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EUROPEAN COMMUNITIES - ANTI-DUMPING DUTIES ON MALLEABLE CAST AB-2003-2 Report of the Appellate Body
TABLE OF CASES CITED IN THIS REPORT
World Trade Organization
Appellate Body
I. Introduction
1. Brazil appeals certain issues of law and legal
interpretations in the Panel Report, European Communities - Anti-Dumping
Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil (the "Panel
Report").1 The Panel was established to consider a complaint by Brazil concerning
the consistency with the Agreement on Implementation of Article VI of the
General Agreement on Tariffs and Trade 1994 (the "Anti-Dumping Agreement
") and the General Agreement on Tariffs and Trade 1994 (the "GATT
1994") of the imposition of anti-dumping duties by the European Communities on
imports of malleable cast iron tube or pipe fittings from Brazil.
2. On 29 May 1999, the European Communities announced the
initiation of an anti-dumping investigation on the imports of malleable cast
iron tube or pipe fittings originating in Brazil and seven other countries. One
Brazilian producer (Ind�stria de Fundi��o Tupy Ltda.) was subject to the
anti-dumping investigation.2 The European Communities imposed provisional
anti-dumping duties on the imports on 28 February 20003 and definitive anti-dumping
duties on 11 August 2000.4 On 21 December 2000, Brazil requested consultations
with the European Communities concerning the imposition of anti-dumping duties
on its exports of malleable cast iron tube or pipe fittings to the European
Communities.5 After consultations failed to resolve the dispute, Brazil requested
the establishment of a panel on 7 June 2001 to examine the matter.6 The factual
aspects of this dispute are set out in greater detail in the Panel Report.7
3. Before the Panel, Brazil claimed that the European
Communities had acted inconsistently with Article VI of the GATT 1994 and with a
number of provisions of the Anti-Dumping Agreement, specifically,
Articles 1, 2.2, 2.4, 2.4.1, 2.4.2, 3.1, 3.2, 3.3, 3.4, 3.5, 6.2, 6.4, 6.6, 6.9,
9.3, 11.1, 11.2, 12.2, 12.2.2, and 15.8
4. In the Panel Report, circulated to Members of the World
Trade Organization (the "WTO") on 7 March 2003, the Panel found that the
European Communities had acted inconsistently with its obligations under:
(a) Article 2.4.2 of the Anti-Dumping Agreement
in "zeroing" negative dumping margins in its dumping determination;
and
(b) Articles 12.2 and 12.2.2 of the Anti-Dumping
Agreement in that it is not directly discernible from the published
Provisional or Definitive Regulation that the European Communities had
addressed or explained the lack of significance of certain injury
factors listed in Article 3.4 of the Anti-Dumping Agreement.9
The Panel rejected all other claims raised by Brazil against
the anti-dumping measure.
5. The Panel accordingly recommended that "the Dispute
Settlement Body request the European Communities to bring its measure into
conformity with its obligations under the Anti-Dumping Agreement."10
6. On 23 April 2003, Brazil notified the Dispute Settlement
Body 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").11 On 5 May 2003, Brazil filed an appellant's
submission.12 Stated briefly, Brazil alleged on appeal that the Panel had erred in
finding that the imposition of anti-dumping duties by the European Communities
was not inconsistent with Article VI:2 of the GATT 1994 and Articles 1, 2.2.2,
3.1, 3.2, 3.3, 3.4, 3.5, 6.2,
or 6.4 of the Anti-Dumping Agreement. Brazil additionally alleged that
the Panel had acted inconsistently with Article 17.6(i) of the Anti-Dumping
Agreement, with respect to the admission of Exhibit EC-12, by failing to
assess whether the investigating authority's establishment of the facts was
proper. On 19 May 2003, the European Communities filed an appellee's submission,
requesting that the Appellate Body reject all of Brazil's claims on appeal.13 On
the same day, Japan and the United States each filed a third participant's
submission14, and Chile and Mexico notified their intention to appear and make
statements at the oral hearing as third participants.15
7. The oral hearing in this appeal was held on 10 June 2003.
The participants and third participant Japan presented oral statements. The
participants and all the third participants also responded to questions put to
them by the Members of the Division hearing the appeal.
II. Arguments of the Participants and the Third
Participants
A. Claims of Error by Brazil - Appellant
8. Brazil appeals the Panel's finding that the European
Commission was neither required nor permitted by Article VI:2 of the GATT 1994
or the Anti-Dumping Agreement to base its dumping determination solely on
export price data from the last quarter of the period of investigation
("POI")-that is, data subsequent to the devaluation of the Brazilian Real that
occurred in January 1999.
9. Brazil maintains that the reason for using a POI in a
dumping determination is to acquire a finite data set relating to a recent
historical period, which can be extrapolated to make a "reasonable assumption"
about the future. According to Brazil, the 42 percent devaluation of the
Brazilian Real constituted a fundamental and lasting change in the trading
conditions of Brazilian exports, and the magnitude of the devaluation was
greater than the dumping margin of 34.8 percent. The dumping was totally
eliminated by the devaluation, and if the data subsequent to devaluation had
been used, no "reasonable assumption" could be made that dumping would occur in
the future.
