E. CLAIMS UNDER ARTICLE 5
6.184 India makes two substantive claims under Article 5.
First, India argues that the European Communities failed to examine the accuracy
and adequacy of the allegations in the complaint before initiating the
anti-dumping investigation, as required by Article 5.3 (claim number 23).
Second, India argues that the European Communities failed to determine the
standing of the domestic industry consistently with Article 5.4 (claim number
24). These claims are addressed below. The associated claims concerning the
alleged failure of the European Communities to sufficiently explain its decision
in the Definitive Regulation (claims 25 and 28) are addressed in section VI.G,
below.
1. Claim under Article 5.3 - failure to examine accuracy
and adequacy of evidence (claim number 23)
(a) Parties' arguments
6.185 India asserts that the European Communities failed to
comply with the obligation to "examine the accuracy and adequacy of the evidence
in the application". India maintains there is no evidence on the record that
such an examination was carried out prior to the initiation of the
investigation. India argues that the available evidence from the first bed linen
anti-dumping proceeding made such examination even more important in this case.70
India asserts that it raised the issue of lack of sufficient evidence to
initiate during the course of the proceeding, but received no response from the
EC authorities beyond the bare statement in the Provisional Regulation that "the
complaint contained evidence of dumping of the said product and of material
injury resulting therefrom, which was considered sufficient to justify the
initiation of a proceeding".71
6.186 India asserts that the investigating authorities did
not "examine" the allegations in the complaint on the state of the domestic
industry before initiating the anti-dumping investigation. In this regard, India
points to the notice of initiation, which stated that:
�The complainant alleges and has provided evidence
that imports from Egypt, India and Pakistan have increased significantly in
absolute terms and in terms of market share, during a period where the
apparent consumption in the Community has decreased.
It is further alleged that the volume and prices of
the imported products have, among other consequences, had a negative impact
on the quantities sold and the prices charged by the Community producers,
resulting in substantial adverse effects on employment and the financial
situation of the Community industry. . . .
Having determined, after consulting the Advisory
Committee, that the complaint has been lodged by or on behalf of the
Community industry and that there is sufficient evidence to justify the
initiation of proceedings, the Commission has commenced an investigation
pursuant to Article 5 of Regulation (EC) No 384/96.� (Emphasis added by
India)72
In India's view, these statements constitute an admission, in
effect, that the EC authorities did not "examine" the evidence before deciding
to initiate the investigation, since they refer only to the allegations of the
complainant, and do not specifically refer to the examination by the
authorities. India argues that the EC authorities "considered" the allegations
in the complaint sufficient to justify initiation, but did not "examine the
accuracy and adequacy of the evidence provided in the application".
6.187 India also argues that the EC authorities had more
information at their disposal than merely the complaint, notably the facts
related to the terminated first bed linen investigation. India acknowledges that
the first bed linen investigation was terminated because the complaint was
withdrawn, but argues that the authorities knew or could have known that the
complaint was withdrawn because it would have been impossible to make an injury
finding. In India's view, these circumstances strongly indicated that the EC
industry might not be injured, since it had refused to support the previous
proceeding. India asserts that the allegations in the complaint underlying the
investigation at issue here largely covered the same products, period and
countries. In India's view this was strong evidence against initiation,
warranting further examination. India takes the position that, while an
investigating authority is not required to conduct any particular sort of
investigation prior to determining whether there is sufficient evidence, since
there is an obligation to "examine" the evidence in the application, that
evidence "can in itself never be the only element "to justify the initiation of
an investigation"", citing the report of the Panel in Guatemala-Cement.73
6.188 In its reply to the Panel's question number 7 following
the first meeting, India asserts that it did argue that the European Communities
erred in determining that the evidence was sufficient to justify initiation,
pointing to the above-quoted statement in support. India is of the view that the
European Communities failed to take counter-evidence (relating to the first bed
linen investigation) into account, and therefore failed to examine the accuracy
and adequacy of the evidence in the application, and therefore initiated
inconsistently with Article 5.3
6.189 In the European Communities' view, India's arguments
are based on an impermissible and vague interpretation of Article 5.3 of the
AD Agreement as requiring some specific action in connection with the
"examination" of the accuracy and adequacy of the evidence in the application.
The European Communities asserts that India's argument seems to suggest that the
information in a complaint may not be relied upon, but must be substantiated by
other information obtained by the investigating authorities, a position which
the European Communities rejects as having no basis in the text of Article 5.3.
6.190 The European Communities argues that Article 5.3 must
be considered in light of Article 5.2 of the AD Agreement. The European
Communities suggests that, taken together, these provisions suggest that
evidence will be adequate if it covers the topics listed in Article 5.2, and
will be accurate if it is sufficiently credible. Regarding the standard of proof
required in making this decision, the European Communities argues that the Panel
in Mexico-HFCS observed that it is less than that appropriate to a
preliminary or final determination of dumping, but more than mere allegation or
conjecture.74 Furthermore, in regard to injury, the European Communities notes
that that Panel concluded there is no need for the investigating authority �to
have or consider information on all the Article 3.4 factors�.75
6.191 The European Communities maintains that, in accordance
with ordinary practice, the EC authorities examined the complaint in the light
of the requirements of Articles 5.2 and 5.3 of the AD Agreement, and with the
benefit of their considerable experience in dealing with such documents, and
concluded that initiation was warranted, which was recorded in the Notice of
Initiation. In the European Communities' view, this demonstrates that the
authorities examined the information contained in the Complaint and found it
sufficient. The European Communities interprets India as arguing that there must
be something more on the record, and/or conveyed to the parties through
publication or a report, demonstrating the process of "examination" of the
evidence in the application and the conclusions based thereon. The European
Communities rejects this suggestion, arguing that there is no such obligation
under the WTO.
6.192 In this regard, the European Communities notes that
India has not challenged the sufficiency of the notice of initiation, and refers
to the views of the Panel in Mexico-HFCS in support of the position that
a more detailed explanation of the decision to initiate and the determinations
underlying that decision was not required by the AD Agreement:
"In our view, Article 5.3 cannot be interpreted to
require the investigating authority to issue an explanation of how it has
resolved all underlying questions of fact at initiation. That is a
requirement that arises at later stages of the proceeding, and is explicitly
set forth in Article 12.2."76
6.193 The European Communities also argues that the
information concerning the first bed linen investigation, while known to EC
officials and considered, was not relevant to the decision to initiate the
subject investigation. The first bed linen investigation concerned different
exporters (Egypt was not subject to that investigation, while Thailand and
Turkey were), and concerned a different investigation period. In any event, the
European Communities notes that no substantive conclusions were made in that
investigation, and in particular, there was no finding that there was no injury.
6.194 Egypt, as third party, is of the view that, contrary to
the express wording of Article 5.3 of the AD Agreement, the European Communities
failed to examine thoroughly the allegations in the complaint. In Egypt's view,
the European Communities failed to take into account information available to it
at the time of initiation pointing to lack of material injury caused by dumped
imports, i.e., information from the first bed linen investigation.
6.195 The United States, as third party, submits that
Article 5.3 does not obligate the European Communities to consider a previously
terminated, incomplete investigation against a different group of countries
before initiating the investigation at issue here. The premise of each aspect of
Articles 5.2 and 5.3 is that the information covered is "evidence". The chapeau
of Article 5.2 specifies that "Simple assertion, unsubstantiated by relevant
evidence, cannot be considered sufficient to meet the requirements of this
paragraph." In this case, the United States does not believe that the earlier
investigation must be considered "evidence" within the meaning of Articles 5.2
and 5.3. First, the earlier investigation was terminated based upon the
withdrawal of the application without any final determination by the
investigating authorities. Second, that earlier investigation, although it may
have involved the same products, involved a different mix of countries. Finally,
each bed linen investigation constituted a separate proceeding for which a
separate record was established by the European Communities. The European
Communities was obligated, consistent with the Agreement, to base its
determination on its assessment of the facts of the matter which were before it.
To the extent that it did so, and its decision was based on an unbiased and
objective evaluation of the facts before it, consistent with the standard
contained in Article 17.6(i), that decision should not be overturned.
(b) Findings
6.196 Article 5.3 of the AD Agreement provides:
�The authorities shall examine the accuracy and adequacy
of the evidence provided in the application to determine whether there is
sufficient evidence to justify the initiation of an investigation.�
6.197 It seems clear, and India does not dispute, that in
this case, there was evidence submitted to the EC authorities in the
application, and that the application was sufficient under Article 5.2 of the
AD Agreement. It is also clear, simply from the language of the EC notice of
initiation (which India has not challenged), that the European Communities
determined that there was sufficient evidence to justify the initiation.
