Guide to EU anti-dumping law

Transcription

1 crowell Guide to EU anti-dumping law July 2006 Crowell & Moring Washington California London Brussels

2 About Crowell & Moring s Trade Team Clients seek out Crowell & Moring s international trade lawyers to increase their international business through costreduction, risk management, and access to new markets. We offer creative solutions to difficult legal issues. Crowell & Moring experts deliver inter-disciplinary solutions to corporate challenges with a strategy defined by the issues. With dedicated expertise in each of the areas faced by modern multinationals, our international trade lawyers provide real world advice on the full range of international issues. We join with clients as an experienced partner, sharing our skills in pursuit of your objectives. EU Trade Law Services Our European trade law team, based in Brussels, works closely with our London and Washington DC offices to provide advice on all aspects of EU trade law ranging from EU customs law and export controls, through EU trade remedies, to WTO law and the development and implementation of strategies to improve market access in third countries. We have extensive experience in all aspects of EU anti-dumping law as well as anti-subsidy investigations and counterfeit and pirated goods seizures. Lawyers from the team are also frequently involved in litigation before the European Court of First Instance and the national courts as well as in procedures involving the European Commission. Contact Points For further information concerning any of the subjects covered in this Guide or details concerning the range of our international trade law services, please contact any of the following attorneys: London Brussels Washington, D.C. Peter A.D. Teare Robert MacLean Jeffrey L Snyder Crowell & Moring Crowell & Moring Crowell & Moring 11 Pilgrim Street 71, rue Royale 1001 Pennsylvania Avenue NW London EC4V 6RN Brussels B-1000 Washington DC Tel + 44 (0) Tel + 32 (0) Tel Fax + 44 (0) Fax + 32 (0) Fax pteare@crowell.com rmaclean@crowell.com jsnyder@crowell.com Visit us on the Web at This Guide is designed to explain complex legal and economic issues in simple and concise terms. It has not been conceived to provide an exhaustive description of this subject and should not be relied upon as providing definitive legal advice. For this reason, Crowell & Moring will not accept any legal responsibility for actions taken based on the contents of the Guide and it should not be relied upon by any party as an authoritative statement of the law.

3 Guide Contents Introduction 1 What is dumping? 3 How anti-dumping investigations are started 9 Other critical elements necessary in an investigation 15 Outline of an anti-dumping investigation 20 On-the-spot verification 25 How exporters defend their interests 27 The imposition of anti-dumping duties 32 Revision of anti-dumping measures 34 Other variations of EU trade protection laws 37 Crowell & Moring was founded in From the beginning, we have aspired to be the best and we have adhered to several guiding principles: excellence, service, dedication to our community and our families, and a willingness to take the road less traveled. Our emphasis was, and continues to be, on those elements that we believe are essential to the lawyer-client relationship - excellent and responsive service delivered in a context of trust and friendship. We are proud to represent many of the biggest and best companies in the world in some of their most important matters.

4 Introduction In simple terms, the European Union s anti-dumping laws are designed to offer protection to European industries facing unfair competition in the form of dumping from foreign suppliers of goods. All Members of the World Trade Organisation (the WTO) are entitled to take such action and, in doing so, the EU is no different from any of its trading partners who have similar laws. When products are found to have been dumped into the EU, anti-dumping duties can be imposed when they are imported into the territory of one of the EU s 25 Member States.* Anti-dumping duties are applied in much the same way as a normal customs duty. The purpose of this additional duty is to increase the price of the dumped goods to match the prices that these goods are sold in the country where they were made. Different kinds of enterprises, both inside and outside the EU, will be directly affected by an EU anti-dumping investigation, particularly if this leads to the final adoption of anti-dumping duties. Specifically, the commercial interests of the following groups will be affected in one way or another: Who are affected by antidumping investigations? European manufacturers of the product for which protection is being sought Non-European producers and exporters of goods which Compete Inside the EU With Those Identified in an Anti-Dumping Complaint EU importers, distributors, agents and licensees of the non-eu products being investigated European industries which use the foreign products as inputs, components or parts in the manufacturing of other finished products Retailers of the foreign goods being investigated Consumers who may eventually have to pay higher prices for the goods * The twenty-five Member States of the EU are: Austria, Belgium, the Czech Republic, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovenia, Slovakia, Spain, Sweden and the United Kingdom. 1

