The International Practice of the European Communities: Current Survey: 1. Dumping

The International Practice of the European Communities: Current Survey

1.1. General Developments

1.2. Administrative Determinations

1.3. Court Cases

1. Dumping

1.1. General Developments

Uruguay Round

The fact that the Uruguay Round was not successfully concluded in Brussels in December 1990 is common knowledge. The controversies with respect to agriculture were - and still are - regarded as the main obstacle for success. The anti-climax of what should have been a successful conclusion has been reported extensively elsewhere.⁴ Further revisions of the 1979 GATT Anti-Dumping Code [Mc Phail II and III] were tabled in Brussels, but no consensus reached. The negotiations were not recommenced seriously until October 1991.

Eighth and Ninth annual report of the Commission on the Community's anti-dumping and anti-subsidy activities

The Commission issued two annual reports within a period of five months.⁵

Although the eighth annual report does provide background information on Commission practice regarding certain items such as the sunset clause, reviews, circumvention and the Uruguay Round Negotiations, the ninth annual report is the most informative of the last decade.

The ninth report describes fairly extensively Commission practice with respect to price undertakings, the use of the injury threshold, terminations, refunds, reviews, and anti-circumvention. Furthermore, a review of six major anti-dumping proceedings is included,⁶ as well as a description of three ECJ cases.⁷ Finally, a description of the Commission's activity in the period 1981-1990 contributes to this report. The report is also notable because of the tables provided, with statistics over the period 1981-1990.

One comment concerning the format and lay-out of the report cannot be omitted. The report is issued on thirty-four A4 size papers, stapled together. By contrast, the Report on Competition Policy,⁸ is a neatly printed book with an outside cover. The report on anti-dumping and anti-subsidy policy should merit the same treatment in the light of its importance.

German Unification

The German Democratic Republic unified on 3 October 1990 with the Federal Republic of Germany. The GDR therefore became an integral part of the European Communities.

The basic Regulation protects the European Economic Community against dumped imports from non-EEC countries. Therefore, anti-dumping measures aimed at products from the GDR no longer have any legal basis since that country no longer exists. Five measures (two duties, three undertakings) are therefore inapplicable. This was communicated in the Notice concerning measures on products from the former GDR, OJ (1990) C 327/14.

1.2. Administrative Determinations

Pure silk typewriter ribbon fabrics from China, OJ (1990) L 174/27 (provisional; undertaking); OJ (1990) L 306/21 (definitive)

This Community industry consisted of a single producer in Germany. In fact, the Chinese producer reportedly was the only other producer of the product in the world. The normal value was therefore determined in accordance with Article 2(5), i.e., by reference to the price actually paid or payable in the Community, duly adjusted to include a reasonable profit margin (5%). A dumping margin of 47.2% was established. The injury margin amounted to 24.6%. For the calculation of the injury margin a 5% target profit was used. Quaere how this difference between dumping and injury margins is possible in view of the fact that essentially the same parameters were used to calculate both.

The Chinese producer offered a price undertaking which was accepted. To safeguard the effectiveness of the undertaking and to prevent possible circumvention by the appearance of other exporters in the future, a residual ad valorem duty limited by the injury margin was also imposed.

Oxalic acid from Brazil, OJ (1990) L 184/16 (undertaking); OJ (1990) C 239/14 (expiry)

This was a review proceeding under Article 15. The Commission verified whether expiry of the measures would lead again to injury and also investigated dumping aspects of the case [a mixed Article 14/15 review]. Normal value was established on a monthly basis in view of the high inflation rate in Brazil, resulting in a dumping margin of 28.1%.

The Commission accepted an undertaking of the sole exporter/producer of oxalic acid in Brazil. No residual duty was imposed.

Woven polyolefin sacks from China, OJ (1990) L 187/36 (provisional); OJ (1990) L 318/2 (definitive)

India was the surrogate country. In the construction of the normal value, the target profit was 5%. For the calculation of the injury margin the target profit for the Community industry was 9.4%.

The provisional and definitive duties were 43.4% (limited by the injury margin - the dumping margin was 80.8%).

The Chinese exporter argued that most of the Chinese sacks were only temporarily imported in the EC, and destined for re-exportation, and that sacks produced in the EC were mostly consumed in the EC. This argument was refuted. The Commission maintained that the temporarily imported sacks were in competition with Community industry sacks because the persons who use the sacks for export could just as well use EC-produced sacks.⁹

Linear tungsten halogen lamps from Japan, OJ (1990) L 188/10 (provisional); OJ (1990) L 318/1 (extension provisional); OJ L 14/1, 19 January 1991 (definitive)

The proceeding covered Linear Tungsten Halogen (LTH) lamps for a voltage exceeding 100 volts, of 100 watts or more, double-ended with R7s caps, of a type used for indoor or outdoor illumination. This meant that LTH lamps which could be used only as components of specialized appliances, such as photocopiers or photographic lamps, were not covered by the proceeding. Also the JD lamp - a different type of Halogen lamp - was not considered to be a `like product'.

Two of the three Japanese producers/exporters that cooperated in the proceeding sold less than 5% of their EC export quantities on the domestic market. The Commission constructed their normal value. The Commission did not accept the proposals of these producers to include the SG & A and profit made on their export sales, respectively sales of the JD lamp. It refused to do so because one company did sell enough lamps on the domestic market, and, according to Article 2 (3)(b)(ii), the SG & A and profit shall then be calculated by reference to the domestic SG & A and domestic profit of such a company. The latter company claimed that this figure should be adjusted downwards to allow for `negative transactions' which it claimed were effectively `notional' transactions connected particularly to cancelled sales orders and the transfer of sales from one year to the next. The effect would be that less than 5% of its sales would have been sold on the domestic market. The argument was rejected by both the Commission and the Council.

For the OEM sales the profit margin for the normal value determination was set at 50% of the profit margin realized on the exporter's domestic own brand sales or, if the exporter had no such sales, 50% of the average own brand profit made by the producer/ exporter with sufficient home market sales. In the definitive determination this profit margin was set at 33% of the own brand profit margin, instead of 50%.