Moreover, the European Communities asserts that it did, in fact, take into
account the circumstances of the previous bed linen investigation, but that
nothing in those circumstances precluded the conclusion that there was
sufficient evidence to justify initiation.
6.198 India claims that the European Communities failed to
examine the accuracy and adequacy of the evidence before initiating the
investigation. Thus, we must determine what the parameters are of the
requirement to "examine" the accuracy and adequacy of the evidence, and on what
basis can it be assessed whether the necessary examination was carried out. It
is difficult to see a basis on which a violation of Article 5.3 could be found
based purely on the claim that the investigating authorities failed to examine
the accuracy and adequacy of the evidence in the application unless we conclude
that the text of Article 5.3 establishes a specific process requirement, that
is, a requirement as to how the examination of the evidence must be
conducted. Further, it is difficult to see a basis on which a violation of
Article 5.3 could be found on the basis of India's claim unless we conclude that
Article 5.3 establishes how the fact of and sufficiency of that
examination must be made known, beyond the notice required by Article 12.1,
which as noted is not at issue here. We can find no such requirements in the
text of Article 5.3.77 It is clear that Article 5.3 requires an investigating
authority to examine the evidence, and that the examination has a purpose � to
determine whether there is sufficient evidence to justify initiation of the
investigation. However, Article 5.3 says nothing regarding the nature of the
examination to be carried out. Nor does it say anything requiring an explanation
of how that examination was carried out.
6.199 The only basis, in our view, on which a panel can
determine whether a Member's investigating authority has examined the accuracy
and adequacy of the information in the application is by reference to the
determination that examination is in aid of - the determination whether there is
sufficient evidence to justify initiation. That is, if the investigating
authority properly determined that there was sufficient evidence to justify
initiation, that determination can only have been made based on an examination
of the accuracy and adequacy of the information in the application, and
consideration of additional evidence (if any) before it.
6.200 However, in this case India has made no claim that the
European Communities violated Article 5.3 of the AD Agreement by initiating this
investigation without sufficient evidence to justify doing so. Even assuming
that India had actually raised such a claim, India has failed to present a
prima facie case that the European Communities erred in concluding that
there was sufficient evidence to justify initiation. India has presented no
arguments or evidence to support such a contention - rather, it has relied on
the particular argument that the European Communities failed to examine the
evidence. It is difficult to imagine how a defending Member might demonstrate
that it has "examined" evidence in the face of India's allegations in this
dispute, except by reference to the determination that there was sufficient
evidence to justify initiation, which is not at issue before us.78 In our view, it
is clear from the mere fact that the EC investigating authorities initiated the
investigation indicates that they examined the evidence in the application to
determine that it was sufficient to justify initiation.
6.201 We therefore conclude that the European Communities did
not violate Article 5.3 of the AD Agreement by failing to examine the accuracy
and adequacy of the information in the application.
2. Claim under Article 5.4 - failure to properly
establish industry support (claim number 26)
(a) Parties' arguments
6.202 India makes two principal arguments challenging the
European Communities' standing determination, i.e., the determination
that the application was supported by producers accounting for at least 25 per
cent of total EC production of the like product. First, India asserts that in
assessing the level of support for the application filed by Eurocoton, the
European Communities wrongly considered the support expressed by producers'
associations on behalf of their members. In India's view, while it is possible
for an association of producers to file a complaint, it is not
permissible, under Article 5.4 of the AD Agreement, for the support of a
producers� association to be substituted for support expressed by its
members, the producers of the like product. Thus, in India's view, only the
expressions of support by individual producers, and not those of producers'
associations, may be considered in determining whether there is sufficient
support for an application under Article 5.4 of the AD Agreement.
6.203 Second, India argues that the European Communities
failed to examine the level of support prior to initiating the investigation. In
this regard, India argues that the information in the non-confidential file,
which India submitted as exhibits, and that submitted by the European
Communities, concerning the expressions of support by individual producers of
the like product, suggests that those expressions of support were not received
prior to initiation. India relies in this regard on conflicts in the dates of
the letters of support themselves, and the headers and footers imposed by
sending and receiving fax machines, which were not evident on the copies of
these documents in the non-confidential file. India acknowledges that, if the
letters of support from individual producers were accepted as fact (which India
maintains they are not), the necessary level of support would have existed, but
maintains that the European Communities could not have made the standing
examination before initiation, an error which can not be corrected after the
fact. India asks the Panel to conclude that the documents submitted on the
question of support do not show that the European Communities examined standing
prior to initiation the investigation, and that the removal of the fax headers
and the different "versions" of the letters of support would suggest that the
European Communities is trying to conceal its mistake of not examining standing
prior to initiation.
6.204 India also argues that the European Communities could
not have determined standing prior to initiation based on the different numbers
of producers which (a) are listed in the application as supporting the complaint
(46), (b) actively expressed support for the application either directly or
thorough producers association and were considered in the standing determination
(38), and (c) were considered as the domestic industry (35). India argues that
the decisions defining the 38 and 35 producer groups took place only after
initiation, but that the European Communities relied on the production of the 38
producers in justifying its standing determination after the fact. In support of
this contention, India asserts that the volume of production referenced in a
note to the file dated 12 September 199679 refers to the production of the 38
producers, and thus can only have been produced after the initiation, and
back-dated.
6.205 The European Communities maintains that it properly
made the standing determination required by Article 5.4 of the Anti-dumping
Agreement. The European Communities asserts that India's argument is premised on
the application of an unnecessarily and improperly high standard of proof
regarding the standing determination under Article 5.4 of the AD Agreement. The
European Communities also takes issue with India's view that the support of
domestic producers for an application must be expressed by each producer itself
directly to the investigating authorities, and, in particular, that support
expressed by an association of producers does not count. The European
Communities argues that India's position imposes unnecessary and unworkable
limitations that are not intended by the text of the AD Agreement. In the
European Communities' view, Article 5.4 of the AD Agreement does not define to
whom support must be expressed by producers, or whether that expression of
support must be made directly to the investigating authorities (although it
obviously has to be brought to their attention), or may be made indirectly.
Furthermore, the provision explicitly envisages that the application may
be made on behalf of the domestic industry. Therefore, the European
Communities argues that the phrase �expressed by domestic producers�,
considered in its context, and in the light of the object and purpose of the
Agreement, may include expressions of support by a trade association.80 The
European Communities notes that there have been several GATT/WTO dispute
proceedings in which the anti-dumping measures at issue were initiated at the
instance of trade associations, and this fact was never challenged.81
6.206 In any event, the European Communities asserts that
even without considering the support expressed by trade associations on behalf
of their member-producers, the information on the record demonstrated that the
25 per cent threshold set in Article 5.4 of the AD Agreement was satisfied. The
European Communities maintains that the record is clear that the individual
expressions of support were received prior to initiation, and that the apparent
confusion of dates in the letters themselves and the fax headers and footers is
a result of photocopying. In addition, the European Communities asserts that the
investigating authority had estimated total EC production of bed linen, on the
basis of statistical information available to it from Eurocoton and Eurostat, as
between 123,917 and 130,128 tonnes. Production of the 38 producers the European
Communities considered as having expressed support for the application was
45,952 tonnes, or 34 per cent of that total. The European Communities points out
that India bears the burden of proof in this regard, and argues that there is no
basis for finding that the European Communities erred in concluding that the
information before the investigating authority at initiation indicated that
producers accounting for a sufficient percentage of production of the like
product supported the application to justify the determination of standing made
by the EC authorities.
6.207 After the second meeting with the parties, the European
Communities offered to submit to the Panel, for its inspection, in India's
presence, the originals of the disputed faxes.
6.208 Egypt, as third party, argues that Eurocoton did not
have the standing required under Article 5.4 of the AD Agreement to lodge a
complaint. Egypt asserts that the investigation revealed that those Community
producers who supported the complaint were in the minority, and that the
proportion of production represented by the complainant producers is extremely
low, 34 percent. Egypt maintains that this percentage is sufficient only if
producers accounting for the remaining 66 of production did not object to the
initiation of the investigation. For Egypt, the information on the record does
not contain conclusive proof that the complainants indeed represented 34 per
cent of total EC production of the like product. Furthermore, Egypt maintains
that the European Communities was obliged to inquire of EC producers to
ascertain their position regarding the application, in order to verify the claim
of the applicant Eurocoton that it represented a "major proportion of the
Community industry" within the meaning of the AD Agreement.
