THE PRACTICE IN VARIOUS COUNTRIES .......................................................................216 2.1 USA.....................................................................................................................217 2.2 Canada................................................................................................................230 2.3 EU.......................................................................................................................238 2.4 Other Countries ..................................................................................................243 2.5 Common Problems..............................................................................................245

CHAPTER FIVE MATERIAL RETARDATION............................................................252

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1. AN OBSCURE STANDARD .............................................................................................253 1.1 Evolvement under GATT/WTO System................................................................253

1.1.1 From “Prevent” to “Retard”..................................................................................... 253 1.1.2 The Only One GATT Case related to Retardation Standard ................................. 255

1.2 Countries’ Legal Guidelines................................................................................256 1.3 Limited Cases......................................................................................................258

2. ESTABLISHMENT OF A LEGISLATIVE FRAMEWORK AND A BALANCED WAY FOR ENFORCEMENT .....................................................................................................................261

2.1 Contradiction between Retardation Standards and the Other Two Standards ....261 2.2 Countries’ Practice for Determining “Un-established Industry” .......................264

2.2.1 USA ............................................................................................................................. 264 2.2.2 South Africa................................................................................................................ 281 2.2.3 EU................................................................................................................................ 282

2.3 Retardation Determination .................................................................................284 2.3.1 Difficulty to Conduct a Normal Injury Test............................................................. 285 2.3.2 Methodology: Unitary or Bifurcated ........................................................................ 289 2.3.3 Countries’ Practice..................................................................................................... 293

2.4 Causation Test: Viability .....................................................................................304

CHAPTER SIX REFORM OF INJURY DETERMINATION RULES.........................313

1. WTO: A PLATFORM TO PROPEL REFORM .....................................................................313 2. THE SYSTEM REQUIRING IMPROVEMENT .....................................................................316

2.1 Problems re Injury Determination ......................................................................316 2.2 Strengthening the Causation Standard................................................................320

2.2.1 Doha Round Proposals regarding the Causation Test............................................. 321 2.2.2 Recent Regression of Causation Standard amidst the Economic Crisis ................ 324 2.2.3 The Necessity and Possibility to Raise the Causation Standard under the WTO System ..................................................................................................................................... 335

2.3 Restrict Current Abuse of Threat of Material Injury Standard............................340 2.3.1 Doha Round Proposals and Draft Consolidated Texts ............................................ 342 2.3.2 Suggestions ................................................................................................................. 345

2.4 Precautions against Future Misuse of Retardation Standard .............................347 2.4.1 Doha Round Proposals and Draft Consolidated Texts ............................................ 348 2.4.2 Suggestions ................................................................................................................. 351

2.5 Loopholes and the Road Ahead...........................................................................354

BIBLIOGRAPHY..................................................................................................................357

BOOKS:.................................................................................................................................357 ARTICLES: ............................................................................................................................359

中文参考文献 .........................................................................................................................367

书籍： .................................................................................................................................367 文章： .................................................................................................................................368

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Abbreviation

AB, Appellate Body

AD, Antidumping

ADA, Agreement on Implementation of Article VI of the General Agreement on

Tariffs and Trade 1994 (The Anti-dumping Agreement)

ASCM, Agreement on Subsidies and Countervailing Measures

CI, Community Industry

CITT, Canadian International Trade Tribunal

CNCE (Argentina), COMISIÓN NACIONAL DE COMERCIO EXTERIOR

CVD, Countervailing Duties

DSB , Dispute Settlement Body

EU, European Union

EC, European Community

FANs, The Friends of Antidumping

GATT, General Agreement on Tariffs and Trade

ITAC, International Trade Administration Commission of South Africa

ITS (South Africa), International Trade Services

IA, Investigating Authority

JWT, Journal of World Trade

Kennedy Code, Agreement on Implementation of Article VI of the General

Agreement on Tariffs and Trade (1968)

KTC, The Korean Trade Commission

LTFV, Lower Than Fair Value

MOFCOM, Ministry of Commerce of the People’s Republic of China

MOCI (India), Ministry of Commerce and Industry, Department of Commerce

NCCR, National Centre of Competence in Research

NTB, Non-Tariff Barrier

OJ, Official Journal

POI, Period of Investigation

http://commerce.nic.in/

v

PRC, People’s Republic of China

SACU, Southern Africa Customs Union

Tokyo Code, Agreement on Implementation of Article VI of the General

Agreement on Tariffs and Trade (1980)

URAA, Uruguay Round Agreements Act

US Federal Circuit, United States Court of Appeals for the Federal Circuit

USA, The United States of America

USITC, United States International Trade Commission

USCIT, United States Court of International Trade

USDOC, United States Department of Commerce

WTO, World Trade Organization

2007 Draft Consolidated Text, Draft Consolidated Chair Texts of the ADA

and ASCM

2008 New Draft Consolidated Texts, New Draft Consolidated Chair Texts of

the ADA and ASCM

http://www.usitc.gov/

1

Chapter One Features of Antidumping Rules against

Globalization

Before the surge of international business and the wave of globalization,

domestic industries were traditionally protected by high tariffs and other various

trade barriers. The coming into force of the General Agreement on Tariffs and

Trade (hereinafter the “GATT”) and the establishment of the World Trade

Organization (hereinafter the “WTO”) have brought dramatic changes to the

global trade system through lowering tariff threshold and reducing non-tariff

barriers. Consequently, the domestic industries began suffering from exposure

to a more fierce global competition and struggled to find new ways to protect

themselves. The antidumping measure, one of permissible trade remedy

measures under the GATT/WTO system1, is increasingly used as a core weapon

to tackle this situation.2 The political importance of antidumping within the

multilateral trading system is apparent.

As the vagueness and loopholes of ADA provisions gave space to some misuse,

the antidumping law was frequently criticized, as it is no longer the law at the

time of its creation, but rather became protectionists’ shelter from the outside

competition storm. This chapter provides an overview of the evolution of the

antidumping law and tries to find out the policy consideration and inclination

behind the special mechanism. The first section deals with the genesis of the

antidumping law and further development under GATT/WTO system while

trade policies of different periods were underlined to explain the reason behind

the successive negotiations and subsequent evolutions. The second section

1 Particularly, antidumping duties are an internationally recognized exception to three core WTO principles: 1) bound tariff commitments; 2) Most-Favored-Nation (MFN) status; and 3) National Treatment. 2 Similar viewpoints see Abstract of Inge Nora Neufeld, “Antidumping and Countervailing Procedures – Use or Abuse? Implications for developing Countries” (2001) United Nations Conference on Trade and Development: Geneva, Switzerland. Policy Issues In International Trade and Commodities Study Series No. 9 accessed 28 November 2010

http://www.unctad.org/en/docs/itcdtab10_en.pdf

2

introduces the basic concepts under the ADA of the WTO, etc. “Dumping”,

“Injury” “Causation”, and importance of injury determination was specially

emphasized. By analyzing the role of antidumping laws among the world

trading system, the third section stresses the necessity to grasp the original

intention of ADA creation and provides some reform suggestions for restricting

the misuse of antidumping measures. To summarize, the historical evolution

review of this chapter provides a background for a further study of injury

determination and helps to make a clear projection of the future development of

the antidumping practice.

