WORLD TRADE
ORGANIZATION
|
WT/DS141/AB/R
1 March 2001
(01-0973)
|
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Original: English |
EUROPEAN COMMUNITIES � ANTI-DUMPING DUTIES ON IMPORTS
OF COTTON-TYPE BED LINEN FROM INDIA
AB-2000-13
Report of the Appellate Body
Introduction
Arguments of the Participants and the Third Participants
Claims of Error by the European Communities � Appellant
Article 2.4.2 of the Anti-Dumping Agreement � Practice of "zeroing"
Arguments of India � Appellee
- Article 2.4.2 of the Anti-Dumping Agreement � Practice of "zeroing"
Claims of Error by India � Appellant
Article 2.2.2(ii) of the Anti-Dumping Agreement
� Data from "other exporters or producers"
Article 2.2.2(ii) of the Anti-Dumping Agreement
� "actual amounts incurred and realized"
Arguments of the European Communities � Appellee
Article 2.2.2(ii) of the Anti-Dumping Agreement � Data from "other exporters or producers"
Article 2.2.2(ii) of the Anti-Dumping Agreement
� "actual amounts incurred and realized"
Arguments of the Third Participants
Egypt
Japan
United States
-
Issues Raised in this Appeal
-
Article 2.4.2 of the Anti-Dumping Agreement
-
Article 2.2.2(ii) of the Anti-Dumping Agreement
-
Findings and Conclusions
WORLD TRADE ORGANIZATION APPELLATE BODY
European Communities � Anti-Dumping Duties
on Imports of
Cotton-Type Bed Linen from
India
European Communities, Appellant/Appellee
India, Appellant/Appellee
Egypt, Third Participant
Japan, Third Participant
United States, Third Participant |
AB-2000-13 Present: Bacchus, Presiding Member Abi-Saab, Member Feliciano, Member
|
I. Introduction
1. The European Communities and India appeal certain issues
of law and legal interpretations in the Panel Report, European Communities �
Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India (the
"Panel Report").1 The Panel was established to consider a complaint by India with
respect to definitive anti-dumping duties imposed by the European Communities on
imports of cotton-type bed linen. 2. On 13 September 1996, the European Communities initiated
an anti-dumping investigation into certain imports of cotton-type bed linen
from, inter alia, India.2 The European Communities made its preliminary
affirmative determination of dumping, injury and causal link on 12 June 1997,
and imposed provisional anti-dumping duties with effect from 14 June 1997.3 The
European Communities made its final affirmative determination of dumping, injury
and causal link on 28 November 1997, and imposed definitive anti-dumping duties
with effect from 5 December 1997.4 The factual aspects of this dispute are set
out in greater detail in the Panel Report.5 3. The Panel considered claims by India that, in imposing the
anti-dumping duties on imports of cotton-type bed linen, the European
Communities acted inconsistently with Articles 2.2, 2.2.2, 2.4.2, 3.1, 3.4, 3.5,
5.3, 5.4, 12.2.2, and 15 of the Agreement on Implementation of Article VI of
the General Agreement on Tariffs and Trade 1994 (the "Anti-Dumping
Agreement").6 4. In its Report, circulated to Members of the World Trade
Organization (the "WTO") on 30 October 2000, the Panel concluded that:
� the European Communities did not act inconsistently
with its obligations under Articles 2.2, 2.2.2, 3.1, 3.4, 3.5, 5.3, 5.4,
and 12.2.2 of the AD Agreement in: (a) calculating the amount for profit in
constructing normal value (India's claims 1 and 4), (b) considering all imports from India (and Egypt
and Pakistan) as dumped in the analysis of injury caused by dumped
imports (India's claims 8, 19, and 20), (c) considering information for producers
comprising the domestic industry but not among the sampled producers
in analyzing the state of the industry (India's claim 15, in part), (d) examining the accuracy and adequacy of the
evidence prior to initiation (India's claim 23), (e) establishing industry support for the
application (India's claim 26), and (f) providing public notice of its final
determination (India's claims 3, 6, 10, 22, 25 and 28).7 � the European Communities acted inconsistently with
its obligations under Articles 2.4.2, 3.4, and 15 of the AD Agreement
in:
(g) determining the existence of margins of
dumping on the basis of a methodology incorporating the practice of
zeroing (India's claim 7), (h) failing to evaluate all relevant factors
having a bearing on the state of the domestic industry, and
specifically all the factors set forth in Article 3.4 (India's claim
11), (i) considering information for producers not
part of the domestic industry as defined by the investigating
authority in analyzing the state of the industry (India's claim 15,
in part), and (j) failing to explore possibilities of
constructive remedies before applying anti-dumping duties (India's
claim 29).8
5. The Panel recommended that the Dispute Settlement Body (the "DSB") request the European Communities to bring its measure into conformity with its obligations under the
Anti-Dumping Agreement.9 6. On 1 December 2000, the European Communities notified the
DSB of its intention to appeal certain issues of law covered in the Panel Report
and certain legal interpretations developed by the Panel, pursuant to paragraph
4 of Article 16 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (the "DSU"), and filed a Notice of Appeal pursuant to
Rule 20 of the Working Procedures for Appellate Review (the "Working
Procedures"). On 11 December 2000, the European Communities filed its
appellant's submission. On 18 December 2000, India filed an other appellant's
submission. On 4 January 2001, Egypt filed a third participant's submission.10 On
8 January 2001, India and the European Communities each filed an appellee's
submission.11 On the same day, Japan and the United States each filed a third
participant's submission.12 7. The oral hearing in the appeal was held on 24 January
2001. The participants and third participants presented oral arguments and
responded to questions put to them by the Members of the Division hearing the
appeal. II. Arguments of the Participants and the Third
Participants
Claims of Error by the European Communities �
Appellant
Article 2.4.2 of the Anti-Dumping
Agreement � Practice of "zeroing"
8. The European Communities appeals the finding of the Panel
that the European Communities acted inconsistently with Article 2.4.2 of the Anti-Dumping
Agreement by "zeroing" the "negative dumping margins" established for
certain models or product types of cotton-type bed linen � the product under
investigation � when calculating the overall rate of dumping for bed linen. The
European Communities alleges the following specific errors committed by the
Panel in reaching its finding. 9. The European Communities first claims that the Panel, in
making its finding, did not follow the rules of interpretation of the Vienna
Convention on the Law of Treaties (the "Vienna Convention")13. In
particular, the Panel did not begin its analysis with the text of the provision
at issue, Article 2.4.2, but, rather, with another provision, Article 2. 10. Next, the European Communities submits that the
interpretation of the Panel fails to give proper meaning to the word
"comparable" in Article 2.4.2. Article 2.4.2 requires only that weighted average
normal value be compared with weighted average export prices for "comparable"
transactions. By determining a dumping margin for individual product types,
i.e., for "comparable" transactions, this is precisely what the European
Communities did. 11. Furthermore, the European Communities contends that in
this case, the calculation of the overall rate of dumping for the
product under investigation does not fall within the express terms of Article
2.4.2. Article 2.4.2 provides no guidance as to how the "dumping margins"
determined for individual product types should be combined in order to calculate
an overall rate of dumping for the product under investigation. 12. The European Communities then argues that the Panel's
interpretation is based on the erroneous premise that dumping margins can be
established only for the product under investigation. The concept
of "dumping margin", as used in the Anti-Dumping Agreement, may refer
not only to the dumping margin for the product under
investigation, but also to the dumping margin established for each product
type or for each individual transaction. 13. The European Communities further claims that the Panel's
interpretation would distort price comparability and disregard the notion of
"normal value", as the existence of dumping margins would depend on the product
mix sold by the exporter. By requiring "positive dumping margins" to be offset
by "negative dumping margins", the Panel is effectively requiring comparison of
a weighted average normal value for all product types of bed linen with
a weighted average export price for all product types. 14. In addition, the European Communities submits that the
Panel's finding would disadvantage Members applying anti-dumping duties on a
"prospective" basis because a Member applying anti-dumping duties
"retrospectively" is not required to give credit for transactions with a
"negative dumping margin". Another result of the interpretation of the Panel is
that Members would not be able to counter dumping targeted to certain product
types. 15. Finally, the European Communities argues that the Panel
failed to apply the standard of review set out in Article 17.6(ii) of the Anti-Dumping Agreement. In particular, in interpreting Article 2.4.2, the
Panel never referred to Article 17.6(ii), and did not determine whether Article
2.4.2 admits of more than one permissible interpretation.