6.209 The United States, as third party, argues that
consideration of industry support information submitted by associations of
domestic producers is not inconsistent with Article 5.4 of the AD Agreement.
While the United States agrees with India that Article 5.4 places certain
affirmative obligations upon the authorities to evaluate the evidence concerning
standing prior to initiating an anti-dumping investigation and establishes
numeric standards which the authorities must find to have been met prior to
initiation, in the United States' view, Article 5.4 does not address from whom
the authorities may receive this evidence. Rather, the evidence which may be
considered by the authorities in making any determinations and the parties
entitled to provide such evidence are discussed in Article 6 of the Agreement.
The United States points out that Article 6.11(iii) of the AD Agreement makes
clear that trade and business associations qualify as interested parties,
provided that a majority of their members produce the like product in the
territory of the importing Member. Further, the AD Agreement provides that these
associations shall have the full opportunity to defend their interests. The
United States notes that the AD Agreement does, however, provide a limited
counter-balance to trade and business associations representing their members.
Article 6.6 requires the authorities to satisfy themselves as to the accuracy of
the information provided by interested parties upon which their findings are
based. Nevertheless, if the authorities have, in fact, confirmed the accuracy of
the representations, contrary to the position of India, the AD Agreement, in the
view of the United States, does not prohibit reliance on the representations of
the associations to determine the necessary level of support. The United States
contends that the European Communities' interpretation of the Agreement is
permissible under Article 17.6(ii) of the AD Agreement. The United States,
however, takes no position as to whether the European Communities' determination
of industry support, as a factual matter, was consistent with the standards
required by Articles 5.4 and 6 of the AD Agreement.
(b) Findings
6.210 Article 5.4 of the AD Agreement provides:
"5.4 An investigation shall not be initiated pursuant to
paragraph 1 unless the authorities have determined, on the basis of an
examination of the degree of support for, or opposition to, the application
expressed13 by domestic producers of the like product, that the application
has been made by or on behalf of the domestic industry.14 The application
shall be considered to have been made "by or on
behalf of the domestic industry" if it is supported by those domestic
producers whose collective output constitutes more than 50 per cent of the
total production of the like product produced by that portion of the
domestic industry expressing either support for or opposition to the
application. However, no investigation shall be initiated when domestic
producers expressly supporting the application account for less than 25 per
cent of total production of the like product produced by the domestic
industry.
_____________________
13 In the case of fragmented industries involving an
exceptionally large number of producers, authorities may determine support
and opposition by using statistically valid sampling techniques.
14 Members are aware that in the territory of certain
Members employees of domestic producers of the like product or
representatives of those employees may make or support an application for an
investigation under paragraph 1".
6.211 Article 5.4 thus sets up two separate calculations to
determine that a minimum level of "support" for the application is shown by
domestic producers. The first requires that producers accounting for more than
50 per cent of production of those producers expressing either support or
opposition express support for the application. That test is not at issue in
this case, and we do not address it here.82
6.212 The second calculation requires that producers
accounting for at least 25 per cent of total production of the like
product by the domestic industry support the application. It is the European
Communities' determination in this regard, both as a legal and as a factual
matter, that is challenged by India.
6.213 The issues raised by the Indian claim in this regard
are similar to those discussed above regarding Article 5.3 with respect to the
lack of an express process requirement in Article 5.4 and the question of
whether and how the determination of standing must be made known to the parties.
As with Article 5.3, Article 5.4 of the AD Agreement requires that the
investigating authorities make certain determinations before an investigation
may be initiated, and establishes the substance of the determinations to be
made, including that the application is supported by producers accounting for at
least 25 per cent of domestic production, but does not set out any specific
requirements as to the process by which that determination must be made. In our
view, whether the necessary examination of the degree of support for the
application was carried out prior to the initiation can only be assessed by
reference to the determination that was actually made, and the evidence before
the authority at the time it made the determination. In this case, the EC
investigating authority clearly concluded that the application was supported by
producers accounting for more than 25 per cent of total EC production of bed
linen, and we have before us documents which it asserts contain the relevant
evidence on which it relied. We therefore turn first to the facts of this
matter.
6.214 We have carefully examined the documents submitted by
both parties.83 These documents are photocopies, and in some cases photocopies of
photocopies, of faxes of (1) letters of support sent by individual producers of
bed linen to the investigating authority indicating support for the application,
(2) letters of support sent by national associations of producers of bed linen
to the investigating authority expressing support on behalf of individual
producers listed in annexes, and (3) letters of support from national
associations of producers of bed linen sent to the investigating authority
expressing support on behalf of their members. It appears that these letters of
support were first sent, by fax, to Eurocoton, which then sent them on, again by
fax, to the EC investigating authority. All of the letters themselves are dated
prior to the initiation of the investigation by the European Communities on 13
September 1996. Based on the letters themselves, individual producers of bed
linen individually communicating support for the application directly to the
investigating authorities accounted for 26.7 per cent of total EC production of
bed linen. This is more than the minimum necessary under Article 5.4 of the
AD Agreement to find sufficient support for the application.
6.215 India asks us to conclude that these letters were not,
in fact, received by the EC investigating authority prior to initiation, that
the EC investigating authority did not, in fact, examine them prior to
initiation, and that the European Communities has tried to cover this
fundamental error by manufacturing evidence post hoc and misrepresenting
the facts before us. This we decline to do. We recognise that the dates in the
fax headers and footers in the photocopied documents submitted to us are
inconsistent with one another and with the dates of the letters themselves.
However, all these dates are prior to the relevant date, that of
initiation on 13 September 1996. We note that the European Communities has
offered to submit the originals of the faxes for our (and India's) inspection in
this dispute, should we deem it necessary to resolve this issue.
6.216 As noted above, India bears the burden of coming
forward with sufficient evidence to make a prima facie case that the
European Communities failed to act consistently with its obligations under
Article 5.4 to determine the necessary level of support prior to initiation. We
presume that Members act in good faith in the context of dispute settlement
proceedings, and are unwilling to assume possible malfeasance in the absence of
evidence to that effect. We consider that the "doubts" which India has as to the
European Communities' actions in this regard do not establish the necessary
prima facie case in this context � the "evidence" of the fax headers relied
on by India does not, in our view, constitute evidence of fraud sufficient to
overcome the presumption of good faith. Moreover, we believe it is more probable
that these inconsistencies in the photocopies are attributable to the
photocopying itself, rather than to the perpetration of a massive fabrication of
fax headers and footers by the EC investigating authority to hide a failure to
make a determination of standing prior to initiation. We therefore do not
consider it necessary to examine the originals of the documents in question.
6.217 We conclude that, as a matter of fact, the EC
investigating authority had before it expressions of support from 38 producers
of bed linen prior to initiation.84 Some of those expressions of support were
received from the individual producers directly, some were received from
national producers associations. As noted above, counting only those submitted
by individual producers directly to the EC investigating authority, that
authority had before it expressions of support from producers accounting for
more than the necessary 25 per cent of total EC production of bed linen. Having
concluded that the European Communities' determination of standing does not
violate Article 5.4 of the AD Agreement on the basis of the express support of
individual producers, we do not consider it necessary to determine whether the
European Communities could properly count the support of associations of
producers.
6.218 We therefore conclude that the European Communities did
not violate Article 5.4 of the AD Agreement by failing to make a proper
determination of standing prior to initiation of the anti-dumping investigation
at issue.
F. CLAIM UNDER ARTICLE 15 - FAILURE TO EXPLORE
POSSIBILITIES OF CONSTRUCTIVE REMEDIES (CLAIM NUMBER 29)
1. Parties' arguments
6.219 India asserts that the European Communities acted
inconsistently with Article 15 of the AD Agreement by not exploring
possibilities of a constructive remedy prior to the imposition of anti-dumping
duties (provisional or final) and by not reacting to detailed arguments from
Indian exporters pertaining to Article 15. India maintains that, despite
repeated and detailed arguments by the Indian parties stressing the importance
of the bed linen and textile industries to India's economy, the European
Communities failed to even mention India�s status as a developing country, let
alone consider or comment on possibilities of constructive remedies. India also
pointed out that Texprocil, the Cotton Textiles Export Promotion Council of
India, acting on behalf of Indian producers and exporters, had communicated to
the European Communities its desire, and that of its members, to offer price
undertakings. India charges that this offer was rejected by the European
Communities without substantive consideration.
