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WORLD TRADE
ORGANIZATION

WT/DS219/R
7 March 2003

(03-1137)

  Original: English

EUROPEAN COMMUNITIES - ANTI-DUMPING DUTIES ON
MALLEABLE CAST IRON TUBE OR PIPE FITTINGS
FROM BRAZIL

Report of the Panel

(Continued)


16. Issue 19 -Information on matters of fact and law

(a) Information relating to the exploration of possibilities of constructive remedies (relating to Issue 1)

(i) Arguments of the parties

7.417 Brazil argues that the European Communities has acted inconsistently with Articles 12.2. and 12.2.2 by failing to include or sufficiently set forth in their published notices certain findings and conclusions reached on issues of fact and law. Brazil states that it agrees with the European Communities that the obligation in Article 12.2 relates only to the findings and conclusions reached on all issues of fact and law considered "material" by the investigating authorities and that the findings and conclusions do not include all underlying evidence. In particular, Brazil asserts that the European Communities violated Articles 12.2 and 12.2.2 by not making public its findings and conclusions with regard to the exploration of possibilities of constructive remedies under Article 15. Brazil asserts that the fact that there is no mention in the Definitive Regulation that the possibility of an undertaking had been explored with regard to the Brazilian exporter (in contrast to the references to Czech, Korea, Thai and Japanese exporters) demonstrates that the European Communities did not itself consider that it had discussed the possibility of price undertakings with Tupy.

7.418 The European Communities generally argues that the "findings and conclusions" as referred to in Article 12.2 do not include all the underlying evidence. Moreover, Article 12.2 only requires Members to address those issues which are "considered material by the investigating authorities". This criterion is affected by the investigating authorities' experience and the matters raised by a party during the investigation. The European Communities argues that it has complied with its obligations under Article 15 by pursuing a price undertaking through diplomatic channels and that the EC's policy not to publish details of negotiations or discussions on undertakings unless they are successful was reinforced by the nature of the diplomatic discussions which are confidential within the meaning of Article 6.5.

(ii) Evaluation by the Panel

7.419 The Panel begins with the text of the relevant provision. Article 12.2 reads:

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.

7.420 Article 12.2.2 reads:

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.

7.421 We examine whether or not the absence of any reference to any of the aspects relating to the exploration of possibilities of constructive remedies under Article 15 considered by Brazil to be "material" -- including the absence of any reference to Brazil in the section of the Definitive Regulation dealing with price undertakings -- constitutes a violation of Article 12.2.

7.422 Article 12.2 requires the publication of "findings and conclusions on all issues of fact and law considered material by the investigating authorities", so that it would seem that there is a degree of subjectivity and discretion on the part of the investigating authorities envisaged here. That being said, however, the Agreement imposes certain objective requirements that would necessarily require reflection in the published report of the investigation and thus consider whether we are dealing with such requirements here.

7.423 Article 12.2 provides that the findings and conclusions on issues of fact and law which are to be included in the public notices, or separate report, are those considered "material" by the investigating authority. The ordinary meaning of the term of "material" is "important, essential, relevant".361

7.424 We understand a "material" issue to be an issue that has arisen in the course of the investigation that must necessarily be resolved in order for the investigating authorities to be able to reach their determination. We observe that the list of topics in Article 12.2.1 is limited to matters associated with the determinations of dumping and injury, while Article 12.2.2 is more generally phrased ("all relevant information on matters of fact and law and reasons which have led to the imposition of final measures, or the acceptance of a price undertaking"). Nevertheless, the phrase "have led to", implies those matters on which a factual or legal determination must necessarily be made in connection with the decision to impose a definitive anti-dumping duty. While it would certainly be desirable for an investigating authority to set out steps it has taken with a view to exploring possibilities of constructive remedies, such exploration is not a matter on which a factual or legal determination must necessarily be made since, at most, it might lead to the imposition of remedies other than anti-dumping duties. We believe that contextual considerations also support this interpretation since, the only matters referred to "in particular" in subparagraph 12.2.2 are, in addition to the information described in subparagraph 2.1, the reasons for acceptance or rejection of relevant arguments or claims, and the basis for certain decisions.

7.425 While Article 15 is indeed an integral part of the Agreement, we do not view the elements of Article 15 as being of this nature. We therefore do not consider the European Communities erred by not treating these elements as "material " within the meaning of that term used in Article 12 and thus do not view it as having erred by not having included these in its published final determination.

7.426 Moreover, we note that the text of Article 12.2 covers, inter alia , "any preliminary and final determination" of dumping and injury, and specifically, "any decision to accept an undertaking pursuant to Article 8". In this regard, as the European Communities did not take a decision to accept (or reject) an undertaking, the specific obligation under Article 12.2 to explain that an undertaking had been accepted or rejected would also not apply in this case.