Arguments of India � Appellee
Article 2.4.2 of the Anti-Dumping
Agreement � Practice of "zeroing"
16. India submits that in interpreting Article 2.4.2 of the Anti-Dumping
Agreement, the Panel properly followed the rules of interpretation of the Vienna Convention.
Article 2.4 and the remainder of Article 2 of the Anti-Dumping Agreement constitute the context of Article 2.4.2, since the entire Article relates to
the determination of whether dumping exists. Accordingly, the Panel properly
began its analysis with the text of Article 2.4.2 and correctly considered it in
its context. 17. Next, India is of the view that the Panel correctly
interpreted the word "comparable" in Article 2.4.2 of the Anti-Dumping
Agreement in the light of its context. Even assuming that the word
"comparable" carries with it a different meaning in Article 2.4.2, it does not
follow that zeroing of these "comparable" data is allowed. The European
Communities incorrectly represented the historical background of the word
"comparable" and of Article 2.4.2. India believes that the addition of this word
in the last phase of the Uruguay Round negotiations does not mean that
"comparable" has a different meaning than in Article VI of the GATT 1994 or the
rest of Article 2 of the Anti-Dumping Agreement. 18. India also claims that the Panel rightly applied Article
2.4.2 to the calculation of the overall rate of dumping for the product under
investigation. The calculation of the amount of dumping for various models or
types of the product under investigation is not separate from the calculation of
the dumping margin for the product under investigation. Both fall within the
terms of Article 2.4.2. Furthermore, the drafting history does not support the
European Communities' view of Article 2.4.2 as allowing the practice of
"zeroing". 19. Next, India argues that the Panel correctly determined
that the concept of "dumping margin" in Article 2.4.2 of the Anti-Dumping
Agreement refers only to the dumping margin established for each
product, and not for each model of that product, or for each individual
transaction. India distinguishes the dumping results or amounts, that
is, the differences between the normal value and export price on a per type
basis, and the dumping margin, that is, the final expression of the
total of these amounts (for the product, for a particular producer). It is clear
from Articles 2.1 and 2.2 that a "dumping margin" is to be calculated for the
"product under investigation". 20. Moreover, the interpretation of the Panel neither
distorts price comparability nor disregards the notion of "normal value". For
India, the finding of the Panel does not disadvantage the importing Members
applying anti-dumping duties on a prospective basis. Results under a prospective
system should not necessarily be the same as under a retrospective system and a
retrospective system should not necessarily form a bench mark for the
prospective system. 21. With regard to the question whether the Panel's finding
would preclude Members from countering dumping targeted to certain product
types, India's view is that the Panel's finding rightly disallows Members to do
so. The text of Article 2.4.2 does not provide for the possibility to counter
dumping targeted to certain product types. 22. Finally, India believes that the Panel applied the
appropriate standard of review pursuant to Article 17.6(ii) of the Anti-Dumping
Agreement. The Panel was not faced with a choice between multiple
"permissible" interpretations, requiring deference, because the ordinary meaning
of the terms of Article 2.4.2, in their context and in the light of the object
and purpose of the Anti-Dumping Agreement, is clear.
Claims of Error by India � Appellant
- Article 2.2.2(ii) of the Anti-Dumping
Agreement � Data from "other exporters or producers"
23. India argues that the Panel erred in finding that Article
2.2.2(ii) of the Anti-Dumping Agreement may be applied in circumstances
where data is available for only one other exporter or producer. The Panel's
ruling to this effect is inconsistent with the rules of treaty interpretation in
the Vienna Convention. 24. India stresses that Article 2.2.2(ii) refers to the
"weighted average" of the "amounts" incurred and realized by other "exporters or
producers". The use of the plural form of "amounts" and "exporters or
producers", in combination with the reference to a "weighted average" of the
"amounts", indicates that figures for multiple exporters or producers must be
available if Article 2.2.2(ii) is to be relied on. The Panel's conclusion that
Article 2.2.2(ii) may be applied where data is available for only one exporter
or producer ignores the clear meaning of these words. 25. India further argues that the Panel should have examined
whether the choice of the European Communities of the method to calculate the
amounts for administrative, selling and general costs and for profits set out in
Article 2.2.2(ii) was "objective and fair". Article 17.6(i) of the Anti-Dumping
Agreement requires that the evaluation of the investigating authorities of
the facts be "unbiased and objective". With viable alternatives, such as Article
2.2.2(i) and Article 2.2.2(iii), available, the insistence of the European
Communities on using the second option cannot have been "unbiased and
objective". By failing to consider whether this choice of methodology was
proper, the Panel erred in law. 26. Finally, India contends that the finding of the Panel
that the European Communities was not obligated to look at available information
outside the sample is not only inconsistent with the standard of review set out
in Article 17.6(i), but is also incompatible with the later finding of the Panel
that "it is not possible to have an objective evaluation of the evidence if some
of the evidence is required to be ignored, even though it relates precisely to
the issues to be resolved."14 In the circumstances of this case, data for an
additional producer was available to the European Communities in the "reserve
sample" it had established for the investigation. Information from this producer
should have been taken into account when relying on the methodology provided in
Article 2.2.2(ii). India recalls that, in examining the question of injury to
the domestic industry, the European Communities relied on information from
outside the sample, and the Panel upheld this decision by the European
Communities. Failure to take into account the available information of an
exporting producer included in the reserve sample for dumping, while
simultaneously taking into account information outside the sample when
establishing whether injury to the domestic industry had occurred, does not
constitute an "unbiased and objective" investigation. The Panel's failure to
reach this conclusion violates the standard of review set out in Article
17.6(i).
Article 2.2.2(ii) of the Anti-Dumping
Agreement � "actual amounts incurred and realized"
27. The Panel found that it is permissible to exclude sales
outside the ordinary course of trade in calculating amounts for administrative,
selling and general costs ("SG&A") and for profits under Article 2.2.2(ii) of
the Anti-Dumping Agreement. According to India, such finding is contrary
to the text and context of Article 2.2.2(ii). The text of Article 2.2.2(ii)
explicitly refers to the "amounts incurred and realized", whereas, by contrast,
the text of the chapeau of Article 2.2.2 requires to consider the relevant data
"in the ordinary course of trade". Nothing in the terms of Article 2.2.2(ii)
suggests that only "amounts" of profitable sales are concerned.