6.220 India asserts that the two sentences of Article 15 are
separate and distinct, and that the first sentence does not impose any specific
legal obligation, but simply expresses a preference that the special situation
of developing countries should be an element to be weighted when making that
evaluation. The second sentence, however, imposes a specific legal obligation to
"explore possibilities". In India's view, this requires a determination (or
assessment) whether the essential interests of the developing country concerned
may be involved, to be made after a determination (preliminary or final) of
dumping and injury caused thereby, but before the application of anti-dumping
duties, including the imposition of provisional measures. Then (still before
provisional measures are imposed) the investigating authorities are required to
explore possibilities of constructive remedies �provided for by this Agreement�.
India suggests that the reference to remedies provided for by the AD Agreement
indicates that such remedies may consist of, among others, the non-imposition of
anti-dumping measures, or an undertaking. India rejects the notion that any
procedural mechanisms, such as simplified questionnaires or extensions of time,
can ever satisfy the requirements of the second sentence of Article 15.
6.221 The European Communities agrees that the second
sentence of Article 15 imposes a legal obligation on Members. The European
Communities further does not dispute that bedlinen producers are part of the
textile industry, that this is an �essential interest� of India, and that
anti-dumping duties would �affect� this interest. The European Communities
asserts that its practice, when developing countries are involved in an
anti-dumping investigation, is to give special consideration to the possibility
of accepting undertakings from their exporters. However, the European
Communities maintains that the difficulty that frequently arises in relation to
undertakings, that of effective supervision, can also apply in the case of
developing countries. In this case, the European Communities argues, the reason
no undertaking was accepted was that none had been offered by the exporters
within the time limits set by the EC Regulation. Under EC procedures,
undertakings may be offered during the 10 day period following the disclosure of
the confidential final dumping margin calculations for investigated producers.
In this case, such disclosure was made on 3 October 1997. The European
Communities asserts that these time limits are a reflection of those imposed by
Article 5.10 of the AD Agreement, and the general obligation to manage
investigations expeditiously (Article 6.14 of the AD Agreement).
6.222 The European Communities pointed out that the offer
from Texprocil referred to by India was made on the last day, under the normal
EC schedule, for acceptance of offers of undertakings, and was not in fact an
offer of an undertaking by any producer, but merely an expression by the
producers association Texprocil of intent to offer an undertaking. The European
Communities asserts that its authorities waited nine days, but no further
details concerning such offers was made, as Texprocil's letter had indicated
would be the case, and thus the European Communities replied that it would no
longer be able consider any offers of undertakings, as it was necessary to
proceed to conclude the investigation.
6.223 Egypt, as third party, argues that Article 15 of the
AD Agreement obligated the European Communities to explore the possibilities of
constructive remedies before applying anti-dumping duties, and that the European
Communities failed to comply with this provision, as it did not suggest to the
Egyptian exporters the possibility of, for instance, price undertakings. Egypt
is of the view that Article 15 imposes a legal obligation on developed countries
any time they contemplate imposing anti-dumping duties, and it is therefore up
to those developed countries then to suggest to the developing countries
involved whether or not they would be interested in offering price undertakings.
6.224 In response to a question from the Panel, Japan
asserted that the requirements of Article 15 do not go beyond those of
Article 8.3 of the AD Agreement, that the "constructive remedies under this
Agreement" referred to in Article 15 would include price undertakings, and that
Article 15 imposes no specific obligations on developed country Members.
6.225 The United States, as third party, submits that
Article 15 of the AD Agreement, while it provides procedural safeguards, does
not require any particular substantive outcome, or any specific accommodations
to be made on the basis of developing country status. In the United States'
view, the second sentence of Article 15 does not impose anything other than a
procedural obligation to "explore" possibilities of constructive remedies. The
word "explore" cannot fairly be read to imply an obligation to reach a
particular substantive outcome; it merely requires consideration of these
possibilities. The United States cites to the Tokyo Round Anti-Dumping Code
Panel Report on Cotton Yarn from Brazil as support for this
interpretation. The question then, according to the United States, is whether
the European Communities explored the possibility of entering into such
constructive remedies, which is a factual determination. The United States takes
no position on whether the European Communities' actions were sufficient under
Article 15. With regard to the timing of such exploration under Article 15, the
United States asserts that the reference in Article 15 to "applying anti-dumping
duties" relates to the actual imposition and collection of anti-dumping duties
pursuant to Article 9 of the Agreement, which did not occur until the European
Communities made its final determination of dumping and injury. The imposition
of provisional measures, which may be provisional anti-dumping duties, is a
separate and earlier step which is distinct from the application of anti-dumping
duties themselves. Furthermore, if the "possibilities" to be explored include
price undertakings, the United States maintains that this exploration can only
occur after any provisional determination by the investigating authorities, in
light of the language of Article 8.2 of the AD Agreement. In response to the
Panel's questions, the United States observed that, in its view, the Article 15
and Article 8.3 obligations were complementary, and that the Article 15
obligation did not extend beyond the Article 8.3 obligation. In addition, the
United States suggested that a developing country might be obligated to identify
those instances in which its essential interests would be affected, so that the
developed country Member considering the imposition of anti-dumping duties would
know to consider possible constructive remedies before imposing duties.
2. Findings
6.226 Article 15 provides:
�It is recognized that special regard must be given by
developed country Members to the special situation of developing country
Members when considering the application of anti‑dumping measures under this
Agreement. Possibilities of constructive remedies provided for by this
Agreement shall be explored before applying anti‑dumping duties where they
would affect the essential interests of developing country Members.�
6.227 We turn first to consideration of the text of the
second sentence of Article 15, which is the basis of India's claim.85 We note that
there is no dispute in this case that the application of anti-dumping duties
would affect the essential interests of a developing country Member, India.
However, the parties disagree on what constitutes "constructive remedies
provided for by this Agreement", whether that exploration must take place before
the application of provisional measures, or only before the application of final
anti-dumping measures, and what is required by the obligation to "explore" the
"possibilities" of such remedies.
6.228 "Remedy" is defined as, inter alia, "a means of
counteracting or removing something undesirable; redress, relief".86
"Constructive" is defined as "tending to construct or build up something
non-material; contributing helpfully, not destructive".87 The term "constructive
remedies" might consequently be understood as helpful means of counteracting the
effect of injurious dumping. However, the term as used in Article 15 is limited
to constructive remedies "provided for under this Agreement". The European
Communities states that, in what it refers to as the "spirit" of Article 15, it
undertook several procedural steps which it considered helpful to Indian
exporters, but it does not consider that these procedural steps constitute
"constructive remedies" per se. Rather, the European Communities seems to
view price undertakings as the constructive remedies provided for in Article 15.
India has declined to offer concrete suggestions as to other possible
"constructive remedies under this Agreement" that might be available under
Article 15.88 In India's view, the obligation is on the European Communities to
find and propose such remedies to developing countries prior to imposition of
anti-dumping measures. In this regard, India having asserted that the European
Communities failed to engage in some action which it was obligated to undertake,
we view it as part of India's burden to present a prima facie case of
violation to indicate what actions it believes should have been undertaken.
India did suggest that a "constructive remedy" might be a decision not to impose
anti-dumping duties at all. We cannot agree. In our view, Article 15 refers to
"remedies" in respect of injurious dumping. A decision not to impose an
anti-dumping duty, while clearly within the authority of a Member under
Article 9.1 of the AD Agreement89, is not a "remedy" of any type, constructive or
otherwise.
6.229 We cannot come to any conclusions as to what might be
encompassed by the phrase "constructive remedies provided for under this
Agreement" - that is, means of counteracting the effects of injurious dumping -
except by reference to the Agreement itself. The Agreement provides for the
imposition of anti-dumping duties, either in the full amount of the dumping
margin, or desirably, in a lesser amount, or the acceptance of price
undertakings, as a means of resolving an anti-dumping investigation resulting in
a final affirmative determination of dumping, injury, and causal link. Thus, in
our view, imposition of a lesser duty, or a price undertaking would constitute
"constructive remedies" within the meaning of Article 15. We come to no
conclusions as to what other actions might in addition be considered to
constitute "constructive remedies" under Article 15, as none have been proposed
to us.90
6.230 With regard to the timing of the obligation in the
second sentence of Article 15, India argues that the exploration of
possibilities of constructive remedies must take place prior to the imposition
of any provisional measures, as well as prior to the application of any final
measures, while the European Communities argues that the obligation only arises
prior to the application of any final anti-dumping duties.
6.231 In this regard, we note Article 1 of the AD Agreement,
which provides that:
"An anti‑dumping measure shall be applied only under the
circumstances provided for in Article VI of GATT 1994 and pursuant to
investigations initiated and conducted in accordance with the provisions of
this Agreement." (footnote omitted).
