External Benchmark Choices in Anti-dumping and Countervailing Duty Proceedings: A Battle of ‘Proxies’?

Bhatnagar, Mukesh; Arora, Pallavi; Das, Isha

doi:10.1007/978-981-13-1331-8_6

Mukesh Bhatnagar³,
Pallavi Arora³ &
Isha Das⁴

455 Accesses
1 Citations

Abstract

The use of external benchmark prices, in the determination of ‘dumping’ under the Anti-Dumping Agreement and ‘benefit’ under the SCM Agreement, is one of the most controversial topics in trade remedy jurisprudence today. The Appellate Body Report in EU—Biodiesel (Argentina) and the Panel Report in EU—Biodiesel (Indonesia) provide some useful indications for employing an external benchmark for constructing the normal value in an anti-dumping investigation. In relation to the SCM Agreement, reliance may be placed on the Appellate Body Reports in US—Softwood Lumber IV, US—Carbon Steel (India) and US—Countervailing Measures (China). These disputes provide circumstances in which departure from the prevailing in-country prices approach could be made during the subsidies and countervailing duty calculations. This chapter aims to analyse the use of external benchmarks in the calculation of ‘dumping’ under the Anti-Dumping Agreement and ‘benefit’ under the SCM Agreement—especially in the context of the expiry of Section 15(a)(ii) of the China’s Protocol of Accession to the World Trade Organization (2001).