Article 2.2.2(ii) simply does not contain an "ordinary course of trade"
restriction. 28. India contends that the context of Article 2.2.2(ii)
confirms this interpretation. It would be illogical to read into the three
alternative options a principle appearing in the chapeau of Article 2.2.2, since
the alternative options come into play when the chapeau does not apply. Further,
none of the main principles contained in Articles 2.1 and 2.2 contain any
specific "ordinary course of trade" requirement with regard to the calculation
of amounts for SG&A and profits. According to India, the negotiating history of
the Anti-Dumping Agreement supports its view on this point.
Arguments of the European Communities � Appellee
- Article 2.2.2(ii)of the Anti-Dumping Agreement� Data from "other exporters or producers"
29. The European Communities submits that the Panel correctly
found that Article 2.2.2(ii) of the Anti-Dumping Agreement may be invoked
even when only one other exporter or producer has eligible data. The Panel
performed an analysis of the ordinary meaning of the words in Article 2.2.2(ii),
and properly took account of the phrase "weighted average". The interpretation
of the Panel does not undermine the effect of the phrase "weighted average" in
Article 2.2.2(ii), since another arithmetic mean could have been set out therein
for cases involving two or more exporters or producers. 30. Next, the European Communities rejects India's contention
that the anti-dumping investigation at issue in this case was not "unbiased and
objective" as required under Article 17.6(i) of the Anti-Dumping Agreement
because the European Communities chose to apply Article 2.2.2(ii) rather
than Article 2.2.2(i). According to the European Communities, this is not a
proper subject for appeal, and India's claim fails to raise any substantive
issue. India's contention was not set out in its request for a panel nor in its
submissions to the Panel and, therefore, it is not a proper subject for this
appeal, since Article 17.6 of the DSU confines appeals to issues of law or legal
interpretations developed by the panel. In addition, India's allegation may
raise new legal issues which could require proof of new facts. India's argument
is not a substantive claim, because Article 17.6 of the Anti-Dumping
Agreement establishes that the obligation of national authorities to
be unbiased and objective applies to the evaluation of the facts of the case.
31. Finally, in the view of the European Communities, India's
allegation that the implementation of Article 2.2.2(ii) by the investigating
authorities of the European Communities was not "unbiased and objective", for
not taking account of certain data from an additional producer, is similarly not
a proper subject for appeal, for the same reasons as above.
Article 2.2.2(ii) of the Anti-Dumping
Agreement � "actual amounts incurred and realized"
32. The European Communities argues that investigating
authorities are allowed to disregard data relating to sales that are not made in
the ordinary course of trade, in particular those made at prices below cost,
when establishing a constructed normal value pursuant to Article 2.2.2(ii) of
the Anti-Dumping Agreement. As the Panel observed, if sales not in the
ordinary course of trade were considered, "the constructed value could be equal
to cost and thus would not include a reasonable amount for profit".15 Moreover,
the "ordinary course of trade" principle in Article 2 and in the chapeau of
Article 2.2.2 would become meaningless, and therefore redundant, if sales not in
the ordinary course of trade were included. 33. With regard to the context of Article 2.2.2(ii), the
European Communities suggests that the exclusion of sales not in the ordinary
course of trade in Article 2.2.2(i) is not "impossible". The Anti-Dumping
Agreement merely authorizes Members to exclude those sales but does not
require to do so. Finally, India's claim that under the Panel's interpretation
of Article 2.2.2(ii) exporters would be unfairly treated, because at the time of
selling, they would not be in a position to anticipate whether their sales would
be found to be dumped, has no merit and should be rejected.
Arguments of the Third Participants
Egypt
34. Egypt welcomes the finding of the Panel that the practice
of "zeroing" employed by the European Communities in calculating the margin of
dumping violated the provisions of Article 2.4.2 of the Anti-Dumping
Agreement. Furthermore, Egypt argues that the European Communities violated
the provisions of Article 2.2.2(ii) of the Anti-Dumping Agreement for
not having properly applied the method identified therein nor met its
requirements. 35. In addition, Egypt submits views on certain issues that
it considers to be fundamental for the proper legal interpretation of the Anti-Dumping
Agreement. In particular, Egypt makes a number of comments on the findings
of the Panel in relation to Articles 3.4, 5.3, and 15 of the Anti-Dumping
Agreement. However, since none of these findings have been appealed, Egypt's
comments do not directly bear upon this appeal.
Japan
36. Japan argues that the analysis of the Panel relating to
the practice of "zeroing" of the European Communities was consistent with the
rules of interpretation of the Vienna Convention. Japan submits that the
decision of the Panel with respect to "zeroing" was also consistent with the
standard of review in Article 17.6(ii) of the Anti-Dumping Agreement. 37. Furthermore, Japan underlines that the European
Communities did not justify the need for introducing the concept of "overall
rate of dumping", a concept not referred to anywhere in the Anti-Dumping
Agreement. Moreover, the use of the plural form of the word "margins" in
Article 2.4.2 of the Anti-Dumping Agreement is merely indicative that
there may be more than one exporter involved in an investigation. According to
Japan, the Panel correctly interpreted the word "comparable" in Article 2.4.2,
finding that it echoed the overall mandate in the Anti-Dumping Agreement
that dumping calculations be based on fair comparison, and made between
"comparable transactions". 38. Moreover, according to Japan, the argument of the
European Communities that the interpretation of the Panel would disadvantage
Members applying anti-dumping duties on a prospective basis is irrelevant. In
the view of Japan, the Panel correctly focused its findings on Article 2.4.2,
since the dispute was related to the calculation of dumping margins for the
product under investigation. The manner in which duties may be collected under
the Anti-Dumping Agreement is relevant, only if, and only after, the
investigating authorities find dumping for a particular producer as a result of
a proper application of the methodologies set out in the Anti-Dumping
Agreement. 39. Finally, Japan finds the "policy" argument of the
European Communities regarding "product targeting" not persuasive. The European
Communities ignores the fact that Article 2.4.2 does not include "product
targeting" as a specific form of dumping justifying an exceptional calculation
methodology, whereas Article 2.4.2 identifies three other forms of "targeting"
justifying such exceptional methodology.
United States
40. In the view of the United States, the Panel failed to
interpret the weighted-average comparison provision of Article 2.4.2 of the Anti-Dumping
Agreement in its context and in the light of the object and purpose of the Anti-Dumping
Agreement. The Anti-Dumping Agreement does not require that
importing countries reduce dumping margins by amounts by which export prices
exceeded normal value on other, non-comparable transactions. The United States
supports the methodology of the European Communities for calculating the overall
margin of dumping. 41. Next, the United States contends that the Panel failed to
account for the remaining provisions of Article 2.4.2. The Panel should have
addressed the totality of Article 2.4.2 before turning to Article 2.1 for
providing the context to Article 2.4.2. The Panel incorrectly emphasized the
word "all", and lost sight of the fact that Article 2.4.2 refers to only all
"comparable" export transactions. Article 2.4.2 makes it clear that
averages must be limited to "comparable" transactions. 42. The United States submits that the Panel was correct in
holding that Article 2.2.2(ii) of the Anti-Dumping Agreement may be
applied where there is data concerning only one other exporter or producer. The
phrase "weighted average" is not determinative of this issue, but simply
clarifies the method to be employed when there are two or more companies from
which data will be utilised pursuant to Article 2.2.2(ii). Likewise, the word
"amounts" in Article 2.2.2(ii) is not determinative, since it refers to the
"amounts for administrative, selling and general costs and for profits",
provided for in the chapeau. There is no guidance as to whether these amounts
can be drawn from a single company or multiple companies. In addition, the
phrase "other exporters or producers" is also not determinative, in the United
States' view, because it cannot be read to exclude a single exporter or producer
without creating "absurd results" throughout the Anti-Dumping Agreement,
which often uses plurals as including the singular. 43. Moreover, the United States argues that the Panel was not
required to examine separately whether the choice of the European Communities of
the method set out in Article 2.2.2(ii) of the Anti-Dumping Agreement
was objective and fair, pursuant to Article 17.6(i) of the Anti-Dumping
Agreement, as compared with the alternative methods provided for in Articles
2.2.2(i) and 2.2.2(iii). 44. The United States concurs with the Panel and the European
Communities that pursuant to Article 2.2.2(ii) of the Anti-Dumping Agreement,
below-cost sales may be excluded from constructed normal value calculations.