10. According to Brazil, the Panel erred in finding that
Article 2.4.2 of the Anti-Dumping Agreement requires investigating
authorities to use all the data from throughout the POI. Brazil explains
that the first sentence of Article 2.4.2 provides that dumping margins are
normally to be established using the average of prices of all export
transactions. However, the second sentence of Article 2.4.2 expressly recognizes
that situations may arise where this methodology would not be appropriate, for
example, where a pattern of export prices differs significantly among different
time periods. Data from the POI show that, although the devaluation did
not affect the normal value of Brazilian exports, the patterns of export prices
in Brazilian Real were completely different in the periods before and after the
devaluation. Therefore, pursuant to Article 2.4.2, the European Commission was
entitled to use in its dumping determination only the export price data relating
to the last three months of the POI, being the period following the devaluation.
11. Moreover, Brazil argues that the European Commission had
an obligation, under Article VI:2 of the GATT 1994, to make its dumping
determination in accordance with the second sentence of Article 2.4.2. Article
VI:2 allows a WTO Member to levy anti-dumping duties only "[i]n order to offset or prevent dumping". To satisfy this fundamental
condition, Brazil argues, the European Commission was required to make a "reasonable
assumption for the future" from data collected in the POI in order to
"anticipate the level of anti-dumping duty that [was] strictly necessary to
prevent dumping in the future."16 The
European Commission was therefore required to choose the methodology under
Article 2.4.2 that best fulfilled this obligation, which is the methodology
prescribed in the second sentence of Article 2.4.2, in particular a comparison
of the weighted average normal value (based on data from the entire POI) with
the prices of individual export transactions that took place in the POI after
the devaluation. According to Brazil, in failing to adopt this methodology and
in imposing duties despite the impact of the devaluation, the European
Communities acted inconsistently with Article VI:2 of the GATT 1994 and,
consequently, Article 1 of the Anti-Dumping Agreement.
12. Brazil considers that this conclusion is not affected by
the Panel's observation that the Anti-Dumping Agreement provides
mechanisms to address situations where dumping decreases or terminates following
an affirmative determination of dumping (through refunds under Article 9.3 and
reviews under Article 11), because the availability of corrective mechanisms
does not justify the imposition of anti-dumping duties in excess of what is
necessary to prevent dumping. According to Brazil, corrective mechanisms are
intended to take account of fundamental changes taking place after the
investigation, but as the devaluation occurred during the POI, the
authorities were obliged to take it into account in a proper way at the time of
the initial dumping determination.
13. Brazil therefore requests the Appellate Body to reverse
the Panel's findings on this issue and to find instead that the European
Communities acted inconsistently with its obligations under Article VI:2 of the
GATT 1994 and Article 1 of the Anti-Dumping Agreement.
2.
Data for SG&A and Profits: Article 2.2.2 of
the Anti-Dumping Agreement
14. Brazil appeals the Panel's finding that the chapeau of
Article 2.2.2 of the Anti-Dumping Agreement compels investigating
authorities to use actual administrative, selling and general costs ("SG&A") and
profit data from all sales in the ordinary course of trade, including
those sales found under Article 2.2 to be low-volume sales.
15. Brazil submits that the chapeau of Article 2.2.2 of the
Anti-Dumping Agreement does not expressly require that all actual
data be used, or that only certain data be excluded from the determination of
SG&A and profits. Brazil further argues that the Panel's reading of Article
2.2.2, which allows authorities to include sales that were found to be
"unrepresentative" in constructing the normal value, nullifies the purpose of
Article 2.2.17 According to Brazil, interpreting one treaty provision so as to
nullify the effects of another provision is inconsistent with the rules of
treaty interpretation under the Vienna Convention on the Law of Treaties.18
Article 2.2 imposes on Members an obligation to construct normal value when the
product concerned is sold in the domestic market in low volumes deemed not to
"permit a proper comparison" with the export price. The purpose of this
provision, in Brazil's view, is to avoid basing normal value on prices that may
not represent normal trading conditions. Brazil submits an example seeking to
demonstrate that this purpose is undermined by the Panel's interpretation of the
chapeau of Article 2.2.2. Under this example, according to Brazil, if data
pertaining to low-volume sales are included in the calculation of SG&A and
profits under Article 2.2.2, the same result is reached as if "normal value"
(that is, selling prices in the domestic market) had been used, and there was no
need for "constructing" a normal value. The Panel's interpretation of the
chapeau of Article 2.2.2 is thus contrary to the customary rules of treaty
interpretation.
16. Brazil therefore requests the Appellate Body to reverse
the Panel's finding that the chapeau of Article 2.2.2 compels investigating
authorities to use actual SG&A and profit data from all sales in the
ordinary course of trade, including those sales found under Article 2.2 to be of
insufficient quantities to permit a proper comparison. Brazil requests that the
Appellate Body find instead that the chapeau of Article 2.2.2 requires the
exclusion of actual data from sales found under Article 2.2 to be of
insufficient quantities to permit a proper comparison, and therefore, that the
European Communities acted inconsistently with this obligation.
