Hebrew University Faculty of Law, Winter 1998, Vol. 32, Number 1
Talia Einhorn*
1. Introduction
Dumping is defined, basically, as the sale of goods to an export market at a price below that charged for comparable goods in the exporter's home market. The General Agreement on Tariffs and Trade (GATT) does not forbid such action, not even when injurious to the competing domestic industry. However, it has taken the view that dumping constitutes an unfair trade practice. Under GATT, Article VI Contracting Parties (or Members, as they are now termed in the GATT 1994 Agreements) are authorized, as an exception to other GATT obligations, to unilaterally impose antidumping (hereinafter: AD) duties to counteract the effects of dumping. The duties should create a level playing field in which producers all over the world will be able to compete fairly with each other. The principles sound simple and straightforward, yet their application is one of the most contentious topics in international trade law.
The economic coherence of AD rules is controversial.1 In international trade, price discrimination between national markets is typically made possible when the exporter has a powerful position in the home market and re-exportation to that market is not feasible. In the domestic arena price discrimination is countered by the laws of competition and antitrust. International trade law offers states a very different remedy, that first and foremost protects the competing local industry, regardless of the procompetitive or anticompetitive effects of dumping on the market as a whole. Dumping may be very beneficial to consumers and industries that regularly use such goods. Unfortunately, states often tend to place industrial policy, intended to protect the profitability, turnover, productivity and other such interests of their domestic industry, above the interests of the public at large in rules that would safeguard free competition in their markets as such.2
The 1994 WTO Agreement, adopted by 124 countries and the EC on 14 April 1994, is the most elaborate attempt ever made at creating an economic order that would enhance international trade, by providing it with a rule-oriented atmosphere that should prevail in all Members. One is tempted to think that free trade may simply be attained in a passive manner that would let the market forces work. Quite the opposite is true. It is planned economies that require only one simple legal principle: the plan is law. Market economies must be based upon a sophisticated and a differentiated system of private and public law.3 Attaining international free trade requires not only cooperation on the international level, but also the implementation of domestic rules that would make the authorities of every Member State support the rules rather than bend them in favour of local interest groups. Only through such rules would citizens all over the world be able to enjoy their rights to pursue international trade activities and explore the advantages conferred on the public at large.
Mindful of this need and aware that direct application of WTO law by national courts is a complex and not very promising possibility at present, 4 the authors included a provision, requiring all Members to ensure the conformity of their laws, regulations and administrative procedures with their obligations under the Agreements.5 These obligations include the Agreement on Implementation of Article VI of GATT 1994 (hereinafter: "the Antidumping Code", or "Code").6 Art. 1 of the Code provides that "antidumping measures shall be applied only under the circumstances provided for in Article VI of GATT 1994 and pursuant to investigations initiated and conducted in accordance with the provisions of this Agreement". The Code commands exclusivity; no specific action against dumping of exports from another Member can be taken except in accordance with the Code and no reservations may be entered with respect to any of its provisions without the consent of the other Members (art. 18). Being neither too formalistic nor loose-ended, the rules are intended to guarantee transparency, certainty, a measure of uniformity in their application in different jurisdictions, and due process to all, including foreign and small companies. To be sure, uniformity will not be complete. As a result of the negotiations and compromises, the WTO rules leave the Member States a measure of discretion regarding the implementation of the rules in their respective legal systems. The specific solutions chosen by each Member should reflect its own economic interests and social needs.
Israel ratified the WTO Agreements in January 1995. Since Israel's implementing legislation should reflect its own interests, those will be first considered. Concurrent with ratification, the Ministry of Trade and Industry established an inter-ministerial committee to analyze and suggest revisions of Israeli international trade laws and regulations. The subcommittee for antidumping and subsidies made a report regarding changes needed in the law and its administration.7 The Ministry of Trade issued a report stating that a new draft law will be submitted in the near future. 8 The new draftlaw prepared by the Ministry of Trade and Industry has not yet been submitted to the Knesset. However, according to that report, Israeli antidumping law is on the whole already compatible with the international obligations.