Nothing in the text requires this exclusion, but nothing in the text forbids
such an exclusion either. It is therefore permissible, though not mandatory,
to exclude sales outside the ordinary course of trade from the calculations made
pursuant to Article 2.2.2(ii). In addition, excluding the profit on sales not in
the ordinary course of trade from the figures used pursuant to Article 2.2.2(ii)
is consistent with the overall operation of Article 2 of the Anti-Dumping
Agreement.
III. Issues Raised in this Appeal
45. This appeal raises the following issues: (a) Whether the Panel erred in finding that the
practice of "zeroing" when establishing "the existence of margins of
dumping", as applied by the European Communities in the anti-dumping
investigation at issue in this dispute, is inconsistent with
Article 2.4.2 of the Anti-Dumping Agreement; and (b) Whether the Panel erred in finding that: (1) the method for calculating amounts for
administrative, selling and general costs and profits provided for
in Article 2.2.2(ii) of the Anti-Dumping Agreement may be
applied where there is data on administrative, selling and general
costs and profits for only one other exporter or producer; and (2) in calculating the amount for profits under
Article 2.2.2(ii) of the Anti-Dumping Agreement, a Member
may exclude sales by other exporters or producers that are not made
in the ordinary course of trade.
IV. Article 2.4.2 of the Anti-Dumping Agreement
46. The first issue raised in this appeal is whether the
practice of "zeroing" when establishing "the existence of margins of dumping",
as applied by the European Communities in the anti-dumping investigation at
issue in this dispute, is consistent with Article 2.4.2 of the Anti-Dumping
Agreement. 47. The practice of "zeroing", as applied in this dispute,
can briefly be described as follows16:
first, the European Communities identified with respect to the
product under investigation � cotton-type bed linen � a certain number of
different "models" or "types" of that product. Next, the European Communities
calculated, for each of these models, a weighted average normal value
and a weighted average export price. Then, the European Communities
compared the weighted average normal value with the weighted average export
price for each model. For some models, normal value was higher than
export price; by subtracting export price from normal value for these models,
the European Communities established a "positive dumping margin" for each
model. For other models, normal value was lower than export price; by
subtracting export price from normal value for these other models, the European
Communities established a "negative dumping margin" for each model.17 Thus,
there is a "positive dumping margin" where there is dumping, and a
"negative dumping margin" where there is not. The "positives" and
"negatives" of the amounts in this calculation are an indication of precisely how
much the export price is above or below the normal value. Having made this
calculation, the European Communities then added up the amounts it had
calculated as "dumping margins" for each model of the product in order to
determine an overall dumping margin for the product as a whole.
However, in doing so, the European Communities treated any "negative dumping
margin" as zero � hence the use of the word "zeroing". Then, finally, having
added up the "positive dumping margins" and the zeroes, the European Communities
divided this sum by the cumulative total value of all the export transactions
involving all types and models of that product. In this way, the European
Communities obtained an overall margin of dumping for the product under
investigation.48. With respect to this first issue appealed, the Panel
found that:
� the European Communities acted inconsistently with
Article 2.4.2 of the AD Agreement in establishing the existence of
margins of dumping on the basis of a methodology which included zeroing
negative price differences calculated for some models of bed linen.18
49. The European Communities appeals this finding. In
defending its practice of "zeroing", the European Communities principally argues
that the Panel was mistaken about the ordinary meaning of Article 2.4.2.
According to the European Communities, Article 2.4.2 requires a comparison with
a "weighted average of prices of all comparable export transactions"
(emphasis added), which, in the view of the European Communities, as we
understand it, is not the same as requiring a comparison with a weighted average
of all export transactions. Emphasizing the presence in Article 2.4.2 of
the word "comparable", the European Communities maintains that, where the
product under investigation consists of various "non-comparable" types or
models, the investigating authorities should first calculate "margins of
dumping" for each of the "non-comparable" types or models, and, then, at a
subsequent stage, combine those "margins" in order to calculate an overall
margin of dumping for the product under investigation. Thus, the European
Communities sees two stages in calculating margins of dumping in such an
anti-dumping investigation, and contends that Article 2.4.2 provides no
guidance as to how the "margins of dumping" for each of the types or models
should be combined in the second stage in order to calculate an overall margin
of dumping for the product under investigation. On this reasoning, the European
Communities asserts that, as "zeroing" takes place during this second stage of
the domestic anti-dumping process, "zeroing" cannot be inconsistent with
Article 2.4.2. Accordingly, the European Communities concludes that the Panel
failed to give proper meaning to the word "comparable" as well as to the
comparability requirement in Article 2.4.219, erroneously applied Article 2.4.2 to
the calculation of the overall margin of dumping for the product under
investigation20, and erred in its overall analysis of this issue on the premise
that dumping margins can be established only for a product.21 50. As always, we turn first to the text of the provision at
issue on appeal. Article 2.4.2 of the Anti-Dumping Agreement states:
Subject to the provisions governing fair comparison
in paragraph 4, 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 a comparison of
normal value and export prices on a transaction‑to‑transaction basis. A
normal value established on a weighted average basis may be compared to
prices of individual export transactions if the authorities find a
pattern of export prices which differ significantly among different
purchasers, regions or time periods, and if an explanation is provided
as to why such differences cannot be taken into account appropriately by
the use of a weighted average‑to‑weighted average or
transaction‑to‑transaction comparison. (emphasis added)
51. Article 2.4.2 of the Anti-Dumping Agreement
explains how domestic investigating authorities must proceed in establishing
"the existence of margins of dumping", that is, it explains how they must
proceed in establishing that there is dumping. Toward this end, Article
2.1 states:
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.
(emphasis added)
From the wording of this provision, it is clear to us that
the Anti-Dumping Agreement concerns the dumping of a product,
and that, therefore, the margins of dumping to which Article 2.4.2 refers
are the margins of dumping for a product. 52. We observe that, in this case, the European Communities
defined the product at issue in its anti-dumping investigation as
follows:
The proceeding covers bed linen of cotton�type
fibres, pure or mixed with man-made fibres or flax, bleached, dyed
or printed. Bed linen includes bed sheets, duvet covers and pillow
cases, packaged for sale either separately or in sets. � Notwithstanding the different possible product
types due to different weaving construction, finish of the fabric,
presentation and size, packing, etc., all of them constitute a single
product for the purpose of this proceeding because they have the
same physical characteristics and essentially the same use.22 (emphasis
added)
53. Thus, of its own accord, the European Communities clearly
identified cotton-type bed linen as the product under investigation in
this case. This is undisputed in this appeal. Having defined the product
as it did, the European Communities was bound to treat that product
consistently thereafter in accordance with that definition. Thus, it follows
that, with respect to Article 2.4.2, the European Communities had to establish
"the existence of margins of dumping" for the product � cotton-type bed
linen � and not for the various types or models of that product. We see nothing
in Article 2.4.2 or in any other provision of the Anti-Dumping Agreement
that provides for the establishment of "the existence of margins of dumping" for
types or models of the product under investigation; to the contrary, all
references to the establishment of "the existence of margins of dumping" are
references to the product that is subject of the investigation.