3.
Cumulation: Articles 3.2 and 3.3 of the
Anti-Dumping Agreement
17. Brazil appeals the Panel's finding that
country-by-country analyses of volumes and prices under Article 3.2 of the
Anti-Dumping Agreement are not pre-conditions to the cumulative assessment
of the effects of dumped imports under Article 3.3.
18. In Brazil's view, Article 3.2 requires investigating
authorities to consider, on a country-by-country basis, whether there has
been an absolute or relative increase in dumped imports and whether the prices
of those imports are lower than the actual or target prices of the domestic
industry. Only where these analyses identify the imports from a particular
country as a likely source of negative effects on the domestic industry is
cumulation of that country's imports permitted under Article 3.3. Brazil submits
that if Article 3.3 were intended to "derogate" from the obligation to analyze
volumes and prices on a country-by-country basis under Article 3.2, this would
have been clearly mentioned in Article 3.3.19
Moreover, according to Brazil, the requirement of a vague
"conditions of competition" analysis under Article 3.3 cannot replace the
precise analyses of prices and volumes required under Article 3.2.
19. Brazil argues that Article 3.2 requires an analysis of
the "factors" that may be causing injury (namely, the volumes and prices of the
dumped imports), whereas Article 3.3 allows cumulation of the "effects" of the
dumped imports (and not the imports themselves). These "effects" are found
through recourse to Article 3.4. Thus, according to Brazil, the logical order of
Article 3 requires that investigating authorities first assess the factors that
may cause injury (Article 3.2), then whether the conditions for cumulation are
fulfilled (Article 3.3), and finally the impact of the dumped imports on the
domestic industry (Article 3.4). Interpreting Article 3.3 to allow cumulation of
"factors" causing injury would involve reading into the Anti-Dumping
Agreement words that are not there, contrary to the rules of interpretation
under public international law.
20. Brazil submits that the Panel's interpretation of Article
3 would lead to absurd results and would undermine the requirements of Article
3. In particular, the Panel's interpretation would allow injury to be attributed
to sources that are not actually causing injury. For example, where imports from
countries X and Y are being dumped, but the factors causing injury are the rapid
increase in market share and the low price of imports from country Y,
anti-dumping duties would be imposed on both countries, even though the imports
from country X are not causing injury. In addition, the Panel's interpretation
would undermine the requirement in Article 3.1 that the determination of injury
be based on an "objective examination", because it makes a finding of injury
more likely and renders a country liable to pay anti-dumping duties when its
dumped imports cannot be said to be causing injury. Brazil submits that such
results are contrary to "basic principles of fundamental fairness."20
21. Brazil therefore requests the Appellate Body to reverse
the Panel's finding that country-specific analyses of volumes and prices under
Article 3.2 are not pre-conditions to cumulation under Article 3.3, and to find
that the European Communities acted inconsistently with Articles 3.2 and 3.3 of
the Anti-Dumping Agreement.
4.
Exhibit EC-12: Articles 3.1, 3.4, and
17.6(i) of the Anti-Dumping Agreement
22. Brazil appeals the Panel's finding that an internal note
for the investigation file, containing an analysis of certain of the injury
factors listed in Article 3.4 and submitted by the European Communities to the
Panel as Exhibit EC-12, was properly before the Panel. First, Brazil argues that
this finding is based on an erroneous legal interpretation of Articles 3.1 and
3.4. Second, Brazil argues that the Panel failed to comply with its obligations
under Article 17.6(i) of the Anti-Dumping Agreement in not ensuring that
Exhibit EC-12 was made during the investigation.21
23. According to Brazil, Article 3.4 requires that there be a
"contemporaneous and verifiable indication that Exhibit EC-12 existed during the
investigation", and this requirement was not met.22 In the absence of such a
requirement, Brazil argues, Article 3.4 would be deprived of its meaning because
an investigating authority could make a finding of injury on the basis of an
incomplete analysis. Citing Article 3.1, Brazil submits further that the
"evidence contained in Exhibit EC-12" cannot be regarded as "positive evidence"
because its contemporaneous character is not established and is "questionable"23,
and the evaluation in Exhibit EC-12 cannot be regarded as "objective" because it
is not established that it was actually made during the investigation.24
24. In relation to the Panel's alleged failure to comply with
Article 17.6(i), Brazil argues that the Panel improperly exercised its
discretion in basing its findings "exclusively on a mere assertion" from the
European Communities that Exhibit EC-12 was made during the investigation, and
on an unsupported presumption of good faith, rather than on positive facts.25
According to Brazil, the obligation on the European Communities to present
evidence could not be substituted by a presumption of good faith. The principle of good faith, as
mentioned in Article 3.10 of the DSU, cannot be regarded as an evidentiary
principle. Rather, it relates to due process and requires parties to cooperate
in dispute settlement proceedings, including by placing material evidence before
the tribunal. Finally, Brazil argues that the confidentiality of information
cannot be an obstacle to a proper examination of the facts as required under
Article 17.6(i), especially as Article 18.2 of the DSU provides a specific
mechanism to protect such information.