Current Israeli law, scanty as it is in detail and scope, will therefore be analyzed for its consistency with the Code, from a substantive as well as a procedural perspective. This critical evaluation will include, with respect to selected issues, comparative analogies drawn mainly from the experience gained in the EC and the US, both notable users of AD duties. Solutions chosen in other jurisdictions may help broaden the scope of options open to Israeli law, provided however that due account be taken of the differences in interests. Finally, guidelines regarding law reform will be suggested.
Lack of transparency in Israel has been a serious obstacle to this study. The decisions made by the administering authorities are not made available to the public. In the absence of such information, it is practically impossible for anybody, unless he is a lawyer who has already litigated some cases, to have any idea how former cases were decided. Even then, there is not much certainty how future cases might be handled. The few decisions cited in this article have been given to the author subject to her written undertaking not to disclose the names of the parties nor the products investigated and countries of production/ exportation thereof. It is not clear to what extent these decisions are representative, but to the extent that they are, they seem to disclose very little of their reasoning. More information has been retrieved from aggrieved litigants. No statistical material is available regarding the number of cases opened every year, and how they ended.
2. Israeli Antidumping Law: The Underlying Goals
Foreign trade is for Israel a sine qua non. Limited natural resources make her dependent upon imports. The funding of the imports should come insofar as possible from exports, since otherwise capital has to be imported, through grants or loans, to make up for the indispensable foreign currency expenditure. In order to compete in export markets, the domestic industry must produce products that are competitive in both quality and price. Exposing the domestic market to competing imports obliges the domestic producer to be efficient in order to survive the market conditions. The small size of the domestic market dictates that, in the absence of competing imports, there would hardly be any competition at all in many sectors. As long as domestic producers are protected from imports, they may sell their output to the local market alone under conditions that they dictate. Their profits are guaranteed even if they do not live up to the more stringent criteria of the world market. Furthermore, mass production is often essential for an industry to be competitive. Israel is too small to provide a market for large-scale domestic production. To reap the benefits of size, the industry must engage in export.
When a country protects its industries from imported goods, it is quite clear that it cannot protect all industries, since that would mean protection to nobody. Thus the whole structure of the economy must be affected through the protection of some industries rather than others. Inefficient patterns of both production and consumption are fostered, as it is the inefficient industries that need to rely on the protection, and the other unprotected industries, as well as the public at large, who must, at the end of the day, bear the costs of protection. Economic research emphasizes that those least able to absorb the economic burden of protection are the exporters, that protection in fact taxes the exporters!9 They must sell on the world markets and can hardly pass any increase in costs on to their consumers, as their competitors would then undercut them. This is just as valid for protection via AD duties. 10 Indeed, the negotiating history of the GATT Uruguay Round seems to indicate that most of the major areas of disagreement pitted the United States and the EC, on one side, against Japan, Hong Kong, Korea, Singapore, and the Nordics, on the other. The former represented the protectionist views of economic actors having large and competitive internal markets, whereas the latter represented the interests of smaller states dependent upon exports and suffering from AD measures.11
Furthermore, "what lawyers tend to describe and analyze as 'international trade conflicts' among states are often, from an economic and political perspective, to a large extent conflicts of interests within states rather than between states". 12 The interests of domestic producers pleading for protection from imports conflict with those of the consumers and of all other producers of the importing country. A substantial share of the goods imported into Israel are consumed by other industries. Exporting industries that must use as inputs goods manufactured by protected industries are thereby made uncompetitive. 13
The political roots of protectionism thus become clear. Since trade restrictions can hardly ever give net protection to the national economy as a whole, they serve instead to redistribute income among domestic groups at a considerable cost to the restricting country. For the sake of buying political support, governments use their discretionary power to distribute "protection rents" that favour domestic producers over the interests of the public as a whole. 14 "Dispensing gratuities at the expense of somebody else who cannot be identified became the most attractive way of buying majority support". 15
It may be true that the most appealing option is to abolish antidumping laws and put an end to the evils they generate - power politics, bad economics and corrupted law.16 This is unrealistic in a world where AD has become one of the most frequently used instruments of protection from imports. 17 A far-reaching reform would require cooperation of the major WTO members. For the time being, each Member should see to its own interests.