Likewise, we see nothing in Article 2.4.2 to support the notion that, in an
anti-dumping investigation, two different stages are envisaged or distinguished
in any way by this provision of the Anti-Dumping Agreement, nor to
justify the distinctions the European Communities contends can be made among types
or models of the same product on the basis of these "two stages". Whatever
the method used to calculate the margins of dumping, in our view, these margins
must be, and can only be, established for the product under
investigation as a whole. We are unable to agree with the European Communities
that Article 2.4.2 provides no guidance as to how to calculate an overall
margin of dumping for the product under investigation. 54. With this in mind, we recall that Article 2.4.2, first
sentence, provides that "the existence of margins of dumping" for the product
under investigation shall normally be established according to one of two
methods. At issue in this case is the first method set out in that provision,
under which "the existence of margins of dumping" must 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 �
55. Under this method, the investigating authorities are
required to compare the weighted average normal value with the weighted average
of prices of all comparable export transactions. Here, we emphasize that
Article 2.4.2 speaks of "all" comparable export transactions. As explained
above, when "zeroing", the European Communities counted as zero the "dumping
margins" for those models where the "dumping margin" was "negative". As the
Panel correctly noted, for those models, the European Communities counted "the
weighted average export price to be equal to the weighted average normal value �
despite the fact that it was, in reality, higher than the weighted average
normal value."23 By "zeroing" the "negative dumping margins", the European
Communities, therefore, did not take fully into account the entirety of
the prices of some export transactions, namely, those export
transactions involving models of cotton-type bed linen where "negative dumping
margins" were found. Instead, the European Communities treated those export
prices as if they were less than what they were. This, in turn, inflated the
result from the calculation of the margin of dumping. Thus, the European
Communities did not establish "the existence of margins of dumping" for
cotton-type bed linen on the basis of a comparison of the weighted average
normal value with the weighted average of prices of all comparable
export transactions � that is, for all transactions involving all
models or types of the product under investigation. Furthermore, we are also of
the view that a comparison between export price and normal value that does not
take fully into account the prices of all comparable export transactions
� such as the practice of "zeroing" at issue in this dispute � is not a
"fair comparison" between export price and normal value, as required by
Article 2.4 and by Article 2.4.2. 56. We are mindful that Article 2.4.2 provides for "a
comparison of a weighted average normal value with a weighted average of prices
of all comparable export transactions". (emphasis added) In our view,
the word "comparable" in Article 2.4.2 does not affect, or diminish in any way,
the obligation of investigating authorities to establish the existence of
margins of dumping on the basis of "a comparison of the weighted average normal
value with the weighted average of prices of all comparable export
transactions". (emphasis added) 57. The ordinary meaning of the word "comparable" is "able to
be compared".24 "Comparable export transactions" within the meaning of
Article 2.4.2 are, therefore, export transactions that are able to be compared.
The European Communities argues before us that export transactions involving
different types or models of cotton-type bed linen are not "comparable" because
different types or models of cotton-type bed linen have very different physical
characteristics. Specifically, the European Communities suggests that the
differences between the various models or types of bed linen involved in the
relevant export transactions are "so substantial that they cannot be eliminated
by making adjustments for differences in physical characteristics".25 However, as
we have already noted, at the very outset of its anti-dumping investigation, the
European Communities identified, of its own accord, cotton-type bed linen as the
product under investigation. Moreover, in defining cotton-type bed linen
as the product at issue, the European Communities stated that "the different
possible product types � constitute a single product for the
purpose of this proceeding because they have the same physical
characteristics and essentially the same use".26 (emphasis added)
Furthermore, we observe that, in the context of defining the product at issue,
the European Communities also made the following determination relating to the
identity of the "like product" on the Community market subject to its
investigation:
The Commission examined whether cotton-type bed linen
produced by the Community industry and sold on the Community market, as
well as cotton-type bed linen produced in Egypt, India and Pakistan and
sold on the Community market and on their domestic markets were alike. � The Commission concluded that although there were
differences in the mix of products produced in the Community and that
sold for export to the Community or sold domestically in the countries
concerned, there were no differences in the basic characteristics and
uses of the different types and qualities of bed linen of cotton-type
fibres. Therefore domestic and export types in the countries
concerned and types produced in the Community were considered like
products within the meaning of Article 1(4) of Regulation (EC)
No 384/96 �27 (emphasis added)
58. Having defined the product at issue and the "like
product" on the Community market as it did, the European Communities could not,
at a subsequent stage of the proceeding, take the position that some types or
models of that product had physical characteristics that were so different from
each other that these types or models were not "comparable". All types or models
falling within the scope of a "like" product must necessarily be "comparable",
and export transactions involving those types or models must therefore be
considered "comparable export transactions" within the meaning of Article 2.4.2. 59. This interpretation of the word "comparable" in Article
2.4.2 is reinforced by the context of this provision. Article 2.4 of the
Anti-Dumping Agreement states in relevant part:
A fair comparison shall be made between the
export price and the normal value. This comparison shall be made at the
same level of trade, normally at the ex‑factory level, and in respect of
sales made at as nearly as possible the same time. Due allowance
shall be made in each case, on its merits, for differences which
affect price comparability, including differences in conditions and
terms of sale, taxation, levels of trade, quantities, physical
characteristics, and any other differences which are also demonstrated
to affect price comparability. (emphasis added)
Article 2.4 sets forth a general obligation to make a "fair
comparison" between export price and normal value. This is a general obligation
that, in our view, informs all of Article 2, but applies, in particular, to
Article 2.4.2 which is specifically made "subject to the provisions governing
fair comparison in [Article 2.4]". Moreover, Article 2.4 sets forth specific
obligations to make comparisons at the same level of trade and at, as nearly as
possible, the same time. Article 2.4 also requires that "due allowance" be made
for differences affecting "price comparability". We note, in particular, that
Article 2.4 requires investigating authorities to make due allowance for
"differences in � physical characteristics". 60. We note that, while the word "comparable" in
Article 2.4.2 relates to the comparability of export transactions, Article 2.4
deals more broadly with a "fair comparison" between export price and normal
value and "price comparability". Nevertheless, and with this qualification in
mind, we see Article 2.4 as useful context sustaining the conclusions we draw
from our analysis of the word "comparable" in Article 2.4.2. In our view,
the word "comparable" in Article 2.4.2 relates back to both the general and the
specific obligations of the investigating authorities when comparing the export
price with the normal value. The European Communities argues on the basis of the
"due allowance" required by Article 2.4 for "differences in physical
characteristics" that distinctions can be made among different types or models
of cotton-type bed linen when determining "comparability". But here again we
fail to see how the European Communities can be permitted to see the physical
characteristics of cotton-type bed linen in one way for one purpose and in
another way for another.28 61. In support of its appeal of the Panel's interpretation of
Article 2.4.2, the European Communities argues, additionally, that this
interpretation would not allow Members to counter dumping "targeted" to certain
types of the product under investigation.29 With respect to the notion of
"targeted" dumping, we note that Article 2.4.2, second sentence, states:
A normal value established on a weighted average
basis may be compared to prices of individual export transactions if the
authorities find a pattern of export prices which differ
significantly among different purchasers, regions or time periods,
and if an explanation is provided as to why such differences cannot be
taken into account appropriately by the use of a weighted
average‑to‑weighted average or transaction‑to‑transaction comparison.