The provisional dumping margins were 146.9, 97.3 and 123.1% ad valorem for the companies Iwasaki, Sigma and Phoenix. The provisional injury margins were 71.7, 84.2 and 85.4% respectively. In the definitive determination the dumping margins were expressed as an amount in ECU (specific duty), adjusted to take account of the revised estimate of the differences between the profit margin on own brand sales and that on sales to OEM, and amounted to 2.3, 1.2 and 1.5 ECU per unit for the three companies. The injury margins definitively established were 35.6 (Iwasaki), 45.5 (Phoenix) and 46.5% (Sigma and residual). The duties were limited by these injury margins.¹⁰

NPK fertilizers from Hungary, Poland, Romania and Yugoslavia, OJ (1990) L 188/63 (termination)

The investigation period covered 14 months. This long period was due to the complexity of the proceeding, in particular the difficulties met by the Commission in obtaining the relevant data of some of the interested parties.

The market shares of the exported product from the countries involved were found to be de minimis, except for the Yugoslav exports. The respective market shares were: Hungary: 0.58%; Poland: 0.25%; Romania: 0.15%; Yugoslavia: 1.94%. The proceeding was terminated because of withdrawal of the complaint after the complainants had been informed by the Commission that it had not found injury.

DRAMs from Japan, OJ (1990) L 193/1 (definitive); OJ (1990) L 292/16 (Amendment)

No material changes, compared with the provisional determination¹¹ have taken place, and, consequently, the definitive duty is set at 60%.

Tungsten products: Tungstic oxide and tungstic acid from China, OJ (1990) L 195/1 (extension provisional); OJ (1990) L 264/4 (definitive); OJ (1990) L 264/57 (undertakings); Tungsten carbide and fused tungsten carbide from China, OJ (1990) L 195/2 (extension provisional); OJ (1990) L 264/7 (definitive); OJ (1990) L 264/59 (undertakings); Tungsten ores and concentrates from China, OJ (1990) L 195/3 (extension provisional); OJ (1990) L 264/1 (definitive)

In all the proceedings the Commission confirmed the provisional duties. In Tungstic oxide and tungstic acid and in Tungsten carbide and fused tungsten carbide undertakings were accepted.

Silicon metal from China, OJ (1990) L 198/57 (definitive)

The Commission established the normal value on the basis of the price payable in the Community for a like product, including a reasonable profit margin. This led to a dumping margin of 38.73%. The target profit for the Community industry was set at 6.5%, and this led to calculation of an injury margin of 18.7%

The Commission found that the export prices of the Chinese exporters/producers had further decreased by approximately 10% after the investigation period. The Commission, however, considered it inappropriate - in conformity with standard practice - to take account of facts which have occurred after the investigation period. Therefore, the provisional measures could be confirmed.

Indirectly, the Commission did take the continuous price decrease after the investigation period into account by making the duty a specific one, expressed in ECU, and calculated on the basis of the injury margin during the investigation period. If the duty - as the provisional one - had been set on an ad valorem basis, it would have decreased together with the price. [Another solution would have been to impose a variable duty.]

Denim fabric from Turkey, Indonesia, Hong Kong and Macao, OJ (1990) L 222/50 (termination)

The normal value for Turkey was established on a monthly basis, to take into account high inflation in this country.

For five of the eleven companies investigated either no or de minimis dumping margins were found, de minimis being defined as less than one per cent. In addition to de minimis dumping, there was also no material injury. The market share of the dumped exports had decreased from 4.4% in 1987 to 2.8% in 1988. This was the major reason for the conclusion that the injury sustained by the Community industry could not be considered to be material.

In the light of the above, the proceeding was terminated.

Hydraulic excavators from Japan, OJ (1990) C 206/5 (initiation of review); OJ (1991) L 36/25 (termination review); OJ (1991) C 51/4 (expiry)

A very high proportion of the Community industry failed to reply to the questionnaire, despite the fact that the original deadline for the reply was extended by the Commission. The combined proportion of those who did reply did not constitute a major proportion of the Community production as set out in the complaint. Therefore, the Commission was unable to establish whether expiry of the measure would lead again to injury or threat thereof, and terminated the review.

Pocket lighters from Japan, OJ (1990) C 206/7 (initiation); Pocket lighters from Japan, China, Korea and Thailand, OJ (1991) L 133/20 (provisional)

The investigation covered the period from 1 January 1989 to 31 December 1989 for China, Korea and Thailand. For Japan the period covered 1 January 1989 to 30 June 1990.

The Commission excluded `piezo lighters' from the product definition because they had different physical characteristics.

The normal value for Thailand was constructed and a profit margin of 8% used. This was considered reasonable in view of the higher profit margin realized by other exporters from other countries and because R & D costs were very low in Thailand.

The Commission used Thailand as the analogue country for China.

For the Japanese normal value determination, the lighters for advertisement were found to have a higher price due to higher cost of production and, moreover, they were not exported. The Commission therefore excluded such lighters from the normal value determination.

The Commission constructed Japanese export prices using a 9% profit margin.

The Commission used a 15% target profit for the Community industry for calculation of the injury margin.

The duties were: 15% for Thailand, 17.8% for China, 35.7% for Japan and 22.7% for Korea. On one Thai company 5.8% was imposed. Of the duties for the four countries involved, the duties for Japan and Korea were limited by the injury margin.¹²

Ballbearings from Japan and Singapore not exceeding 30 mm, OJ (1990) L 256/1 (amendment)

With respect to the construction of the export price, the Commission used a profit margin for related importers of 6%, as in the previous investigation. The profit margin for the Community industry (establishment of target price for purposes of calculating the injury margins) was set at 15% (shortfall of 7%), which is the same as the one used for the Community industry in Ballbearings from Thailand not exceeding 30 mm, concluded one month later.