25. Brazil therefore requests the Appellate Body to reverse
the Panel's finding that Exhibit EC-12 was properly before it and consequently
find that the European Communities acted inconsistently with Articles 3.1 and
3.4 of the Anti-Dumping Agreement.
5.
Disclosure of Information: Articles 6.2 and
6.4 of the Anti-Dumping Agreement
26. Brazil appeals the Panel's finding that the European
Communities was not required under Articles 6.2 and 6.4 of the Anti-Dumping
Agreement to disclose to the interested parties, during the anti-dumping
investigation, the information on certain injury factors contained in Exhibit
EC-12, because the European Commission had determined that the data contained in
Exhibit EC-12 were in line with other data (which had been disclosed) and did
not add any value to its analysis of the injury factors listed in Article 3.4 of
the Anti-Dumping Agreement.
27. According to Brazil, when making an injury determination,
investigating authorities must assess the role, relevance, and relative weight
of at least those factors listed in Article 3.4. Therefore, the findings of
investigating authorities on each of these factors are necessarily "relevant"
within the meaning of Article 6.4. Brazil submits that it cannot be left to
investigating authorities to decide, on their own, which information is
"relevant" under Article 6.4 and relates to the defence of parties' interests
under Article 6.2. Brazil further argues that Article 6 is a "fundamental due
process provision" seeking to ensure that interested parties can defend their
interests during the investigation process itself, rather than be
informed of relevant information only after the investigation is
completed and its result reflected in the definitive determination, as required
under Article 12.2.26 In Brazil's view, the obligations set out in Articles 6.2
and 12.2 are distinct obligations relating to different periods of an
anti-dumping investigation.
28. Brazil therefore requests the Appellate Body to reverse the
Panel's finding that the European Communities did not have to disclose the
information contained in Exhibit EC-12 relating to the evaluation of certain
injury factors listed in Article 3.4, and to find that the European Communities
acted inconsistently with Articles 6.2 and 6.4 of the Anti-Dumping Agreement.
6.
Implicit Analysis of the "Growth" Factor:
Article 3.4 of the Anti-Dumping Agreement
29. Brazil appeals the Panel's finding that, in evaluating
other injury factors, the European Commission had implicitly addressed the
"growth" factor, and thereby did not act inconsistently with Article 3.4 of the
Anti-Dumping Agreement.
30. According to Brazil, the evaluation of each injury factor
listed in Article 3.4 must be explicit and it cannot simply be deduced from or
found to be implicit in the evaluation of other factors. The Panel's contrary
interpretation, in Brazil's view, is inconsistent with the principle of
effectiveness as recognized by the Appellate Body, because it nullifies the
obligation under Article 3.4 to evaluate each of the factors listed in that
provision. The interpretation is also inconsistent with the requirement that it
is the investigating authority (rather than the Panel) that must evaluate
each factor, because Article 17.6(i) limits the Panel's role to assessing
whether the authorities properly established the facts and evaluated them in an
unbiased and objective manner.
31. As a result, Brazil requests that the Appellate Body
reverse the Panel's finding that the European Communities did not act
inconsistently with Article 3.4 of the Anti-Dumping Agreement in its
treatment of the factor of "growth".
32. Brazil claims that the Panel erred in concluding that the
European Communities did not act inconsistently with Article 3.5 of the
Anti-Dumping Agreement in conducting its causality analysis. First, Brazil
appeals the Panel's finding that a factor "known" to the European Commission in
the context of its dumping and injury analyses was not a factor "known" to it in
the context of its causality analysis. Second, Brazil appeals the Panel's
finding that the European Commission did not improperly attribute to the dumped
imports injury to the domestic industry caused by other factors, even though it
analyzed the effects of those other factors only individually and not
collectively.
33. In relation to other "known" factors under Article 3.5,
Brazil argues that the relatively high cost of production of the European
Communities industry compared to that of the Brazilian industry was a causal
factor "known" to the European Commission in its causality analysis.27 According
to Brazil, this difference in cost of production is reflected in the "margins
analysis"; that is, in the fact that the dumping margin found for the Brazilian
exporter was 34.8 percent, whereas the underselling margin was 82.06 percent of
the export price. Brazil argues that this cost disadvantage was known to the
investigating authority because the European Commission itself had calculated
the dumping and underselling margins and had full information on the production
costs of the different producers. Furthermore, the Brazilian exporter had raised
this issue in the context of the dumping and injury determinations. As the
elimination of dumping by the Brazilian producer would not have substantially
improved the condition of the European Communities industry, Brazil submits that
a significant part, if not all, of the injury could have been caused by the
domestic industry's high cost of production. The European Commission was
therefore under an obligation to conduct a non-attribution analysis with respect
to this factor.