(emphasis added)
62. This provision allows Members, in structuring their
anti-dumping investigations, to address three kinds of "targeted" dumping,
namely dumping that is targeted to certain purchasers, targeted to certain
regions, or targeted to certain time periods. However, neither Article 2.4.2,
second sentence, nor any other provision of the Anti-Dumping Agreement
refers to dumping "targeted" to certain "models" or "types" of the same product
under investigation. It seems to us that, had the drafters of the Anti-Dumping
Agreement intended to authorize Members to respond to such kind of
"targeted" dumping, they would have done so explicitly in Article 2.4.2, second
sentence. The European Communities has not demonstrated that any provision of
the Agreement implies that targeted dumping may be examined in relation to
specific types or models of the product under investigation. Furthermore, we are
bound to add that, if the European Communities wanted to address, in particular,
dumping of certain types or models of bed linen, it could have defined, or
redefined, the product under investigation in a narrower way.30 63. Finally, the European Communities argues that the Panel
did not establish that the interpretation of Article 2.4.2 by the European
Communities was "impermissible" and that, therefore, the Panel failed to apply
the standard of review laid down in Article 17.6(ii) of the Anti-Dumping
Agreement.31 On this, we observe that Article 17.6(ii) states:
the panel shall interpret the relevant provisions of
the Agreement in accordance with customary rules of interpretation of
public international law. Where the panel finds that a relevant
provision of the Agreement admits of more than one permissible
interpretation, the panel shall find the authorities' measure to be in
conformity with the Agreement if it rests upon one of those permissible
interpretations.
64. In this case, the Panel explicitly recognized that it was
to interpret the Anti-Dumping Agreement in accordance with the customary
rules of interpretation of public international law as set out in the Vienna
Convention.32 Having interpreted Article 2.4.2 accordingly, the Panel found:
� that the European Communities acted inconsistently
with Article 2.4.2 of the AD Agreement in establishing the existence of
margins of dumping on the basis of a methodology which included zeroing
negative price differences calculated for some models of bed linen.33
(emphasis added)
65. It appears clear to us from the emphatic and unqualified
nature of this finding of inconsistency that the Panel did not view the
interpretation given by the European Communities of Article 2.4.2 of the Anti-Dumping
Agreement as a "permissible interpretation" within the meaning of Article
17.6(ii) of the Anti-Dumping Agreement. Thus, the Panel was not faced
with a choice among multiple "permissible" interpretations which would have
required it, under Article 17.6(ii), to give deference to the interpretation
relied upon by the European Communities. Rather, the Panel was faced with a
situation in which the interpretation relied upon by the European Communities
was, to borrow a word from the European Communities, "impermissible". We do not
share the view of the European Communities that the Panel failed to apply the
standard of review set out in Article 17.6(ii) of the Anti-Dumping Agreement. 66. For all these reasons, we uphold the finding of the Panel
in paragraph 6.119 of the Panel Report that the practice of "zeroing" when
establishing "the existence of margins of dumping", as applied by the European
Communities in the anti-dumping investigation at issue in this dispute, is
inconsistent with Article 2.4.2 of the Anti-Dumping Agreement.
V. Article 2.2.2(ii) of the Anti-Dumping Agreement
67. The two other issues raised in this appeal both concern
the Panel's interpretation of Article 2.2.2(ii) of the Anti-Dumping
Agreement. Pursuant to Article 2.2, the margin of dumping for the product
under investigation may, in certain circumstances, be determined by comparison
of the export price of the product with a constructed normal value consisting of
the cost of production of the product in the country of origin plus a reasonable
amount for administrative, selling and general costs ("SG&A") as well as for
profits. Article 2.2.2 sets forth how the amounts for SG&A and profits are to be
calculated in such circumstances. Article 2.2.2 states:
For the purpose of paragraph 2, the amounts for
administrative, selling and general costs and for profits shall be based
on actual data pertaining to production and sales in the ordinary course
of trade of the like product by the exporter or producer under
investigation. When such amounts cannot be determined on this basis, the
amounts may be determined on the basis of: (i) the actual amounts incurred and realized by
the exporter or producer in question in respect of production and
sales in the domestic market of the country of origin of the same
general category of products; (ii) the weighted average of the actual
amounts incurred and realized by other exporters or producers
subject to investigation in respect of production and sales of the
like product in the domestic market of the country of origin; (iii) any other reasonable method, provided that
the amount for profit so established shall not exceed the profit
normally realized by other exporters or producers on sales of
products of the same general category in the domestic market of the
country of origin. (emphasis added)
68. The first issue raised is whether the method of
calculating amounts for SG&A and profits set out in Article 2.2.2(ii) may be
applied where there is data on SG&A and profits for only one other
exporter or producer. The second issue is whether, in calculating the amount for
profits under Article 2.2.2(ii), a Member may exclude sales by other exporters
or producers that are not made in the ordinary course of trade. 69. With respect to the first issue, the Panel found:
As we have concluded that Article 2.2.2(ii) may be
applied in a case where there is data concerning profit and SG&A for
only one other producer or exporter, we conclude that the European
Communities was not precluded from applying the methodology set out in
that provision in this case, and therefore did not act inconsistently
with Article 2.2.2(ii) in this regard.34
70. With respect to the second issue, the Panel found:
Thus we consider that an interpretation of
Article 2.2.2(ii) under which sales not in the ordinary course of trade
are excluded from the determination of the profit amount to be used in
the calculation of a constructed normal value is permissible. We
therefore conclude that the European Communities did not err in its
application of paragraph (ii) by using data only on transactions in the
ordinary course of trade.35
71. India appeals both these findings. With respect to the
first of these two findings of the Panel, relating to the applicability of
Article 2.2.2(ii) where there is data for only one other exporter or
producer, India argues that the text of Article 2.2.2(ii), and, in particular,
the use of the terms "amounts" and "exporters or producers" in the plural, in
combination with the reference to a "weighted average" of the "amounts", clearly
indicate that Article 2.2.2(ii) cannot be applied where there is data for only one
other exporter or producer.36 Furthermore, with respect to this finding, India
argues that the Panel failed to meet the standard of review set forth in Article
17.6(i) of the Anti-Dumping Agreement.37 With respect to the second of
these two findings of the Panel, relating to the exclusion of sales by other
exporters or producers that are not made in the ordinary course of trade, India
argues that the text of Article 2.2.2(ii) states that the amount for profits
must be based on "amounts incurred and realized", and that nothing in these
terms suggests that they relate only to profitable sales.38 According to India,
this reading of Article 2.2.2(ii) is confirmed by the chapeau of Article 2.2.2,
which, in contrast with Article 2.2.2(ii), explicitly excludes sales made
outside the ordinary course of trade. 72. On the first of these two issues on appeal � that is,
whether the method for calculating amounts for SG&A and profits set out in
Article 2.2.2(ii) may be applied where there is data on SG&A and profits for
only one other exporter or producer � we recall that Article 2.2.2(ii)
states that, when this method is chosen by the investigating authorities, the
amounts for SG&A and profits must be calculated on the basis of:
the weighted average of the actual amounts incurred
and realized by other exporters or producers subject to investigation in
respect of production and sales of the like product in the domestic
market of the country of origin;
Here, we note especially that Article 2.2.2(ii) refers to
"the weighted average of the actual amounts incurred and
realized by other exporters or producers". (emphasis added) 73. In construing this provision, the Panel found that the
