How to balance the conflicting interests under the Anti-dumping Agreement?

Young Jae, Cho

2

Dumping & Anti-dumping

Dumping Dumping is exporting at prices below those charged on the domestic market

• International Price Discrimination

• Scale of economy, Product Life Cycle, etc.

The effects of dumping • Distortion of Free Market Economy Principle

• Export of unemployment, etc.

Anti-dumping Level playing field

Domestic producers’ (DPs’) interests • Even DPs with monopoly profit

• Regulation of monopoly profit is on Anti-trust (AT) law aiming at consumer’s welfare

• In integrated market (advanced FTA), AT tends to replace AD

Workers’ interests (job)

3

Anti-dumping Agreement (ADA)

What ADA secures for interested parties

Domestic producers (DP) : legitimate right for remedy

Investigating authorities (IA) : quasi-judicial power

Foreign exporters (FE) : due process right

Possibilities of abuse by interested parties

Domestic producers : strategic construction of petition ex) standing, definition of industry, product scope, sunset review, etc.

Investigating authorities : excessive discretion ex) zeroing, facts available, NME, etc.

Foreign exporters : evasive tactics ex) targeted dumping, circumvention, absorption, etc.

Adjudication (Dispute Settlement), New Rule Making (DDA)

4

Guidelines for DDA negotiation & Major issues

Guidelines for DDA negotiation Reflecting WTO jurisprudence

Balancing conflicting interests among DP, IA, FE while ensuring legitimate rights but disciplining abuse or moral hazard

• Shifting the focus from member countries to 3 parties might help outcome of negotiation depend more on rationality than on political bargaining

Considering technical feasibility

• Remove undue burden on DP, FE as well as IA

Some major issues to be dealt with in light of the Guidelines Dumping & Import : Zeroing, Targeted Dumping, De minimis, Negligibility, etc.

Domestic Industry & Injury : Standing, Definition of domestic Industry, Injury Margin, Non-attribution, Causation, etc.

Sunset Review : Automatic Termination, Standard, etc.

Product Scope : Substantive rules, Procedural rules, etc.

5

Dumping & Import

Zeroing & Targeted Dumping (TD)

Under ADA & WTO jurisprudence, prohibited except for TD

• Art. 2.4.2 (fair comparison, all comparable export transactions), Art. 9.3 (not exceed DM), etc.

Need other exceptions than TD?

• In case that, in sunset review, IA calculates DM and adjusts duty rate, FEs might try to adjust export volume & price to get low or no DM during the period of original duty

• However, zeroing could be applied pursuant to Art. 2.4.2, assuming Art. 2 applies to Art. 11

TD, detour to zeroing• Significant difference in export prices among different purchasers, regions or time periods

• Pattern of export prices (a regular form or order in which a series of things occur)

• Explanation as to why A-A or T-T is not appropriate, or A-T is necessary

Need to further clarify requirements for TD because zeroing is likely to move its battleground to TD in the near future

6

Dumping & Import

De minimis : raising the standard (2%) Pros : business practice/ abuse/ margin of error/ no material injury, etc.

Cons • FE’s room for TD IA’s frequent resort to TD

ex) 5%: 1/2 export (10% DM), 1/2 export (0% DM)

• Commercially meaningful, cumulative effect, etc.

Negligible volume Basis of 3% : total imports of the like product (LP) domestic market of LP

• Negligibility for the impact of dumped import on domestic market rather than on total import

• Impact of dumped imports on the other imports

Repealing cumulative standard of 7 %• Encouraging DP to include as many small sources as possible

• However, repealing cumulative standard of 7% along with changing the basis of 3% might restrict DP’s legitimate right to petition

7

Domestic Industry & Injury

Standing & Definition of Domestic Industry Support by 50% out of domestic producers expressing support or opposition in

terms of output & 25% of total production of domestic industry (Art. 5.4) Domestic industry refers to the domestic producers as a whole of the like

products or to a major proportion of the total domestic production of those products. (Art. 4.1)

What are the loopholes & how to deal therewith? Need dual standards for standing?

• Both are based upon proportion of total production 50% & 25% are too low?