1. Evolution of Antidumping Laws

The appearance of antidumping law and the use of antidumping measure are

defended for safeguarding fair competition in the international market.3 After

various countries individually adopted the legislation on antidumping 4 ,

multilateral initiatives were also commenced.5 Later, a collective agreement was

finally achieved, named GATT 1947, Article VI of which incorporated the basic

conditions for adopting antidumping measures for international use. Then

during the Kenney Round, the first independent Antidumping Code was enacted.

The Code was later revised throughout the Tokyo Round and the Uruguay

Round. The ADA negotiated during the Uruguay Round and passed by the

contracting parties in 1994 remains in force until today.

1.1 Genesis of Antidumping Law in the Early 20th Century

Since the Industrial Revolution, major developed countries had a significant

production increase and International Cartels from Germany and Trusts from

3 H. Vandenbussche, R. Veugelers and J. Konings, ‘Unionization and European Antidumping Protection’ (2001) Oxford Economic Papers, 53 4 The world’s first antidumping law was introduced by Canada in 1904, followed by New Zealand, Australia, Britain and the USA in Early 20th Century. 5 In 1922, the League of Nations undertook a study on dumping and differential pricing, however, no agreement was reached on a collective basis. However, this endeavor resulted in Jacob Viner’s study: ‘Memorandum on Dumping’ (1926) 3-19, L.N. Doc. C.E.C.P. 36(1), Sales No. 1926. II. 63.

3

USA attempted to continue the market expansion by seizing and monopolizing

overseas markets. To Export at a dumped price was viewed as an easy and

convenient strategy. Consequently, governments are urged to find out some

solution to tackle this unfair competition behavior and prevent the dumping

trend. However, to raise the common tariff rate will certainly be contested by

certain group like the peasants that is why a special duty – antidumping measure

was created.6 To conclude, the antidumping mechanism was adopted to prevent

or restrict the further use of dumping and maintain a fair competition order.

The world’s first antidumping law was introduced by Canada in 19047, followed

by New Zealand, Australia. In these three countries, the antidumping

mechanism functioned similarly: antidumping law provides the administrative

authority certain discretion to tackle conflicts between different interest groups

by deciding whether to impose a measure or not.8 Therefore, while the ultimate

aim of this mechanism was to tackle unfair competition, sometimes the real

impetus was the pressure from the domestic industry for protection. This was an

initiative attempt of these three countries to set up a new mechanism to

counteract the effect of dumping. Although these antidumping laws are simple

and immature, they could be viewed as the embryo of the modern antidumping

system.

In 1921, Britain promulgated its first antidumping act while Canada, New

Zealand and Australia improved their previous acts, followed by more and more 6 See Raj Krishna, ‘Antidumping in Law and Practice’ (1998) World Bank Policy Research Working Paper No. 1823, 14 7 An Act to Amend the Customs Tariffs of 1897, S.C. 1904, CII, S. 19 8 In Canada, the motivation for drafting this law was the pressure from Canadian steel industry, which concerned about the low-priced steel from USA and asked for protection from the dumped imports. A Similar situation happened in New Zealand. Confronted with the threat from an international harvest cartel, the government wanted to provide protection to the domestic agricultural machinery industry by resorting to a balanced tool, without provoking the peasants for increased costs. Therefore, New Zealand followed the example of Canada, adopted an act to regulate the production, import and sales of agricultural machinery, which aimed at handling undervalued imports and restraining unfair competition. In Australia, pressure from the international Harvester Trust prompted the country’s legislation to be enacted.

4

antidumping legislations passed in other European countries.9 In the USA, the

first antidumping legislation10 was adopted in 1916, providing for damages

through Federal court against parties who dumped foreign goods in the USA11.

However, precisely speaking, the “Antidumping Act of 1921”12, rather than the

1916 Act, was the first genuine antidumping law of USA which shares the

common characteristics of an antidumping legislation and lays the foundation

for the US antidumping law as it stands today13.

In fact, the phenomenon of dumping appeared at a much earlier spot while the

rush of countries’ antidumping enactment happened in a similar period. This

was mainly due to the increased political pressures from uncompetitive firms.

Particularly in 1920s, even countries advocating opposite trade policies all

adopted the antidumping mechanism.14 The historical context reveals that to

provide protection to the domestic industry was the most important driving

force of the concurrent emergence and evolution of antidumping laws. This

implies that the antidumping law, from its date of birth, was a tool to help

relieve pressure from certain powerful domestic interest party, under the name

of fair competition policy and surrounded by anti-monopoly/ anti-predatory

dumping rhetoric.

9 A surge in antidumping legislation enactment happened in 1920s due to a fear that Germany had stored up huge amounts of goods during World War I to win on the economic battlefield through predatory pricing by dumping on the global market. 10 Pub. L. No. 64-271, Section 801, 39 Stat. 798. This legislation was an extension of the Sherman Antitrust Act of 1890 and the Clayton Act of 1914. 11 See José Tavares de Araujo Jr., Carla Macario and Karsten Steinfatt, ‘Antidumping in the Americas’ (2001) 35(4) Journal of World Trade 555,564 accessed 6 August 2009 12 Antidumping Act of 1921, Ch. 14§ 201-12, Pub. L. No 67-10, 42 Stat. 9, 11-15 13 The Sherman Antitrust Act of 1890 and the Clayton Act of 1914 were very different from the AD mechanism. They were only criminal statutes with criminal punishments and underlined the dumper’s intent as a determinant factor. Consequently, the requirements under the AD statute which was inherited from the previous Acts, particularly the need to demonstrate intent, were difficult to meet, leading Congress to establish a different structure for the antidumping law. 14 For example, both the US government dominated by the Republican Party on behalf of trade protectionism power and the British government ruled by the Liberal Party which supported trade liberalization policy put forward the AD mechanism to deal with post-World War I trade predicament.

http://www.eclac.org/publicaciones/xml/5/6315/lcl1516i.pdf%3E%20accessed

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1.2 GATT/WTO Rules Negotiations and Corresponding Trade Policies

On the international level, no rules were widely accepted to deal with dumping

until the formation of GATT in the late 1940’s.15 The formation of the GATT

1947 marked the birth of a new multilateral trading system. At the insistence of

the USA 16 , GATT 1947 incorporated the basic conditions for adopting

antidumping measures for international use. The proposal submitted by the

USA formed the basis for Article VI of the GATT, which serves as the model

for the antidumping laws of countries worldwide. Although included all the

basic elements like the definition of dumping and injury, Article VI contained

no details on administration or calculation methodology and each individual

signatory was entitled to establish its own regime, which led to differences in

the policies adopted by GATT contracting parties.