Given Israel's interest in foreign trade, this means that AD duties should be applied only when genuine dumping causes domestic producers of "like products" material injury, which is not offset by benefits accruing to other manufacturers, or to the public at large. Therefore, when drafting the rules of its new antidumping law, Israel should select such rules that would enhance the public interest and restrict the use of AD measures only to those cases that deserve such protection, not allowing the protectionist bias to prevail. This is important for one more reason. Proper implementation of the Antidumping Code involves significant administrative costs. A small country can hardly afford the handling of a flood of applications. This bureaucratic dimension should also influence the institutional organization selected to handle AD cases.
3. Israel's International Obligations vs. Current Israeli Antidumping Law
3.1 The Substantive Requirements
GATT Members may impose AD duties if the existence of the following three substantive requirements is proved: (1) dumping; (2) material injury, or a threat thereof, to the competing domestic industry; (3) a causal link between the dumped imports and the injury, or threat thereof, to the domestic industry. During the Uruguay Round, several participants, including Japan, Korea, Singapore, Hong Kong, Canada and the Nordic states, suggested one more substantive requirement, namely that the imposition of AD duties be in the public interest, rather than in the interest of the competing domestic industry alone.18 The EC, a major AD user, had already a public interest clause.19 Had these suggestions been accepted, it would have become mandatory to assess the implications of the imposition of duties for other industries, consumers and the economy in general. The final text reflectsm this suggestion only to a limited extent (arts. 6.12, 9.1).
3.1.1 The determination of dumping
a. Definition of "dumping" and "dumping margin"
GATT 1994: Art. 2 of the Antidumping Code reads:
2.1 For the purpose of this Agreement, a product is to be considered as being dumped, i.e. 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.
2.2 When there are no sales of the like product in the ordinary course of trade in the domestic market of the exporting country or when, because of the particular market situation or the low volume of the sales in the domestic market of the exporting market, such sales do not permit a proper comparison, the margin of dumping shall be determined by comparison with a comparable price of the like product when exported to an appropriate third country, provided that this price is representative, or with the cost of production in the country of origin plus a reasonable amount for administrative, selling and general costs and for profits.
From an economic point of view, there may be a stronger case for restricting imports sold at a price not covering their cost of production, whether or not this is lower than their home market price.20 Since a company would fail if it conducted such a pricing policy over an extended period of time, below cost sales are likely to be temporary, and thus more injurious to the importing country in the long run. Such behaviour may occur when a foreign producer is trying to drive his competitors out of the market. These incidences are probably rare and should be punishable under the domestic laws of competition. 21 More often, a foreign producer would adopt such a policy in order to penetrate a new market, or cut losses. Even if he cannot sell at prices that cover his total (fixed and variable) costs, it would still be rational to sell as long as the sales cover short-term variable costs. The losses incurred in closing the plant down may be higher. In the long run, all costs are variable and prices have to cover the costs, or the producer will eventually go bankrupt. 22 The greater attention given to sales below "normal value" rather than sales below cost is partially due to the assumption that all sales below cost are also sales below "normal value".23 However, the main reason is practical. Determining the "normal value" is a difficult yet surmountable administrative task. The calculation of foreign costs of production reaches beyond that.
The difference between the allegedly higher "normal value" and the lower "export price" constitutes the dumping. To calculate the "dumping margin", this difference has to be calculated as a percentage of the c.i.f. price of the goods. If foreign products sold in the home market and in the import market were physically identical and sold under identical circumstances, the calculation of dumping would be no more than simple arithmetic. Any difference in price would be proof of dumping, with the difference in price being its exact amount. In reality, the process of establishing the "normal value" and "export price" is very complex. In order to compare "apples with apples", both values have to be established at the same level of trade, normally at "ex-factory" level (art. 2.3).
The first study of AD, published in 1936, highlighted some of the problems. 24 According to that study, the most important single factor giving rise to spurious dumping is the difference in size of the unit orders. The foreign buyer often makes larger orders. Export sales are usually one or more stages less advanced in the process of distribution to the ultimate customer. The importer buys for resale to distributors or to large-scale consumers, whereas in domestic trade the manufacturer often sells his product directly to the end-user or to small retailers, which normally implies smaller orders. Hence, concessions in price to foreign buyers for large orders should not be regarded as dumping if similar concessions are made on domestic orders of the same magnitude, or if the sellers would be willing to make similar concessions if such orders were obtainable in the domestic market. The conduct of domestic marketing may involve employment of salesmen and advertising services, and even the maintenance of agencies, whereas sales to a foreign market are often made directly to the buyer. Payment is often more secure in international transactions.