34. Brazil maintains that the European Commission was obliged
to examine this factor even though the Brazilian producer did not expressly
raise it as a causal factor. In Brazil's view, a textual interpretation of
Article 3.5 shows that an investigating authority cannot limit itself to
evaluating only those factors that were specifically raised in the context of
the causality analysis. Article 3.5 requires that investigating authorities
examine "all relevant evidence before the authorities" and that they "also
examine any known factors other than the dumped imports". Finally,
Brazil argues that the Spanish version of Article 3.5 requires the authorities
to examine "cualesquiera otros factores de que tengan
conocimiento", making it clear that the authorities must examine any factor
known to them, regardless of whether such factor was raised by an interested
party.
35. In relation to the collective analysis of other known
factors under Article 3.5, Brazil argues that the European Commission's
methodology in this case involved an evaluation of causal factors
individually, but it did not involve an evaluation of their collective
impact. Brazil challenges the application of this methodology to this case on
the basis that it deprives Article 3.5 of its aim to ensure that other causal
factors are not themselves the cause of the injury found. Although individual
factors may each have an insignificant effect on injury, multiple insignificant
factors may together contribute significantly to injury. A methodology that
assesses other injury factors only individually does not address the possibility
that such factors may collectively "sever the causal link between the dumping
and the injury."28 According to
Brazil, in examining each known factor only individually, an investigating
authority automatically attributes to the dumped imports the injurious effects
of all the other known factors. As such, the European Commission in this
investigation failed to identify, isolate, and analyze the effects of such
factors as required by Article 3.5 and the Appellate Body's decision in US -
Hot-Rolled Steel.29 Finally, Brazil claims that the individual factor analysis
employed in this case may lead to the absurd result that the greater the number
of causal factors, the less likely those factors will be found to constitute a
significant cause of injury, regardless of their collective effect.
36. Brazil therefore requests the Appellate Body to reverse
the Panel's findings that (a) the cost of production differential between the
European Communities industry and the Brazilian exporter was not a "known"
factor other than dumped imports that the European Commission was required to
examine; and (b) the non-attribution obligation under Article 3.5 did not
require in this case an examination of the collective effects of other causal
factors. Brazil consequently requests the Appellate Body to find that the
European Communities acted inconsistently with its obligations under Article 3.5
of the Anti-Dumping Agreement.
B. Arguments of the European Communities -
Appellee
37. The European Communities agrees with the Panel that the
methodologies specified in the first sentence of Article 2.4.2 of the
Anti-Dumping Agreement "would seem to require, in general, that data
throughout the entire investigation period would necessarily consistently be
taken into account."30 According to
the European Communities, the standards of objective and unbiased action in
determining the existence of dumping and the dumping margin are implicit in the
specific rules of Article 2 of the Anti-Dumping Agreement, because
if these standards did not exist the rules would be rendered ineffective. The
European Communities maintains that its system assures objectivity by using, in the determination of injurious dumping and in the
determination of the definitive dumping margin, all data pertaining to a
sufficiently lengthy period, which is applied on a regular basis in anti-dumping
investigations.
38. In contrast, according to the European Communities,
Brazil's notion of a "reasonable assumption for the future" is inherently vague
and introduces into the Anti-Dumping Agreement an element of subjectivity
on the part of the investigating authority. The European Communities states,
furthermore, that there was no guarantee that the Brazilian producer would
maintain the same pricing policy in the immediate aftermath of the devaluation.
It also points out that the Anti-Dumping Agreement has a provision for
addressing exchange rate movements (Article 2.4.1), thereby suggesting that the
proper response to currency devaluation is not the exclusion of certain data
from the POI.
39. The European Communities, citing the Appellate Body
Report in EC - Bed Linen31, argues that nothing in Article 2.4.2 indicates
that an investigating authority may select among the export transactions within
the POI. The second sentence of Article 2.4.2, in the European Communities'
view, specifically addresses "targeted dumping", meaning dumping concentrated in
sales to certain regions, customers, or time periods. The European Communities
therefore submits that this sentence does not allow an investigating authority
to select transactions within the POI on the basis of a "reasonable assumption
for the future". Furthermore, investigating authorities are not required to
adopt any particular methodology under Article 2.4.2. Rather, in the European
Communities' view, investigating authorities should in principle use one of the
two methodologies in the first sentence. They may resort to the methodology in
the second sentence only when certain circumstances mentioned therein are
present, which was not the case in this anti-dumping investigation.
40. In response to Brazil's arguments that the mechanisms
provided by the Anti-Dumping Agreement for refunds and reviews operate
only in relation to events occurring after the POI, the European Communities
contends that the corrective mechanisms would also operate in relation to
changes of an "enduring" character that occur during the POI.
2.
Data for SG&A and Profits: Article 2.2.2 of the
Anti-Dumping Agreement
41. The European Communities argues that Brazil's
interpretation of Articles 2.2 and 2.2.2 of the Anti-Dumping Agreement is
incorrect. The text of Article 2.2 separately identifies "low-volume" sales and
sales not made "in the ordinary course of trade", thereby distinguishing the two
types of sales. The chapeau of Article 2.2.2, however, expressly excludes data
relating to sales not made "in the ordinary course of trade", but makes no
mention of data relating to low-volume sales, indicating that it places no
restriction on the inclusion of such sales. Similarly, the European Communities
states that sub-paragraphs (i) and (ii) of Article 2.2.2, which relate to the
construction of normal value, do not mention the exclusion of data relating to
low-volume sales.