During the negotiations in the early GATT rounds before 1960s, the contracting

parties have envisaged some elaborate plans for trade liberalization and

undertaken to facilitate further reduction of trade-distorting practices in future

negotiating Rounds. However, concentrate was still fixed on further tariff

reductions and the antidumping measure was only an insignificant trade

instrument in the first 20 years since the creation of GATT.17 However, while

the tariff gradually lowered down to a certain extent and a surge of antidumping

15 In the International Conference on Trade and Employment in 1947, a package of trade rules of the Havana Charter for an ITO and tariff concessions, which affected about one-fifth of the world's total trade, was negotiated and accepted by twenty-three negotiating countries. This combined package later became known as the GATT, which entered into force in January 1948. Although the Havana Charter for an ITO, which was meant to establish a multilateral trade organization, never came into force for various reasons, the GATT remained a valid multilateral instrument that had a controlling influence on international trade from 1948 until the establishment of the WTO. 16 In the course of negotiating the GATT 1947, the USA submitted a draft proposal on dumping based on its Antidumping Act of 1921 and was keen to include trade remedies into the agreement as response to the allegedly unfair trade, which is in the form of dumping or subsidized goods. It argued that the application of trade remedies is important to ensure that neither government subsidy practices nor dumping upset the balance struck at the negotiating table. 17 According to statistics, up to 1958, there are only 37 new antidumping investigations from GATT member states (excluding Canada and New Zealand), 21 of which were initiated and enforced by South Africa. See Aradhna Aggarwal, ‘Macro Economic Determinants of Anti-dumping: A Comparative Analysis of Developed and Developing Countries’(2004), 32(6) World Development 1043, 1044

6

measures since mid-1950s, possible imposition of the antidumping measures

attracted many attentions.18

The Kennedy Round of trade negotiations (1964-1967) brought the start of the

modern era in antidumping administration19. The Kennedy Code set out the

conditions for the initiation of antidumping investigations and provided details

regulating calculation of dumping margin, injury determination and causality

establishment between the two. This innovative code introduced the “lesser duty

rule” for the first time, which set out that the antidumping duty could be less

than the dumping margin where a lesser duty would be adequate to remove the

injury. The “principal cause” test also drew a lot of attentions,20 which required

the authorities to weigh, on one hand, the effect of the dumping and, on the

other hand, all other factors taken together that may be adversely affecting the

industry. In addition, this code also mentioned the normally neglected

“retardation” standard. 21 Although the effect of the Kennedy Code was

substantially weakened by the rejection from the USA22, this code was accepted

and abided by other GATT contracting parties and remained effective until the

18 The contracting parties asked the Secretariat to undertake a comparative study of national antidumping laws in 1958. Further to this study of national antidumping laws, to conduct a research on ambiguous terms of Article VI and accomplished certain common interpretations, a special Group of Experts was established in 1960. The agenda of GATT Working Parties also incorporated the proposal to develop comprehensive antidumping rules and discussions were held extensively during the process. 19 In this round, to enact a separate antidumping agreement with a view to replacing the simple Article VI of GATT, negotiation of a multilateral antidumping code was taken up seriously and finally the Kenney Code was agreed on. 20 Article 3(a) of The Kennedy Code provides that an injury determination shall be made only when the authorities concerned are satisfied that the dumped imports are demonstrably the principal cause of material injury or of threat of material injury to a domestic industry or the principal cause of material retardation of the establishment of such an industry. 21 Where the establishment of a new industry in the importing country was retarded, the IA was required to have convincing evidences of the forthcoming establishment of an industry, for example that the plans for a new industry had come to a relatively advanced stage, funding was prepared , a plant was being constructed or machinery had been ordered. 22 A Group on Antidumping Policies (GAP), dominated by OECD countries, was responsible for the negotiations during this Round. However, the USA refused to be a signatory of this code as the antidumping code incorporated a much more stringent test of “causality” and consequently the US Congress objected to the higher standard, which conflicted with the existing US legislation. Actually, throughout the whole negotiation process since the beginning up to now, the US Congress have always been highly sensitive to weakening of the US antidumping policy in multilateral negotiations and clearly declared that it would not be a party to any such attempt.

7

Tokyo Round.

During the period the Kennedy Code took effect, there were around 30 new

investigations per year on average and only 5% reached an affirmative

determination, mainly due to the strict standard.23 The high threshold was not

invented just by accident; rather it was a mirror of the dominant trade policy.

The period after World War II, from the effective date of GATT 1947 to the

middle 1970s, was regarded by Economist as the Phase of Trade Liberalization.

All the major developed countries endeavored to reduce tariff and to wipe out

all possible barriers of the global trade market. The antidumping law, a tool to

protect domestic industry from the low-priced imports entering into the market,

was inevitably made subject to strict restriction.

With tariff’s continued reduction, the global trade volume had significantly

increased and multinational competition had become extremely acute. While the

new industrial countries emerged in large numbers, the traditional developed

countries lost their competition advantages and suffered from a deterioration

trade condition. Confronted with the above situation, the USA pointed out that

it was attributed to the unfair competition activities of other countries and

insisted the fair competition should also be maintained although trade

liberalization remained a mainstream of the trade inclination.24 The period

between mid-1970s and mid-1990s was consequently named as the Phase of

Trade Liberalization with Fair Competition, which affected the subsequent

development of antidumping rules.

23 This code was highly appraised by many scholars for its stringent standard and high threshold to prevent the misuse of antidumping measures. Although some economist argued that it was due to the balanced international trade relationship, it is undeniable that this code had made an active contribution. 24 While EU put its emphasis on the internal market integration within the Union and Japan remained silent and low-key, the US policy governed the development of international policy during the last thirty years of 20th Century.