5 The form of protection that is given as a result of an antidumping investigation is the adoption of anti-dumping duties on a specific product from specific countries. Each of these categories of business has financial and commercial interests to protect in the course of an EU anti-dumping investigation, although these are not always the same. EU manufacturers, for example, will wish to see protection granted to their industry in the form of anti-dumping duties. Generally speaking, each of the other categories of interested parties will suffer adversely if this type of protection is granted. However, at least in theory, the procedure used to carry out an antidumping investigation is designed to take into account all of these conflicting interests before a final decision to impose anti-dumping duties will be taken. The form of protection that is given as a result of an anti-dumping investigation is the adoption of anti-dumping duties on a specific product from specific countries. When the goods are imported into the EU, an additional duty is imposed to eliminate the competitive disadvantage faced by EU manufacturers confronted by dumping. This normally takes the form of an ad valorem or fixed additional duty that must be paid before the goods in question are customs cleared. In the recent past, these additional duties have ranged from 2% to in excess of 100% of the value of the imported goods. Consequently, the financial impact of anti-dumping duties can be very significant indeed. These kinds of duties can only be imposed after a thorough investigation by the European Commission, which is the EU s executive body. Before such action can be taken, the following steps must have been exhausted: A properly documented complaint must have been lodged on behalf of an European industry claiming that dumping is happening and the complaint must contain adequate evidence to support the claim. Foreign exporters accused of dumping are entitled to make their case to the Commission to show that they have not done so. The Commission must objectively examine all the evidence presented by both sides in the investigation and give reasons for their key findings. Any decision to adopt anti-dumping duties is open to challenge by both European and foreign companies alike before the EU s own courts. In the course of anti-dumping investigations, all interested parties have rights that they are entitled to exercise and which, if properly asserted, should adequately protect their commercial interests. Our advice to any client contemplating or responding to anti-dumping allegations is to make full use of these rights. As EU law stands at the moment, antidumping duties can only be imposed on goods manufactured outside the European Union. It is not possible for manufacturers in one EU Member State to invoke the EU s anti-dumping instrument against their competitors in another EU country. Nor is it possible for antidumping complaints to target allegations of dumping in the services sectors.* In both cases, the only remedies available in these situations at present lie in the domain of EU competition (or antitrust) law. The purpose of this Guide is to give a basic outline of how the rules and procedures are applied in an EU anti-dumping investigation. First, however, a word of warning. The rules are complex and the information requirements often extremely onerous. Failure to comply with these rules can result in applications being declared inadmissible and companies held to be non-cooperating, which has severe repercussions. Hence, this Guide and its contents are not intended as a substitute for proper legal advice. It is only illustrative of the general application of the rules in question. Any company involved in such proceedings should immediately seek the advice of properly qualified counsel and we do not accept liability for any actions taken on the basis of the general guidance contained in this Guide. * This may change in the near future as the EU is about to adopt special laws to tackle certain kinds of unfair commercial practices in particular service sectors such as the airline industry. 2

6 What is dumping? The internationally agreed definition of dumping Dumping has a precise technical definition in EU law, and in WTO law for that matter. Dumping occurs: when the price of a product exported to the European Union is less than the price charged for the same, or a similar, product in the country where the product was manufactured. To find out whether or not dumping is happening, it is necessary to make a comparison between: the price of the same (or similar) goods when sold in the foreign market where the goods were originally made ( the normal value ); and the price of non-eu goods sold to importers or customers in the EU ( the export price ). If the price of the goods to customers in the national market where the goods are being produced is higher than those charged to European customers, the manufacturer of the goods may be engaging in dumping. So, for example, if a Japanese producer makes two identical products, and sells one to a Japanese customer for 150 and the other to a British customer for 100, the goods in question are being dumped. In very simple terms, the margin of dumping in such a case is calculated as follows: Example: calculating the margin of dumping Japanese normal value EU export price = margin of dumping e.g =

7 Anti-dumping duties bring the price of the goods when sold to the EU to the same level as when the goods are sold in the domestic market, eliminating the element of unfair competition. Common misconceptions of what is dumping All too often, there is confusion over what practices actually constitute dumping. It is therefore important at this point to stress that there is only one definition of dumping and that is set out above. The same basic definition is applied by all members of the WTO which includes not only the EU but also the United States, Japan, Canada, Australia and now the Peoples Republic of China. It is important to bear in mind that dumping is not: The difference between prices charged for the same products by European producers and those by foreign manufacturers to European customers Selling goods at below their costs of production if such sales are being made on an equivalent basis in both the home market and the EU market Selling goods of an inferior quality to EU-produced goods. None of these practices constitute dumping in the legal sense of the term. So, for example, if a German company sells its products for 50, and its US competitor sells the same products in both the US and the EU for 30, there is no dumping. This is because the US company is selling its products for the same price in both its own domestic market and the EU market. It is only where adverse price discrimination is taking place between the EU and the country of origin of the goods that dumping occurs. What does the EU do about dumping? If non-eu goods are being dumped inside the EU, then EU producers of competing products can ask the Commission to open an anti-dumping investigation. This is because the rules of international trade law characterise such practices as unfair competition. Foreign producers are not allowed to cause injury to European industries by selling their goods at prices they cannot achieve in their own markets. To start this kind of investigation, a complaint can be lodged with the Anti- Dumping Unit of the Commission, in Brussels, to request that an investigation be carried out. Such a complaint must prove not only that dumping is taking place but also that injury is being caused as a result of the dumping. There are also a number of additional requirements that must be satisfied and these are discussed later. In the event that the EU industry is successful in establishing the allegations made in its complaint, and foreign products are found to have been dumped in the EU market, anti-dumping duties may be imposed. These duties are intended to neutralise any unfair price advantage that the dumped goods have been found to have. Anti-dumping duties are therefore designed to bring the price of the goods when sold to the EU to the same level as when the goods are sold in the domestic market. This eliminates the element of unfair competition faced by European manufacturers and prevents further injury being caused. 4

