CHAPTER 4

DUMPING UNDER GATT/WTO

What is dumping?

Dumping is, in general, a situation of international price discrimination, where the

price of a product when sold in the importing country is less than the price of that
product in the market of the exporting country. Thus, in the simplest of cases, one
identifies dumping simply by comparing prices in two markets. However, the
situation is rarely, if ever, that simple, and in most cases it is necessary to undertake a
series of complex analytical steps in order to determine the appropriate price in the
market of the exporting country (known as the “normal value”) and the appropriate
price in the market of the importing country (known as the “export price”) so as to be
able to undertake an appropriate comparison.

Article VI of GATT and the Anti-Dumping Agreement

The GATT 1994 sets forth a number of basic principles applicable in trade between
Members of the WTO, including the “most favoured nation” principle. It also requires
that imported products not be subject to internal taxes or other changes in excess of
those imposed on domestic goods, and that imported goods in other respects be
accorded treatment no less favourable than domestic goods under domestic laws and
regulations, and establishes rules regarding quantitative restrictions, fees and
formalities related to importation, and customs valuation. Members of the WTO also
agreed to the establishment of schedules of bound tariff rates. Article VI of
GATT 1994, on the other hand, explicitly authorizes the imposition of a specific anti-
dumping duty on imports from a particular source, in excess of bound rates, in cases
where dumping causes or threatens injury to a domestic industry, or materially retards
the establishment of a domestic industry.

The Agreement on Implementation of Article VI of GATT 1994, commonly known as

the Anti-Dumping Agreement, provides further elaboration on the basic principles set
forth in Article VI itself, to govern the investigation, determination, and application,
of anti-dumping duties.

Previous Agreements

As tariff rates were lowered over time following the original GATT agreement, anti-
dumping duties were increasingly imposed, and the inadequacy of Article VI to
govern their imposition became ever more apparent. For instance, Article VI requires
a determination of material injury, but does not contain any guidance as to criteria for
determining whether such injury exists, and addresses the methodology for
establishing the existence of dumping in only the most general fashion. Consequently,
contracting parties to GATT negotiated more detailed Codes relating to anti-dumping.
The first such Code, the Agreement on Anti-Dumping Practices, entered into force
in 1967 as a result of the Kennedy Round. However, the United States never signed
the Kennedy Round Code, and as a result the Code had little practical significance.
The Tokyo Round Code, which entered into force in 1980, represented a quantum
leap forward. Substantively, it provided enormously more guidance about the
determination of dumping and of injury than did Article VI. Equally important, it set
out in substantial detail certain procedural and due process requirements that must be
fulfilled in the conduct of investigations. Nevertheless, the Code still represented no
more than a general framework for countries to follow in conducting investigations
and imposing duties. It was also marked by ambiguities on numerous controversial
points, and was limited by the fact that only the 27 Parties to the Code were bound by
its requirements.

The Uruguay Round Agreement

Basic principles

Dumping is defined in the Agreement on Implementation of Article VI of the

GATT 1994 (The Anti-Dumping Agreement) as the introduction of a product into the
commerce of another country at less than its normal value. Under Article VI of
GATT 1994, and the Anti-Dumping Agreement, WTO Members can impose anti-
dumping measures, if, after investigation in accordance with the Agreement, a
determination is made (a) that dumping is occurring, (b) that the domestic industry
producing the like product in the importing country is suffering material injury, and
(c) that there is a causal link between the two. In addition to substantive rules
governing the determination of dumping, injury, and causal link, the Agreement sets
forth detailed procedural rules for the initiation and conduct of investigations, the
imposition of measures, and the duration and review of measures.

Determination of dumping

Determination of normal value

General rule

The normal value is generally the price of the product at issue, in the ordinary course
of trade, when destined for consumption in the exporting country market. In certain
circumstances, for example when there are no sales in the domestic market, it may not
be possible to determine normal value on this basis. The Agreement provides
alternative methods for the determination of normal value in such cases.