7.427 In addition, Article 12.2.2 explicitly mentions that the obligations it contains are subject to the requirement to maintain confidentiality. To the extent that any communications between the EC and Brazilian governments were not disclosed by the European Communities in its final published determination on the basis of confidentiality concerns, we can not find this to be a violation of Article 12.2.

7.428 For these reasons, we find that the European Communities did not violate its obligations under Article 12.2 in this regard.

(b) Information relating to Article 3.4 injury factors (relating to Issue 16)

(i) Arguments of the parties

7.429 Brazil alleges that the European Communities violated Article 12.2 and 12.2.2 by not making public its findings and conclusions with regard to all of the mandatory injury factors under Article 3.4.362

7.430 The European Communities argues that the Definitive Regulation generally addresses the evaluation of all Article 3.4 factors by stating that not all of these factors need to be analysed in the same way. In addition, the EC found that the factors concerned were generally in line with other Article 3.4 factors and did not therefore need to be mentioned in the public determination.

(ii) Arguments of third parties

7.431 Japan argues that: by failing to describe all elements that European Communities considered in its injury determination in the Definitive Regulation, the European Communities violated Article 12.2.2; the lack of any findings or conclusions regarding certain Article 3.4 factors in the public notices violates Article 12.2.2. Japan submits that the European Communities has accordingly also violated Article VI of the GATT 1994 and Article 1 of the Anti-Dumping Agreement.

(iii) Evaluation by the Panel

7.432 Article 12.2 requires that the authorities set forth, in sufficient detail, the findings and conclusions reached on all issues of fact and law considered material by the investigating authorities. We have addressed the meaning of "material" above.363 In addition, Article 12.2 contains a textual link to "paragraph 2.1" of Article 12. Among the items specified in Article 12.2.1 are "(iv) considerations relevant to the injury determination as set out in Article 3." We have found that Article 3.4 requires that an investigating authority must assess the role, relevance and relative weight of each factor in a particular investigation, and must explain their conclusions as to the lack of relevance or significance of factors determined not to be relevant or of significant weight.364 We therefore consider that Article 12.2, and the explicit textual link to paragraph 12.2.1 require that it must be discernible from the published determination that an investigating authority reflect this explanation as to the lack of relevance or significance.

7.433 In this case, it is not directly discernible from the published Provisional or Definitive Determination that the European Communities addressed or explained the lack of significance of the following factors in its injury determination: ability to raise capital; productivity, return on investments; cash flow and wages. The relative significance of these factors is addressed exclusively in the internal "note to file" Exhibit EC-12.

7.434 The Definitive Regulation indicates that Tupy "argued that the determination of the impact of the dumped imports was not valid since certain injury factors set out in Article 3.4" had not been examined. The European Communities rejected this line of reasoning on the basis that "the WTO Anti-Dumping Agreement and the basic Regulation do not require that each factor be analysed in exactly the same way" and that, in the specific case, "all the relevant factors considered as having a bearing on the state of the industry have been taken into account in the context of the injury assessment."365 We do not consider this general reference by the European Communities to its perception of its obligations under the Agreement to reflect any explanation of the relative significance of the particular Article 3.4 factors concerned here.

7.435 We therefore find that the European Communities acted inconsistently with its obligations under Article 12.2 and Article 12.2.2 of the Anti-Dumping Agreement in that it is not directly discernible from the published Provisional or Definitive Determination that the European Communities addressed or explained the lack of significance of certain listed Article 3.4 factors.

(c) Information relating to EC producers' export performance (relating to Issues 16 and 17)

(i) Arguments of the parties

7.436 Brazil submits that the European Communities violated Article 12.2 and 12.2.2 by not making public its findings and conclusions with regard to the EC producers' export performance.

7.437 The European Communities argues that Brazil's claim relates to disclosure rather than publication of information and therefore is not within the scope of Article 12.

(ii) Arguments of third parties

7.438 Japan argues that the European Communities' failure to provide an explanation of why it rejected Brazil's claim concerning poor export performance violates Article 12.2.2 Japan submits that the European Communities has accordingly also violated Article VI of the GATT 1994 and Article 1 of the Anti-Dumping Agreement .

(iii) Evaluation by the Panel

7.439 We refer to our discussion of the relationship between Article 12.2 and Article 3.4 above. We have found that "export performance" was not a "relevant" factor within the meaning of Article 3.4. We therefore do not pursue Brazil's Article 3.4-related allegation under Article 12.2.

7.440 With respect to Brazil's allegation that the European Communities failed to publish information relating to export performance in relation to its causation analysis under Article 3.5, we recall that the European Communities disclosed to Tupy during the investigation its finding that on the basis that of the proportion of sales outside the Community as compared to the sales on the EC market, it could not be concluded that the decrease of sales outside the Community significantly contributed to increased stocks.

