19 July 2017

Compliance with recommendations and rulings of the DSB by the EU in trade remedy cases


Article 19.1 of the WTO Dispute Settlement Understanding (DSU) provides that where a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned bring the measure into conformity with that agreement. In the disputes involving trade remedy measures, Article 19.1 of the DSU obliges the Member to amend or withdraw the duty to bring the measure into conformity with that agreement.

On two occasions noted herein, practice of the European Commission (Commission) was declared inconsistent with the obligations under the Anti-dumping agreement. While the Commission has not resorted to the WTO inconsistent methodology in new investigations, it has indirectly relied on these inconsistent methodologies for its ‘likelihood’ determination in expiry reviews.

In a review proceeding, reliance on methodologies, which were declared inconsistent by a Panel or the Appellate Body with WTO obligations may not be considered as WTO consistent. In US-Zeroing (EC) (Article 21.5 – EC), Appellate Body observed that if an investigating authority relies upon a margin of dumping calculated using a WTO-inconsistent methodology to support its likelihood-of-dumping determination [in a review under Article 11.3 of the Anti-dumping Agreement], the use of such a methodology would render the sunset review determination inconsistent with Article 11.3 of the Anti-dumping Agreement.


Continued use of multiple averaging for the purpose of dumping margin determination

In several cases, the Commission calculated dumping margin for each model types of the product under investigation. Consequently, different anti-dumping duty rates were recommended for different product types. In Bed linen from India, the Commission determined dumping margin for each model type and zeroed negative dumping margins which were arrived at with respect to certain model types.

The measure was challenged before the WTO DSB and use of zeroing methodology was declared inconsistent with the obligations under the Anti-dumping Agreement. Appellate Body also observed that having defined the product at issue as it did, the EU was bound to treat the product consistently thereafter in accordance with that definition. Article 2.4.2 of the Anti-dumping Agreement does not provide for establishment of ‘existence of margins of dumping’ for types or models of the product under investigation but the product that is subject to investigation. 

In US-Softwood lumber, the Appellate Body clarified that the investigating authority may take multiple averaging to establish margin of dumping for the product under investigation as intermediate calculations only but margins of dumping under Article 2.4.2 is for the product as a whole.   The Appellate Body also noted that the investigating authority must treat that product as a whole for, inter alia, the following purposes: (i) determination of the volume of dumped imports, (ii) injury determination, (iii) causal link between dumped imports and injury to domestic industry, and (iv) calculation of the margin of dumping.  Thus, multiple averaging for different types of product under consideration which eventually results in different anti-dumping duties for different product types may not be consistent with WTO Anti-dumping Agreement.  

In 1997 i.e. prior to the issuance of Appellate Body Report in EC-Bed linen case, the Commission in the case of import of Ring Binder mechanism from China determined the weighted average normal value per model (FOB Malaysian port) and compared it to the weighted average export price of the comparable model (FOB China port) for determining dumping margin for each model.  Consequently, different anti-dumping duty was recommended for different product types of the PUC.  In the expiry review, the Commission continued with the anti-dumping duty that was imposed based on dumping margin determined for each model types even though Appellate Body reports in EC-Bed linen and US-Softwood Lumber V, which declared this methodology as WTO inconsistent, pre-dates the expiry review determination. 


Continued use of Individual Treatment test against non-market economy countries

In EC-Steel Fasteners, Rule 9(5) of the EU Basic Anti-dumping Regulation was under challenge as it provided that anti-dumping duty will be specified for the country concerned and not for each supplier in case of imports from non-market economy countries. If exporters from this country satisfied the separate Individual Treatment (IT) test then these exporters could be provided with individual duty rate.  The Appellate body, in the report circulated on 15 July 2011, declared Rule 9(5) of the EU Basic Anti-dumping Regulation ‘as such’ inconsistent with the obligations under the Anti-dumping Agreement.   

In Melamine from China, in May 2011, the Commission applied individual treatment test for five exporting producers from China. It rejected individual treatment to two exporters and therefore individual duty was not provided for these two exporters.  In the expiry review determination issued recently, the Commission continued the imposition of anti-dumping duty as prescribed in the original investigation. This implied continued application of IT test. 



The Commission has failed to correct the inconsistency in the original investigation in these review proceedings. Moreover, the Commission merely extends the anti-dumping duty that is in force in an expiry review if it determines that there is a likelihood of continuation of recurrence of dumping and thus may not be able to modify the existing anti-dumping duty that is based on WTO inconsistent methodology. The Commission has also not initiated suo moto partial interim review to bring these measures into conformity with its obligations under the WTO.   This practice of the Commission undermines its record of compliance with the WTO DSB recommendations.

Be that as it may, it is advisable that the exporters request for partial interim review, ensure full cooperation by providing all the necessary information and specifically raise the issue of WTO inconsistency of the existing measures during the review proceedings. This should allow sufficient opportunity to the Commission to comply with the recommendations of the WTO DSB. 

[The author is a Principal Associate, International Trade Practice, Lakshmikumaran & Sridharan, New Delhi]


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