• Arguably not, considering many producers expressing no opinion• Alternatively, a single standard ex) support by 50% of total production of domestic industry

Relation between standing & ‘a major proportion’ as the domestic industry?• Not clear, but probably would pass WTO jurisprudence if IA includes 25% or more of total

domestic production for injury determination• But, what if IA includes less than 25% of total domestic production? • If a single standard for standing(50%) & apply it to the definition of domestic industry, better

representation for both petition & injury determination• In Art. 4.1, a major proportion the major proportion, i.e. 1/2

8

Domestic Industry & Injury

Lesser Duty & Injury Margin

Desirable that the duty be less than the margin if such lesser duty would be adequate to remove the injury to the domestic industry (Art. 9.1)

Lesser Duty Rule (LDR)• Very difficult to measure injury caused by dumping because it could take various forms

ex) profit, market share, employment, operating rate, etc.

• However, AD is to remedy injury caused only by dumping

• A legal fiction to regard the gap between DP’s P & FE’s P (or between DP’s actual P & DP’s non-undercut P) as injury caused by dumping

Calculation of Injury Margin (IM)• Need a lot of assumptions

• Even more complicated in relation to non-attribution & causation

• Alternatively, provide for essential factors in calculating injury margin ex) FE’s P & DP’s P in the market, average profit rate in the industry of DP, the degree of suppression of DP’s P due to FE’s P, etc.

9

Domestic Industry & Injury

Non-attribution & Causation

Injuries caused by other factors not attributed to the dumped imports (Art. 3.5)

Need to Separate & Distinguish other factors?• Desirable in principle, but how?

• Given current causation standard, however, little difference be it Quantitatively or Qualitatively

• Affirmative determination if there is injury & dumping is a cause thereof

• Standard of Causation comes before Non-attribution

Improvement of standard of causation • Dumping be the primary cause or one of the major causes of material injury?

• Need weigh dumping against other factors?

Relevant issue• IM & LDR might be able to play 2nd causation role, complementing flaws of current causation

• Need to improve at least one out of Causation & LDR

10

Sunset Review

Automatic termination If no automatic termination, DP may use sunset review repeatedly

• Worse, if IA gives sympathetic consideration to DPs However, if automatic termination with no possibility of extension, FE may keep

dumping or absorbing duty especially under the prospective assessment

Examples of extension, assuming possibility of extension 5yrs + 3yrs (continuation only) 5yrs + 3yrs (continuation, recurrence) 5yrs + 5yrs (continuation only) 5yrs + 5yrs (continuation, recurrence)

Additional standard for sunset review Continuation, Art. 3.2, 3.4, 3.5 can generally apply because injury continues Recurrence, might need additional standard

• Loose, recurrence if AD duty applied & injury recovered • Tight, recurrence only if it is ‘clearly foreseen & imminent’• Intermediate, likely to recur in the ‘foreseeable future’

11

Product Scope

Product Under Consideration (PUC) & Product Scope (PS)

No direct provision for PUC/PS • Like product is a product alike to all respects to PUC, or a product of characteristics closely

resembling those of PUC (Art. 2.6)

PUC, not just about definition or description but about scope of a product• Under PUC, many sub-models, sub-types, market segments, etc.

Legal implication of PUC/PS • Affects overall AD proceedings i.e. Standing, DM, Injury, imposition of AD duty, etc.

• Subject to legal assessment, severally and jointly

Interested parties’ behaviors • DP : expansion of PS, selective PS (arbitrary line drawing)

• FE : circumvention by minor alteration

• IA : excessive discretion

12

[Example of Selective PS]

Product Scope

C1, C2 : Generally Accepted Criteria Of Categorization, C1 > C2

C1 C2

[Case 2]

C1 C2

[Case 3]

C2

[Case 1]

C1

While all the products in the PS share the same basic physical characteristics with each other, the above examples have the following problems.

[case 1,2] PS singles out fragmented market segments

[case 3] PS disregards C1 ex) C1: Physical characteristics, C2: Color

13

Product Scope

Substantive rules for PS Rule 1 : A single product in one AD investigation

Rule 2 : Sharing of the same basic physical characteristics among sub-items

Rule 3 : PS not in conflict with generally accepted criteria in the industry/market• “Selective PS” is prohibited

• If no clear dividing line, all sub-items shall be a product

Exception? ex) Exclusion of certain sub-items for public interest • Even if allowed, in the stage of imposition of AD duty, not in the stage of investigation

Procedural rules for PS Amending PS

• Exclusion as in case1 & Inclusion as in case2

Time limit for amending• Exclusion, by final decision to impose AD duty

• Inclusion, within certain period after the initiation