Studies in the Application of Anti-Dumping and Anti-Subsidy Measures

1. Studies in the Application of Anti-Dumping and Anti-Subsidy Measures Stephen J. Orava  WTO Practice Group steve.orava@bakernet.com www.bakerinfo.com

2. Overview • What are the conditions for applying a measure? • What is dumping? • What is a countervailable subsidy? • What is material injury or threat thereof? • What is causation? • What is the role of the domestic authority? • What is the standard of review?

3. Background • History • Object and purpose • Antidumping measures • Countervailing duty measures • Developments • Deference to domestic investigating authorities • Presentation gives highlights of obligations and prevailing interpretations

4. What are the conditions for applying a measure?

5. What is dumping? (1) • “introduced into the commerce of another country at less than normal value” (Article 2.1 ADA) • in other words - “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“ (Article 2.1 ADA)

6. What is dumping? (2) • Like product - identical or closely resembling (Article 2.6 ADA) • export price < normal value (e.g., price in Chile < comparable price when sold in the United States) • ex-factory prices, with adjustments to achieve a “fair comparison” (Article 2.4 ADA) • same level of trade • same time • differences affecting price comparability, including conditions and terms of sale, taxation, and physical characteristics

7. What is dumping? (3) • Sales outside the ordinary course of trade • low volume of sales (footnote 2 ADA) • sales below costs (Article 2.2.1.1 ADA) • Third country for normal value • Constructed value - “cost of production plus reasonable amount for administrative, selling and general costs and for profits” (Article 2.6 ADA)

8. What is a countervailable subsidy? (1) • Two conditions (Article 1 SCM): • “financial contribution” • “a benefit is thereby conferred”

9. What is a countervailable subsidy? (2) • “financial contribution” • direct transfer of funds (grants, loans) • potential direct transfer of funds (loan guarantees) • government provision/purchase of goods or services • government payments to a funding mechanism or government direction (or entrustment) to do one of the above

10. What is a countervailable subsidy? (3) • “conferring a benefit” - limitations on what constitutes for purposes of countervailing duty investigation (Article 14 SCM) • equity capital, only if investment decision is inconsistent with the actual investment practice • loan, only if amount paid is different from commercial loan/guarantee • goods or services, only if for less (provision) or more (purchase) than adequate remuneration

11. What is a countervailable subsidy? (4) • Only a countervailable subsidy if “specific” (Article 2 SCM) • specific if access is limited to an enterprise or industry or group of enterprises or industries • not specific if access based on objective criteria or conditions, provided that they are automatic, strictly adhered to, and verifiable • but, specific nevertheless if other factors indicate so

12. What is a countervailable subsidy? (5) • Only a countervailable subsidy if “specific” (cont’d) • specific if access is limited to certain enterprises located within a designated geographical region • specific if a prohibited subsidy under Article 3 SCM • contingent on export performance (Annex I SCM) • contingent upon the use of domestic over foreign goods

13. What is material injury or threat thereof? (1) • Similar conditions for antidumping and countervailing duty measures (Article 3 ADA; Article 15 SCM) • Conditions govern the “determination” of injury not whether • there is injury or threat thereof, or • whether such injury is “material” • “positive evidence” and “objective examination” (Article 3.1 ADA; Article 15.1 SCM)

14. What is material injury or threat thereof? (2) • Volume of dumped/subsidised imports • Effect on prices in the domestic market • Impact on domestic producers

15. What is material injury or threat thereof? (3) • Volume of dumped/subsidised imports (Article 3.2 ADA; Article 15.2 SCM) • consider whether there is a “significant” increase • increase in either absolute terms or relative to production or consumption • Interpretation

16. What is material injury or threat thereof? (4) • Effect on prices in the domestic market (Article 3.2 ADA; Article 15.2 SCM) • consider whether there is “significant” price undercutting • otherwise, whether the effect of such imports is to depress prices or prevent price increases to a “significant” degree • Adjustments? • Interpretation