8

In the Tokyo Round (1973-1979), there was no significant modification for

dumping-related provisions while one of the most influential changes was the

removal of the “principal cause” test.25 The causation test was revised to a

different version 26 , which even neglected the requirements to examine

Non-LTFV factors and to establish it is the injury that caused by them.

Furthermore, the list of “other factors”, which was originally stipulated in the

main text in the Kennedy Code, was converted into a footnote. In conclusion,

the standard for the causation determination was substantially lowered down to

facilitate the use of the antidumping measures. In addition, standard for the

injury test were also eased during the Tokyo Round negotiations. 27 The

softening of injury and causation standards during the Tokyo Round facilitated

the use of AD measure post-Tokyo Round negotiations and led to a later surge

of antidumping activities.

The GATT Uruguay Round negotiations culminated in 1994 when the WTO

was set up in replacement of the GATT. Although the 1986 Ministerial

Declaration to launch the Uruguay Round did not expressly mention

antidumping, the debate on the role of competition laws in relation to

antidumping had subsequently intensified among the developed world. 28 A

suggestion was made that antidumping be discarded and replaced by

competition laws. Though this proposal was rejected, some alternative reforms

were introduced to the Uruguay Round ADA text to address the concern of the

pro-competition lobbyists.29 25 The developed world needs an easy-to-use safety valve to protect their industries from import competition and to make the allegations easier to prove. 26 Article 3(4) of the Tokyo Code stipulated that there might be “other factors”, which at the same time are injuring the industry, and the injuries caused by other factors must not be attributed to the dumped imports. 27 For example, “export performance” and “restrictive trade practices”, which were included in the list of injury indicators in the Kennedy Code, were deleted to soften the rigidness of the injury test. 28 “Antidumping Rules became one of the ‘central issues’ at the Uruguay Round”, Financial Times (July 10 1990) 5; the debate was driven by the growing complaints that antidumping mechanism had become back-door protectionism and that competition policy was the appropriate substitute. 29 For example, to allow consumers and industrial users to express their views during the investigations, to instruct the authorities to examine all known factors other than the dumped imports

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Both Article VI of the GATT 1994 and the ADA entitled WTO contracting

members to impose antidumping measures if the subject exporter caused injury.

These rules have been further interpreted under the GATT/WTO dispute

settlement system. If the nature of development of antidumping laws and the

history of how the balance between the recognition of the right to take

antidumping measures and regulation of that right has been maintained, is to be

summed up in a few words, it can be said that gradually the emphasis of

antidumping provision has changed from a positive right for countries to protect

their industries into a negative provision ensuring that the right does not hinder

free trade.30

Later in 2001, the Doha Ministerial Conference laid the foundation for

launching new post-Uruguay Round Multilateral Trade Negotiations. During

the negotiations, the USA strongly opposed to including the ADA into the

agenda of the Doha Round31, although ultimately the US Government had to

bow to international pressure due to an overwhelming support for the inclusion

of antidumping rules. Nonetheless, the USA still sought to limit the scope of

such negotiations. In contrast with the USA, the “Friends of Antidumping”

(hereinafter the “FANs”)32 participated actively in ADA reform. The FANs,

strongly supported 33 reform of the antidumping rules and requested for

clarification of the antidumping rules, aimed at restricting misuse of

and to push forward procedural reforms to ensure transparency of antidumping activities. 30 Sheela Rai, ‘Protection of Competition through Anti-dumping Law: A Case Study of the Vitamin Industry in India’ (2006) 40(5) Journal of World Trade 969-977, 970 31 On the eve of the Doha Ministerial Conference, both houses of US Congress passed strongly worded resolutions advising the President not to approve major revisions in the current regime. Furthermore, in May 2001, sixty-two senators signed a letter to the President warning him not to authorize any trade deals, which would weaken the antidumping laws. Defenders of US trade laws asked the administration to veto any similar discussion in the upcoming negotiations under the WTO system. 32 FANs is consisted of Brazil, Chile, Colombia, Costa Rica, Hong Kong, Israel, Japan, Mexico, Norway, Singapore, Korea, Switzerland, Thailand, and Turkey. 33 A joint statement calculated that among nearly 100 proposals, which had been tabled for the negotiations, around thirty had been from the FANs.

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antidumping measures. In the end, taking into consideration of all the opinions,

the decision of the Doha Ministerial Conference emphasized preservation of the

basic concepts, principles, instruments, objectives and effectiveness of ADA. It

mandates members to enter into negotiations “aimed at clarifying and

improving disciplines”34 under the ADA.

2. Dumping and Injury Determination of Current ADA

Current ADA is generally aimed at regulating and ensuring proper use of

antidumping measures among the WTO contracting members. The agreement

can be separately viewed from procedural and substantive aspects. The

substantive aspect is related to the substantive requirements for making the

following two determinations: the determination that products are dumped and

the determination that the products have caused material injury to the domestic

industry of the like product. In other words, only upon the proof of a positive

finding of dumping and a positive finding of injury can an antidumping measure

be imposed. Based on the affirmative determinations, antidumping measures

may take the form of definitive antidumping duties, price undertakings and

provisional measures etc.

2.1 Dumping

The traditional definition of dumping is the price discrimination between the

home market and the alien market. In other words, dumping refers to the

situation in which the dumping producer sells at a lower price abroad than in its

home market. Viner identifies three types of dumping: sporadic dumping, short

run or intermittent dumping, and long-term or continuous dumping.35 Sporadic

dumping is usually used to dispose off surplus stocks. Short run or intermittent

34 Doha WTO Ministerial 2001: Ministerial Declaration, WT/MIN (01)/DEC/1, 20 November 2001, para 28 35 Viner J, Dumping: A Problem in International Trade (Reprint of 1923 Edition, New York: Augustus M.Kelley 1966) 23

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dumping is not continuous and is motivated to acquire an entry into a market or

retain the existing market share or to drive away other competitors from the

market. Long term or continuous dumping is motivated by the intent to reach or

maintain full protection in large-scale economies. None of the distinctions is

made in the ADA. The concept of dumping under the Article 2.136 of the ADA

is relatively simple.

A lot of arguments have been advanced to the concept of dumping, the central

idea of which is practically dumping will contribute to the improvement of the

overall economic welfare as it leads to cheaper prices of products of the

importing country. The only exception to the rule would be the case of

predatory dumping, the particular type of dumping motivated to drive the

domestic competitors out of the market and subsequently to raise prices to

monopoly levels. Therefore, some scholar argued that only this form of

dumping should be acted against.37 In spite of the above classification, the ADA

did not distinguish between different types. As long as the Investigating

Authority (hereinafter the “IA”) identified one form of price discrimination, an

affirmative dumping determination could be established.