For the determination of dumping, prices should be compared on the same date. This seems an obvious principle, yet not free of complications. It is often the practice of foreign buyers to anticipate their needs long ahead, and to give a single order covering their requirements for a substantial period, with deliveries to be made according to a specified schedule, or as requested. This may create a considerable time lapse between the date of purchase and the date of shipment. If during this interval prices rise in the exporting market, comparison of prices on the basis of the date of shipment will reveal apparent dumping, even though the prices were the same at the date of purchase and there was no actual dumping.
Differences in price may be due to an exemption of exporters from payment of customs of dutiable imported materials, further used in manufacture for export. Such exemption may be made directly or by refund upon exportation. If no concealed bounty is involved, such refunds confer no special advantage on the exporters in their competition on the international market. They merely mitigate the handicaps created by domestic protective tariffs. The same holds true for other similar charges, such as excise duties.
The products compared should be "like products". The price of a fancy 27-inch television set, top-of-the-line model with a wooden cabinet, sold on the home market, should not be compared with that of an exported 13-inch basic set in a metal cabinet.25 This issue is complicated by the fact that high technology products have a very short life cycle, and are frequently modified, while the costs to make and sell them often decrease.26
b. Calculation of "export price"
To make a fair comparison between the ex-factory prices of the goods sold in the export market and in the import market, the invoice price is often used as a starting point. Adjustments are then made for packaging, transportation, size of orders, level of trade, terms and conditions of sale, indirect taxes and duties, physical characteristics and any other differences that may affect price comparability (art. 2.4).27 Where the product is first sold to an affiliated company in the importing country, further adjustments will have to be made to obtain a "constructed export price". The price in this case should be further reduced by the amount generally incurred by the producer or exporter, or by the affiliated seller in the importing country, in selling such goods, such as a reasonable margin for general, selling, and administrative (GS&A) costs. 28 These costs should be based on the generally accepted accounting principles of the exporting country.29
Special problems occur when a product is first sold to an unrelated intermediate company located in the exporting country, e.g. a trading house, which then sells to importers;30 or where the manufacturer establishes a branch in the importing country and sells intermediate or raw materials, at prices below home market price, to be incorporated in different end products (input dumping); or when components, requiring just minor assembling operations, are dumped and then assembled at the import market (sub-assembly dumping).31
c. Calculation of "normal value"
"Normal value", for a market oriented country, is the home market price. Is the home market that of the country of production, origin, or export? 32 The Code does not provide a conclusive answer. According to art. 2.5:
in the case where products are not imported directly from the country of origin, but are exported to the importing Member from an intermediate country, the price at which the products are sold from the country of export to the importing Member shall normally be compared with the comparable price in the country of export. However, comparison may be made with the price in the country of origin, if, for example, the products are merely transshipped through the country of export, or such products are not produced in the country of export, or there is no comparable price for them in the country of export.
The home market price is defined as the price at which such goods are sold "in the ordinary course of trade". During the Uruguay Round the Nordic delegation suggested that the following should be considered sales outside the ordinary course of trade: sales at sharply reduced prices to liquidate the end of stock; sales at particularly advantageous prices having the character of gifts to important interest groupings for the company or business sector; low-price sales offers, which are valid for very limited periods of time, to introduce new products. 33 Other delegations objected. They regarded such sales as normal business practices.34
Japan contended that high-tech products were different from other products, in that they require large initial development costs that decline sharply as production technologies mature. Therefore, their pricing should reflect a long-term view of the cost recovery period, which might be below cost in the near term, but above cost in the longer term.35 Another factor that may affect the calculation occurs in times of recession, when companies sell below cost, provided they can cover their variable costs. Producers may sell some models at a loss, e.g. because they are end-of-model-year, or have been replaced by other models.36
The Code states that sales of the like product on the home market at prices below per unit (fixed and variable) costs of production plus GS&A costs may be treated as not being in the ordinary course of trade. They may be disregarded in determining normal value only if the authorities determine that such sales are made over an extended period, in substantial quantities and at prices which do not provide for recovery of all costs within a reasonable time (art. 2.2.1).