Determination of export price

General rule

The export price will normally be based on the transaction price at which the foreign
producer sells the product to an importer in the importing country. However, as is the
case with normal value, the Agreement recognizes that this transaction price may not
be appropriate for purposes of comparison.
Exceptions

There may be no export price for a given product, for instance, if the export
transaction is an internal transfer, or if the product is exchanged in a barter transaction.
In addition, the transaction price at which the exporter sells the product to the
importing country may be unreliable because of an association or a compensatory
arrangement between the exporter and the importer or a third party. In such a case, the
transaction price may not be an arms-length market price, but may be manipulated,
for instance for tax purposes. The Agreement recognizes that, in such cases, an
alternative method of determining an appropriate export price for comparison is
needed.

Calculation of dumping margins and duty assessment

Calculation of dumping margins

The Agreement contains rules governing the calculation of dumping margins. In the
usual case, the Agreement requires either the comparison of the weighted average
normal value to the weighted average of all comparable export prices, or a
transaction-to-transaction comparison of normal value and export price (Article 2.4.2).
A different basis of comparison can be used if there is “targeted dumping”: that is, if a
pattern exists of export prices differing significantly among different purchasers,
regions or time periods. In this situation, if the investigating authorities provide an
explanation as to why such differences cannot be taken into account in weighted
average-to-weighted average or transaction-to-transaction comparisons, the weighted
average normal value can be compared to the export prices on individual transactions.

Refund or reimbursement

The Agreement requires Members to collect duties on a non-discriminatory basis on

imports from all sources found to be dumped and causing injury, except with respect
to sources from which a price undertaking has been accepted. Moreover, the amount
of the duty collected may not exceed the dumping margin, although it may be a lesser
amount. The Agreement specifies two mechanisms to ensure that excessive duties are
not collected. The choice of mechanism depends on the nature of the duty collection
process. If a Member allows importation and collects an estimated anti-dumping duty,
and only later calculates the specific amount of anti-dumping duty to be paid, the
Agreement requires that the final determination of the amount must take place as soon
as possible, upon request for a final assessment. In both cases, the Agreement
provides that the final decision of the authorities must normally be made within
12 months of a request for refund or final assessment, and that any refund should be
made within 90 days

Determination of injury and casual link

Like product

Definition (Article 2.6)

 An important decision must be made early in each investigation to determine the
domestic “like product”. Like product is defined in the Agreement as “a product
which is identical, i.e. alike in all respects to the product under consideration or, in the
absence of such a product, another product which, although not alike in all respects,
has characteristics closely resembling those of the product under consideration”. The
determination involves first examining the imported product or products that are
alleged to be dumped, and then establishing what domestically produced product or
products are the appropriate “like product”. The decision regarding the like product is
important because it is the basis of determining which companies constitute the
domestic industry, and that determination in turn governs the scope of the
investigation and determination of injury and causal link.

Domestic industry

Definition (Article 4)

The Agreement defines the term “domestic industry” to mean “the domestic
producers as a whole of the like products or those of them whose collective output of
the products constitutes a major proportion of the total domestic production of those
products”.

Injury

Types of injury

The Agreement provides that, in order to impose anti-dumping measures, the

investigating authorities of the importing Member must make a determination of
injury. The Agreement defines the term “injury” to mean either (i) material injury to
a domestic industry, (ii) threat of material injury to a domestic industry, or
(iii) material retardation of the establishment of a domestic industry, but is silent on
the evaluation of material retardation of the establishment of a domestic industry.

Basic requirements for determination of material injury

The Agreement does not define the notion of “material”. However, it does require that
a determination of injury must be based on positive evidence and involve an objective
examination of (i) the volume of dumped imports and the effect of the dumped
imports on prices in the domestic market for like products, and (ii) the consequent
impact of the dumped imports on domestic producers of the like product. Article 3
contains some specific additional factors to be considered in the evaluation of these
two basic elements, but does not provide detailed guidance on how these factors are to
be evaluated or weighed, or on how the determination of causal link is to be made.