42. The European Communities argues that there is a rational
explanation for excluding non-representative sales from a normal value based on
sale prices, while at the same time including them in a normal value that
is constructed. Typically, the dumping margin for a product is calculated
by determining a weighted average of the dumping margins for different versions
of the like product on the basis of the volume and the price of export
sales. If the domestic sales volume for a particular version is small, there is
a greater risk of atypical prices affecting the calculation, because prices from
those low-volume sales will be weighted according to the export sales of
the product rather than the domestic sales. In contrast, the relative volume of
domestic sales (in the exporting country) of different versions of a like
product is taken into account in the construction of normal value because SG&A
and profit data from all versions of the like product are weight-averaged
according to domestic sales. Thus, the fact that a small volume of one version
of the product is sold at atypical prices will have a correspondingly small
effect on the profit margin used in constructing normal value. The European
Communities argues that this rationale for the different treatment of low-volume
sales under Articles 2.2 and 2.2.2 is illustrated by the present case, where the
effect of including the data in question would be to alter the profit margin,
and therefore the dumping margin, by only one hundredth of one percent.
43. The European Communities concedes that, in the particular
set of circumstances of Brazil's example, (involving only one product type that
is sold almost entirely for export, with only a low-volume quantity being sold,
profitably, in the domestic market), the price resulting from a constructed
normal value, based on the Panel's interpretation, would be the same as if the
price had been derived from domestic sales originally rejected as not permitting
a "proper comparison". However, the European Communities submits that this
example does not show that the Panel's interpretation renders Article 2.2
ineffective. According to the European Communities, the circumstances posited by
Brazil are somewhat unusual. The European Communities states that, in most cases
(such as the present case), the problem of arriving at the same price through
constructed value as through reliance on low-volume domestic sales prices would
not arise.
44. Finally, the European Communities emphasizes that the
inclusion of actual data from low-volume sales entails no inherent bias either
for or against the exporter. In fact, according to the European Communities,
Brazil's interpretation seems to imply that an investigating authority could
pick and choose among the data collected, which would introduce a subjective
element into the anti-dumping procedure, contrary to the objectivity intended
under the Anti-Dumping Agreement.
3.
Cumulation: Articles 3.2 and 3.3 of the
Anti-Dumping Agreement
45. The European Communities argues that the ordinary meaning
of the terms of Article 3.3 of the Anti-Dumping Agreement in their
context indicates that volumes and prices under Article 3.2 may be cumulatively
assessed. The requirement under Article 3.3 of a calculation of individual
countries' export volumes to establish that they are "not negligible" indicates,
in the European Communities' view, that there is no requirement that
investigating authorities consider whether imports have increased from each
individual country before conducting a cumulative assessment. The European
Communities submits that the obligation to consider prices and volume in
accordance with Article 3.2 still exists, although Article 3.3 modifies this
rule to permit their consideration on a cumulated, rather than on a
country-by-country, basis.
46. The European Communities argues that a proper
consideration of the object and purpose of Article 3.3 demonstrates that it must
provide for the cumulative assessment of volume and prices because it is
precisely the cumulated effects of volume and prices with which domestic
producers are confronted on the domestic market. If an investigating authority
had to establish that imports from each country were causing injury, cumulation
under Article 3.3 would be redundant.32 In response to Brazil's example
demonstrating that failure to carry out a country-by-country consideration under
Article 3.2 would inappropriately attribute injury, the European Communities
argues that a country (such as country X in Brazil's example) may be both a
"victim" and a "cause" of injury.33 47. The European Communities challenges Brazil's notion that
"effects" and "factors" are used in Article 3 of the Anti-Dumping Agreement
as "terms of art", or terms having precise and different meanings.34 The
European Communities notes that the last sentence of Article 3.4 refers to the
"effects" also as "factors", and Articles 3.1 and 3.4 refer to these effects
collectively as the "impact". Articles 3.1 and 3.2 also identify the "effect" of
the dumped imports on prices as the second of two topics for investigating
authorities to consider. The European Communities acknowledges that the first of
these topics is described as "the volume of the dumped imports", with no
explicit mention of effects. However, the European Communities argues, because
Article 3.5 refers to "the effects of dumping, as set forth in paragraphs 2 and
4", it would be a "strained interpretation" of Article 3.5 to read this as
referring only to the price effects under Article 3.2.35
4. Exhibit EC-12: Articles 3.1, 3.4, and
17.6(i) of the Anti-Dumping Agreement
48. The European Communities contends that no rule of
evidence exists in the WTO that precludes panels from accepting as evidence a
document that was produced during an anti-dumping investigation unless
accompanied by a "contemporaneous and verifiable written indication" that it
actually existed during the investigation. According to the European
Communities, the requirement of "positive evidence" in Article 3.1 "is not a
rule governing the evidence that panels may take into account."36
49. The European Communities maintains that no rule of law
limits a panel's reliance on a presumption of good faith, and the extent to
which a panel relies on such a presumption is a matter within the panel's
discretion. Nevertheless, the European Communities disputes Brazil's suggestion
that the sole justification given by the Panel for accepting the genuine nature
of Exhibit EC-12 was that the European Communities had asserted that it was
genuine. The European Communities notes that it provided responses to questions
by the Panel regarding the sources of information and the methodology on which
Exhibit EC-12 was based. The genuineness of the document was demonstrated by the
consistency between the raw data that had been collected and the consideration
of that data in Exhibit EC-12, as well as the similar consistency between the
conclusions described in Exhibit EC-12 and those stated in the Definitive
Regulation.