If there is no home market price, because the product is not sold on the home market in the ordinary course of trade, or, if the volume of sales on that market is too low to serve as a fair basis for comparison, then a "constructed normal price" is used. This is the price of such goods when sold to a third country at a representative price, or the cost of production in the country of origin plus a reasonable amount for GS&A costs and for profits (art. 2.2).37 If a surrogate country is chosen, there is danger that a country at a higher level of economic development would be selected where prices and costs will be much higher.38
d. Calculation of "dumping"
Once normal value and export price have been established, they must be compared fairly. Adjustments should be made in each case, on its merits, for physical characteristics; terms and conditions of sale (e.g., commissions, credit expenses, guarantees, warranties); level of trade; quantity (art. 2.4). When the comparison requires a conversion of currencies, such conversion should, in the regular case, be made using the rate of exchange on the date of sale. Fluctuations in exchange rates shall be ignored and in an investigation the authorities shall allow exporters at least 60 days to have adjusted their export prices to reflect sustained changes in exchange rates during the period of investigation (art. 2.4.1).
The existence of margins of dumping during the investigation phase shall normally be established on the basis of a comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions, or by comparing the normal value and export prices on a transaction-to-transaction basis (art. 2.4.2). This ensures that indeed apples be compared with apples rather than pears.
Israeli law: The Israel Trade Duties Law, 1991,39 defines dumping as importation of goods, the export price of which is lower than the normal value(sec. 11).
Sec. 12 reads:
(a) "Normal value" of goods is the price, in the ordinary course of trade, of identical or similar goods intended for consumption in the country of production; a sale is not considered to have taken place in the ordinary course of trade, where the parties to the sales transaction are related or have a special arrangement, including the connection between a producer and a corporate body controlled by the producer.
(b) If identical or similar goods are not sold in the producing country, or, if market conditions in that state do not allow for a proper comparison of the sales for the determination of the "normal value", the normal value shall be determined as follows: - (1) the highest price of identical goods exported to a third country in the ordinary course of trade; and in the absence of such a price - (2) the sum of all production costs of identical goods in the producing state plus reasonable profit.
(c) If there are no data regarding the normal value mentioned in 12(a) and 12(b), the normal value is to be determined according to the price in the ordinary course of trade of identical goods intended for consumption in another country, allowance made for differences in the relevant conditions existing in that other country.
(d) If the price of identical or similar goods intended for consumption in the producing country is less than their cost of production there, this price will not be regarded as a price obtained in the ordinary course of trade, and the normal value shall be determined according to subsections (b) or (c).
(f) if the goods are not imported to Israel directly from the producing state, the normal value shall be their normal value in the exporting country; however, the commissioner or the advisory committee may determine that the normal value is their normal value in the producing state.
Where the export price is influenced by special arrangements between the importer and the foreign supplier, the export price is to be calculated on the basis of the price of sale by that supplier to an unrelated buyer. If such information is hard to obtain, the export price will be calculated on a reasonable basis, determined by the Advisory Committee (sec. 13). The export price and normal value shall be compared under similar terms of trade, account taken of the terms and conditions of the different sales, including differences in indirect taxation, and any other factor that may influence the comparison (sec. 14). There is also a special provision for goods imported from nonmarket economies (sec. 12(e)).The law is oblivious of the possibility that more than one importer may be involved, and does not rule whether the margins of dumping should be calculated for each separately.
The rules are short and give very few guidelines as to exactly how the calculations are to be made. On the whole, they seem compatible with the Code, with the exception of sec. 13, which allows the Advisory Committee (hereinafter: "the Committee") unlimited discretion, subject only to its reasonable exercise, in the calculation of an export price. It is therefore important to see how the rules were applied in practice, in order to assess whether the brevity of the rules has been supplemented by the administering authorities, i.e., the Commissioner and the Committee.