17. What is material injury or threat thereof? (5) • Impact on domestic producers (Article 3.4 ADA; Article 15.4 SCM) • “an evaluation of all relevant economic factors and indices having a bearing on the state of the industry, including actual and potential decline in sales, profits, output, market share, productivity, return on investments, or utilization of capacity; factors affecting domestic prices; the magnitude of the margin of dumping; actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital or investments.” • Interpretation

18. What is material injury or threat thereof? (5) • Threat of material injury (Article 3.7 ADA; Article 15.7 SCM) • Change in circumstances to create injury must be “clearly foreseen and imminent” • Factors: • significant rate of increase in dumped/subsidised imports • available capacity • depressing/suppressing on domestic prices • inventories • Interpretation

19. What is causation? (1) • Article 3.5 ADA; Article 15.5 SCM • “must be demonstrated” that the dumped/subsidised imports are causing injury • “through the effects” means in terms of volume, price effects, and impact • “shall examine all relevant evidence before the investigating authorities” • “any known factors other than dumped imports which at the same time are injuring the domestic industry”

20. What is causation? (2) • “Factors which may be relevant in this respect include, inter alia, the volume and prices of imports not sold at dumping prices, contraction in demand or changes in the patterns of consumption, trade-restrictive practices of and competition between the foreign and domestic producers, developments in technology and the export performance and productivity of the industry.” • Interpretation

21. What is the role of the domestic authority? (1) • Initiation • Preliminary and final determinations • Review

22. What is the role of the domestic authority? (2) • Initiation (Article 5 ADA; Article 11 SCM) • “by or on behalf of the domestic industry” - 50%/25% • contents of the application • information reasonably available to applicant regarding applicant, product, prices, injury • interpretation

23. What is the role of the domestic authority? (3) • Initiation (cont’d) • “The authorities shall examine the accuracy and adequacy of the evidence provided in the application to determine whether there is sufficient evidence to justify the initiation of an investigation” • Interpretation

24. What is the role of the domestic authority? (4) • Initiation (cont’d) • notice (Article 5.5 ADA) • notice of initiation • de minimis • dumping - margin less that 2%; volume less than 3% of total imports • countervailing duty - subsidy less than 1 percent ad valorem; volume of imports or injury “negligible” • Interpretation

25. What is the role of the domestic authority? (5) • Preliminary and final determinations • due process - “full opportunity for defence” (Article 6 ADA; Article 12 SCM) • provision of application, “essential facts”, hearings, etc. • Confidential information, verification, best information available, sampling • Notifications and explanations (Article 12 ADA; Article 22 ADA) • Interpretation

26. What is the role of the domestic authority? (6) • Preliminary and final determinations • due process - “full opportunity for defence” (Article 6 ADA; Article 12 SCM) • provision of application, “essential facts”, hearings, etc. • Confidential information, verification, best information available, sampling • Notifications and explanations (Article 12 ADA; Article 22 ADA) • Interpretation

27. What is the role of the domestic authority? (7) • Review (Article 11 ADA; Article 21 SCM) • “sunset review” • an antidumping or countervailing duty measure “shall be terminated no later than five years from its imposition unless” expiry would “be likely to lead to continuation or recurrence of“ dumping/subsidisation and injury • Interpretation

28. What is the standard of review? (1) • Antidumping measures (Article 17.6 ADA) • (i) “whether the authorities’ establishment of the facts was proper and whether their evaluation of those facts was unbiased and objective. If the establishment of the facts was proper and the evaluation was unbiased and objective, even though the panel might have reached a different conclusion, the evaluation shall not be overturned” • Interpretation

29. What is the standard of review? (3) • Antidumping measures (Article 17.6 ADA) • (ii) “the panel shall interpret the relevant provisions of the Agreement in accordance with customary rules of interpretation of public international law. Where the panel finds that a relevant provision of the Agreement admits of more than one permissible interpretation, the panel shall find the authorities’ measure to be in conformity with the Agreement if it rests upon one of those permissible interpretations” • Interpretation

30. What is the standard of review? (4) • Countervailing duty measures (Article 11 DSU) • “a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreement” • Interpretation