7.441 We have discussed above the meaning of the term "material" in Article 12.2. The fact that the European Communities disclosed this finding to Tupy does not necessarily render it "material". Furthermore, the information disclosed to Tupy indicates that the European Communities did not consider this to be a significant causal factor and therefore not one necessarily relevant as a basis for its causation determination.

7.442 Members are certainly encouraged to include in their published determinations all considerations underlying their causation determination. However, the failure to do so with respect to an element that is not required to be addressed cannot be a violation.

7.443 In addition, Article 12.2.2 explicitly mentions that the obligations it contains are subject to the requirement to maintain confidentiality. To the extent that the European Communities did not publish actual export performance data on the basis of confidentiality concerns, we can not find this to be a violation of Article 12.2.

7.444 For these reasons, we do not find that the European Communities violated its obligations under Article 12.2 or 12.2.2 in respect of information relating to export performance.

VIII. CONCLUSIONS AND RECOMMENDATION

A. CONCLUSION

8.1 In light of our findings above, we conclude that:

(a) The European Communities has acted inconsistently with its obligations under:

(i) Article 2.4.2 of the Anti-Dumping Agreement in "zeroing" negative dumping margins in its dumping determination; and

(ii) Article 12.2 and 12.2.2 in that it is not directly discernible from the published Provisional or Definitive Determination that the European Communities addressed or explained the lack of significance of certain injury factors listed in Article 3.4.

(b) The European Communities has not acted inconsistently with its obligations under:

(i) Article 15 of the Anti-Dumping Agreement by failing to explore possibilities of constructive remedies;

(ii) Article 1 of the Anti-Dumping Agreement or Article VI:2 of the GATT 1994 in imposing an anti-dumping measure in this case following the devaluation of the Brazilian currency at the beginning of the fourth quarter of the IP; or Articles 11.1 or 11.2 of the Anti-Dumping Agreement by imposing definitive anti-dumping measures in this case or by not, simultaneously with that imposition, self-initiating a review following the devaluation of Brazil's currency that occurred at the beginning of the fourth quarter of the IP.

(iii) Article 2.2 or 2.2.2 of the Anti-Dumping Agreement by including data relating to "low volume" sales in the construction of normal value; nor by including data from sales of certain product types within the definition of "like product" in constructing normal value.

(iv) Article 2.4 of the Anti-Dumping Agreement or Article VI (in particular, paragraphs 2 and 4) of the GATT 1994 in not granting an adjustment in relation to the IPI Premium Credit;

(v) Article 2.4 of the Anti-Dumping Agreement or Article VI (in particular, paragraphs 2 and 4) of the GATT 1994 by the methodology it applied in calculating the PIS/COFINS adjustment;

(vi) Article 2.4 of the Anti-Dumping Agreement by denying an adjustment with respect to packing costs, by failing to indicate to Tupy what information was necessary to ensure a fair comparison or by imposing an unreasonable burden of proof on Tupy in respect of packing costs;

(vii) Article 2.4.1 of the Anti-Dumping Agreement , as Brazil has failed to establish that Article 2.4.1 provides a legal basis for its claim concerning the currency conversions for adjustments, or under Article 6.4 by failing to provide timely opportunities for Tupy to see information relevant to the presentation of its case with respect to exchange rate conversion for adjustments;

(viii) Articles 3.3 or 3.1 of the Anti-Dumping Agreement with respect to cumulation assessment, nor under Article 3.2 as Brazil's claim under Article 3.2 was predicated on the assumption that the European Communities was obligated to examine the volume of dumped imports on a country-by-country basis;

(ix) Articles 3.2 and 3.1 of the Anti-Dumping Agreement by "zeroing" negative undercutting margins and focusing on transactions relating to matching models in considering price undercutting;

(x) Articles 3.2 and 3.1 of the Anti-Dumping Agreement in not granting an adjustment for price comparability in its comparison of prices of sales of black heart and white heart fittings in the context of its consideration of price undercutting;

(xi) Articles 3.4 or 3.1 of the Anti-Dumping Agreement in its evaluation of injury factors as in light of the overall development and interaction among injury indicators collectively, the record data overall would not preclude a finding by a reasonable and objective investigating authority that the domestic industry was injured;

(xii) Articles 6.2 or 6.4 of the Anti-Dumping Agreement with respect to the information on injury factors referred to exclusively in Exhibit EC-12 as this information was considered not relevant and was not specifically relied upon by the EC in reaching the anti-dumping determination.