The Commission found that the response to the questionnaire of Nippon Seiko, was insufficient in the light of the findings at the verification. In particular, the Commission found that the report of the discounts given on the domestic market was incorrect; the comparison of the normal value was based on types which were similar and not identical; some replies (of related companies) were totally incomplete and there were substantial errors in some replies concerning transport costs and customs duties. Moreover, it proved impossible to verify the data relating to the cost of production. Consequently the Commission determined that it would reward non-cooperation to assume that the dumping margin for Nippon Seiko was lower than the highest dumping margin found. This latter conclusion also applied to two related companies of Nippon Seiko, despite the fact that one of these two related companies (Inoue Jikuuke Kogyo) provided a full and satisfactory reply to the questionnaire.

The Commission found the following dumping and injury margins for the Japanese Companies:

Company

Dumping margin

Injury margin

Sapporo Precision

4.56%

4.5%

NTN Toyo Bearing

25.9%

10%

Nachi Fujikoshi

30.74%

8.1%

Koyo Seiko

30.85%

8.7%

Nankai Seiko

46.8%

7%

Nippon Seiko

46.8%

9.2%

NSK Micro Precision

46.8%

9.2%

Inoue Jikuuke

46.8%

9.2%

It is noteworthy that although the Commission based its findings for the dumping margins for the three last mentioned companies on the best facts available, it did not do so with respect to the injury margins and the duties related thereto. It is uncertain what the ratio is for this decision.

Mechanical wristwatches from the USSR, OJ (1990) L 256/10 (repeal)

In February 1990, the Commission initiated a review proceeding under Article 14 at the request of the sole USSR exporter. The only known Community producer withdrew from participation in the investigation because it had definitively ceased production. This meant that there was no longer a Community industry for the product concerned. Consequently, the anti-dumping duties could be repealed.

On the `like product' determination, other watchmakers - from the quartz segment of the market - had argued that dumped imports could influence the marketability of all other wristwatches. But the Commission refuted this argument by stating that:

...[t]his argument has little or no relevance since quartz watches use a completely different movement technology in comparison with mechanical watches and cannot therefore be considered a like product within the meaning of Article 2(12)...

Furthermore, the Commission stated that the repeal of duties with respect to the watches concerned would not retard the re-establishment of a Community industry producing mechanical watches. In the opinion of the Commission, the revival of this industry is limited to the medium and high-quality segment of the market, and not the low quality end of the market where the USSR product is positioned.

Potassium permanganate from the USSR, OJ (1990) L 276/36 (extension provisional); OJ (1991) L 14/56 (termination)

An unusual end came to the proceeding when it appeared that the product imported actually did not originate in the USSR, but in Romania. The small portion which did originate in the USSR was imported outside the reference period. The preliminary determinations on dumping therefore were invalidated insofar as they referred to imports from the USSR. The same was true for the injury determination. Since therefore no dumping had occurred from the USSR, and consequently, no injury had resulted therefrom, the Commission terminated the proceeding.¹³

Ballbearings from Thailand with a greatest external diameter not exceeding 30 mm, OJ (1990) L 281/1 (definitive)

The Council confirmed the original findings of the Commission Regulation. The target profit margins which were used for the calculation of the constructed normal value and for the calculation of the injury margin were 32 and 15% respectively. The 15% target profit for the Community industry was set because the present profit of 8% was not considered to represent a reasonable return on sales for the Community industry.

Dense sodium carbonate from the USA, OJ (1990) L 283/38 (termination)

The Commission published a notice of impending expiry in February 1989. A full (Article 14) review was initiated in March 1989. Because the review had not been concluded in July, the Commission announced that the measures would remain in force after the end of the relevant five year period, pending the outcome of the review.

The investigation of dumping covered the period from December 1987 to February 1989 (15 months!).

The Commission first determined whether enough profitable sales had been made on the home market. It found that, although substantial quantities had been sold at a loss, the volume of sales which could be taken into account amounted to some 30% of the EC export sales. The normal value was, in general, established on a monthly basis. No particular reason was provided.

The Commission reconstructed some export prices (related importer) using a 3% profit margin.

With respect to the adjustment of the export price, costs were deducted resulting from non-recoverable waste caused by successive loading and unloading of the export consignments.

The dumping margins for the four companies under investigation were 2.9, 12.8, 9.8, and 11.9% respectively.

The average margin of undercutting amounted to 6%. The market share of the imports was 3.2% in 1983, and fell to 1.4% in the period thereafter remaining at that level. The Commission determined that this insignificantly limited the volume of imports (at recital (36)), and undercutting had made practically no effect on the price levels. The Commission recognized that it had not been established that the expiry of the current measures in force would (threaten to) cause material injury to the Community industry. Only a large increase of exports would be able to succeed in influencing the general price levels to the Community. Therefore, the Commission terminated the review in October 1990.

Audio tapes in cassettes from Japan, Korea and Hong Kong, OJ (1990) L 313/5 (provisional); OJ (1991) L 65/20 (extension provisional); OJ (1991) L 119/35 (definitive Japan, Korea; termination Hong Kong)

The Commission determined that audio tapes in cassettes and audio tapes on reels are two different products, because of differences in physical characteristics and uses. The audio tape in a cassette is the finished product, and the audio tape on a reel is the semi-finished product. Although the initiation of the proceeding refers to both products, the proceeding continued only with the coverage of audio tapes in cassettes.¹⁴

With respect to adjustments one Japanese exporter claimed that various free items (give-aways such as index cards, photographs) should be treated as a rebate and deducted from the domestic price. The Commission did not allow this claim; it considered these costs as promotional expenses for which no allowance may be made.

For the constructed value the Commission used a `reasonable' profit margin.

One exporter claimed that this profit margin should be less because sales were made on an OEM basis. The Commission initially did not agree because it did not consider these sales to have been made on an OEM basis. In the definitive determination, however, the Commission granted this claim and reduced the profit margin used in the constructed normal value by 50% for OEM sales.