31. What is the standard of review? (5) • Consequences for different standard of review • Significance of Article 17.5 ADA • “panel to examine the matter based upon . . . (ii) the facts made available in conformity with appropriate domestic procedures to the authorities of the importing Member” • Relevance of confidential information

32. Studies in the Application of Anti-Dumping and Anti-Subsidy Measures Stephen J. Orava  WTO Practice Group steve.orava@bakernet.com www.bakerinfo.com

33. Safeguards Stephen J. Orava  WTO Practice Group steve.orava@bakernet.com www.bakerinfo.com

34. Overview • What is the intent underlying the provision for safeguard measures? • What are the conditions for applying a measure? • What is serious injury or threat thereof? • What is causation? • What is the role of the domestic authority? • Concluding remarks

35. What is the intent underlying the provision for safeguard measures? • Article XIX of GATT 1994 - “Emergency Action on Imports of Particular Products” • “safety valve” • Facilitate greater liberalisation • Eliminate non-transparent grey area measures • Deference?

36. What are the conditions for applying a safeguard? (1) • Article XIX applies: • “result of unforeseen circumstances” • “of the effect of the obligations incurred” under “this Agreement”, including tariff concessions • Interpretation

37. What are the conditions for applying a safeguard? (2) • A product “is being imported into its territory is such increased quantities, absolute or relative to domestic production” (Article 2.1 SA) • Essentially, whether imports have increased in absolute or relative terms • Interpretation

38. What are the conditions for applying a safeguard? (3) • “and under such conditions as to cause or threaten to cause serious injury to the domestic industry that produces like or directly competitive products” • Interpretation of “under such conditions” • “Like or directly competitive products”

39. What is serious injury or threat thereof? (1) • “Determination” (Article 4 SA) • “serious injury” - a significant overall impairment in the position of the domestic industry • “threat of serious injury” - serious injury that is “imminent” • “domestic industry” - at least producers whose output constitutes a major proportion of total domestic production

40. What is serious injury or threat thereof? (2) • Authorities “shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry, in particular, the rate and amount of the increase in imports of the product concerned in absolute and relative terms, the share of the domestic market taken by increased imports, changes in the level of sales, production, productivity, capacity utilization, profits and losses and employment” • Interpretation

41. What is serious injury or threat thereof? (3) • Interpretation of factors • volume • market share • changes in other factors • Relates to obligation to “publish promptly . . . a detailed analysis of the case under investigation as well as a demonstration of the relevance of the factors considered”

42. What is causation? • The authorities’ determination “shall not be made unless this investigation demonstrates on the basis of objective evidence, the existence of the causal link between increased imports of the product concerned and serious injury or threat thereof. When factors other than increased imports are causing injury to the domestic industry at the same time, such injury shall not be attributed to increased imports.” • Interpretation

43. What is the role of the domestic authority? (1) • Investigation (Article 3 SA) • public procedures • reasonable public notice and hearings • “other appropriate means” of presenting views • ability to submit views as to whether the safeguard is in the public interest

44. What is the role of the domestic authority? (2) • Investigation (Article 3 SA) (cont’d) • public report of “findings and reasoned conclusions reached on all pertinent issues of fact and law” • treatment of confidential information

45. What is the role of the domestic authority? (3) • Applying the measure • “shall be applied to a product being imported irrespective of source” (Article 2.2 SA) • Interpretation

46. What is the role of the domestic authority? (4) • Applying a quantitative restriction (Article 5.1 SA) • “only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment” • “shall not reduce the quantity of imports below the level of a recent period” • the average of imports in the last three representative years for which statistics are available • clear justification

47. What is the role of the domestic authority? (5) • Duration and review (Article 7 SA) • not exceed 4 years, but can extend for another 4 years if necessity demonstrated • progressive liberalisation • mid-term review if duration is greater than 3 years

48. Concluding Remarks • Prohibits even “seek[ing] voluntary export restraints, orderly marketing arrangements, or similar measures on the import or export side (Article 11 SA) • WTO-related notification and consultation requirements (Article 12 SA) • “objective assessment” under Article 11 DSU

49. Safeguards Stephen J. Orava  WTO Practice Group steve.orava@bakernet.com www.bakerinfo.com