phrase "other exporters or producers":
� as a general matter, admits of an understanding
where the plural form includes the singular case � the case where there
is only one other producer or exporter. � In this context, we do not
consider that the reference to other producers or exporters in the
plural necessarily must be understood to preclude resort to option (ii)
in the case where there is only one other producer or exporter of the
like product.39
74. We disagree. In our view, the phrase "weighted average"
in Article 2.2.2(ii) precludes, in this particular provision, understanding the
phrase "other exporters or producers" in the plural as including the singular
case. To us, the use of the phrase "weighted average" in Article 2.2.2(ii) makes
it impossible to read "other exporters or producers" as "one exporter or
producer". First of all, and obviously, an "average" of amounts for SG&A and
profits cannot be calculated on the basis of data on SG&A and profits
relating to only one exporter or producer.40 Moreover, the textual
directive to "weight" the average further supports this view because the
"average" which results from combining the data from different exporters or
producers must reflect the relative importance of these different exporters or
producers in the overall mean.41 In short, it is simply not possible to calculate
the "weighted average" relating to only one exporter or producer. Indeed, we
note that, at the oral hearing in this appeal, the European Communities conceded
that the phrase "weighted average" envisages a situation where there is more
than one exporter or producer. 75. The requirement to calculate a "weighted average" in
Article 2.2.2(ii) is, in our view, the key to interpreting that provision. It
is indispensable to the calculation method set forth in this provision, and,
thus, it is indispensable to the entire provision � which deals only with the
mechanics of that calculation. We disagree with the Panel that "the concept of
weighted averaging is relevant only when there is information from more than
one other producer or exporter available to be considered."42 (emphasis in the
original) We see no justification, textual or otherwise, for concluding that
amounts for SG&A and profits are to be determined on the basis of the weighted
average some of the time but not all of the time. In so
interpreting Article 2.2.2(ii), the Panel, in effect, reads the requirement of
calculating a "weighted average" out of the text in some circumstances. In those
circumstances, this would substantially empty the phrase "weighted average" of
meaning.43 76. In our view, then, the use of the phrase "weighted
average", combined with the use of the words "amounts" and "exporters or
producers" in the plural in the text of Article 2.2.2(ii), clearly anticipates
the use of data from more than one exporter or producer. We conclude
that the method for calculating amounts for SG&A and profits set out in this
provision can only be used if data relating to more than one other exporter or
producer is available. 77. Accordingly, we reverse the finding of the Panel, in
paragraph 6.75 of the Panel Report, that the method for calculating amounts for
SG&A and profits provided for in Article 2.2.2(ii) of the Anti-Dumping
Agreement, may be applied where there is data on SG&A and profits for only
one other exporter or producer. 78. We recall that India also argues that the Panel's finding
in paragraph 6.75 of the Panel Report on the applicability of Article 2.2.2(ii)
was inconsistent with the standard of review set forth in Article 17.6(i) of the
Anti-Dumping Agreement. However, since we have already concluded that
the finding of the Panel in that paragraph is inconsistent with Article
2.2.2(ii), there is no need for us to examine whether the Panel in making this
finding also acted inconsistently with Article 17.6(i). 79. On the second issue relating to the Panel's
interpretation of Article 2.2.2(ii) � that is, whether in calculating the amount
for profits pursuant to Article 2.2.2(ii), Members may exclude sales by other
exporters or producers that are not made in the ordinary course of trade
� we recall that the amounts for SG&A and profits for an
exporter or a producer under investigation are, under Article 2.2.2(ii),
calculated on the basis of:
the weighted average of the actual amounts incurred
and realized by other exporters or producers subject to investigation in
respect of production and sales of the like product in the domestic
market of the country of origin;
80. Here, we note especially that Article 2.2.2(ii) refers to
"the weighted average of the actual amounts incurred and realized
by other exporters or producers". (emphasis added) In referring to "the actual
amounts incurred and realized", this provision does not make any exceptions or
qualifications. In our view, the ordinary meaning of the phrase "actual
amounts incurred and realized" includes the SG&A actually incurred, and
the profits or losses actually realized44 by other exporters or
producers in respect of production and sales of the like product in the domestic
market of the country of origin. There is no basis in Article 2.2.2(ii) for
excluding some amounts that were actually incurred or realized from the
"actual amounts incurred or realized". It follows that, in the calculation of
the "weighted average", all of "the actual amounts incurred and
realized" by other exporters or producers must be included, regardless of
whether those amounts are incurred and realized on production and sales made in
the ordinary course of trade or not. Thus, in our view, a Member is not allowed
to exclude those sales that are not made in the ordinary course of trade from
the calculation of the "weighted average" under Article 2.2.2(ii). 81. We find support for this textual interpretation of
Article 2.2.2(ii) in the context of this provision and, in particular, in the
first sentence of the chapeau of Article 2.2.2, which sets out the principal
method for calculating amounts for SG&A and profits. The method set out in
Article 2.2.2(ii) is one of three alternative methods which may be applied only
in circumstances where the amounts for SG&A and profits cannot be determined
by the principal method set out in the chapeau of Article 2.2.2.45 In setting out
this principal method, the first sentence of the chapeau of Article 2.2.2
states:
For the purpose of paragraph 2, the amounts for
administrative, selling and general costs and for profits shall be
based on actual data pertaining to production and sales in the ordinary
course of trade of the like product by the exporter or producer
under investigation. (emphasis added)
82. In contrast to Article 2.2.2(ii), the first sentence of
the chapeau of Article 2.2.2 refers to "actual data pertaining to production and
sales in the ordinary course of trade". (emphasis added) Thus, the
drafters of the Anti-Dumping Agreement have made clear that sales not
in the ordinary course of trade are to be excluded when
calculating amounts for SG&A and profits using the method set out in the chapeau
of Article 2.2.2. 83. The exclusion in the chapeau leads us to believe that,
where there is no such explicit exclusion elsewhere in the same Article of the Anti-Dumping
Agreement, no exclusion should be implied. And there is no such explicit
exclusion in Article 2.2.2(ii). Article 2.2.2(ii) provides for an alternative
calculation method that can be employed precisely when the method contemplated
by the chapeau cannot be used. Article 2.2.2(ii) contains its own specific
requirements. On their face, these requirements do not call for the exclusion of
sales not made in the ordinary course of trade. Reading into the text of Article
2.2.2(ii) a requirement provided for in the chapeau of Article 2.2.2 is
not justified either by the text or by the context of Article 2.2.2(ii). In our
Report in India � Patent Protection for Pharmaceutical and Agricultural
Chemical Products, we stated:
The duty of a treaty interpreter is to examine the
words of the treaty to determine the intentions of the parties. This
should be done in accordance with the principles of treaty
interpretation set out in Article 31 of the Vienna Convention.
But these principles of interpretation neither require nor condone the
imputation into a treaty of words that are not there or the importation
into a treaty of concepts that were not intended.46
84. Therefore, we reverse the finding of the Panel in
paragraph 6.87 of the Panel Report that, in calculating the amount for profits
under Article 2.2.2(ii) of the Anti-Dumping Agreement, a Member may
exclude sales by other exporters or producers that are not made in the ordinary
course of trade. 85. In view of our findings in paragraphs 77 and 84 of this
Report, we conclude that the European Communities, in calculating amounts for
SG&A and profits in the anti-dumping investigation at issue in this dispute,
acted inconsistently with Article 2.2.2(ii) of the Anti-Dumping Agreement.