It should be noted¹⁵ that the Commission is becoming increasingly stringent in allowing OEM-claims - both with respect to the identification of OEM sales and with respect to the setting of an appropriate profit margin to be used in the constructed normal value for OEM-sales.

On the basis of recent cases it would seem that the Commission requires not only OEM-customers' specifications, but also differences in quantities sold and prices charged to OEM and own brand customers in order to determine that `genuine' OEM sales exist. With respect to the appropriate profit, the Commission in recent cases has no longer used the fixed five per cent profit margin, but rather more flexible thresholds, such as 33% or 50% of the profit generated on domestic own brand sales.

Some Korean companies had claimed an allowance for salaries of part-time salesmen. This was not granted and only salaries for personnel wholly engaged in sales services were allowed.¹⁶ In this context, the Commission also disallowed sales staff expenses such as for car and telephone because these expenses in the view of the Commission did not form part of the salaries but are part of the general selling expenses of the exporters.

The Commission verified more than 70% of the export transactions for each exporter. The export transactions from Korea had all taken place in US Dollars, and therefore had to be converted into Won. The exporters had used for this purpose an average yearly exchange rate. The Commission did not accept this, and instead used monthly currency rates, because of the serious fluctuations of the Won during the reference period.

Where the exports were made through a subsidiary, prices were reconstructed. In one case, the Commission deducted advertising costs paid by an associated exporter. A profit margin of 5% was used in the construction of the export price.

The Commission found dumping margins between 0.43 and 80.20%. The margins of 0.43% and 0.50% were considered de minimis.

For the calculation of injury¹⁷ the Commission found that a price erosion of 12% had taken place in the period between 1985 and 1988. The global profitability of the two German producers BASF and AGFA amounted to 1.89%. In the view of the Commission, this profitability only partly reflected the state of the Community industry because the Community industry had only focused on those sales which had been reasonably profitable with a continuous decrease of non-profitable sales.

The Commission therefore determined that the injury consisted of a reduced profitability and considerable loss of sales. For the purposes of the injury calculation the target profit was set at 12%. Given, however, the particular circumstances of the Community industry, the target profit was then adjusted to take account of the price depression and the global profit shortfall. The adjusted target profit led to a calculation of a necessary price increase of 17.36% for the Community industry.

The Commission adjusted this latter figure for each exporter to take account of the relative price level of each exporter and the relative volume of the dumped imports in relation to the other exporters. Several exporters contested this so-called volume factor (a novel element in EC injury margin calculations). They argued that the comparative volume of imports bore no relationship to the injury suffered. The Council did not accept this argument, stating that the adjustment - a variance of 20% above and below the average according to the volume of exports of each exporter - was far from unreasonable.

The argument of Japanese exporters that their exports had decreased from 42% in 1985 to 35% in 1988 (and could therefore not attribute to injury) was not accepted by the Council. The market share of Japanese imports had indeed decreased but had still remained very large (i.e. 35%, double the Community industry's market share).

The duties imposed were limited to the injury margins (15.2-25.2%) in the case of Japan. It should be noted that, although Sony did not cooperate in the investigation of the dumping, Sony had done so for injury purposes and therefore, despite the fact that it had received the highest dumping margin, it did not receive the highest duty because of injury reasons (23.4 instead of 25.2%).

For Korea, the duties were limited to the dumping margins (9.2 and 2.6%). The Council stated explicitly that in cases where the exporting company is not the same as the producing company, the rate pertaining to the producing company shall be imposed in order to deal with `trading houses'.

Imports from Hong Kong were decumulated because they were de minimis: 1.5% in 1985 and 1.6% in 1986.

We mention two miscellaneous items about this investigation:

For one of the Korean companies, Nakayama, the documents were investigated at the premises of its Japanese parent company. This is fairly unusual as the Commission normally prefers to conduct verifications at the place where the source records are normally checked.

The definitive determination sums up the criteria for cumulation of imports from several countries: interchangeability, sales on the same geographical market, similar distribution channels, simultaneous presence, and non-de-minimis.

In a reaction to the provisional duties, Japan stated that it would seek action under the GATT Anti-Dumping Code if the Commission would impose definitive duties.¹⁸ The duties would violate Article VI of the GATT and the Anti-Dumping Code, essentially on injury grounds.

Aspartame from Japan and the USA, OJ (1990) L 330/16 (provisional); OJ (1991) L 82/1 (extension provisional); OJ (1991) L 134/1 (definitive)

The complaint had been lodged by the sole producer of aspartame in the Community.

For the normal value of aspartame from the US, the Commission verified whether the sales had been made in the ordinary course of trade. The comparison between the average cost of production with the average ex-factory domestic prices revealed that domestic sales were made at prices which permitted recovery of all costs.

The US exporter alleged that the prices in the US would not allow a proper comparison and therefore it requested that the normal value be based on the constructed value rather than on the domestic sales prices. It argued that there were differences in the price elasticity between the US and the Community markets because of a higher degree of health awareness in the US and therefore preference for aspartame in the US. In addition the Community market for aspartame developed later, and therefore the product was less well-known.

The Commission fully agreed that there might be a difference in price elasticity, but not surprisingly took the view that price elasticity is in fact a prerequisite for price differentiation; if adjustments had to be made on these grounds dumping could never be found.

Furthermore, the exporter claimed that in the Community patents had lapsed, whereas on the US market the product was sold under patent. The Commission also rejected this claim. Price discrimination causing injury is condemned by the Community and international law irrespective of the reasons. Consequently, the normal value was determined on the basis of the weighted average domestic price, net of all discounts.

Some of the export sales were made to customers in the US for subsequent export to the Community. The exporter claimed that these sales therefore should not be included as export sales. The Commission could not accept this argument since the producer was aware of the final destination of the product.

The provisional dumping margin with respect to the US exceeded 100%. In the definitive determination the dumping margin was expressed in ECU, and amounted to 66 ECU/kg for the US imports. It was limited to the injury margin: 25.15 ECU/kg.