2.2 Injury

Antidumping rules under the WTO system were concerned with the

trade-distorting effect of the dumping behavior, rather than with the effect of

dumping itself. Thus, the discretion of the importing country to resort to

protective measures against dumping is limited to the situation injury has been

36 Article 2.1 provides: “For the purpose of this Agreement, a product is to be considered as being dumped, for example, introduced into 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.” 37 Edwin A. Vermulst, ‘Injury Determinations in Antidumping Investigations in the USA and the European Community’ (1986) Vol 7 N.Y.L Sch.J.Int’l &Comp.L. accessed 19 January 2009,420

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found. Otherwise, whatever the dumping margin may be, antidumping measures

are not allowed. That is to say, in order to impose an antidumping duty, it is not

enough to prove dumping has occurred, injury to the domestic industry should

be verified, too.

2.2.1 Incorporation and Development of Injury Rules

Injury rules are not an original part of the ancestor antidumping law. Within

Canada’s first antidumping law in the world, no provision was formulated for an

injury test. Afterwards, an article 38 of the 1906 Australian antidumping

legislation can be viewed as the earliest provision touching upon the injury

determination. Although only limited circumstances were listed to picture

“injury” and the injury determination was messed with dumping determination

rather than as a separate part, this article had taken the element “injury to the

domestic industry” into consideration and enumerated it as one of the conditions

to confirm the existence of unfair competition.

The US Antidumping Act of 1921 was the first statute, which formally

introduced the concept of “injury” and had embodied all the fundamental

elements of an injury determination. The provision prescribed: “Whenever the

secretary of the Treasure finds that an industry in the USA is being or is likely

to be injured or is prevented from being established, by reasons of importation

into the USA of foreign merchandise and that merchandise of such class is

being sold or is likely to be sold in the USA at less than its fair value….there

shall be levied, collected and paid a special duty in an amount equal to such

difference.” The antidumping Act of 1921 had set up a basic framework of

injury determination for a contemporary antidumping law.

38 The article stipulated that competition within certain market should be deemed “unfair” if “it have caused or may cause inappropriate payment for labor or lead to a substantial disruption of the domestic industry or widespread unemployment.”

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In the text of GATT 1947, the injury provision was more explicit, which

provided that “Dumping needs to be condemned and offset by imposing an

antidumping duty if it caused or threatened material injury to an established

industry in the territory of a contracting party or materially retarded the

establishment of a domestic industry.” Thus, GATT 1947 had possessed a

complete set of injury definition similar to the current ADA, which will be

explained below.

2.2.2 The Meaning of “Injury” and “Material”

The ADA provided the concept of injury in footnote 939, which just listed three

types of Injury. Strictly speaking, this explanation is not a definition, but rather

a listing of categories for the “injury” concept.

Nonetheless, the domestic stipulations could be helpful as a reference. For

example, Article 4 of the PRC’s Antidumping Industry Injury Investigation

Rules 40 (hereinafter the “Injury Rules”) defines the three types of injury:

“material injury” means injury that has been caused to a domestic industry and

is not negligible; “threat of material injury” means material injury has not been

caused to domestic industry, while evidence shows that the dumping would

cause foreseen and imminent injury if no measures are taken; “material

retardation” means although no material injury or threat of material injury has

been caused to a domestic industry, the establishment of a domestic industry has

been seriously retarded.

In Australia, a 1990 Ministerial Direction also tried to interpret “material

39 Footnote 9 provides that “under this Agreement the term ‘injury’ shall, unless otherwise specified, be taken to mean material injury to a domestic industry, threat of material injury to a domestic industry or material retardation of the establishment of such an industry and shall be interpreted in accordance with the provisions of this Article.” 40 Order No.5 (2003) of the Ministry of Commerce, October 17, 2003, available at accessed 10 Jan 2012

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injury”..41 “material injury” was defined as injury greater than that is likely to

occur in the normal decline and flow of business. The Direction also indicated

that material injury to an Australian industry would usually involve (or threaten)

either a "material" loss of profits or of market share caused by dumped exports.

In addition, the Australian Minister wrote to Customs in December 1991

suggesting that particular issues be considered when assessing material injury.

The advice focused on the following aspects of injury:

(1) the greater impact of injury during periods of economic downturn;

(2) regional dumping;

(3) reduced rates of growth as an element of injury; and

(4) threat of injury.42

As all three types of injury are restricted by the term “material”, which

indicated that not injury of any degree could be qualified for the injury

determination, how to define “material” is vital to the final determination.43

Despite continuous improvements under the ADA, the interpretation for the

injury determination remains far less developed than the dumping determination.

Basic injury-related concepts were not defined adequately and practice differed

greatly among various countries. Since the term “material injury” was first

incorporated into GATT 1947, the meaning of the “material” remained

undefined either under GATT 1947 or during subsequent negotiations.44 Even

up to now, in spite of various tests stipulated under the ADA and national AD

statutes 45 , to determine which extent was qualified as “material” remains 41 Antidumping Booklet (Australia’s Antidumping and Countervailing Administration 2000) accessed 28 November 2007 42 Ibid.,10 43 Tracy Murray and Donald J. Rousslang presented a practical method for estimating the injury to domestic industry based on the traditional differentiated product model of import competition in their paper ‘A Method for Estimating Injury Caused by Unfair Trade Practices’ (1989) 9 International Review of Law and Economics 149-160 44 However, Reem Anwar Ahmed. and Raslan held that “in the absence of any specific standards, it is in practice, interpreted as ‘any injury’” see Antidumping: A Developing Country Perspective (Wolters Kluwer Law & Business 2009) 45 In South Africa, “for the injury to be material the decline and the negative effects must be

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troublesome46. In absence of any specified standards, it is irrational that material

injury can even be interpreted as “any injury” arbitrarily.

The only implicit interpretation under the ADA can be found in Article 3.247

and the standard of “material” could be comprehended from wording of the

indices in Article 3.2. It is obvious there are correlation and interaction between

the word “significant” and “material”, nonetheless, similar to “material”, the

word “significant” remained undefined.