VI. Findings and Conclusions
86. For the reasons set out in this Report, the Appellate
Body:
(1) upholds the finding of the Panel in
paragraph 6.119 of the Panel Report that the practice of "zeroing" when
establishing "the existence of margins of dumping", as applied by the
European Communities in the anti-dumping investigation at issue in this
dispute, is inconsistent with Article 2.4.2 of the Anti-Dumping
Agreement; and (2) reverses the findings of the Panel in paragraphs
6.75 and 6.87, respectively, of the Panel Report that:
(a) the method for calculating amounts for
administrative, selling and general costs and profits provided for
in Article 2.2.2(ii) of the Anti-Dumping Agreement may be
applied where there is data on administrative, selling and general
costs and profits for only one other exporter or producer; and (b) in calculating the amount for profits under
Article 2.2.2(ii) of the Anti-Dumping Agreement, a Member
may exclude sales by other exporters or producers that are not made
in the ordinary course of trade;
and, as a consequence, concludes that the European
Communities, in calculating amounts for administrative, selling and
general costs and profits in the anti-dumping investigation at issue in
this dispute, acted inconsistently with Article 2.2.2(ii) of the Anti-Dumping Agreement.
87. The Appellate Body recommends that the DSB request that
the European Communities bring its measure found in this Report, and in the
Panel Report as modified by this Report, to be inconsistent with the Anti-Dumping
Agreement into conformity with its obligations under that Agreement. Signed in the original at Geneva this 8th day of February
2001 by: _________________________
James Bacchus
Presiding Member
_________________________
Florentino P. Feliciano
Member
|
_________________________
Georges-Michel Abi-Saab
Member |
1 WT/DS141/R, 30 October 2000.
2 Panel Report, para. 2.3.
3 Commission Regulation (EC) No 1069/97 of
12 June 1997 imposing a provisional anti-dumping duty on imports of
cotton-type bed linen originating in Egypt, India and Pakistan, Official
Journal, No L 156, 13 June 1997, p. 11.
4 Council Regulation (EC) No 2398/97 of 28
November 1997 imposing a definitive anti-dumping duty on imports of
cotton-type bed linen originating in Egypt, India and Pakistan, Official
Journal, No L 332, 4 December 1997, p. 1.
5 Panel Report, paras. 2.1-2.11.
6 The Panel did not examine the claims
withdrawn by India in the course of the Panel proceedings and declined to
consider certain claims falling outside the scope of its terms of reference.
Furthermore, the Panel did not deem it necessary nor appropriate to make
findings on a number of other claims in light of considerations of judicial
economy. See Panel Report, para. 7.3.
7 Panel Report, para. 7.1.
8 Panel Report, para. 7.2.
9 Panel Report, para. 7.5.
10 Pursuant to Rule 21 of the Working Procedures.
11 Pursuant to Rule 23(1) of the Working Procedures.
12 Following a joint request by the European Communities and
India, the Division hearing the appeal decided on 12 December 2000, pursuant
to Rule 16(2) of the Working Procedure and in the light of the
"exceptional circumstances" in this appeal, to extend the time-period for
filing the appellee's and third participant's submissions from 2 January 2001
to 8 January 2001.
13 Done at Vienna, 23 May 1969, 1155 U.N.T.S. 331; 8
International Legal Materials 679.
14 Panel Report, para. 6.181.
15 Panel Report, para. 6.86; European Communities' appellee's
submission, para. 46.
16 For a more detailed description, see Panel Report, para.
6.102.
17 For these latter models, in other words, dumping had not
occurred, as the export price exceeded the normal value.
18 Panel Report, para. 6.119.
19 European Communities' appellant's submission, paras. 14-20
and 38-41.
20 European Communities' appellant's submission, paras.
21-30.
21 European Communities' appellant's submission, paras.
31-37.
22 Commission Regulation (EC) No 1069/97, supra,
footnote 3, para. 10. See also Council Regulation (EC) No 2398/97, supra,
footnote 4, para. 9.
23 Panel Report, para. 6.115.
24
The Concise Oxford Dictionary of Current English
(Clarendon Press, 1995), p. 269.
25 European Communities' appellant's submission, para. 39.
See also para. 40 and footnote 34 of the European Communities' appellant's
submission.
26 Commission Regulation (EC) No 1069/97, supra,
footnote 3, para. 10.
27 Commission Regulation (EC) No 1069/97, supra,
footnote 3, paras. 11 and 14. See also Council Regulation (EC) No 2398/97,
supra, footnote 4, para. 9.
28 See supra, paras. 57-58.
29 European Communities' appellant's submission, paras.
46-49.
30 The European Communities also argues in its appellant's
submission, paras. 42-45, that the Panel's interpretation of Article 2.4.2
would disadvantage those importing Members which collect anti-dumping duties
on a "prospective" basis when compared to those importing Members which
collect anti-dumping duties on a "retrospective" basis. We note, though, that
Article 2.4.2 is not concerned with the collection of anti-dumping duties,
but rather with the determination of "the existence of margins of dumping".
Rules relating to the "prospective" and "retrospective" collection of
anti-dumping duties are set forth in Article 9 of the Anti-Dumping
Agreement. The European Communities has not shown how and to what extent
these rules on the "prospective" and "retrospective" collection of
anti-dumping duties bear on the issue of the establishment of "the existence
of dumping margins" under Article 2.4.2.
31 European Communities' appellant's submission, paras.
50-58.
32 Panel Report, para. 6.46.
33 Panel Report, para. 6.119.
34 Panel Report, para. 6.75.
35 Panel Report, para. 6.87.
36 India's appellant's submission, paras. 5-7.
37 India's appellant's submission, paras. 8-17.
38 India's appellant's submission, paras. 18-32.
39 Panel Report, para. 6.70.
40 "Average" is defined in The Concise Oxford Dictionary
of Current English, supra, footnote 24, p. 86, as follows: "an
amount obtained by dividing the total of given amounts by the number of
amounts in the set".
41 "To weight" is defined as "multiply the components of (an
average) by factors to take account of their importance". See The Concise
Oxford Dictionary of Current English, supra, footnote 24, p. 1589.
"Weighted average" is defined as "resulting from the multiplication of each
component by a factor reflecting its importance". See The New Shorter
Oxford English Dictionary (Clarendon Press, 1993), Vol. II, p. 3651.
42 Panel Report, para. 6.71.
43 We note that in a case where there is data relating to
only one other exporter or producer, a Member may have recourse to the
calculation method set forth in Article 2.2.2(iii), provided, of course, that
the specific requirements for the use of this calculation method are met. We
recall that Article 2.2.2(iii) states that amounts for SG&A and profits may
be calculated on the basis of :
any other reasonable method, provided that the
amount for profit so established shall not exceed the profit normally
realized by other exporters or producers on sales of products of the
same general category in the domestic market of the country of
origin.
44 It is worthwhile noting that "realized" is a word used
with respect to both gains (profits) and losses. See Black's Law
Dictionary (West Group, 1999), p. 1271, which speaks of both "realized
gain" and "realized loss".
45 See second sentence of the chapeau of Article 2.2.2.
46 Appellate Body Report, WT/DS50/AB/R, adopted 16 January
1998, para. 45.
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