For Japan, the Commission used the `best' information available (US figures) in the provisional determination. The reason was that the Commission was not able to verify the domestic sales. Also the export sales could not be verified. The export sales were all made through a related party in Switzerland and the Swiss authorities refused the Commission permission to carry out an on-the-spot investigation.

The dumping situation for Japan was reconsidered in the definitive determination.

The Commission found with respect to normal value that the product was not imported to the Community directly from Japan, but was first imported to the US. The situation envisaged in Article 2(6)¹⁹ had therefore occurred:

[t]he investigation revealed that the product was not merely transhipped through the USA but was actually sold to and imported by the US producer/exporter in the USA before exportation to the Community. The investigation also showed that there was substantial production within the USA and that there was a comparable price for aspartame in the USA.
In these circumstances the conditions under which, pursuant to Article 2(6) of Regulation (EEC) No. 2423/88, the country of origin might be considered appropriate as a basis for establishing normal value are not fulfilled.

The Commission therefore based normal value on US domestic prices. However, the dumping margin for Japan (based on the same data as for the US) was much lower: 47 ECU/kg (not 66 ECU/kg). Nonetheless, the injury margin and therewith the duty are higher: 27.21 ECU/kg (not 25.15 ECU/kg). At first sight, this seems strange as it would appear that normal values for the US and the Japanese products were similar whereas export prices of the Japanese products presumably were higher (lower dumping margin). Yet, the injury margins for the Japanese products were higher.

Video cassettes from Korea and Hong Kong, OJ (1990) L 343/1 (Amendment); OJ (1991) C 7/2 (initiation review)

The amendment was the result of a newcomer review. The Commission constructed the normal value because the company did not sell on the domestic market. A profit rate of 8% was used. There had been no exports so it was not possible to calculate the dumping margin. Therefore the Commission imposed a variable duty with a floor price set at the level of the constructed normal value.

Another newcomer review proceeding was initiated one month later. The establishment of the expedited newcomer review possibility is a welcome but under utilized innovation in EC anti-dumping practice.

Espadrilles from China, OJ (1990) L 365/25 (provisional), OJ (1991) L 166/1 (definitive)

The investigation period covered the whole of 1988 even though the initiation was published in December 1989. The 1988 period was selected because most of the Community producers and importers were small firms. This meant that the finalized and audited results of 1988 were the most recent available.

The dumping margin in the provisional determination was 93.3% and the injury margin 221% (taking into account a target profit of 7% for the Community industry).

In the provisional proceeding, the Commission took the view that the product in question, although categorized under two different CN codes - and corresponding to three different types of slippers - constituted one product. In the definitive determination, however, the Commission categorized the product into two different products (`A' and `B' slippers), on the basis of the two different CN codes.

The surrogate country which was chosen was Uruguay, and the profit margin for the construction of the normal value was set at 7%.

In the definitive determination an allowance was granted for physical differences for both the `A' and `B' category of slippers. This resulted in respective dumping and injury margins of 105.3% and 255.7% for type A and 70.3% and 154.9% for type B slippers. The duties were limited by the dumping margins.

Small-screen colour television receivers from Hong Kong and China, OJ (1991) L 14/31 (provisional); OJ (1991) L 122/1 (extension provisional)

The investigation period was ten months. For the product determination the Commission stated that SCTVs with a screen size of less than six inches are not in direct competition with the larger ones (mainly 14-16 inch) and these smaller SCTVs were therefore excluded from the scope of the proceeding. Features such as radio broadcast receivers, or a clock were not considered physical differences which would materially affect the definition of the product under consideration.

The Commission further determined that for `like product' the important features are: the screen size, the presentation (e.g., glass plate), the tuning control system (e.g., remote control), the connections (video, audio) and the available sound output.

Conversely, this was not the case with features such as flat square screens, teletext modules, a digital chassis and the adaptation of the television receiver to a different broadcasting standard. These features do not affect the basic technology employed, or the consumer perception and usage of the product.

For the normal value of Hong Kong, the Commission accepted for one exporter the claim to disregard certain own brand domestic sales through a department store, since this trade channel was not comparable with that used for own-brand export sales.

For another Hong Kong producer/exporter where the sales had been made through a related trading company, it was found that:

[c]ommissions paid by the producer/exporter to the related trading company have not been taken into account as allowable selling expenses, since the two companies concerned form part of the same economic entity.

In the case where three Hong Kong producers/exporters had made export sales on an OEM basis, but where the normal value had to be constructed, the Commission used a profit margin of five per cent. This was also the case for the construction of the normal value for China, since almost all the export sales from China had been made on an OEM basis.

In the construction of the export price for China the Commission used a 10% profit margin.

One Hong Kong exporter had claimed an adjustment for credit expenses of domestically sold products. The Commission refused to grant this adjustment, because all the domestic sales had been made under cash on delivery terms.

The injury calculation took place by way of, inter alia, cross-cumulation²⁰ with the Korean SCTV proceeding.

Furthermore, the argument was made that injury could not be suffered at present, because four Member States had already enforced quantitative restrictions. The Commission refuted this argument on the ground that the injury was price rather than quantity related. For the calculation of the amount of undercutting a target profit of 10% was used.

The duties were limited by the dumping margin, except for one Sino-Japanese joint venture (Fujian-Hitachi) for whom the injury margin (13.1%) was lower than the dumping margin (17.04%). The duties varied between 2.1 and 4.8% for Hong Kong and 7.5 and 17.4% for China.

Portland cement from Yugoslavia, OJ (1991) L 16/34 (termination)

With respect to the definition of the Community industry, the regional industry exception was applied.

This resulted in the Community market being divided into several competitive markets, and the producers in Italy regarded as the Community industry. The Commission found that the Italian industry (1) sold almost all its production (99%) on the local market, and, (2) the demand in the Italian market was not in any substantial degree supplied by producers located elsewhere in the Community.

