Lakshmi Kumaran & Sridharan AttorneysAn ISO 9001 / 27001 certified law firm

Single rate for producers & exporters from NME countries – An analysis

By Elaine TAN

On December 3, 2013, China has requested for a consultation with the United States of America for certain methodologies in 13 anti-dumping measures imposed by USDOC against China (DS471). It is alleged by China that USDOC uses certain anti-dumping methodologies that are inconsistent with the US obligations under the Anti-dumping Agreement (ADA), including “targeted dumping methodology”, “zeroing”, “single rate presumption” and “NME-wide methodology”.

This is already not the first time China has raised these issues, especially the “zeroing” method, which has been disputed and held to be inconsistent with the ADA by various DSB panels.

In DS471 case, the focus is more on the single rate presumption, involving in all 13 alleged anti-dumping measures. With regards to US practice, the US presumes that all producers and exporters comprise a single entity under common government control. Section 351.107 (d) set forth “Rates in antidumping proceedings involving nonmarket economy countries. In an antidumping proceeding involving imports from a nonmarket economy country, “rates” may consist of a single dumping margin applicable to all exporters and producers.” When determining the anti-dumping duty rate, it actually exists three catalogues of rates, i.e. individual rate applicable to mandatory respondent, weighted average rate applicable to respondents who are not mandatory  but pass “separate rate” test and nation-wide single rate for all other enterprises on the basis of facts available. In this situation, the burden is placed upon the producers and exporters to provide sufficient proof of absence of government control, in law and in fact, with respect to their export activities, based on a number of factors comprising the US’ “separate rate” test. Companies who do not pass the “separate rate” test shall subject to nation-wide single rate, whether or not they provide reliable export prices.

Thus, it is of importance to understand how US practice violates the WTO obligations in this regard.

Article 6.10 of the ADA which provides for the imposition of an individual margin of dumping for each known exporter or producer, reads as below:

“The authorities shall, as a rule, determine an individual margin of dumping for each known exporter or producer concerned of the product under investigation. In cases where the number of exporters, producers, importers or types of products involved is so large as to make such a determination impracticable, the authorities may limit their examination either to a reasonable number of interested parties or products by using samples which are statistically valid on the basis of information available to the authorities at the time of the selection, or to the largest percentage of the volume of the exports from the country in question which can reasonably be investigated.”

First of all, it is normally understood that the above article places an obligation on the authorities to apply individual dumping rate for each known exporter or producer. The Appellate Body in EC-Fasteners (China) [see end note 1] stated that the rule in the first sentence of Article 6.10 is mandatory. This is equally applicable in the case of all WTO Member countries irrespective of the nature of the economies. Article 6.10 first sentence does not envisage a special treatment for non-market economy countries.  There is no sanction for applying a single rate treating all the exporters and producers in NME countries as a single homogenous entity.

Secondly, Article 6.10 only provides one exception namely where it is “impracticable”. What’s the meaning of impracticable? Although there is no specific interpretation on this word by the Panel yet, we shall understand it under related WTO provisions. If we go through the ADA , “impracticable” appears in Article 9.2 also.

“… If, however, several suppliers from the same country are involved, and it is impracticable to name all these suppliers, the authorities may name the supplying country concerned.  If several suppliers from more than one country are involved, the authorities may name either all the suppliers involved, or, if this is impracticable, all the supplying countries involved.”

Both Articles in fact provide same explanation of “impracticable”, i.e. when a large number of exporters or producers are involved in the investigation and it is not practicable to determine an individual rate to each, the authorities may limit the number of interested parties. Other than this condition, the rules do not provide any additional conditions such as where NME applies.

Thirdly, according to the principle of the US legislation, it’s not possible to determine individual dumping margins for each exporter or producer in NMEs. The US view is that in case varying dumping margins are determined to every export entity, it may cause circumvention since in an NME all producers and exporters comprise a single entity under common government control. In Korea – Certain Paper [see end note 2], the Panel concluded that:

“…Having said that, however, we do not consider that Article 6.10 provides the IA with unlimited discretion to do so… In our view, in order to properly treat multiple companies as a single exporter or producer in the context of its dumping determinations in an investigation, the IA has to determine that these companies are in a relationship close enough to support that treatment.”

Therefore, the Panel holds that under the Article 6.10, if the authority decides not to grant individual dumping margin to companies who may be related, the burden shall be placed on the authority to closely evaluate if these companies are related enough to be deemed as a single entity but not on the presumption [see end note 3] or on the exporters or producers to prove their export activities are not intervened by the government.

Fourthly, even if under some situation, some exporters or producers are related companies in NMEs, the authorities still have the obligation to determine individual dumping margin for each. In EC – Fasteners (China [see end note 4]), the Appellate Body concluded that:

“[W]e do not find any provision in the covered agreements that would allow importing Members to depart from the obligation to determine individual dumping margins only in respect of imports from NMEs. We have explained above that Section 15 of China’s Accession Protocol permits derogation in respect of the domestic price or normal value aspect of price comparability, but does not address the export price aspect of price comparability. It, therefore, has no entailment in respect of the obligation in Article 6.10 of the Anti-Dumping Agreement to determine individual dumping margins. In our view, therefore, Section 15 of China’s Accession Protocol does not provide a legal basis for flexibility in respect of export prices and for justifying an exception to the requirement to determine individual dumping margins in Article 6.10 of the Anti-Dumping Agreement.”

Thus, there is no legal basis to deny a fully cooperative exporter’s export price from NMEs. China’s Accession Protocol only made compromise on the determination of domestic price and cost, which are two critical data for the determination of normal value, but these two data have never been used for the determination of export price. Therefore, if the company who passes the “separate rate” test, it shall be eligible to get individual rate based on its own export price and not be subject to the uniform rate impacted by other exporters.

Further, it has also been contended that the US measures, presuming state control, are inconsistent with the factual findings made by the US Department to justify CVD proceedings. The issue was last raised in a case before the US Court of International Trade [Slip opinion dated 11-10-2013 in Diamond saw blades] [see end note 5]. Though US courts have been consistent in their opinion and have time and again justified presumption of state control [see end note 6], the issue it seems has been settled by the Appellate Body in the EC – Fasteners (China) and the non-individual treatment has been held inconsistent with WTO obligations.

This precedent case assumes more importance in the issue raised above as USA had participated in the said dispute before the WTO as the interested third party, siding with the European Union on the issue raised above, and its arguments before the Appellate Body had been rejected. It hence seems most likely that the US has to change its practice in this regard.

[ The author is an Attorney, Lakshmikumaran & Sridharan and she is based in Shanghai, China ]

End Notes:
  1. Appellate Body Report, EC – Fasteners (China) Para. 320.
  2. Panel Report, Korea – Certain Paper, Para.7.161
  3. In EC – Fasteners (China), the Appellate Body upheld the Panel’s finding that the presumption in Article 9(5) violated Article 6.10.
  4. Appellate Body Report, EC – Fasteners (China) Para. 328.
  5. The US Court of International Trade however declined to express its opinion on the issue.
  6. Sigma Corp. v. United States, 117 F.3d 1401, 1405–06 (Fed. Cir. 1997)
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