In our view, this implies that the phrase "before applying
anti-dumping duties" in Article 15 means before the application of definitive
anti-dumping measures. Looking at the whole of the AD Agreement, we consider
that the term "provisional measures" is consistently used where the intention is
to refer to measures imposed before the end of the investigative process.
Indeed, in our view, the AD Agreement clearly distinguishes between provisional
measures and anti-dumping duties, which term consistently refers to definitive
measures. We find no instance in the Agreement where the term "anti-dumping
duties" is used in a context in which it can reasonably be understood to refer
to provisional measures. Thus, in our view, the ordinary meaning of the term
"anti-dumping duties" in Article 15 is clear � it refers to the imposition of
definitive anti-dumping measures at the end of the investigative process.
6.232 Consideration of practical elements reinforces this
conclusion. Provisional measures are based on a preliminary determination of
dumping, injury, and causal link. While it is certainly permitted, and may be in
a foreign producer's or exporter's interest to offer or enter into an
undertaking at this stage of the proceeding, we do not consider that Article 15
can be understood to require developed country Members to explore the
possibilities of price undertakings prior to imposition of provisional measures.
In addition to the fact that such exploration may result in delay or distraction
from the continuation of the investigation, in some cases, a price undertaking
based on the preliminary determination of dumping could be subject to revision
in light of the final determination of dumping. However, unlike a provisional
duty or security, which must, under Article 10.3, be refunded or released in the
event the final dumping margin is lower than the preliminarily calculated margin
(as is frequently the case), a "provisional" price undertaking could not be
retroactively revised. We do not consider that an interpretation of Article 15
which could, in some cases, have negative effects on the very parties it is
intended to benefit, producers and exporters in developing countries, is
required.
6.233 We consider next the term "explore", which is defined,
inter alia, as "investigate; examine scrutinise".91 In our view, while the exact
parameters of the term are difficult to establish, the concept of "explore"
clearly does not imply any particular outcome. We recall that Article 15 does
not require that "constructive remedies" must be explored, but rather that the
"possibilities" of such remedies must be explored, which further suggests that
the exploration may conclude that no possibilities exist, or that no
constructive remedies are possible, in the particular circumstances of a given
case. Taken in its context, however, and in light of the object and purpose of
Article 15, we do consider that the "exploration" of possibilities must be
actively undertaken by the developed country authorities with a willingness to
reach a positive outcome. Thus, in our view, Article 15 imposes no obligation to
actually provide or accept any constructive remedy that may be identified and/or
offered.92 It does, however, impose an obligation to actively consider, with an
open mind, the possibility of such a remedy prior to imposition of an
anti-dumping measure that would affect the essential interests of a developing
country.
6.234 Based on the foregoing understanding of Article 15 of
the AD Agreement, we consider the issue before us in this case to be whether the
EC authorities actively considered with an open mind the possibilities of price
undertakings with Indian exporters prior to the imposition of final anti-dumping
measures in the bed linen investigation.
6.235 India stresses that the Indian exporters and Texprocil
made numerous arguments and submissions concerning the developing country status
of India, and the importance of the bed linen proceeding for Indian interests.
India appears to be dissatisfied as a general matter with the European
Communities' failure to address these arguments in the various public notices,
but makes no specific claims in this regard.93 We make no specific findings in
this regard, as a consequence. However, we do note in general that the
provisions of Article 12, which we address below, are quite specific as to the
matters to be addressed in public notices. Beyond those public notices, we are
not aware of, and India has not presented any arguments indicating, a general
obligation on the investigating authorities to "explain" any aspect of their
analysis or determinations. Clearly, when, in dispute settlement, a prima
facie case is made that a Member has failed to comply with its obligations
under the AD Agreement, that Member must present evidence and explanations as to
how it considers that it did comply with the relevant obligation. This does not,
however, impose any general obligation to explain various elements of the
analysis or decision during the course of the proceedings, or in dispute
settlement, beyond the explanations required by the Agreement itself, or in
order to rebut a claim of inconsistent action.
6.236 According to India, counsel for Texprocil, and
Texprocil itself, sought during the course of the investigation to persuade
Indian exporters to propose undertakings, but these attempts were unsuccessful
until very late in the proceeding. During the month of October 1997, there were
telephone communications between the EC authorities and counsel for the Indian
producers' association, Texprocil. According to the European Communities, during
these conversations, the EC authorities:
"emphasised the difficulty of drafting satisfactory
undertakings because the product was supplied in consignments according to
individual specifications of purchasers, involving hundreds of suppliers.
They were advised to discuss the possibilities with Texprocil, the
exporters' association. This willingness to contemplate undertakings by a
trade association is not an automatic feature of the European Communities'
practice in this respect".94
Following the final disclosure of the anti-dumping
calculations, a series of faxes between counsel for Texprocil and Texprocil and
Indian government authorities indicate that counsel explained the nature of
undertakings and the relevant deadline for offering undertakings, in this case
13 October 1997.95 Following further communications between the Indian parties and
counsel,96 on 13 October 1997, counsel for Texprocil sent a telefax to the EC
investigating authorities, communicating "the desire of . . . Texprocil and its
Members to offer price undertakings" in the bed linen investigation.97 The letter
continued to note that Texprocil was "working on a detailed formula concerning
the practical aspects of this offer", and indicated that the proposed formula
implementing the practical details of the offer would be relayed "as soon as
this has been worked out in detail". The letter expressed the hope that the
offer "can be given due consideration especially in light of Article 15 of the
WTO Agreement".98 There were no further communications from the Indian parties to
the EC authorities in this regard. On 14 October 1997, counsel for Texprocil
informed the Texprocil representatives that the letter had been submitted, asked
that the details of the formula for undertakings be sent at Texprocil's earliest
convenience, and noting that the EC authorities had indicated that "Bed Linen
was "too complicated a product for undertakings"".99
6.237 There was no response from the European Communities
until a letter to counsel for Texprocil dated 22 October 1997. That response
noted that the letter from counsel for Texprocil had reached the European
Communities the last day of the period for offering undertakings, but that "no
detailed offer of price undertakings has been made yet". The EC response noted
that the investigation was to be concluded within 15 months of initiation under
EC law (in this case, by 13 December 1997), and continued to state that the EC
authorities would "not be in a position to consider any offer of undertakings
which your client may be considering submitting at this stage."100
6.238 It is these facts which we must evaluate to determine
whether the European Communities gave adequate consideration to, that is
"explored" the possibility of entering into an undertaking with the Indian
producers. As noted above, while the obligation is on the European Communities
to explore possibilities, we do not consider that this entails acceptance of any
particular offer that might be made. In this case, it is clear to us that no
formal proposal of a price undertaking was made. However, in light of the
expressed desire of the Indian producers to offer undertakings, we consider that
the European Communities should have made some response upon receipt of the
letter from counsel for Texprocil dated 13 October 1997. The rejection expressed
in the European Communities' letter of 22 October 1997 does not, in our view,
indicate that the possibility of an undertaking was explored, but rather that
the possibility was rejected out of hand. We cannot conclude, based on these
facts, that the European Communities explored the possibilities of constructive
remedies prior to imposing anti-dumping duties. In our view, the European
Communities simply did nothing different in this case, than it would have done
in any other anti-dumping proceeding � there was no notice or information
concerning the opportunities for exploration of possibilities of constructive
remedies given to the Indian parties, nothing that would demonstrate that the
European Communities actively undertook the obligation imposed by Article 15 of
the AD Agreement. Pure passivity is not sufficient, in our view, to satisfy the
obligation to "explore" possibilities of constructive remedies, particularly
where the possibility of an undertaking has already been broached by the
developing country concerned. Thus, we consider that the failure of the European
Communities to respond in some fashion other than bare rejection,
particularly once the desire to offer undertakings had been communicated
to it, constituted a failure to "explore possibilities of constructive
remedies", and therefore conclude that the European Communities failed to act
consistently with its obligations under Article 15 of the AD Agreement.
G. CLAIMS UNDER ARTICLE 12.2.2 (CLAIMS NUMBERS 3, 6, 10,
13, 18, 22, 25, 28, AND 31)
1. Parties' arguments
6.239 India argues, with respect to almost all of its
substantive claims of violation of the AD Agreement, that the European
Communities failed adequately to explain its decisions relating to those matters
in the Definitive Regulation. India asserts that the Definitive Regulation does
not set forth the European Communities' reasoning as to why it applied relevant
provisions of its domestic legislation and the AD Agreement in the way it did,
which in India's view is inconsistent with the requirements of the AD Agreement.