The Commission found that four areas within Italy were particularly affected by imports from Yugoslavia. The Commission therefore considered whether these areas, in turn - either individually or collectively - could constitute a Community industry. It found that this was not possible.

The market share of the imports rose from 0.78% to 1.49%. The Commission did not explicitly state that this constituted a de minimis market share, but the proceeding was terminated because of a no injury.

Cotton terry-towelling articles from Turkey, OJ (1991) L 17/22 (termination)

Despite the fact that the deadline for reply to the questionnaires for Community producers was extended by the Commission, many of the producers did not reply. The number which did reply did not constitute a major proportion of the Community industry and the Commission terminated the proceeding.

Hydraulic excavators from Japan, OJ (1991) L 36/25 (termination review); OJ (1991) C 51/4 (expiry)

The complaint was filed by the Federation of Manufacturers of Construction Equipment and Cranes on behalf of hydraulic excavator producers whose collective output was alleged to constitute the majority of the Community production of the product in question.

The information submitted was sufficient to initiate a review. But a very high percentage of the Community producers failed to reply to the questionnaires. The Commission found that their combined production did not constitute a major proportion of the Community industry, and this prevented the Commission from establishing whether expiry would lead again to injury or threat thereof and it terminated the review.

Barium chloride from China, OJ (1991) L 60/1 (definitive)

The proceeding was dropped with respect to German products due to the German unification.

The previously made distinction in the product determination between the crystallized and anhydrous forms of barium chloride was abandoned because it became clear that the differences were negligible.

The Commission did not succeed in using the US as a surrogate because of reasons beyond its control. Therefore the normal value was determined on the basis of the price paid or payable to the Community. Normal value was determined on a monthly basis, adjusted to include a profit margin of less than 10%. The recalculated dumping margin was 50.13%. On injury grounds the duty was limited to 25.8%.

EPROMs from Japan, OJ (1991) L 65/1 (definitive); OJ (1991) 65/42 (undertakings)

The investigation period ran from April 1986 to March 1987. The examination of injury covered the period from 1983 to 1987.

For the like product determination the Commission considered that `processed wafers and dice are like finished EPROMs' and `different densities of EPROMs constitute different like products'. For the determination of the Community industry, the Commission considered that companies which import wafers and dice for assembly in the Community, from related Japanese exporters, should be excluded from the definition of the Community industry.

The normal value was constructed because less than 5% of the export sales-quantities were sold with profit on the domestic market. The profit margin used in the construction was that of the sales which were profitable on the domestic market.

An argument which was raised in order not to construct the normal value was that, although sales of some devices might have been made at a loss, all costs would have been recovered in the long run. The Council did not accept this argument because in its view EPROM devices which are sold at prices which do not permit recovery of all costs within the one year investigation period, cannot be regarded as having been made in the ordinary course of trade.

Claims for patent fees were not accepted because such adjustments equally affect the normal value and the export price.

The injury margin was calculated with a 25% target profit for the EC industry and amounted to 94%. This was lower than the highest dumping margin of 106%. Undertakings offered by seven exporters were accepted.

Atlantic salmon from Norway, OJ (1991) L 69/3 (termination)

The product under consideration was fresh and chilled Atlantic salmon. Although salmon can be qualified into three categories all salmon was considered as one like product.

Because of the large number of operators involved in the proceeding, both in the Community and in Norway, the Commission resorted to sampling.

In the Community, the Commission made a representative selection on the basis of size and location of the total 180 production units.

Out of the about 1,000 Norwegian producers/exporters, a selection was made on the basis of proposals from the Norwegian industry, the volume of their sales, and their geographical location. An additional criterion was the quality of the answers to the questionnaire.

The Commission constructed the normal value because practically all the domestic sales are made at a loss. A 5% profit margin was used. The export price taken was the actual export price. The weighted average dumping margin which the Commission established was 11.3%.

The underselling margin calculated (prices of Norwegian imports compared with Community's production costs plus transport costs plus 15% profit) amounted to 29.6%.

Nevertheless, no measures were adopted so far because the Norwegian Government in 1989 adopted a series of measures which restricted the volume of salmon which was supplied to the European market. Also the Norwegian industry has taken similar measures itself. The result of these measures was a recovery in prices on the Community market during 1989. Furthermore, intentions of goodwill also led the Commission to conclude that measures are unnecessary at the moment but developments will be monitored closely from now on. The advisory Committee - except for Ireland and the UK - agreed with the Commission. Therefore the proposal to terminate was forwarded to the Council. Since the Council did not decide otherwise, within one month the proposal of the Commission was adopted.

It should be noted that the legal basis of this voluntary restraint agreement as a matter of EEC anti-dumping law is unclear as it is clearly not envisaged by the basic Regulation. Political pressure exerted by the Norwegian Government and the ongoing EEA negotiations probably played a large role.

Welded tubes of iron or non-alloy steel from Turkey and Venezuela, OJ (1991) L 91/1 (definitive, undertakings); OJ (1990) L 351/17 (provisional, undertakings)

The exports of the Venezuelan Company Conduven were channelled through Connectors Inc., located in New York. Connectors had the function of an export department of Conduven. Connectors handled no other exports, and was fully controlled by Conduven. The export contracts, invoicing and collection of payments were made by Connectors; the handling and shipping of the goods was carried out by Conduven, which shipped the goods directly to the Community. The exporting country is therefore Venezuela. The export price was taken to be that invoiced by Connectors, since this company merely performed the functions of an export department of Conduven which would otherwise have been carried out in Venezuela.

This is the second time that the Commission has decided to treat a sales subsidiary of a foreign exporter, located in a third country, as part of the exporter's exporting network rather than as part of its importing network. The distinction is of great practical importance because under the former determination, the Commission will deduct only direct selling expenses, incurred by the sales subsidiary, from the export price while, under the latter determination, direct and indirect selling expenses as well as a reasonable profit margin - normally 5-6% - will be deducted.

