Anti-dumping

The WTO AD Agreement

Key Concepts

Under the AD Agreement, AD measures can only be imposed if it has been determined following an investigation initiated and conducted in accordance with the Agreement that -

• the imports concerned are dumped;
  
  
• the domestic industry in the importing country is suffering from material injury or threat of material injury, or the establishment of the domestic industry is materially retarded; and
  
  
• there is a causal link between the dumped imports and the injury being suffered by the domestic industry in the importing country.

What is dumping exactly? Pursuant to Article 2.1 of the AD Agreement, dumping is defined as follows -

"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" 

In other words, dumping occurs when a company exports a product at a price below the price it normally charges in its home market. The latter is referred to as the "normal value" in the AD Agreement. The calculation of "normal value" is one of the important steps for dumping determination. For this purpose, the AD Agreement provides for three methodologies. The first one is based on the sales of the like product in the ordinary course of trade in the exporter's domestic market. When this methodology cannot be used, the Agreement provides for two alternatives. One is based on the price charged by the exporter when it exports the like product to an appropriate third country (i.e. one other than the exporting and importing countries), while the other alternative entails the construction of price on the basis of the exporter's production costs, other expenses and profits (it is also known as the constructed normal value). Following the calculation of the "normal value", a comparison between the export price and "normal value" has to be performed in order to determine whether a product is dumped and if so, the margin of dumping.

Apart from dumping determination, the AD Agreement also sets forth the rules for determining whether the domestic industry in the importing country is suffering from injury as a result of the dumped imports concerned. To this end, the Agreement requires the conduct of an objective examination of the volume of the dumped imports and the effect of dumped imports on prices of the like product in the importing country. It also requires an evaluation of all relevant economic factors that have a bearing on the state of the industry (e.g. actual and potential decline in sales, profits, output, market share, etc.). If the determination shows that the domestic industry is being injured as a result of the dumped imports, AD measure can be imposed.

Overview of an AD Investigation

An investigation by the authorities of the importing country must be initiated and conducted in accordance with the requirements in the AD Agreement for the purpose of determining whether dumping, injury and a causal link between the two exist. Generally speaking, an AD investigation can be broadly divided into the following stages -

• Initiation of investigation: an investigation is normally initiated upon the receipt of a written application by the domestic industry in the importing country. The AD Agreement requires that the application shall include evidence of dumping, injury, and a causal link between the dumped imports and the alleged injury. The Agreement also requires that once the application is accepted, the WTO Member initiating the AD investigation shall give notice on initiation to the parties concerned including exporters and producers known to the investigating authorities to have an interest therein.  The parties should also be given opportunity to present evidence in the course of the investigation.
  
  
• Preliminary determination: upon the initiation of an investigation, a preliminary determination may be made on whether there is dumping and consequent injury to the domestic industry in the importing country, although it is not a mandatory requirement to conduct such a determination. However, a preliminary determination must be conducted and lead to affirmative findings of dumping and consequent injury if the WTO Member concerned wishes to impose provisional AD measure before the completion of the whole AD investigation. Such provisional measure may take the form of a provisional duty or preferably, a security by cash deposit or bond at a level which may be equal to but not higher than the provisionally estimated margin of dumping.
  
  
• Final determination: all interested parties shall have the opportunity for defence of their interests during the AD investigation.  A final determination will be made after taking into account the evidence and detailed information gathered from relevant parties including exporters, importers and domestic industry (e.g. information collected by means of questionnaires). As a rule, the whole AD investigation shall, except in special circumstances, be concluded within one year, and in no case more than 18 months, after initiation.

At the conclusion of an investigation, definitive AD measure may be imposed if the final determination shows the existence of dumping, injury and causal link between the two. Final measure may take the form of final AD duty or price undertaking (i.e. individual exporters undertake to revise their export prices, or cease exports at dumped prices). On the contrary, the investigation shall be terminated if relevant conditions as specified in the Anti-dumping Agreement are met (e.g. the margin of dumping is less than 2%). No definitive AD measure shall be imposed if the final determination is negative with respect to dumping, injury or causal link.

An AD duty must expire five years after the date of imposition, unless a review is initiated before the expiry of the five years and it is determined that the expiry of the duty would be likely to lead to continuation or recurrence of dumping and injury. It is commonly known as the sunset or expiry review.

For full text of the WTO AD Agreement, please refer to the WTO official website http://www.wto.org/english/docs_e/legal_e/19-adp_01_e.htm. More detailed information explaining the key provisions of the AD Agreement can also be found in the relevant section of the WTO official website - http://www.wto.org/english/tratop_e/adp_e/adp_e.htm.