India also argues that the European Communities failed adequately to explain its
choices of methodology, analysis, and conclusions on questions of fact, and
failed adequately to explain why it rejected arguments by the Indian exporters.
India's claims under Article 12.2.2 of the AD Agreement correspond to its
substantive claims as follows:
6.240 India sets out four bases for its claim 3, asserting
insufficient notice of the European Communities' decisions and analysis under
Article 2.2.2. First, India argues that the European Communities failed to
provide a sufficient explanation of why it applied Article 2.2.2(ii) instead of
Article 2.2.2(i). Second, India asserts that the European Communities failed to
provide a sufficient explanation as to why it applied an option for which the
requirements were not fulfilled. Third, India posits that the European
Communities failed to explain why it considered only sales in the ordinary
course of trade in deriving an amount for profit under Article 2.2.2(ii).
Finally, India maintains that the European Communities failed to explain why it
considered the profit rate it established to be reasonable under
Articles 2.2.2(iii) and 2.2.
6.241 India also argues that, to the extent the European
Communities may argue that it did not commit certain of the substantive
violations alleged, and in particular to the extent the European Communities may
argue that it did consider all the relevant economic factors under Article 3.4
(India's claim 13), the European Communities' notice is inconsistent with the
requirements of Article 12.2.2. In India's view, any such consideration cannot
be determined from that notice, which is thus insufficient. India argues that,
apart from access to the non-confidential file of the investigation, the notice
is the only basis for the Indian exporters to understand the facts on which the
determination was based, and know the determination that was made, and thus must
be complete in order to further the interest of transparency which underlies
Article 12.2 as a whole.
6.242 Finally, India argues, based on the text of
Article 12.2.2, that the notice of final determination must contain a detailed
explanation of decisions taken and information considered in the context of
initiation. This argument underlies India's claims25 and 28, which assert that
the European Communities' Definitive Regulation is inconsistent with
Article 12.2.2 because it does not explain the European Communities' examination
of the information in the application under Article 5.3, and does not address
the information and arguments made by the Indian exporters concerning the
standing of the applicant under Article 5.4.
6.243 The European Communities posits, in general, that not
every aspect of a final determination must be explained in the notice thereof.
Rather, the European Communities asserts that only certain matters need to be
set out in the final determination � those that are relevant to the final
determination itself, and those that are not known to the parties without
reference to the final determination, because, for example, they were discussed
or addressed during earlier stages of the proceedings, or are well-known
elements of the practice of the investigating authorities. The European
Communities maintains that its Definitive Regulation (taken together with the
Provisional Regulation where appropriate) adequately explains its final
determination, the legal analysis and facts relied upon and the reasoning
underlying its conclusions. In addition, the European Communities argues that to
the extent India's arguments under Article 12.2.2 assert that the European
Communities failed to explain why it acted in a manner that India considers
inconsistent with the AD Agreement, there was nothing to explain, since the
European Communities maintains that it committed no substantive violations.
6.244 Turning to the specific claims, the European
Communities argues with regard to India's claim 3 that since the AD Agreement
does not obligate a Member to explain its choice between the options listed in
Article 2.2.2, there can be no obligation to provide notice of such an
explanation. With regard to India's claim 6, the European Communities asserts
that paragraphs 18 and 19 of the Definitive Regulation adequately address
various arguments raised by the exporters concerning the determination of the
profit rate for the constructed normal value. Moreover, the European Communities
maintains that since it did not act inconsistently with the AD Agreement in the
application of Article 2.2.2, no further explanation or justification of the
European Communities' decisions is necessary. Finally, the European Communities
asserts that Article 12.2.2 requires notice of decisions taken by the
investigating authorities, while the European Communities' practice under
Article 2.2.2 is a matter of policy, not a case-by-case decision. Similarly,
with respect to India's claim 10, the European Communities argues that the
European Communities' methodology in injury analysis is standard practice and,
in the absence of any argument on the point by one of the interested parties to
the investigation, the European Communities was not obligated to publish details
of the methodology applied.
6.245 With respect to India's claim 13, the European
Communities maintains that paragraphs 40 and 41 of the Definitive Regulation set
forth a detailed account of the factors considered in the examination of injury,
including those listed in Article 3.4 that were relevant to the determination.
As regards the alleged failure to address �relevant arguments or claims made by
the exporters�, the European Communities maintains that the arguments of the
exporters were not raised in the final phase of the investigation, but were
directed at the original Complaint, and as such were not arguments relevant to
the final decisions made by the EC authorities. Consequently, the Article 12.2.2
requirement to give reasons for their acceptance or rejection did not apply.
6.246 With respect to India's claim 22, the European
Communities argues that the Definitive Regulation makes clear that employment
was not a factor on which the European Communities relied in concluding that the
domestic industry was suffering injury. Consequently, the exporters� argument on
this point was not relevant, and therefore the European Communities was not
required to address it. Moreover, the European Communities asserts that it did
not regard imports prior to the investigation period as constituting �dumped
imports�. Consequently, it had no obligation to explain such a conclusion, which
it did not reach, in the Definitive Regulation.
6.247 With respect to India's claims 25 and 28, the European
Communities disputes India's interpretation of Article 12.2.2. The European
Communities asserts that India�s approach fails to take proper account of the
structure of the Article. In the European Communities' view, Article 12 is
straightforward � initiation issues are dealt with by paragraph 1, while
paragraph 2 covers the measures adopted during and after the investigation (that
is, provisional measures, definitive measures and undertakings). India's claim
25 asserts failure to explain matters arising under Article 5.3, concerning
alleged failure to examine the evidence prior to initiation. The European
Communities maintains that the Definitive Regulation addresses the issues of
dumping and causation of injury at the end of the investigation and the
imposition of final measures, as required by Article 12.2.2. In the European
Communities' view, arguments regarding the initiation of the investigation and
the determination of standing were not relevant to the final determination and
definitive measure and, therefore, there was no obligation to include any
discussion of them in the Definitive Regulation. The European Communities also
asserts that the investigating authorities are under no obligation to review an
initiation decision with benefit of hindsight and, thus, arguments directed to
the initiation decision later in the investigation could never be relevant
arguments that must be addressed in the notice of final determination. The
European Communities makes similar arguments concerning the obligation to
address only relevant arguments with respect to India's claim 28,
asserting failure to address the determination of standing. The European
Communities asserts that the arguments of the exporters which are allegedly not
addressed in the Definitive Regulation were not relevant to the final
determination described in that notice.
6.248 Finally, with respect to India's claim 31, the European
Communities argues that its practice with respect to the obligations set forth
in Article 15 is well-known to exporters, and therefore no further explanation
was required. Moreover, the European Communities points out that, as India
acknowledges, the matter was discussed with the exporters.
6.249 Egypt, as third party, argues that, even if the
European Communities carried out the examination required by Article 5.3 of the
Agreement, it failed to disclose this fact to the interested parties and,
therefore, acted in breach of Articles 12.1 (an Article of which India has
not alleged a violation) and 12.2 of the AD Agreement.
2. Findings
6.250 We will consider in turn each of India's claims under
Article 12.2.2. Before doing so, we recall our conclusion that India has
withdrawn its claims under Article 12.2.1 regarding the Provisional Regulation
(India's claims 2, 5, 9, 12, 17, 21, 24, 27, and 30). Therefore, we have made no
rulings concerning these claims. In addition, we note that India's claim 18
relates to its substantive claim 16, alleging a violation of Articles 6.10 and
6.11. We recall our conclusion that India's claims under Article 6, claims 14
and 16, are not within our terms of reference. In these circumstances, we
consider it unnecessary and inappropriate to address India's claim 18.
6.251 Article 12 governs the contents of public notices
issued in the course of anti-dumping investigations. It provides, in pertinent
part:
"12.2. Public notice shall be given of any preliminary or
final determination, whether affirmative or negative, of any decision to
accept an undertaking pursuant to Article 8, of the termination of such an
undertaking, and of the termination of a definitive anti‑dumping duty. Each
such notice shall set forth, or otherwise make available through a separate
report, in sufficient detail the findings and conclusions reached on all
issues of fact and law considered material by the investigating authorities.
All such notices and reports shall be forwarded to the Member or Members the
products of which are subject to such determination or undertaking and to
other interested parties known to have an interest therein.