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Notes

1.
Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1869 U.N.T.S. 201 (1994), art. 2.1 [hereinafter Anti-Dumping Agreement].
2.
Id., art. 2.2.
3.
Id., art. 2.2.
4.
See Edwin A. Vermulst, The WTO Anti-Dumping Agreement: A Commentary 5 (Oxford University Press, 2005).
5.
See generally, Mikyung Yun, The Use of “Particular Market Situation” Provision and its Implications for Regulation of Anti-Dumping, 21(3) East Asian Econ. Rev. 231, 238–242 (2017).
6.
Id.
7.
Id., at 231, 238–242.
8.
Directorate General of Anti-Dumping and Allied Duties, Anti-Dumping Investigation concerning Imports of Polypropylene Originating in or Exported from Oman, Saudi Arabia and Singapore – Final Findings, No. 14/5/2009-DGAD ((Ministry of Com. & Indus., May 14, 2009)(final finding)[hereinafter Polypropylene Decision].
9.
See generally, Panel Report, European Union — Anti-Dumping Measures on Biodiesel from Indonesia, WTO Doc. WT/DS480/6 (adopted Feb., 28, 2018) [hereinafter EU — Biodiesel from Indonesia (Panel Report)]; Appellate Body Report, European Union — Anti-Dumping Measures on Biodiesel from Argentina, WTO Doc. WT/DS473/AB/R (adopted Oct. 6, 2016) [hereinafter EU — Biodiesel from Argentina (AB Report)].
10.
See EU — Biodiesel from Argentina (AB Report), supra note 9, ¶ 5.5; EU — Biodiesel from Indonesia (Panel Report), supra note 9, ¶ 7.13.
11.
EU — Biodiesel from Argentina (AB Report), supra note 9.
12.
Id.
13.
See Id., ¶ 6.56; EU — Biodiesel from Indonesia (Panel Report), supra note 9, ¶ 7.33.
14.
Agreement on Subsidies and Countervailing Measures, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1869 U.N.T.S. 14 [hereinafter SCM Agreement].
15.
Appellate Body Report, United States — Final Countervailing Duty Determination with respect to Certain Softwood Lumber from Canada, WTO Doc. WT/DS257/AB/R (adopted Feb. 17, 2004) [hereinafter US — Softwood Lumber (AB Report)].
16.
Appellate Body Report, United States — Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India, WTO Doc. WT/DS436/AB/R (adopted Dec. 19, 2014) [hereinafter US – Carbon Steel (AB Report)].
17.
Appellate Body Report, United States — Countervailing Duty Measures on Certain Products from China, WTO Doc. No. WT/DS437/AB/R (adopted Dec. 18, 2014) [hereinafter US — Countervailing Measures (China) (AB Report)].
18.
Commission Implementing Regulation (EU) 2016/387 of 17 March 2016 Imposing a Definitive Countervailing Duty on Import of Tubes and Pipes of Ductile Cast Iron (also known as Spheroid Graphite Cast Iron) originating in India, 2016 O.J. (L 73) 1 [hereinafter Tubes CVD Decision].
19.
Protocol on the Accession of the People’s Republic of China, WTO Doc. WT/L/432 (Nov. 23, 2001).
20.