5. Disclosure of Information: Articles 6.2 and
6.4 of the Anti-Dumping Agreement:
50. The European Communities argues that, although the Panel
was correct to reject Brazil's claim under Articles 6.2 and 6.4 of the
Anti-Dumping Agreement, its reasoning was not appropriate because it
implicitly presumed that these provisions required the European Commission to
inform the Brazilian producer about the conclusions (as opposed to
information) it had reached on the basis of the data obtained during the
investigation.37
51. The European Communities contends that the term
"information" used in Article 6.4 does not extend to investigating authorities'
conclusions from, or reasoning applied to, data obtained in the course of their
enquiries. This view, according to the European Communities, is supported by the
ordinary meaning of the text of Article 6.4, in its context. The European
Communities submits that where the Anti-Dumping Agreement refers to
"information" with the intention of imposing an obligation to provide
notification of the authorities' reasoning, it does so explicitly (as, for
example, in Article 12.2.2). The European Communities claims that an examination
of the object and purpose of Article 6.4 supports this interpretation, because
the disclosure requirements are intended to give parties an opportunity to
influence the conclusions of investigating authorities. According to the
European Communities, it had no obligation to disclose Exhibit EC-12 because it
contains its investigating authority's conclusions with respect to some of the
injury factors listed in Article 3.4; any data published in Exhibit EC-12 had
previously been disclosed to the interested parties to the extent that it was
compatible with confidentiality requirements.
52. Citing the panel report in Guatemala - Cement II,
the European Communities also argues that the general nature of Article
6.2 is not such as to impose a specific obligation on the European
Commission to inform the Brazilian exporter in the course of the
investigation about matters that are specifically required to be conveyed at
the end of the investigation by virtue of Article 12.2.38
6. Implicit Analysis of the "Growth" Factor:
Article 3.4 of the Anti-Dumping Agreement:
53. The European Communities argues that the obligation under
Article 3.4 of the Anti-Dumping Agreement to consider each of the factors
listed in that provision is distinct from other obligations under the
Anti-Dumping Agreement to disclose or publish information about an
investigating authority's consideration of a particular factor. In the present
case, the Panel found that the examination of "growth" was "implicit" in that it
was carried out in the course of examining other factors, which examination was
clearly evident in the record (including in the Provisional Regulation). In the
European Communities' view, allowing the implicit examination of a factor avoids
a formalistic approach to Article 3.4, without rendering ineffective the
substantive requirement that each factor be examined. Moreover, according to the
European Communities, there is no rule in Article 17.6(i) of the Anti-Dumping
Agreement or elsewhere in the covered agreements that prevents panels from
determining whether a factor was properly evaluated on the basis of the
evaluation of other factors. The European Communities submits that such a
determination is therefore within the discretion of the Panel.
54. The European Communities argues that the high cost of
production of the European Communities industry, relative to the Brazilian
industry, was not raised as a causal factor before the investigating
authorities, and therefore, it was not "known" to the investigating authorities
in that context. The European Communities notes that the factors that the Panel
described as being known to the investigating authorities in the context of the
dumping and injury analyses were the alleged differences in cost of production
and market perception between "white" and "black heart" variants of the product
under investigation. As the Panel reported, the European Commission had
determined during the investigation that the difference in cost of production
was minimal and, therefore, such difference could not have been a causal factor.
The European Communities submits that this determination by the European
Commission is an issue of fact and, therefore, not within the Appellate Body's
jurisdiction. Finally, the European Communities argues, even if the difference
in cost of production as described by Brazil were known to the European
Commission, the investigating authorities would not have been required to
consider it in a causality determination under Article 3.5, because a difference
in cost of production of the product being examined is not a factor "other than
dumped imports".
55. The European Communities asserts that Brazil's arguments
regarding the European Communities' methodology of analyzing each causal factor
only individually are not properly before the Appellate Body because Brazil did
not argue before the Panel that the European Commission failed to consider the
collective effect of the "other factors". Therefore, the European Communities
submits, in so far as the Panel's finding involved a legal interpretation of the
obligations of investigating authorities in regard to the collective effect of
"other factors", the Appellate Body should declare it to be of no effect as this
was not an issue in dispute. Similarly, the European Communities argues that the
Appellate Body should also declare any factual findings of the Panel on this
issue irrelevant to the determination.