As for the question which circumstance can be defined as “material injury”,

scholars held different views. Some believed that it was a factual decision,

which should be made case by case48, while some others viewed it as a legal

problem and requested for a unified statutory standard. Honestly speaking, there

may be little possibility to agree on a formula for “material injury”, however, it

does not indicate a unified definition or some decisive principles could not be

invented. In fact, no stipulation would leave the injury determination totally

under the discretion of the IA and consequently lead to misuse. A solution for

this situation is that some rules and standards could be predetermined through

the Doha Round negotiation and are applicable to determine material injury

under normal conditions whilst an IA could break the rules if they provide

substantial to the point where the effected industry cannot combat the impact of the dumped imports from its own resources. The board has dismissed a number of cases on the basis that there is no material injury” see Keith Steele, Anti-Dumping under the WTO: A Comparative Review (1 edition, Springer 1996), 222-223 46 On the difficulty of defining “material”, see Grey, Rodney De C., ‘Some Notes on Subsidies and the International Rules’ in Wallace, Don, Frank J. Loftus and Van Z. Krikorian(ed) Interface Three: Legal Treatment of Domestic Subsidies( Washington D.C.1984) 61, 69 47 Article 3.2 provides that “with regard to the volume of the dumped imports, the IA shall consider whether there has been a significant increase in dumped imports; With regard to the effect of the dumped imports on prices, the IA shall consider whether there has been a significant price undercutting or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increases, which otherwise would have occurred, to a significant degree”. 48 The scholars may cite an example to support their allegation: a significant underselling may not make any influence while a weak underselling in certain circumstances may result in a disaster to the domestic industry. The phenomenon is understandable: on one hand, a significant underselling may not cause sales transfer because of customers’ certain preference on other non-price factors; on the other hand, a small extent of underselling may have a great influence because the customers make choices absolutely on price, even a tiny price difference.

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reasonable explanations for the exception. In this way, it may be possible to

establish a legal structure for “material injury” in the future.

The definition of “Serious Injury” under the WTO Safeguard Agreement can be

used as a reference for the interpretation of “material injury” under the ADA

system. Article 4.1(a) of Safeguard Agreement defines “serious injury” as

“significant overall impairment in the position of a domestic industry”. This

definition could be divided into two separate requirements: significant

impairment and overall impairment. “Overall” means “in general rather than in

particular, or including all the people or things in a particular group or

situation”49. That is to say, in principle all of the domestic producers suffered an

impairment, despite in reality, the authority would identify an “overall

impairment” as long as the major part of domestic producers suffered;

“Significant” means “to an important or considerable degree”50 or “having an

important effect or influence, especially on what will happen in the future”51,

which could be extended to mean that the domestic industry could not be easily

recovered from such impairment. To determine whether such "significant

impairment" existed can be made upon evaluation of the overall situation of the

domestic industry, in light of all the relevant factors having a bearing on the

situation of that industry. “Significant” can only be proved when the fluctuation

of every relevant factor has been examined and the current level of most indices

has declined by an important or considerable degree, compared with the

previous average level.

Similar to the approach to define “serious injury”, the definition of “material

injury” could also be decided from two aspects: extension and degree. The word

“material” could be understood as important, essential and crucial. Apparently

49 Cambridge Advanced Learner's Dictionary 50 Oxford Advanced Learner & apos; Dictionary of Current English 51 Longman Dictionary of Contemporary English

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the “material injury” standard is less severe than the “serious injury” standard

and injury caused by the dumped imports need not to be overall and significant.

As long as a majority of domestic producers has suffered essentially, the

“material” standard had been satisfied.

It is noteworthy that the common acceptance of the “material” standard among

the contracting parties went through twists and turns. Despite the standard of

“material injury” had been adopted as early as GATT 1947, some of the

contracting parties was exempt from transplanting it into their domestic

legislation because of the “Grandfather Clause”. For example, in the USA,

under the early antidumping law, there is no need to prove that injury have

reached the degree of “material”, thus the USA did not replace its previous

“injury” standard with the “material injury” standard until the Tokyo Code take

effects in 1979. Under a strong pressure from EU and other countries, in

exchange for lowering the causation threshold, the USA added the wording

“material injury” and defined it as “harm which is not inconsequential,

immaterial, or unimportant.”52 Using this double negative clause, the degree of

“material” is virtually undermined.53 Thus, although the annotation to the word

“material” by the US law has been ex facie consistent with ADA, to dig deep to

get the truth, this definition created a merely more than “de minimis” injury test

and is lower than the ADA standard. The original intent of the ADA is to give

the word “material” a positive and meaningful sense – to signify a degree of

adverse impact that is substantially more than merely trivial or negligible. As

matters stand, in the US practice, at least, the word “material” is without

meaning54.

52 19 USAC Sec 1677(7)(B) Trade Agreements Act of 1979 53 Even if applying a positive form, the degree of “consequential and important” is still lower than that of “essential and crucial”, which is normally understood to be equal to “the most important”. In addition to formulating its own interpretation of the word “material”, the USA also declared that ITC had applied the “material injury” standard since the previous five years before 1979. 54 Positive Agenda and Future Trade Negotiations ( United Nations Publications 2005) 423

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The adjective “material” should be given some real meaning. This may not be

easy to negotiate, given that the USA and the US Congress put in place a weak

definition for “material”. However, this proposal is not completely unrealistic

nowadays. Especially when situations have changed that the signatories of the

ADA, which used to be major users of the antidumping measures, are also

facing actions from other countries, they may be more willing to consider

making the system less protectionist by raising the threshold of “material”

standard.

2.2.3 Types of Injury

Since GATT 1947 until today, injury has been defined as encompassing three

forms: (1) material injury to a domestic industry (hereafter referred to as

“material injury”); (2) threat of material injury to a domestic industry (hereafter

referred to as “Threat of Material Injury”); (3) material retardation of the

establishment of such an industry (hereafter referred to as “Material

Retardation”). These three standards will be elaborated separately in Chapter

Two, Four and Five while this part will provide an overview.

Among the three, the “material injury” is a fundamental and most frequently

used standard. The WTO Contracting Parties have gained considerable

experiences in handling such cases and accordingly drawn up detailed

enforcement guidelines. The WTO Dispute Settlement Body (hereinafter the

“DSB”) also issued plenty of Panel and Appellate Body (hereinafter the “AB”)

reports on this regards. As for the “Threat of Material Injury” standard, Article

3.7 and 3.8 of the ADA offered an abstract description and guideline, which

have aroused much controversy. In addition, few WTO Panel or AB reports

touched upon this standard. Only a few countries like the USA and Canada have

made separate determination applying this standard to impose antidumping

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measures.55 Therefore, study of this standard could only rely on the limited

practice of these countries. Regarding the Material Retardation standard, there

is not even one word mentioning the definition and evaluation criterion under

the ADA. Furthermore, few countries have imposed antidumping measures

based on the Material Retardation standard.