See, eg, Minyou Yu and Jian Guan, The Non-Market Economy Methodology shall be Terminated after 2016, 12(1), Global Trade & Customs J. 16, 16–24 (2017); Li Zhenghao, Interpreting Paragraph 15 of China’s Accession Protocol in Light of the Working Party Report, 11(5), Global Trade & Customs J. 229, 229–237 (2016); Stephanie Noel, Why the European Union Must Dump So-called ‘Non-Market Economy’ Methodologies and Adjustments in Its Anti-Dumping Investigations, 11(7/8) Global Trade & Customs J. 296, 296–305 (2016).
21.
See generally Edwin Vermulst, Juhi Dion Sud and Simon J. Evenett, Normal Value in Anti-Dumping Proceeding against China Post-2016: Are Some Animals Less Equal than Others? 11(5) Global Trade & Customs J. 212, 212–225 (2016); Weihuan Zhou and Andrew Percival, Debunking the Myth of ‘Particular Market Situation’ in WTO Anti-Dumping Law, 19(4) J. Int’l. Econ. Law, 863, 871–884 (2016).
22.
US — Softwood Lumber (AB Report), supra note 15, ¶ 2.
23.
SCM Agreement, supra note 14, Article 1.1(a)(1)(iii).
24.
SCM Agreement, supra note 14, Article 1.1(b).
25.
US — Softwood Lumber (AB Report), supra note 15, ¶ 2.
26.
Id., ¶ 3.
27.
Id., ¶ 15.
28.
Id., ¶ 2.
29.
Id., ¶ 77.
30.
Panel Report, United States – Final Countervailing Duty Determination with respect to Certain Softwood Lumber from Canada, ¶¶ 7.64 and 7.65, WTO Doc. WT/DS257/R (adopted Feb. 17, 2003).
31.
US — Softwood Lumber (AB Report), supra note 15, ¶ 157.
32.
Id., ¶¶ 82–96.
33.
Id., ¶ 97.
34.
Id., ¶ 89.
35.
Id., ¶ 89.
36.
Id., ¶ 89.
37.
Id., ¶ 89.
38.
Id., ¶ 90.
39.
Vienna Convention on the Law of Treaties, May 23, 1969, 1155 U.N.T.S. 331.
40.
US — Softwood Lumber (AB Report), supra note 15, ¶ 95.
41.
Id., ¶ 95.
42.
Id., ¶ 95.
43.
Appellate Body Report, Canada — Measures Affecting the Export of Civilian Aircraft, WTO Doc. WT/DS70/AB/R (adopted Aug. 20, 1999).
44.
Id., ¶ 157.
45.
US — Softwood Lumber (AB Report), supra note 15, ¶ 93.
46.
Id., ¶¶ 104–107.
47.
Id., ¶¶ 106.
48.
This has also been upheld in US — Carbon Steel (AB Report), supra note 16, ¶ 4.184. The Appellate Body held that the second sentence of Article 14(d) of the SCM Agreement allows IAs to use any appropriate benchmark- private prices, government prices or international prices- to arrive at prices that reflect prevailing market conditions in the country of provision. For these purposes, in-country prices may be used only as a starting point for determining a benchmark. Furthermore, a combination of in-country government and private prices may also be used.
49.
US — Softwood Lumber (AB Report), supra note 15, ¶ 98. Recalling the Appellate Body’s statement in US —Carbon Steel (AB Report), supra note 16, that a government, in its role as a provider of a good, may distort in-country prices by setting an artificially low price, the Appellate Body in US – Countervailing Measures (China) explained:

In such circumstances, those prices cannot be said to be market determined. We emphasize that the ability of a government provider to have such an influence on in-country private prices presupposes that it has sufficient market power to do so. The Appellate Body explained that, in such a situation, ‘the government’s role in providing the financial contribution [may be] so predominant that it effectively determines the price at which private suppliers sell the same or similar goods, so that the comparison contemplated by Article 14 would become circular.’ Because this would lead to a calculation of benefit that is artificially low, or even zero, the right of Members to countervail subsidies could be undermined or circumvented in such a scenario.

US — Countervailing Measures (China) (AB Report), supra note 17, ¶ 4.50.
50.
US — Softwood Lumber (AB Report), supra note 15, ¶ 98.
51.
Id., ¶ 100.
52.
Id., ¶ 100.
53.
Id., ¶ 100.
54.
19 C.F.R. § 351.511(a)(2)(i)-(iv) and 351.308.
55.
The difference between “as such” and “as applied” claims was explained by the Appellate Body in EU —Biodiesel (Argentina) as follows:

[A] claim that a measure is inconsistent ‘as such’ challenges a measure of a Member that has general and prospective application [such as a law or regulation], whereas a claim that a measure is inconsistent “as applied” challenges one or more specific instances of the application of such a measure.

EU — Biodiesel from Argentina (AB Report), supra note 9, ¶ 6.154.
56.
Panel Report, United States – Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India, WTO Doc. WT/DS436/R (adopted Dec. 19, 2014).
57.
US — Carbon Steel (AB Report), supra note 16, ¶¶ 4.162 and 4.163.
58.
Id., ¶¶ 4.162 and 4.163.
59.
Id., ¶¶ 4.168 – 4.173.
60.
Id., ¶ 4.168.
61.
Id., ¶¶ 4.179 and 4.180.
62.
Id., ¶ 4.180.
63.
Appellate Body Report, United States — Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, ¶ 439, WTO Doc. No. WT/DS379/AB/R (adopted Mar. 11, 2011).
64.
US — Carbon Steel (AB Report), supra note 16, ¶ 4.184.
65.
Id., ¶ 4.189.
66.
Id., ¶ 4.190.
67.
Id., ¶ 4.190.
68.
Id., ¶¶ 4.222–4.224.
69.
Id., ¶¶ 4.222–4.224.
70.
Id., ¶ 4.251.
71.
Id., ¶¶ 4.117–4.120.
72.
Id., ¶ 4.129.
73.
Id., ¶¶ 4.280 and 4.281.
74.
Id., ¶¶ 4.284–4.286.
75.
Id., ¶ 4.287.
76.
Id., ¶ 4.288.
77.
Id., ¶ 4.300.
78.
Id., ¶ 4.314.
79.
The products under issue in US — Countervailing Measures (China) (AB Report), supra note 17, were thermal paper, pressure pipe, line pipe, citric acid, lawn groomers, kitchen shelving, oil country tubular goods, wire strand, magnesia bricks, seamless pipe, print graphics, drill pipe, aluminium extrusions, steel cylinders, solar panels, wind towers, and steel sinks from China.
80.
US — Countervailing Measures (China) (AB Report), supra note 17, ¶ 2.1.
81.
Id., ¶ 2.1.
82.
Id., ¶ 2.1.
83.
Id., ¶¶ 2.1, 2.3, 2.6 - 2.27.
84.
Id., ¶ 1.13.
85.
Id., ¶ 4.37.
86.
Id., ¶ 4.39.
87.
Id., ¶ 4.42.
88.
Id., ¶ 4.42.
89.
Id., ¶ 4.42.
90.
Id., ¶ 4.42.
91.
Id., ¶¶ 4.43 and 4.63.
92.
Id., ¶¶ 4.43 and 4.63.
93.
Id., ¶ 4.48. See also US — Carbon Steel (AB Report), supra note 16, ¶ 4.154.
94.
Id., ¶ 4.64.
95.
Id., ¶ 4.61.
96.
Id., ¶ 4.80.
97.
Id., ¶¶ 4.81–4.107.
98.
Panel Report, United States — Countervailing Duty Measures on Certain Products from China – Recourse to Article 21.5 of the DSU by China, WTO Doc. WT/DS437/RW (circulated Mar. 21, 2018).
99.
Id., ¶ 7.143.
100.
Id., ¶ 7.157.
101.
Id., ¶ 7.157.
102.
Id., ¶ 7.157.
103.
Id., ¶ 7.160.
104.
Id., ¶ 7.162.
105.
Id., ¶ 7.165.
106.
Id., ¶ 7.174.
107.
Id., ¶ 7.3.3.3.
108.
Id., ¶ 7.205.
109.
Id., ¶ 7.205.
110.
Id., ¶ 7.220.
111.
Id., ¶ 8.1.
112.
Tubes CVD Decision, supra note 18.
113.
Id., ¶¶ 131–133.
114.
Id., ¶ 131.
115.
Id., ¶ 133.
116.
Id., ¶ 182.
117.
Id., ¶ 166.
118.
Id., ¶¶ 205–211.
119.
Anti-Dumping Agreement, supra note 1, art. 2.2.
120.
EU — Biodiesel from Argentina (AB Report), supra note 9, ¶ 5.5.
121.
Id., ¶ 5.7.
122.
Panel Report, European Union — Anti-Dumping Measures on Biodiesel from Argentina, WTO Doc. WT/DS473/R (circulated on Oct., 26, 2016) [hereinafter EU — Biodiesel from Argentina (Panel Report)].
123.
General Agreement on Tariffs and Trade 1994, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1867 U.N.T.S. 187 [hereinafter GATT 1994].
124.
EU — Biodiesel from Argentina (AB Report), supra note 9, ¶ 6.66.
125.
Id., ¶ 6.70.
126.
Id., ¶ 6.81.
127.
Id., ¶ 6.81.
128.
Id., ¶ 6.83.
129.
Anti-Dumping Agreement, Article 2.2.1.1 states,

For the purpose of paragraph 2, costs shall normally be calculated on the basis of the records kept by the exporter or producer under investigation, provided that such records are in accordance with the generally accepted accounting principles of the exporting country and reasonably reflect the costs associated with the production and sale of the product under consideration.