12.2.1 A public notice of the imposition of
provisional measures shall set forth, or otherwise make available
through a separate report, sufficiently detailed explanations for the
preliminary determinations on dumping and injury and shall refer to the
matters of fact and law which have led to arguments being accepted or
rejected. Such a notice or report shall, due regard being paid to the
requirement for the protection of confidential information, contain in
particular:
(i) the names of the suppliers, or when this is
impracticable, the supplying countries involved;
(ii) a description of the product which is sufficient
for customs purposes;
(iii) the margins of dumping established and a full
explanation of the reasons for the methodology used in the establishment
and comparison of the export price and the normal value under Article 2;
(iv) considerations relevant to the injury
determination as set out in Article 3;
(v) the main reasons leading to the determination.
12.2.2 A public notice of conclusion or suspension of
an investigation in the case of an affirmative determination providing
for the imposition of a definitive duty or the acceptance of a price
undertaking shall contain, or otherwise make available through a
separate report, all relevant information on the matters of fact and law
and reasons which have led to the imposition of final measures or the
acceptance of a price undertaking, due regard being paid to the
requirement for the protection of confidential information. In
particular, the notice or report shall contain the information described
in subparagraph 2.1, as well as the reasons for the acceptance or
rejection of relevant arguments or claims made by the exporters and
importers, and the basis for any decision made under subparagraph 10.2
of Article 6."
Claims 3 and 6
6.252 We consider first India's claims 3 and 6, which assert
that the Definitive Regulation failed to give sufficient notice of the European
Communities' substantive determinations and analysis in applying Article 2.2.2,
which India alleges, in its claims 1 and 4, were inconsistent with
Articles 2.2.2 and 2.2. We recall our conclusion that the order in which the
three options are set out in Article 2.2.2 is without any hierarchical
significance and that Members have complete discretion as to which of the three
methodologies they use in their investigations.101 We found, therefore, that the
European Communities was not required by the AD Agreement to resort to option
(i) before it could resort to option (ii) and it did not act inconsistently with
Article 2.2.2 by using the latter option. We note, further, that the European
Communities resorted to the methodology set out in paragraph 2.2.2(ii) in
accordance with Article 2(6) of its Regulation. In light of our finding in
respect of the order of options set out in Article 2.2.2 and the fact that the
European Communities applied what is its customary methodology for the
calculation of SG&A and profit rates, and the basis for its determination in
this regard is clear from the final determination, we do not consider that
Article 12.2.2 requires the European Communities to explain its choice of
methodology.
6.253 We also recall our conclusion that Article 2.2.2(ii)
may be applied in a case where there are data concerning SG&A and profit for
only one other exporter or producer.102 We found, therefore, 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. India's argument in support of its claim under
Article 12.2.2 presupposes an inconsistency with Article 2.2.2(ii), which we did
not find. Since we did not find that the European Communities applied an option
for which the requirements were not fulfilled, and the basis for its
determination in this regard is clear from the final determination, we do not
consider that the European Communities was required to give any further
explanation in this regard.
6.254 We also recall our conclusion 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 rate to be used in the calculation
of a constructed normal value is permissible.103 We found, therefore, 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. We note, further,
that the European Communities excluded data for sales not in the ordinary course
of trade in accordance with Article 2(4) of its Regulation. In light of our
finding in respect of the exclusion of data for sales not in the ordinary course
of trade, the fact that the European Communities applied the customary
methodology set forth in its legislation for the calculation of SG&A and profit
rates, and the fact that its analysis in this regard is clear in its
determination, we do not consider that the European Communities was required to
explain its decision to derive profit on the basis of sales in the ordinary
course of trade.
6.255 Finally, we recall our conclusion that
Article 2.2.2(ii), when applied correctly, necessarily yields amounts for
profits that are deemed "reasonable" for purposes of Article 2.2, and that the
AD Agreement does not require consideration of a separate reasonability test in
respect of results arrived at through the use of that methodology.104 We found,
therefore, that the European Communities did not act inconsistently with the
requirements of Article 2.2 by not having applied such a test to the results
that it obtained under Article 2.2.2(ii). Clearly, where there is no obligation
for the European Communities to consider whether the profit established is
reasonable on the basis of a separate test of reasonability � as we have found
to be the case � there can be no obligation to explain a consideration that need
not be undertaken.
6.256 The basis for the European Communities' application of
and its analysis under Article 2.2.2 are apparent on the face of the Definitive
Regulation, taken together with the Provisional Regulation as appropriate, and
with reference to EC legislation. For the foregoing reasons, we find that
India's claims 3 and 6, asserting that the European Communities failed to
sufficiently explain why and how it applied Article 2.2.2 and that the European
Communities failed to sufficiently explain why and how it applied Article 2.2,
must both fail.
Claims 10 and 22
6.257 The next issue before us is whether, as India claims,
the European Communities failed to explain its consideration of all imports from
India during the period of investigation (Claim 10) as well as in the years
prior to the period of investigation, i.e., 1 January 1992-30 June 1995
(Claim 22). We recall our conclusion that the phrase "dumped imports" refers to
all imports of the product from exporters/producers as to which an
affirmative determination of dumping has been made.105 We found, therefore, that
the European Communities, having made an affirmative determination of dumping
with respect to imports from all producers/exporters in this case, did not act
inconsistently with Articles 3.1, 3.4 and 3.5 of the AD Agreement by considering
all such imports in its evaluation of the volume, price effects and consequent
impact of dumped imports. That the European Communities carried out its analysis
on the basis of all imports is clear from the final determination. It follows,
therefore, in our view, that the European Communities' explanation of its
determination is adequate and in conformity with the AD Agreement, and that
India's claim 10 must fail.
6.258 We turn next to India's claim regarding the European
Communities' failure to explain its consideration of imports from all
producers/exporters as "dumped imports" in the years prior to the period of
investigation. We recall that we did not address this issue as a substantive
matter, in light of our conclusion that the European Communities' determination
of injury was not made consistently with its obligations under Article 3.4.106 We
find it neither necessary nor appropriate to address India's claim 22 asserting
a failure to explain this aspect of the determination.
Claim 13
6.259 We now turn to India's claim that the European
Communities failed to adequately explain its evaluation of certain factors
listed in Article 3.4. We recall our finding that the European Communities acted
inconsistently with Article 3.4 of the AD Agreement by failing to evaluate all
the economic factors set forth in Article 3.4.107 In light of our finding of
inconsistency with Article 3.4, we find it neither necessary nor appropriate to
address India's claim of inadequate notice. We note that our finding concerning
Article 3.4 was based principally on the explanation of the injury determination
in the European Communities' notices. Having found a violation of the
substantive requirement to consider all the factors set forth in Article 3.4 in
assessing the impact of imports, the question of whether the notice of either
the preliminary or affirmative determination of injury is "sufficient" under
Article 12.2 is immaterial. A notice may adequately explain the determination
that was made, but if the determination was substantively inconsistent with the
relevant legal obligations, the adequacy of the notice is meaningless. Further,
in our view, it is meaningless to consider whether the notice of a decision that
is substantive inconsistent with the requirements of the AD Agreement is, as a
separate matter, insufficient under Article 12.2. A finding that the notice of
an inconsistent action is inadequate does not add anything to the finding of
violation, the resolution of the dispute before us, or to the understanding of
the obligations imposed by the AD Agreement. We therefore make no findings on
claim 13.
Claims 25 and 28
6.260 We turn next to India's claims regarding the failure of
the European Communities to explain, in the Definitive Regulation, its
examination of the evidence in the application under Article 5.3 and the
determination of industry support under Article 5.4. We do not agree with
India's view that Article 12.2.2 requires explanations relating to initiation to
be set out in the notice of final determination. Article 12.1 of the
AD Agreement requires public notice of an initiation, and sets out the
requirements regarding the information to be contained in such notices. India
has made no claim under Article 12.1 in this dispute. Article 12.2 requires
notice of preliminary and final determinations, whether affirmative or negative,
and notice of undertakings, and sets forth in some detail in Articles 12.2.1,
12.2.2, and 12.2.3 the information to be included in such notices. Those
requirements, in addition to basic information concerning the product and
parties, all provide for transparency with respect to the decisions of which
notice is being given. There is no reference to the initiation decision among
the elements to be addressed in notices under Article 12.2. Moreover, in our
view, it would be anomalous to interpret Article 12.2 as also requiring, in
addition to the detailed information concerning the decisions of which notice is
being given, explanations concerning the initiation of the investigation, of
which notice has previously been given under Article 12.1. This is particularly
the case with respect to elements which are not within the scope of the
information to be disclosed in the notice of initiation itself.108 We do not
believe that Article 12.2.2 requires a Member to explain, in the notice of final
determination, aspects of its decision to initiate the investigation in the
first place. We find, therefore, that India's claims under Article 12.2.2
regarding the European Communities' examination of the evidence in the
application under Article 5.3 and its determination of industry support under
Article 5.4 must fail.
