Info Service on WTO and Trade Issues (Nov16/07)
4 November 2016
Third World Network
technical talks on critical dumping issues
Published in SUNS #8345 dated 1 November 2016
Geneva, 31 Oct (D. Ravi Kanth) -- A technical group of the Negotiating
Group on Rules on Friday (28 October) discussed "a highly technical
but critically important topic that can have fundamental implications
for the calculation, or even existence, of margins of dumping"
at the World Trade Organization, according to an unofficial room document
reviewed by SUNS.
It is not clear why the chair of the technical group, Hannes Welge,
chose to focus on the use of "alternative methods for determining
normal value", which is a critical element in the calculation
of anti-dumping margins, all of a sudden, said a negotiator who asked
not to be identified.
When there are several outstanding issues in the Doha rules dossier,
particularly in anti-dumping that includes the "zeroing"
methodology, the chair's focus on alternative methods has raised eyebrows,
the negotiator said.
Barring the United States, all other WTO members have called for the
elimination of the zeroing methodology. But the zeroing issue is not
even remotely touched because of the pervasive fear that it will anger
the US, said another negotiator.
Meanwhile, the chair of the Doha rules negotiating body Ambassador
Wayne McCook of Jamaica is convening an informal meeting on 11 November
to present his assessment based on the consultations he held with
members until now.
Perhaps, "we will then know the issues that would be taken up
in the rules, particularly fisheries subsidies," for the WTO's
eleventh ministerial meeting in Buenos Aires, Argentina, next year,
the negotiator said.
In his fax as well as the unofficial room document circulated to members
ahead of Friday's meeting, the chair of the technical group on anti-dumping
said "the starting point for the discussion is once a decision
has been made to resort to an alternative method."
"In other words," he said, "we will not be talking
about the circumstances when one could or could not use alternative
methods, such as "NME [non-market economy]" methodologies
or "particular market situation"."
"Nor will we address the treatment of "distorted input prices"
under Article 126.96.36.199, because this controversial topic is currently
in dispute settlement," Mr Welge said.
The moot issue is why the chair is leaving out a discussion on "NME
methodologies" which are often used against China by the US and
also the EU, or "particular market situation," a codeword
for China again, the negotiator pointed out.
The chair said "our discussion will begin with the choice between
alternative methodologies", without clarifying why the discussion
must begin with this issue.
Mr Welge posed a range of questions to members directly on the choice
between alternative methodologies. The questions include:
(i) Do you use third country export price, or CNV [constructed normal
value], or perhaps some other alternative, when you cannot use home
(ii) Do you always use one or the other of these alternative methodologies,
or can you choose case-by-case?
(iii) If the latter, i. e. case-by-case, do you have a preference
or hierarchy between alternatives? What factors do you take into account
in choosing between them?
(iv) Where the investigation involves multiple models, might you use
different methodologies for different models?
(v) At what point in the investigation do you seek detailed information
on cost of production and third country export prices?
(vi) Do you seek all that information in your primary questionnaire
or do you only seek that information once you have decided that you
cannot use home market prices?
These questions, though pertinent to alternative methods for determining
normal value, do not quite reveal the underlying background and why
the chair finalized these questions.
Mr Welge did not explain why these issues are raised and whether they
are based on proposals/inputs provided by any member or members, according
to the negotiator.
From alternative methodologies, the chair went on to discuss the "use
of third country export prices."
Here again he raised a range of direct questions to members such as:
(i) How do you decide which country [export prices] to use, taking
into account the tests of "appropriateness" and "representativeness"
in the ADA?
(ii) Do you consider the volume of sales, the ordinary course of trade
test, how prices vary between third country markets, or any differences
between products, transactions, levels of trade, etc.?
(iii) Do you collect data regarding more than one third country before
choosing the third country and, if so, what data do you collect and
for what purposes? Once a third country is chosen, what is your source
(iv) Do you rely upon the exporter's pricing data, or do you also
seek corroborating information from the importers or other parties
in the third country? Do you ever undertake verification in the third
(v) How do you deal with lack of information or non-cooperation from
parties in the third country?
(vi) What do you do if the exporter is related to the importer in
the third country?
These are interesting issues on which the panels and the Appellate
Body have already issued definite rulings. The chair ought to have
explained the historical context which prompted him to raise these
questions on the use of third country export prices.
After the discussion on the choice of alternative methodologies and
the use of third country export prices, the chair turned to "the
construction of normal values" in which he raised the following
(i) Do you routinely ask for cost information necessary to construct
a normal value, or only when the applicant so requests?
(ii) How do you distinguish between costs associated with the domestic
like product for which you are constructing normal value, costs associated
with a product other than the domestic like product, and costs not
associated with any specific product?
(iii) What evidence do you consider and who bears the burden of establishing
(iv) Do you routinely check whether records are kept consistent with
GAAP? Under what circumstances has your authority considered that
cost allocations in the producer's records are not consistent with
GAAP [Generally Accepted Accounting Principles]?
(v) How do you address situations where nothing in the producer's
records speaks to how a particular allocation should be made?
Following these three issues, the chair moved to another set of questions
on production costs and their role in anti-dumping investigations.
Mr Welge sought to know:
(i) What do you do if inputs are purchased from a related supplier?
(ii) How do you distinguish between "direct" (or variable)
and "indirect" (fixed, overhead) production costs?
(iii) How do you distinguish any such "indirect" manufacturing
costs from SG&A [selling, general, and administrative expenses]?
(iv) How do you allocate production costs over different products?
(v) Do you allocate costs on the basis of volume, value, production
capacity or some other method?
(vi) How do you deal with costs that should be allocated over a period
longer than the dumping POI?
(vii) Do you rely upon the average useful life of assets, upon evidence
of allocations from the company's records, or some other means?
(viii) What is your approach where the producer, or the production,
is in the start-up phase?
(ix) When costs differ between the exported goods and those sold in
the home market, which do you use?
Further, he sought to know more about selling, general and administrative
Mr Welge raised the following questions on SG&A:
(a) What types of expenses do you include in the SG&A calculation?
(b) Under what circumstances might you consider that SG&A cannot
be determined on the basis of an exporter's SG&A?
(c) In such cases, what alternative bases do you use to calculate
(d) Do you treat research and/or development costs as SG&A or
as production costs, and why?
(e) How do you allocate SG&A to the like product?
(f) How do you deal with claims of differentiated selling expenses
between the domestic and export market? How do address financial expenses,
particularly in cases where those expenses are not product-specific?
Lastly, the chair asked members to answer issues centering on amount
for profit. The questions include:
(1) In what circumstances do you decline to consider the actual data
associated with the sale of the like product for a particular exporter
(2) In such cases, on what basis do you determine an amount for profit?
(3) Do you have a preference for profits of the same producer for
similar products, for profits of different producers for the like
product, or some other approach?
(4) Or do you proceed on a case by case basis?
(5) Are any such preferences reflected in your law, regulations or
guidelines, or are they a reflection of practice?
In short, the chair's technical questions raised doubts about the
underlying goals and whether these questions are posed by any one
or more members, said negotiators familiar with the discussion. +