(xiii) Articles 3.5 or 3.1 of the Anti-Dumping Agreement in examining whether each factor constituted, individually, a significant cause of injury, nor in its assessment of the causal link between dumped imports and injury;

(xiv) Articles 6.2 or 6.4 of the Anti-Dumping Agreement in not disclosing confidential information relating to EC producers' exports and purchases of the product concerned;

(xv) Article 6.6 of the Anti-Dumping Agreement by relying on Eurostat data with respect to imports from Poland, a third country not under investigation for dumped imports of the product concerned; or

(xvi) Articles 12.2 and 12.2.2 of the Anti-Dumping Agreement by not referring in the published determination to elements relating to the exploration of possibilities of constructive remedies under Article 15, including the absence of any reference to Brazil in the section of the Definitive Regulation dealing with price undertakings; nor in respect of information relating to EC producers' export performance.

B. NULLIFICATION AND IMPAIRMENT

8.2 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.

8.3 The European Communities asserts that in respect of Brazil's claims under Issue 9 ("No proper currency conversion") and Issue 10 ("No proper basis to assess PIS/COFINS indirect taxes") it has shown that even were the European Communities found to have infringed the obligations invoked by Brazil, the implications for the anti-dumping duties imposed on Tupy were in the latter case imperceptible, and in the former actually slightly beneficial to Tupy. Furthermore, the European Communities continues, in relation to Issue 13, the results of applying "zeroing" to the calculation of undercutting margins were so slight that it is inconceivable that the use of this methodology could have affected the conclusion that injury had been caused by the dumped imports. As such, these infringements could not have nullified or impaired any benefit accruing to Brazil, directly or indirectly, under the Agreement. The European Communities therefore submits that, should we find infringements arising from these claims only, no finding of nullification or impairment would be appropriate.366

8.4 As we have not found violations of the obligations referred to in this context by the European Communities, we do not consider this issue any further.

8.5 Accordingly, we conclude that to the extent the European Communities has acted inconsistently with the provisions of the Anti-Dumping Agreement , it has nullified or impaired benefits accruing to Brazil under that Agreement.

C. RECOMMENDATION

8.6 The European Communities submits that, in initiating the review of the anti-dumping measures on malleable fittings which it initiated in December 2001367, which review will, according to the European Communities, reflect the views of the Appellate Body on the zeroing of dumping margins, the European Communities also provided the opportunity for Tupy to demonstrate that its assertions regarding the consequences of devaluation were in fact correct. The European Communities submits that, even were the Panel to find that the European Communities had acted in breach of its WTO obligations by applying "zeroing" in the calculation of Tupy's dumping margin, or by not re-examining Tupy's margin of dumping following the devaluation, the European Communities would, by initiating this review, have done what was necessary to remedy this situation so that there would be no need for us to make recommendations in this regard. The European Communities refers to the distinction made by the panel in India - Automotive Sector between a panel's finding of infringement and its recommendation to the DSB.368 The European Communities therefore requests the Panel to make no recommendation in respect of Tupy's claims in this regard, irrespective of its findings on the issue of infringement.

8.7 In light of our finding that the European Communities acted inconsistently with its obligations under Article 2.4.2 by applying "zeroing" in its dumping determination, we have carefully considered these arguments of the European Communities. The EC measure referred to in our terms of reference and that that we have found to be inconsistent with the EC obligations under the Agreement remains in force.

8.8 We therefore recommend that the Dispute Settlement Body request the European Communities to bring its measure into conformity with its obligations under the Anti-Dumping Agreement .

8.9 Brazil requests that we exercise our discretion under Article 19.1 of the DSU to suggest ways in which the European Communities could implement our recommendation. Specifically, Brazil requests us to suggest that, the European Communities repeal its anti-dumping duty order and reimburse all anti-dumping duties collected thereunder.

8.10 Article 19.1 of the DSU provides that:

"In addition to its recommendations, the panel or Appellate Body may suggest ways in which the Member concerned could implement the recommendations".

8.11 By virtue of Article 19.1 of the DSU, a panel has discretion to ("may") suggest ways in which a Member could implement the recommendation that the Member concerned bring the measure into conformity with the covered agreement in question. Clearly, however, a panel is by no means required to make a suggestion should it not deem it appropriate to do so. Thus, while we are free to suggest ways in which we believe the European Communities could appropriately implement our recommendation, we decide not to do so in this case.


To continue with IX. BRAZIL'S PANEL REQUEST

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361 Concise Oxford Dictionary.

362 Brazil, second written submission, para. 366.

363 Supra, para. 7.424.

364 See supra, para. 7.314.

365 Definitive Regulation, Exhibit BRL-19, recitals 95-96.

366 EC second oral statement, paras. 162-165.

367 EC response to the Panel question 144, Annex E-3.

368 Panel Report, India - Measures Affecting the Automotive Sector, WT/DS146/R, WT/DS175/R, adopted 5 May 2002, paras. 8.25 et seq.