Claim 31
6.261 Finally, we turn to India's claim that the European
Communities failed to explain its consideration of the Indian exporters'
arguments concerning Article 15 of the AD Agreement. In light of our finding of
inconsistency with Article 15,109 we find it neither necessary nor appropriate to
address this claim. As discussed above in connection with India's claim 13, we
consider that where there is a violation of the substantive requirement, the
question of whether the notice is sufficient under Article 12.2.2 is immaterial.
We therefore make no findings on claim 31.
VII CONCLUSIONS AND RECOMMENDATION
7.1 In light of the findings above, we conclude 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).
7.2 In light of the findings above, we conclude that 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).
7.3 With respect to those of India's claims not addressed
above we have:
(a) found that India has withdrawn those claims
(claims 2, 5, 9, 12, 17, 21, 24, 27, and 30),
(b) concluded that the claims are not within our
terms of reference (claims 14 and 16), and
(c) concluded that, in light of considerations of
judicial economy, it is neither necessary nor appropriate to make
findings on those claims (claims 13, 18, and 31).
7.4 Under Article 3.8 of the DSU, in cases where there is
infringement of the obligations assumed under a covered agreement, the action is
considered prima facie to constitute a case of nullification or
impairment of benefits under that agreement. Accordingly, we conclude that to
the extent the European Communities has acted inconsistently with the provisions
of the AD Agreement, it has nullified or impaired benefits accruing to India
under that Agreement.
7.5 We recommend that the Dispute Settlement Body request the
European Communities to bring its measure into conformity with its obligations
under the AD Agreement.
70 In January 1994, the European Communities had initiated an
anti-dumping investigation of bed linen from India, Pakistan, Thailand, and
Turkey, based on an application filed by Eurocoton, the complainant in this
investigation. The investigation was terminated, without any measures being
imposed, in July 1996, following the withdrawal of the complaint.
71 India acknowledged, in its response to Question 7 from the
Panel following the first meeting, that it was not challenging the sufficiency
of the application under Article 5.2 of the AD Agreement. Annex 1-6.
72 Exhibit India-7.
73 First Submission of India, Annex 1-1, para. 5.20.
74 Mexico - HFCS, para. 7.94.
75 Id., para. 7.97.
76 Id., para. 7.110.
77 We note that Article 5.3 was recently considered by the Panel
in Mexico - HFCS. In that case, an issue similar to that before us was
addressed, concerning the obligation (if any) on the investigating authority to
make specific determinations about factual issues involved in the initiation,
based on the evidence in the application prior to initiation, and the obligation
(if any) to make such determinations known to the parties. That Panel concluded
that Article 5.3 did not itself establish any obligation to make, or to make
known, a determination concerning issues underlying the decision to initiate.
Mexico - HFCS, paras. 7.105 and 7.110. In our view, this lends support to
our conclusion that there are no obligations in Article 5.3 regarding how the
examination of the accuracy and adequacy of the evidence is to be undertaken, or
explained.
78 Moreover, India appears to be arguing that the European
Communities failed to "examine" evidence outside the scope of the application,
when it argues that the European Communities failed to consider the events
concerning the first bed linen investigation. However, Article 5.3 specifically
requires the investigating authority to examine the "accuracy and adequacy of
the evidence provided in the application�". We note that India appears to
misapprehend the decision of the Panel in Guatemala - Cement, which held
that the obligation of the investigating authority under Article 5.3 goes beyond
a determination that the requirements of Article 5.2 are satisfied. In that
case, the Panel further found that an investigating authority may, but is not
obligated to, seek out information beyond that in the application, and take
such information into account in determining whether there is sufficient
evidence to justify initiation under Article 5.3 of the AD Agreement. See
Guatemala - Anti-Dumping Investigation Regarding Portland Cement from Mexico,
Panel Report, WT/DS60/R, adopted 25 November 1998, paras. 7.50‑7.52. That is
very different from the proposition suggested by India that the obligation to
examine the accuracy and adequacy of information in the application is rendered
"more acute" because an investigation of the same product from one of the same
countries had recently been terminated. The obligation imposed on investigating
authorities under Article 5.3 does not vary by virtue of the factual
circumstances.
79 Exhibit India-59.
80 In the European Communities' view, footnote 14 to
Article 5.4, which allows trade unions to express support on behalf of their
members, also undermines India's arguments.
81 The European Communities cites, in this regard, the Panel
Reports on Salmon - Anti-Dumping Duties and Mexico - HFCS.
82 Consequently, we express no views on Egypt's arguments as
third party, which seem to address this aspect of the Article 5.4 determination
in asserting that the European Communities was obliged to inquire of producers
concerning their support or opposition for the application, and that the
European Communities erred in finding sufficient support without finding that
producers who did not support the application did not object to it.
83 These documents were submitted in various iterations as
Exhibits India-59, India-86, India-87, EC-4 and EC-5.
84 India makes numerous references to the differences between
the number of producers listed in the application, the number of producers
expressing support, and the number of producers eventually found to comprise the
domestic industry. While the import of its arguments in this regard is not
entirely clear, we do not, in any event, consider these differences to have any
significance for the issue before us, whether the producers expressing support
accounted for the necessary minimum 25 per cent of total EC production of bed
linen. It is in our view understandable that some companies listed in the
application as producers of the like product may not subsequently specifically
express support for the application. It is also understandable, in our view,
that following initiation, the actual definition of the domestic industry may
change, as a result of exclusions, such that the set of producers in the
industry is not, in fact, the same as that considered in evaluating support.
However, in this latter respect, we note that the question is not before us, as
India has made no claim suggesting that standing somehow was lost or evaporated
after initiation.
85 The parties are in agreement that the first sentence of
Article 15 imposes no legal obligations on developed country Members. As there
is no claim in this regard, we express no views on this matter.
86 The New Shorter Oxford English Dictionary, Clarendon
Press, Oxford, 1993.
87 Id.
88 See, e.g., Response of India to Question 13
from the Panel following the first meeting, Annex 1-6, and Oral Statement of
India at the first meeting of the Panel, Annex 1-4, paras. 87-91.
89 Article 9.1 provides, in pertinent part, that "It is
desirable that the imposition [of an anti-dumping duty] be permissive�".
90 It is clear that the European Communities did consider the
imposition of a lesser duty, although it concluded that such a duty would not be
appropriate in this case since the injury margin exceeded the dumping margin for
each company (paragraph 131, Provisional Regulation, Exhibit India-8). India has
made no claim or arguments in this regard.
91 The New Shorter Oxford English Dictionary, Clarendon
Press, Oxford, 1993.
92 We note that our interpretation of Article 15 in this regard
is consistent with that of a GATT Panel which considered the predecessor of that
provision, Article 13 of the Tokyo Round Anti-Dumping Code, which provision is
substantively identical to present Article 15. That Panel found:
"The Panel noted that if the application of anti-dumping
measures "would affect the essential interests of developing countries", the
obligation that then arose was to explore the "possibilities" of
"constructive remedies". It was clear from the words "[p]ossibilities"
and "explored" that the investigating authorities were not required to adopt
constructive remedies merely because they were proposed." EC -
Imposition of Anti-Dumping Duties on Imports of Cotton Yarn from Brazil, Panel Report, ADP/137, adopted 30 October 1995, para. 584 (emphasis added).
93 India's specific Article 12 claim with respect to the
European Communities' determination in connection with Article 15 is addressed
below.
94 Response of the European Communities to Question 16 from the
Panel following the second meeting, Annex 2-8. India has not disputed this
statement by the European Communities.
95 Exhibit India-89.
96 Exhibits India-90 and -91.
97 Exhibit India-72.
98 Id.
99 Exhibit India-93.
100 Exhibit India-72.
101 See paras. 6.54-6.62, supra.
102 See paras. 6.69-6.75, supra.
103 See paras. 6.83-6.87, supra.
104 See paras. 6.94-6.101, supra.
105 See paras. 6.132-6.142, supra.
106 See paras. 6.153-6.169, supra.
107 Id.
108 We note, in this regard, the decision of the Panel in
Mexico - HFCS concerning the scope of the information required in a notice
of initiation.
109 See paras. 6.226-6.238, supra.