Basic requirements for determination of threat of material injury

The Agreement sets forth factors to be considered in the evaluation of threat of

material injury. These include the rate of increase of dumped imports, the capacity of
the exporter(s), the likely effects of prices of dumped imports, and inventories. There
is no further elaboration on these factors, or on how they are to be evaluated. The
Agreement does, however, specify that a determination of threat of material injury
shall be based on facts, and not merely on allegation, conjecture, or remote possibility,
and moreover, that the change in circumstances which would create a situation where
dumped imports caused material injury must be clearly foreseen and imminent.

Elements for Analysis of Dumping

➢ Consideration of volume effects of dumped imports

➢ Consideration of price effects of dumped imports
➢ Evaluation of volume and price effects of dumped imports
➢ Examination of impact of dumped imports on the domestic industry
➢ Demonstration of causal link

Procedural requirements

Investigation

➢ Initiation

Agreement Article 5 of the Agreement establishes the requirements for the initiation
of investigations. The Agreement specifies that investigations should generally be
initiated on the basis of written request submitted “by or on behalf of” a domestic
industry. This “standing” requirement includes numerical limits for determining
whether there is sufficient support by domestic producers to conclude that the request
is made by or on behalf of the domestic industry, and thereby warrants initiation. The
Agreement establishes requirements for evidence of dumping, injury, and causality, as
well as other information regarding the product, industry, importers, exporters, and
other matters, in written applications for anti-dumping relief, and specifies that, in
special circumstances when authorities initiate without a written application from a
domestic industry, they shall proceed only if they have sufficient evidence of
dumping, injury, and causality. In order to ensure that investigations without merit are
not continued, potentially disrupting legitimate trade, Article 5.8 provides for
immediate termination of investigations in the event the volume of imports is
negligible or the margin of dumping is de minimis, and establishes numeric thresholds
for these determinations. In order to minimize the trade-disruptive effect of
investigations, Article 5.10 specifies that investigations should be completed within
one year, and in no case more than 18 months, after initiation.

➢ Conduct

Article 6 of the Agreement sets forth detailed rules on the process of investigation,
including the collection of evidence and the use of sampling techniques. It requires
authorities to guarantee the confidentiality of sensitive information and verify the
information on which determinations are based. In addition, to ensure the
transparency of proceedings, authorities are required to disclose the information on
which determinations are to be based to interested parties and provide them with
adequate opportunity to comment. The Agreement establishes the rights of parties to
participate in the investigation, including the right to meet with parties with adverse
interests, for instance in a public hearing. Further guidance on the conduct of
investigations is contained in two Annexes to the Agreement, which set forth rules for
the on-the-spot investigations to verify information obtained from foreign parties, as
well as rules for the use of best information available in the event a party refuses
access to, or does not provide, requested information, or significantly impedes the
investigation.

Article 11 of the Agreement establishes rules for the duration of anti-dumping duties,
and requirements for periodic review of the continuing need, if any, for the imposition
of anti-dumping duties or price undertakings. These requirements respond to the
concern raised by the practice of some countries of leaving anti-dumping duties in
place indefinitely. The “sunset” requirement establishes that dumping duties shall
normally terminate no later than five years after first being applied, unless a review
investigation prior to that date establishes that expiry of the duty would be likely to
lead to continuation or recurrence of dumping and injury. This five year “sunset”
provision also applies to price undertakings. The Agreement requires authorities to
review the need for the continued imposition of a duty upon request of an interested
party.

ONLINE VIDEOS

1. https://www.youtube.com/watch?v=f4ERAILZy8k
2. https://www.youtube.com/watch?v=Uhx_6KzdpTY (Illustration on Dumping - US
Perspective)