Anti-dumping Agreement, supra note 1, art. 2.2.1.1.
130.
EU — Biodiesel from Argentina (AB Report), supra note 9, ¶ 7.249.
131.
Id., ¶ 6.11.
132.
Id., ¶ 6.11.
133.
Id., ¶ 6.30.
134.
Id., ¶ 6.11.
135.
Id., ¶¶ 7.247 and 7.242.
136.
The Panel relied on Panel Report, United States — Final Dumping Determination on Softwood Lumber from Canada V, ¶ 7.312, WTO Doc. WT/DS264/R (adopted Aug. 31, 2004); Panel Report, Egypt — Definitive Anti-Dumping Measures on Steel from Turkey, ¶¶ 7.422–7.426, WTO Doc. WT/DS211/R (adopted Oct. 1, 2002); Panel Report, EC — Anti-Dumping Measure on Farmed Salmon from Norway, ¶¶ 7.506–7.507 and 7.514, WTO Doc. WT/DS337/R (adopted Jan. 8, 2008).
137.
EU — Biodiesel from Argentina (AB Report), supra note 9, ¶ 6.30.
138.
Id., ¶ 6.30.
139.
Id., ¶ 6.30.
140.
Id., ¶ 6.31.
141.
Id., ¶ 6.33.
142.
Id., ¶ 6.35.
143.
Id., ¶ 6.37.
144.
Id., ¶ 6.37.
145.
Id., ¶ 6.56.
146.
See EU — Biodiesel from Indonesia (Panel Report), supra note 9.
147.
Id., ¶ 3.1(a).
148.
Id., ¶ 3.1(a).
149.
Id., ¶ 7.33.
150.
See generally Ming Du, China’s State Capitalism and World Trade Law, 63 Int. & Comp. L.Q., 409, 409-430 (2014); Mark Wu, The “China Inc.” Challenge to Global Trade Governance, 27(2) Harvard Int. Law J., 261, 269-284 (2016); Yuhua Wang, Beyond Local Protectionism: China’s State-Business Relations in the Last Two Decades, 226 China Quart. 319, 320–339 (2016).
151.
See generally Julia Ya Qin, WTO Regulation of Subsidies to State-Owned Enterprises (SOEs) – A Critical Appraisal of the China Accession Protocol, 7(4) J. Int’l. Econ. Law, 86, 91–93 (2004); Jorge Miranda, Interpreting Paragraph 15 of China’s Protocol of Accession, 9(3) Global Trade & Customs J., 94, 95–103 (2014).
152.
See Accession Protocol, supra note 19, Chapeau to Section 15(a).
153.
See generally Vermulst, Sud and Evenett, supra note 21, 212–225; Zhou and Percival, supra note 21, 871–884.
154.
Request for Consultations by China, United States — Measures related to Price Comparison Methodologies, WTO Doc. WT/DS515/1 (Dec., 12, 2016); Request for Consultations by China, European Union — Measures Related to Price Comparison Methodologies, WTO Doc. WT/DS516/1 (Dec., 12, 2016).
155.
Id.
156.
Request for the Establishment of a Panel by China, European Union — Measures Related to Price Comparison Methodologies, WTO Doc. WT/DS516/9 (Mar. 9, 2017).
157.
The second Supplementary Provision to GATT Article VI:1 reads,

It is recognized that, in the case of imports from a country which has a complete or substantially complete monopoly of its trade and where all domestic prices are fixed by the State, special difficulties may exist in determining price comparability for the purposes of paragraph 1, and in such cases importing contracting parties may find it necessary to take into account the possibility that a strict comparison with domestic prices in such a country may not always be appropriate.