In general, decisions given prior to the coming into effect of the Antidumping Code are not at all revealing. It is practically impossible to follow the calculations. There is some confusion as to what exactly constitutes dumping, and no serious effort is made to calculate the margin of dumping according to the method described in the Code. To be sure, Israel was not a party to the Kennedy and Tokyo codes on AD. In their decisions, the authorities did not reject offhand even the most peculiar claims. Decisions given following Israel's membership in the WTO are more transparent, yet not free of methodological faults. To illustrate the problems encountered, two cases will be closely scrutinized, the first preceding the Code, and the second - following thereafter. Each decision has a confidential version, which remains only with the Committee, and another, non-confidential, which the parties receive. The non-confidential version is full of [ ] characters, denoting that the information is confidential. This study is confined to the non-confidential version made available to the author.
(a) In this case, decided prior to the coming into effect of the Code, the complaint was brought by the sole producer in Israel of two kinds of a certain product, against an importer of similar products. The complainant claimed that foreign products were dumped on the Israeli market. As evidence, he presented a summary report of worldwide production data, written in 1990 (no mention is made regarding the period to which the data relate). From this report, the Committee should be able to conclude the incidence of dumping, so the complainant, because the prices resulting from mass production in Western Europe are lower than the price level worldwide [sic!]. The Committee, applying the following sequence of decisions, concluded that the targeted goods had indeed been dumped:
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(1) "Like products" - The Committee first compares the length and weight of the domestic products with those of the imported ones. The domestic products are significantly heavier, yet the Committee is of the opinion that this difference may be ignored. This may well be true, yet the decision warrants some explanation.
(2) "Normal value" - the price of the two imported targeted products is compared with the price list of a wholesale supplier of similar products, manufactured by another company in the exporting country, denoted by [ ] (i.e., confidential). According to the export director of the investigated supplier, the prices on the list are those quoted to wholesalers, net ex-factory, payment to be made within 30 days. According to the Committee, the prices quoted by the second unspecified supplier relate to the sale of a large quantity. A table follows with the domestic prices in the exporting country of these two suppliers: (i) regarding the investigated supplier: the products wholesale price ex-factory, according to the price list submitted by the complainant; an indication that the quantity to which the price relates is unknown; price to be paid within 30 days; (ii) regarding the other wholesale supplier denoted by [ ]: wholesale price - [ ]; quantity - 2000 units for one product and 600 for the other; the goods are to be delivered to a railway station in Germany (neither place of manufacture, nor name of railway station are mentioned); terms of payment - unknown.
The importer claims that the price list, used by the Committee for the targeted products, only applies to relatively small orders and includes such components as storage, delivery to the building site, and profits, which should have been subtracted from the price, had the normal value been properly calculated. The importer claims also that rebates should have been deducted.40 The Committee rejects some allegations and expresses serious doubts regarding others, claiming that the importer has not produced a reliable price list denoting the price of the products for consumption in the domestic market.
The Committee rejects the importer's suggestion, to compare the price list provided by the complainant to price lists offered by the producer to customers in Norway and in Singapore. The reasons: first, these price lists do not substitute hard and fast evidence regarding the "normal value", and may at most be taken to reflect the" export price". Secondly, even if these prices were to be regarded as the normal value, it would be difficult to give them much weight, since many factors are missing, and they do not outweigh the above-mentioned findings. This part of the decision reflects a measure of confusion between the different concepts of "export value" and "normal value".41 Besides, many factors are also missing from the price lists used by the Committee, such as the quantities purchased, the terms of payment, the terms and conditions of the agreement, terms of delivery, etc. The Committee does not mention which data in particular were missing from these price lists that were not missing from the others. While the Committee states that the importer has not provided firm evidence to support his case it remains unclear which data exactly are referred to, and whether the importer was asked to provide these specific data.
The Committee concludes that it has not been convinced that the normal value is not reflected by the price list. This statement is somewhat peculiar. The Committee should have been positively convinced that the price list reflects the normal value, or otherwise stated that it has made its determinations using the best information available. Under the Code (art. 6.8), recourse to the best information available should be restricted to cases where a party refuses access to necessary information, or does not provide necessary information within the time limits, or significantly impedes the investigation.