There is another question whether the injury requirement may be met on the

basis of any one or more than one of the three forms, or it must be based on

only one of the three forms. A GATT Panel once determined that under the

1979 Antidumping Code the three types of injury were mutually exclusive and a

finding could only be based on one of the three forms.56 However, in a recent

decision under Safeguards Agreement of the WTO, the AB reversed

conclusions of the Panel and interpreted differently regarding the similar

question, noting that the use of the conjunction “or,” does not exclude the

finding of both serious injury and threat of serious injury at the same time.57 To

sum up, while the ADA and the Countervailing Agreement requires making the

material injury and threat of injury determination in consideration of different

factors, the Safeguards Agreement does not have such a requirement. Maybe the

language of the Safeguards Agreement is too dissimilar to provide guidance on

the injury requirement of the ADA and the Agreement on Subsidies and

Countervailing Measures (hereinafter the “ASCM”).58 This problem will be

discussed further in the following chapters.59

55 In other countries, for example, the PRC, India etc., normally this standard is accompanied with the “Material Injury” standard, thus not very meaningful. 56 Korea – Antidumping Duties on Imports of Polyacetal Resins from the USA, GATT Panel Report of 27 April 1993, ADP/92 and Corr.1(hereinafter “GATT Panel Report of Korea – Resins”) 57 US – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe From Korea, AB Report of 15 February 2002, WT/DS202/AB/R,177 58 Peggy A. Clarke and Gary N. Horlick, Injury Determinations in Antidumping and Countervailing Duty Investigations in: Patrick F. J. Macrory, Arthur E. Appleton and Michael G. Plummer, ed. 2005. The World Trade Organization: Legal, Economic and Political Analysis. Springer , Ch17, 736 59 The conclusion may be: the coexistence of the material injury and threat of injury standard is permissible, despite not very meaningful, nonetheless the material retardation standard is forbidden to be applied simultaneously with the material injury and threat of injury standard.

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2.2.4 Non-Mandatory Rules

Under Article 3 of the ADA, most of the rules should be compulsorily executed

(for example, the Non-Attribution Rules, list of Article 3.4 factors for

consideration). Nonetheless, related to the injury calculation, some special

methodologies were not mandated by the ADA to be applied forcibly, including

the Cumulation Assessment and the Lesser Duty Rule. The Cumulation practice

is subject to restriction of Article 3.3 of the ADA, while the Lesser Duty Rule is

stipulated and recommended by Article 9.1 of the ADA. Details will be

discussed below.

2.2.4.1 Cumulative Analysis

The cumulation provision is one of the most significant changes to the ADA

brought about by the Uruguay Round.60 Cumulation refers to the consideration

of dumped imports from more than one country on a combined basis in

determining injury to the domestic industry. 61 As this method obviously

increased the probability of an affirmative determination62, it aroused a lot of

debates during the Tokyo Code and Uruguay Round negotiations. Under current

ADA, Articles 3.3 recognizes that an IA is entitled to cumulate the impact of

imports, however, should fulfill certain preconditions. In conclusion, a practice

which began a number of years ago that was of questionable legality under the

Tokyo Code has been legitimized. Therefore, it no longer is possible to question

its legality, only its wisdom.63

60 David Palmeter, ‘A Commentary on the WTO Antidumping Code’ (1996) No.4 Journal of World Trade 30, 52 61 The concept of cumulation was first invented by the USA to deal with the situation where dumped imports from a number of countries might collectively be injuring a domestic industry, even though the volume of imports from each individual country was minimal to cause harm. 62 Similar viewpoints see Neufeld, Inge Nora (2001) “Antidumping and Countervailing Procedures – Use or Abuse? Implications for developing Countries” United Nations Conference on Trade and Development: Geneva, Switzerland. Policy Issues In International Trade and Commodities Study Series No. 9,5 63 David Palmeter, ‘A Commentary on the WTO Antidumping Code’ (1996) No.4 Journal of World Trade 30, 52

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Article 3.3 of the ADA64 is the only provision specifically addressing the

practice of cumulation. The word “determine” in the text, which has a meaning

of “find out or establish precisely” or to “decide or settle”, precludes an IA from

simply assuming that the cumulative assessment is appropriate. In particular, an

IA must consider the facts before it and make a justified conclusion that

cumulation is appropriate upon the circumstances at that time. In the case EC –

Anti-dumping Duties on Malleable Cast Iron Tube or Pipe Fittings From Brazil

(hereinafter the case “EC – Pipe Fittings”), the AB held that the text of Article

3.3 expressly identifies three conditions which should be satisfied before an IA

is permitted to make a cumulative assessment.65

It is worthy mentioning that in the case US – Sunset Review of Antidumping

Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan

(hereinafter the case “US – Corrosion Resistant Carbon Steel Flat Products”),

the Panel ruled that the provision of Article 3.3 is only applicable to

investigations, but not to sunset reviews.66

2.2.4.1.1 “Conditions of Competition”

As stipulated in Article 3.3, to apply the cumulative analysis, it should be

“appropriate in light of conditions of competition”. “Appropriate” means “to

(sth) suitable, acceptable or correct for the particular circumstances”.67 However,

64 Article 3.3 provides that “where imports of a product from more than one country are simultaneously subject to antidumping investigations, the IA may cumulatively assess the effects of such imports only if they determine that (a) the margin of dumping established in relation to the imports from each country is more than de minimis as defined in paragraph 8 of Article 5 and the volume of imports from each country is not negligible and (b) a cumulative assessment of the effects of the imports is appropriate in light of the conditions of competition between the imported products and the conditions of competition between the imported products and the like domestic product.” 65 EC – Anti-dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, AB Report of 22 July 2003, WT/DS219/AB/R (hereinafter “AB Report of EC– Pipe Fittings”), para 109. These conditions are “The dumping margin from each individual country must be more than de minimis; the volume of imports from each individual country must not be negligible; and cumulative assessment must be appropriate in the light of the conditions of competition between the imported products; and between the imported products and the like domestic product.” 66 US – Sunset Review of Antidumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan, Panel Report of 14 August 2003, WT/DS244/R 67 Oxford Advanced Learner’s Dictionary

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which circumstance is qualified as “appropriate” remains undefined either under

the context of the ADA or case analysis of the Panel and AB Report. Therefore,

appropriateness should be judged case-by-case. In light of the general wording

of Article 3.3 and the nature of the term "appropriate", an IA has a certain

degree of discretion to determine whether to apply the cumulative test or not. As

for the phrase “Conditions of Competition”, unlike Articles 3.2, 3.4 and 3.5,

which enumerate a list of factors to help an IA to make determinations, Article

3.3 contains no indicative list that might be relevant for the assessment of the

“Conditions of Competition”.