22.1% dumping was found for Conduven. The undercutting margin was 25.8%. The market share of 1.9% was considered to be significant.

For Turkey the normal value was calculated on a monthly basis. Dumping margins of 18.5 and 8.1% were found for the Turkish producers. The respective undercutting margins were 21.2 and 7%. The market share of Turkey of 3.9% was considered significant.

The Commission accepted price undertakings of the companies investigated, and imposed residual duties at the rate of the dumping margins (22.1% for Venezuela and 22.1% for Turkey).

Video tapes in cassettes from China, OJ (1991) L 106/15 (provisional)

No producers in surrogate market economies were found willing to cooperate with the Commission to calculate the normal value. Therefore the normal value was established in accordance with Article 2(5)(c).²¹ The profit margin was for this purpose set at 12%.

An association representing enterprises with foreign investments in China claimed that the companies concerned operate on a market economy basis. Therefore, the companies should be treated on an individual basis - differently from the state-owned companies in China. The Commission refuted this argument by stating that these foreign companies were not sufficiently independent from the market economy forces that prevail in China. Consequently, only one uniform dumping margin for China was calculated: 122.9%.²²

For the injury calculation a price undercutting of 59.9% was found. Moreover, the Commission determined that a target profit of 12% was necessary.

The duty was set at 25.8%.

Ferro-silicon from Brazil, OJ (1991) L 111/1 (definitive); OJ (1991) L 111/47 (undertakings)

The Commission calculated normal values on a monthly basis to offset the inflationary effect of domestic prices. Dumping margins between 0 and 66.56% were found. The residual duty was 39% and limited by the injury margin. Six firms offered undertakings which were accepted.

It should be noted that this determination was the result of a review request of the Brazilian industry and that for some companies, for example Rima Eletrometalur, the result was far worse than that in the original 1987 proceeding. Rima has challenged the determination of the Council in Court.²³

Welded wire-mesh from Yugoslavia, OJ (1991) L 123/54 (undertakings)

The normal values were compared with the export prices on a monthly basis. The dumping margin was 29.7%. Price-undertakings were offered and accepted at a level which was sufficient to eliminate the injury.²⁴

Woven polyolefin bags from China, OJ (1991) C 157/5 (initiation)

This investigation was initiated under the Articles 13(11) and 14. This was the first time that an investigation has been opened under Article 13(11) (`anti-absorption'). Article 13(11) prohibits anti-dumping duties being borne by the exporter.

Polyester film from Korea, OJ (1991) L 151/89 (termination)

This was the second proceeding concerning polyester film. After the Commission had determined in the first proceeding that the exports had not caused injury to the film sector, nor material injury to the thin film (film from 12 to 36 microns) sector, the Community withdrew its complaint only to file a new complaint a mere eight days later for film which is thinner than 25 microns.

The Commission found that the Korean imports did not undercut those of the Community producers and, given their small (less than 5% and declining) market share, they could hardly have caused price depression.

In the absence of injury, the Commission considered it unnecessary to take protective measures and terminated the proceeding. It should be noted that although the Commission did not calculate dumping margins it did remark that there were indications of dumping practices in 1989.

1.3. Court Cases²⁵

Case C-49/88, Al-Jubail Fertilizer Company and others v. Council of the European Communities, Judgment of 27 June 1991 (Urea) (not yet reported)

In this case, two Saudi Arabian Companies sought a declaration that Article 1 of Council Regulation (EEC) No. 3339/87 of 4 November 1987, imposing a definitive anti-dumping duty on imports of urea, is void insofar as it concerns them. The duty under consideration was an ad valorem duty of 40% which was later (Regulation No. 450/89 of 20 February 1989) adjusted to 12.8%.

The applicants argued their case on the basis of four different grounds, alleging in turn the denial of their right to a fair hearing, an inadequate statement of reasoning behind the Regulation imposing the duty, manifest errors of appraisal and, lastly, errors of law and misrepresention of the facts.

The Court only focused on the first of these four grounds, the denial of a right to a fair hearing. In support of their position with respect to this head of challenge, the applicants made separate allegations.

The applicants first alleged that they were adversely affected by the method used to calculate the definitive duty, given that it was different from that used in calculating the provisional duty and that they received no prior warning of this change in method. Specifically, the provisional duty consisted of a floor price of 133 ECU, whereas the definitive duty was set at the abovementioned 40% ad valorem, later adjusted to 12.8%. The Court concluded that, whereas the amount of the duty is information essential to the parties, the same is not true for the method of calculation nor for the type of duty. The absence of such information cannot be said to influence adversely the rights of defence and the Court therefore rejected the applicants' argument with respect thereto.

Second, the applicants argued that the Community institutions had failed to supply them with information concerning allowances, thereby hampering the defence of the applicants' interests. In defence of its position, the Council referred solely to an internal mission report and to the summaries of two internal meetings with representatives of the parties involved. Given that the Council did not provide adequate proof that this information was made available to the applicants, the Court held that the Commission did not discharge its obligation to inform the applicants adequately.

The third argument of the parties related to the failure to reply to the applicants' questions regarding the determination of the threshold of injury. This question's main objective was to determine the production costs of the Community producer chosen by the Commission for establishing the threshold. The applicants criticized the Commission for the inadequacy of the information supplied on this point. The Council referred to a letter from the Commission to counsel for the applicant, which the applicants claim they did not receive. This letter, dated 8 September 1987, in the view of the Council, contained relevant information on these questions. The Court found, however, insufficient proof of receipt of this letter by the applicants, and held that the Commission again failed to fulfil its obligations to provide the information required by the interested parties.

Since two main allegations of the applicants with respect to the lack of a fair hearing were considered to be relevant, i.e., both relating to the failure of the Community institutions to fulfil their duty to put at the disposition of the applicants information necessary to defend their interests, the Court annulled the definitive duty imposed.