(3) "Export price" - The Committee draws a table with the export prices of the investigated products. The wholesale price f.o.b. (port of export unmentioned) is denoted by [ ]. The data regarding the quantities, to which the prices relate, are unknown. The importer claims that the export prices mentioned in the invoices used by the Committee, should be increased by a commission of [ ]%, which the importer had to pay the foreign producer for handling the transportation, according to an invoice produced to that effect. The Committee accepts this allegation, yet rejects all other allegations not specified in the decision, claiming that the importer has not produced hard and fast evidence regarding the terms and conditions of his purchases. Based upon the invoices and import listings, it decides that the export price amounts to [ ] (confidential) for one product and [ ] (confidential) for the other.
(4) "Dumping" determination - The Committee then compares the export price with the normal value (a simple comparison, so it would seem, between the domestic price and the export price) and concludes that there is a difference of [ ]% (even this figure is kept in confidence), with respect to one product, and [ ]% - with respect to the other.
(5) "Dumping margin" - The dumping margin is now calculated as the difference between the normal value and the export value. Since all data provided to the Committee relate to the period October 1989-April 1990, the comparison relates to that period. Three tables are drawn. This time two more small-size importers of like products are introduced, which, so it seems, were not taken into account previously. The dumping margin is calculated four times with respect to each of the two products: (i) the export price of the investigated importer is compared with the normal value, taken on the basis of the price list alone, no rebates for quantity etc. taken into account; (ii) the export price of the other two importers compared with a normal value based on the price list alone; (iii) the export price of the investigated importer compared with the normal value, rebates taken account of; (iv) the export price of the other two importers compared with the normal value, account taken of the rebates. Every table thus contains four blanks, representing the values arrived at. It remains unclear how the margin has been calculated. The margin should be given as a percentage of the price c.i.f. of the products, yet there is no indication that the figure was arrived at in this manner. The Committee decides that the dumping margin fluctuates between [ ] and [ ] for each of the products. The Committee decides not to adopt the maximum figure, since it often happens that importers do enjoy certain rebates. Therefore, the Committee determines that the dumping margin is 15%, adding that neither the importer nor the foreign producer cooperated with the Committee in providing unambiguous information. However, the Committee does not state that consequently it used the best information available, but rather that the credibility of their pleas has suffered thereby. |
(b) This decision was made after the coming into effect of the Code. The Committee declares that even though the complaint was made beforehand it is following the rules set in the Code. When calculating the "normal value", the Committee concludes that more than 20% of the products were sold in the domestic market of the exporting country at prices below cost. Therefore, it considers all such sales outside the ordinary course of trade, and excludes them from the calculation of the "normal value". In reaching this decision, the Committee compares the average monthly prices of the products with the average annual cost of production, with the result that, even though for any given month, the domestic price might have well exceeded production costs in that specific month, a large share of the sales is nevertheless considered "below cost", due to a substantial increase in production costs in the course of the year. The Committee quotes art. 2.2.1 of the Antidumping Code as the basis for this mode of calculation, the relevant part of which reads: "If prices which are below per unit costs at the time of sale are above weighted average per unit costs for the period of investigation, such prices should still be treated as being in the ordinary course of trade, and not be disregarded when calculating the normal value". It seems that art. 2.2.1 does not provide that the monthly domestic price should be generally compared with the average annual cost of production in determining the percentage of sales made below cost. Art. 2.2.1 makes an exception which reduces the number of incidences of sales being treated as not being in the ordinary course of trade, rather than the other way around. By using an erroneous method of calculation, the Committee determines a "normal value" higher than warranted by the facts of the case.\
Regarding the "export price", the Committee just mentions that it accepts the values determined by the Commissioner carrying out the investigation under the law.
The Committee then makes the adjustments to the same level of trade. One may wonder whether these are the only adjustments needed in this case. Be that as it may, the Committee does not take into account any differences due to the differences in the quantities sold and risks incurred in both markets. It does not indicate whether it compares the weighted average normal value with a weighted average of prices of all comparable export transactions, or the normal value and export prices on a transaction-to-transaction basis.
3.1.2 Determination of material injury
GATT 1994: A determination of injury is a precondition to the imposition of AD duties. The authorities must first define the relevant "domestic industry" producing "like products", which has been allegedly affected by the dumped imports, and then decide whether that industry suffered "material injury" or has been threatened with such injury.
a. "Like products"
The definition of "like products" is based on factors such as physical similarity; interchangeability in use; degree of substitutability in different mar |