In the case EC – Pipe Fittings, the difference between the “Like Product” and

“Conditions of Competition” was raised as a problem. The EC was accused for

its analysis of “Conditions of Competition” because it is a "tautology" and no

more than a repetition of the "Like Product" analysis. EC defended its

methodology for analysis and summarized the criterion it considered for the

cumulation assessment in this case, which are as follows: like product finding,

the significance of the import volume level, the development and level of the

prices of imports, the undercutting margin and similarity of sales channels. In

the end, the Panel concluded that EC was not acting inconsistently with the

ADA, as it had examined the relationship in the marketplace between the

products produced by the Community industry and the subject products, which

formed the basis of its investigation of “Conditions of Competition”.68

2.2.4.1.2 The Relationship between Article 3.2 and Article 3.3 of the ADA

Article 3.2 of the ADA provides guidance for the examination of the volume of

dumped imports and their impact on the domestic industry's prices, while 68 EC – Antidumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, Panel Report of 7 March 2003, WT/DS219/R, (hereinafter “Panel Report of EC – Pipe Fittings”) paras 7.245-7.249. Without distinguishing the two concepts, the Panel reached a vague determination that the examination of “Conditions of Competition” based on definition of “Like Product” is not a question of redundancy or “tautology”, but rather one of required consistency for the purposes of the dumping and injury determination.

23

Article 3.3 deals with dumped imports from more than one country. The main

problems of this section include: to find out whether the country-specific

analysis under Article 3.2 should be carried out before conducting the

cumulation assessment; to check whether the volume and price examination

under Article 3.2 could be cumulatively assessed.

2.2.4.1.2.1 Country-Specific Analysis is not a Precondition of Cumulation

In the case EC – Pipe Fittings, EC was accused of cumulatively assessing the

effects of dumped imports from several countries, including Brazil, without

analyzing the volume and prices of dumped imports from Brazil individually,

pursuant to Article 3.2. This accusation from Brazil indicated the volume and

price requirements of Article 3.2 should be satisfied on a country-by-country

basis as a precondition for cumulation and only upon identification of the

imports from a particular country as a likely source of negative effects on the

domestic industry could the methodology of cumulation of that country's

imports be applied. Therefore, the main dispute issue of this case is whether the

IA is required to assess imports from each individual country before

determining whether it may conduct a cumulative assessment.

The Panel concluded that the condition identified in Article 3.3 is the sole

condition for an IA to undertake the cumulative assessment and an analysis of

individual countries' volume and price under Article 3.2 is not a mandatory

precondition for cumulation. Reasons were given for the conclusion:

(1) In stipulating how to undertake the analysis of volume and price, Article 3.2

refers to the phrase “dumped imports” and does not indicate that the analysis of

volume and price of the “dumped imports” must be country-specific in

multiple-country investigations;

(2) By expressly providing for cumulation in Article 3.3 of the ADA, the

negotiators appear to have recognized that a domestic industry confronted with

24

dumped imports originating from several countries may be injured by the

cumulated effects of those imports, and that those effects may not be adequately

taken into account in a country-specific analysis of the injurious effects of

dumped imports.69

Assuming the IA has made a country-specific analysis of the volume and price,

if there are some divergences among different countries, will the

“appropriateness in light of the conditions of competition” be undermined? The

answer is no, the methodology of cumulation will still be applied.

In the case EC – Pipe Fittings, regarding the volume analysis under Article 3.2,

Brazil alleged that the dissimilarities in import volume trends between imports

from Brazil and other countries concerned should render the cumulation clause

inapplicable, which was rejected by the Panel.

Given the text of Article 3.3(b) contains no explicit reference to any particular

factors or indicators by which to assess the conditions of competition, including,

in particular, no explicit reference to import volume trends – let alone identical

or similar import volume trends. Therefore, there is no basis in the text for

Brazil’s argument that an investigating authority is required to conduct a

country-by-country import volume examination as a precondition for deciding

whether a cumulative assessment is appropriate within the meaning of the

“conditions of competition” element of Article 3.3(b). In addition, while a

parallel increase or decrease in volume of imports from various sources may

well indicate competition, products with non-parallel volume trends may also be

competing in certain circumstances. As the ADA does not incorporate a

requirement of identity or similarity in import volume trends as a pre-condition

for cumulation, the divergence will not undermine the “appropriateness in light

69 AB Report of EC– Pipe Fittings, para 116

25

of the conditions of competition” under Article 3.3.

The same logic could be applied to the price analysis under Article 3.2. While

Brazil pointed out dissimilarities in trends of import prices, in particular, from

the Czech Republic and the PRC, in relation to those of Brazil, the Panel used

similar reasons to reject this argument. The Panel found that Article 3.3 does not

contain any guidance concerning whether or how pricing should or must be

examined as part of the conditions of competition element of a cumulation

determination, and does not set out any requirement that "price sensitivity" and

differences in pricing structure are a required component of a conditions of

competition analysis and products with non-parallel price trends may also be

competing in certain circumstances. On this basis, the Panel supported EC’s

conclusion and held that although the prices of the Brazilian imports and of the

imports from the other countries concerned were not in all cases identical

during the Period of Investigation (hereinafter the “POI”), which is not required

by the Basic Regulation, the difference among them was not so significant that

justify a non cumulative assessment.70

2.2.4.1.2.2 Whether Volume and Price could be Cumulatively Assessed

In the case EC – Pipe Fittings, Brazil asserted that distinctions existed between

the “Factors” which may be causing injury (namely, the volumes and prices of

the dumped imports) under Article 3.2 and the “Effects” of the dumped imports

under Article 3.3, which could be cumulated. Therefore, import volumes and

prices cannot be cumulated under Article 3.3 because they are precisely

“Factors” which may cause the effects while Article 3.3 explicitly permits

cumulative assessment of the “Effects” of dumped imports. The AB rejected

this argument, by referring to the wording in the text of Article 3.5 that “effects

of dumping, as set forth in paragraphs 2 and 4” and deduced that it directly

70 Panel Report of EC – Pi