GATT 1994, supra note 123, art. VI:1.
158.
Anti-Dumping Agreement, supra note 1, art. 2.7 states, “This Article is without prejudice to the second Supplementary Provision to paragraph 1 of Article VI in Annex I to GATT 1994.”.
159.
GATT 1994, supra note 123, Interpretative Note Ad Article VI from Annex 1, para. 1(2).
160.
See Helena Detlof and Hilda Fridh, The EU Treatment of Non-market Economy Countries in Anti-Dumping Proceedings, 2 (7/8) Global Trade & Customs J. 265, 270 (2007).
161.
Australia has consistently treated China as having a “particular market situation” in anti-dumping investigations. See Weihuan Zhou, Australia’s Anti-Dumping and Countervailing Law and Practice: An Analysis of Current Issues Incompatible with Free Trade with China, 49(6) J. World Trade, 975, 980–990 (2015).
162.
See Weihuan Zhou, Appellate Body Report on EU — Biodiesel: The Future of China’s State Capitalism under the WTO Anti-Dumping Agreement, 17 World Trade Rev. (2018).
163.
Id.
164.
Regulation (EU) 2017/2321 of the European Parliament and of the Council of 12 December amending Regulation (EU) 2016/1036 on Protection against Dumped Imports from Countries not Members of the European Union and Regulation (EU) 2016/1037 on Protection against Subsidized Imports from Countries not Members of the European Union, 2017 O.J. (L338) 1 [hereinafter EU NME Amendment].
165.
See id., Preamble.
166.
Id., art. 1. Article 1 amends Regulation (EU) 2016/1036 infra note 169, by inserting Article 2.6a.
167.
Id., art. 1.
168.
Id., art. 1.
169.
Regulation (EU) 2016/1036 on Protection against Dumped Imports from Countries not Members of the European Union, 2016 O.J. (L176) 21, Section 2.7(b).
170.
EU NME Amendment, supra note 164.
171.
Id.
172.
See, e.g., Du, supra note 150, at 411.
173.
See, e.g., Wu, supra note 150, at 261–324; Wang, supra note 150, at 319–341.
174.
EU — Biodiesel from Argentina (AB Report), supra note 9, ¶ 5.65.
175.
Id., ¶ 5.65.
176.
See, e.g., Li Wen Lin, A Network Anatomy of Chinese State-Owned Enterprises, 1–14 (European University Institute, Working Paper No. RSCAS 2017/07, 2017).
177.
European Union’s appellant submission, Appellate Body Report, European Union — Anti-Dumping Measures on Biodiesel from Argentina, ¶ 84, WTO Doc. WT/DS473/AB/R (adopted Oct. 6, 2016).
178.
EU — Biodiesel from Argentina (AB Report), supra note 9, ¶ 6.41.
179.
Id., ¶ 6.71.
180.
Id., ¶ 6.73.
181.
Id., ¶ 6.73.
182.
See Vitaliy Pogoretskyy, The System of Energy Dual Pricing in International Trade: Subsidies and Anti-Dumping Perspectives, in Regulation of Energy in International Trade Law: WTO, NAFTA and Energy Charter (Julia Selivanova ed., 2011).
183.
See James Nedumpara, Energy Security and the WTO Agreement, in Trade, the WTO and Energy Security: Mapping the Linkages for India (Mathur S ed., 2014).
184.
Id.
185.
Vitaliy Pogoretsky, The System of Energy Dual Pricing in Russia and Ukraine: The Consistency of the Energy Dual Pricing System with the WTO Agreement on Anti-Dumping, 4(10) Global Trade & Customs J. 313, 313–323 (2009).
186.
Nedumpara, supra note 183, at 31–32.
187.
Id.
188.
World Trade Organisation, Report of the Working Party on the Accession of Saudi Arabia, ¶ 33, WTO Doc. WT/ACC/SAU/61 (Nov. 1, 2005); World Trade Organisation, Report of the Working Party on the Accession of the Russian Federation, ¶ 132, WTO Doc. WT/ACC/RUS/70 and WT/MIN (11)/2 (Nov. 17, 2011).
189.
Polypropylene Decision, supra note 8. Under the same finding, an anti-dumping duty was also imposed on Oman and Singapore, but for reasons other than dual pricing.
190.
Id., ¶ 80.
191.
Id., ¶ 81.
192.
Id., ¶ 82.
193.
Id., ¶ 80.

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Centre for WTO Studies, Indian Institute of Foreign Trade, New Delhi, India
Mukesh Bhatnagar & Pallavi Arora
Amity Law School, Guru Gobind Singh Indraprastha University, New Delhi, India
Isha Das

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Mukesh Bhatnagar
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Centre for Trade and Investment Law, Indian Institute of Foreign Trade, New Delhi, Delhi, India
James J. Nedumpara
Faculty of Law, UNSW Australia, Sydney, NSW, Australia
Weihuan Zhou

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Bhatnagar, M., Arora, P., Das, I. (2018). External Benchmark Choices in Anti-dumping and Countervailing Duty Proceedings: A Battle of ‘Proxies’?. In: Nedumpara, J., Zhou, W. (eds) Non-market Economies in the Global Trading System. Springer, Singapore. https://doi.org/10.1007/978-981-13-1331-8_6

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