The Court stated, inter alia, that in the interpretation of Article 7(4) of the basic Regulation, account must be taken of the fundamental rights of defence. This is especially so, given that EC procedure does not contain all the safeguards envisaged under certain national laws. The Court stated:

[a]ny action taken by the Community institutions must be all the more scrupulous in view of the fact that, as they stand at present, the rules in question do not provide all the procedural guarantees for the protection of the individual which may exist in certain national systems.

The interested parties therefore must, in any event, be given the opportunity in the course of the proceedings to make known their points of view. With respect to providing information, the Court finds that the institutions must act with all necessary diligence to give to the parties concerned the required information, provided that the business secrets of the other parties are respected.

The Court has clearly not gone as far as the proposal of the Advocate General, namely to constitute the establishment of a system similar to that found under American law, i.e., the `administrative protective order'.²⁶ However, the Commission will in the future probably be more attentive to respecting procedural safeguards provided for in the basic Regulation.

Case C-69/89, Nakajima All Precision Co. Ltd. v. Council of the European Communities, Judgment of 7 May 1991 (Dot matrix printers) (not yet reported)

The ECJ upheld the Commission's calculation method under the basic Regulation concerning the constructed value. The ECJ stated that the constructed value for Nakajima had been calculated in a similar manner under the old basic Regulation.

The other features of the case concerned a wild variety of procedural questions all of which were rejected by the ECJ.

An interesting facet is that the ECJ examined whether or not some Articles of the basic Anti-Dumping Regulation are `Anti-Dumping-Code-compatible'. Whereas the ECJ explicitly states that the Code has no direct effect, it reserves the right to inquire whether internal EC law complies with the Code, because the EC is bound by the Code. The provision under attack, however, did not violate the Code because it was reasonable within the parameters of the Code provisions.

Case C-358/89, Extramet v. Council, Judgment of 16 May 1991 (not yet reported)

Finally, Extramet should be mentioned. In this case, the Court considered admissible the appeal brought by Extramet, an independent importer of calcium metal from China and the Soviet Union: Extramet was not only the single most important importer, but also an end user of the product. Its economic activities in view of the Court depended to a large extent on the imports and therefore the contested Regulation because of the small number of calcium producers and because it had experienced problems in obtaining the product from the main EC producer (and complainant) Pechiney, which was simultaneously its main competitor in the processing market.

4 For more details see, e.g., Nordgren, `The GATT Panels During the Uruguay Round', 25: 4 Journal of World Trade (1991) 57-72.

5 23 January 1991 and 31 May 1991.

6 Compact disc players, DRAMs, SCTVs, Halogen lamps, Audio tapes and Aspartame.

7 Multi phase electric motors (a group of nine cases), Plain paper photocopiers (Nashua and Gestetner) and Kraftliner.

8 Compare the resolution of the Parliament, OJ (1982) C 11/37 at 39 , rec. 16: `...[t]o produce an annual report analogous to the Report on competition policy'.

9 This is in accordance with established Commission practice, see E. Vermulst, Anti-Dumping Law and Practice in the United States and the European Communities (1987) 457, footnote 3.

10 Phoenix brought an appeal against these decisions on 27 April 1991, Case C-124/91, OJ (1991) C 145/12. However, the case was removed from the Register by Court order of 9 July 1991, OJ (1991) C 274/13.

11 See Vermulst, `Commercial Defense Actions II', 1 EJIL (1991) 166-199, at 180.

12 The dumping margins for Japan and Korea were 96.56 and 31.58%.

13 Origin is increasingly becoming a problem in EC anti-dumping proceedings, see the discussion with respect to SCTVs supra note 1 and Vermulst, Waer, `European Community Rules of Origin as Commercial Policy Instruments?', 24: 3 Journal of World Trade (1990) 55-99.

14 I.e.: `[a]udio tapes in cassettes mean audio cassettes of a length of 100 millimetres, a height of 64 millimetres and a depth of 12 millimetres and with a tolerance of + 1 milimetre [sic]'.

15 See also Section 1.2.4, supra.

16 From a logical point of view one may wonder whether the basic Regulation's limitation to `full-time salesmen' makes any sense.

17 The injury aspects of this case and of dumping proceedings in general, are analyzed in more detail in Vermulst, Waer, `The Calculation of Injury Margins in EEC Anti-Dumping Proceedings', to be published in Journal of World Trade (December 1991).

18 8 International Trade Reporter No. 19 at 696.

19 `[w]here a product is not imported directly from the country of origin but is exported to the Community from an intermediate country, the normal value shall be the comparable price actually paid or payable for the like product on the domestic market of either the country of export or the country of origin. The latter basis might be appropriate inter alia, where the product is merely transhipped through the country of export, where such products are not produced in the country of export or where no comparable price for it exists in the country of export.'

20 I.e., although Korea was not involved in this proceeding, it was included in the calculation of the injury, see page 40 of the investigation report.

21 This method is being used more and more often with respect to Chinese proceedings, see Video tapes in cassettes from China, OJ (1991) L 106/15 (provisional); Barium chloride from China, OJ (1991) L 60/1 (definitive); Typewriter ribbons from China, OJ (1990) L 306/21 (definitive); Silicon metal from China, OJ L 198/57 (1990) (provisional); Oxalic acid from China, OJ (1988) L 343/34 (undertaking).

22 This decision was revised in the definitive determination which will be discussed in the next report.

23 Action brought on 14 August 1991, Case C-216/91, OJ (1991) C 243/7.

24 The price undercutting amounted to 12.5%.

25 For a detailed analysis of the following three judgments see Vermulst, Hooijer, `Recent European Court of Justice Judgments in the field of Anti-Dumping', to be published in Common Market Law Review (1992).

26 See Taylor, Vermulst, `Disclosure of Confidential Information in Anti-Dumping and Countervailing Duty Proceedings under United States Law: A framework for the European Communities', 21 The International Lawyer No. 1, 43.

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The International Practice of the European Communities: Current Survey

1. Dumping

1.1. General Developments

1.2. Administrative Determinations

1.3. Court Cases25

1.3. Court Cases²⁵