56. Notwithstanding its objection as to the admissibility of
Brazil's claim on this issue, the European Communities agrees with the Panel's
finding that the European Commission's consideration of all the possible causal
factors satisfied the requirements of Article 3.5. According to the European
Communities, Brazil fails to recognize that an injury can have two causes, each
of which would have been sufficient to cause the injury. Therefore, the European
Communities claims that the requirement of a collective examination would serve
no further purpose in ensuring that a sufficient causal link existed between
dumped imports and injury. The European Communities further notes that Article
3.5 specifies no methodology for an investigating authority's causality
analysis, as the Appellate Body recognized in US - Hot-Rolled Steel.39 In
requiring an examination of the collective impact of other factors, Brazil is
extending the legal requirements of Article 3.5 beyond the limits determined by
the Appellate Body, and is effectively prescribing the particular methods and
approaches that investigating authorities must adopt.
3Commission Regulation (EC) No 449/2000 of 28 February 2000,
imposing a provisional anti-dumping duty on imports of malleable cast iron tube
or pipe fittings originating in Brazil, the Czech Republic, Japan, the People's
Republic of China, the Republic of Korea and Thailand and accepting an
undertaking offered by an exporting producer in the Czech Republic, published in
the Official Journal of the European Communities, 29 February 2000, L-series,
No. 55 ("Provisional Regulation").
4Council Regulation (EC) No 1784/2000 of 11 August 2000,
imposing a definitive anti-dumping duty and collecting definitively the
provisional duty imposed on imports of certain malleable cast iron tube or pipe
fittings originating in Brazil, the Czech Republic, Japan, the People's Republic
of China, the Republic of Korea and Thailand, published in the Official Journal
of the European Communities, 18 August 2000, L-series, No. 208 ("Definitive
Regulation").
5WT/DS219/1, 9 January 2001.
6WT/DS219/2, 8 June 2001.
7Panel Report, paras. 2.1-2.7.
8Ibid., para. 3.1 and footnote 15 thereto.
9Ibid., para. 8.1(a).
10Panel Report, para. 8.8.
11The issues appealed by Brazil are set forth in its Notice of
Appeal, WT/DS219/7, 29 April 2003, which is attached as Annex 1 to this Report.
12Pursuant to Rule 21(1) of the Working Procedures.
13Pursuant to Rule 22(1) of the Working Procedures.
14Pursuant to Rule 24(1) of the Working Procedures.
15Pursuant to Rule 24(2) of the Working Procedures.
16Brazil's appellant's submission, para. 58. (original
emphasis)
17Brazil's appellant's submission, para. 83.
18Done at Vienna, 23 May 1969, 1155 U.N.T.S. 331; 8
International Legal Materials 679.
19Brazil's appellant's submission, para. 105.
20Ibid., para. 113.
21In its Notice of Appeal, Brazil also claimed that the Panel
had breached its obligations under Article 11 of the DSU because of its reliance
on the presumption of good faith. (Notice of Appeal, p. 3, attached as Annex 1
to this Report) During the oral hearing, however, Brazil clarified that it was
not pursuing its claim under Article 11. (Brazil's response to questioning at
the oral hearing) Brazil also states that, to the extent that the Panel failed
to examine properly the contemporaneous character of Exhibit EC-12, the Panel
did not examine the matter based upon "the facts made available in conformity
with appropriate domestic procedures to the authorities of the importing
Member", in accordance with Article 17.5(ii) of the Anti-Dumping Agreement.
22Brazil's appellant's submission, para. 124. See also, ibid.,
para. 125, quoting Panel Report, Egypt - Steel Rebar, para. 7.49.
23Ibid., para. 130.
24Ibid., paras. 129-130, quoting Appellate Body Report,
US - Hot-Rolled Steel, paras. 192-193.
25Ibid., para. 146.
26Brazil's statement at the oral hearing.
27Brazil's response to questioning at the oral hearing. In
Brazil's appellant's submission, it described the relevant "factor" in various
ways, such as "margins analysis", the Brazilian exporter's "comparative
advantage", and the Brazilian exporter's "cost efficiency". (Brazil's
appellant's submission, paras. 181, 184, 198, 199, and 204)
28Brazil's statement at the oral hearing.
29Appellate Body Report, US - Hot-Rolled Steel, para.
228.
30Panel Report, para. 7.104. (original emphasis)
31Appellate Body Report, EC - Bed Linen, para.
55.
32European Communities' response to questioning at the oral
hearing.
33European Communities' appellee's submission, para. 90.
34Ibid., paras. 81 and 83.
35European Communities' appellee's submission, para. 85.
36Ibid., para. 116.
37Although the European Communities disagrees with the
reasoning relied upon by the Panel, it did not bring a cross-appeal on this
point.
38Panel Report, Guatemala - Cement II, para. 8.238.
39Appellate Body Report, US - Hot-Rolled Steel, para.
224.
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