8 How are anti-dumping duties applied? The actual application of anti-dumping duties happens in much the same way as when normal EU customs duties are imposed. On importation, the EU importer is charged the additional antidumping duties at the same time as normal customs duty liability is imposed, i.e. at the time the products are customs cleared. In general terms, anti-dumping duties take two forms: Provisional anti-dumping duties If, after a preliminary investigation, the Commission believes that dumping is taking place, provisional anti-dumping duties are imposed, normally 6-9 months after the investigation has been opened. In most cases, actual payment of provisional duties is not required and instead a security or bank guarantee is given when the goods are imported. The amounts secured in this way are only collected if a decision is taken later to impose definitive duties and collect the provisional ones. If so, the amounts are collected retrospectively under the security. Definitive duties Definitive duties are imposed after the end of the full investigation, normally for a period of five years. Actual payment of these sums is required when products are customs cleared. Normally, the additional amounts are added to liability statements issued by national customs authorities for assessing normal customs duties and VAT. In most cases, this is automatically done by the customs authorities when the goods are imported under CN Customs codes attracting these duties. In normal circumstances, imported goods cannot be customs cleared until the lodging of security or the payment of the antidumping duties by the EU importer. Also, it is not the foreign manufacturer who is liable for the duties (unless it is an European subsidiary or branch of that manufacturer who is importing the products). The EU importer bears this liability and the EU s anti-dumping laws contain anti-circumvention provisions to prevent the passing on of this liability back to the manufacturer. Summary of the time periods for which anti-dumping duties are applied Provisional anti-dumping duties are applied normally for 6 months (and for a maximum of 9 months) until replaced by definitive duties Definitive duties are applied for five years from the date of their adoption The maximum period of provisional and definitive duties is 5 years and nine months from the introduction of the provisional measures After the end of the five years period of definitive duties, the measures can be extended for additional five year periods by way of expiry reviews During expiry reviews, the anti-dumping duties are continued until the results of the expiry reviews are known 5

9 Other important features of EU anti-dumping law EU anti-dumping duties are applied to: (a) specific goods; (b) from individual countries. Such measures are therefore both product-specific and countryspecific. Specific products EU anti-dumping investigations generally focus on quite specific products. For example, recent cases have involved imports of aluminium foil, steel ropes and cables, paracetamol, polyester fibres, stainless steel fasteners, colour TV receivers, personal fax machines, electronic weighing scales, etc. Occasionally, the product scope is more extensive and covers a wider potential range of different types of similar products such as, for example, leather handbags or hairbrushes. In such cases, a large range of different styles, qualities and kinds of similar products can be covered. Again generally speaking, the precise scope of the products covered by an investigation is identified by reference to the particular EU Customs Code Classification used for the importation of the goods in question. When goods from a particular country are imported under such classifications, liability for payment of anti-dumping duties is normally triggered. Individual countries At the same time, only products from specific countries are investigated. So, for example, anti-dumping duties are applied against steel pipes from Russia or bicycles from China. However, a number of countries can be targeted in a single complaint. Hence, one recent investigation targeted iron tubes and pipe fittings from Brazil, the Czech Republic, Japan, the PRC, Korea and Thailand. In such exceptional cases, evidence must be provided by the complaint that producers in all identified countries are engaged in dumping. Once a specific country has been targeted and the allegations of dumping found to be true, anti-dumping measures are applied to all producers in the countries investigated. Individual manufacturers who cooperate in the anti-dumping investigation are entitled Foreign manufacturers who decide not to co-operate with the Commission in the investigation are subject to the highest duty rate. to an individual dumping margin for their products. All other producers in the target country will be subject to a single anti-dumping duty rate (known as the residual duty rate ), which is set at the highest dumping rate found in the course of the investigation. This practice penalises foreign manufacturers who decide not to cooperate with the Commission in the investigation since they become subject to the highest duty rate. This remains true even if noncooperation is not deliberate. If, for example, a foreign manufacturer is unaware of the existence of the investigation, or is unable to respond within the tight initial deadline imposed for notifying the Commission of interest in the proceedings, it is deemed to be non-co-operating and subject to the residual duty rate. The economic and commercial effects of anti-dumping duties The introduction of provisional and/or definitive anti-dumping duties by the European Union normally has the following economic and commercial effects: The volume of EU imports of the product covered by the anti-dumping duties declines due to the additional charges imposed Prices of the products inside the EU increase because European manufacturers no longer face unfair competition from foreign exports The market shares held by the EU industries tend to increase as the volume of imported goods decreases Higher profit margins are reported by EU manufacturers due to both higher prices and increased sales. For foreign exporters who do not defend anti-dumping cases, or who have in fact been found to have engaged in dumping, high anti-dumping duties can effectively close the EU market, particularly in cases where anti-dumping duty levels exceed 15-20%. This effect can last for five years, which is the maximum period that the EU can impose anti-dumping duties without carrying out a review. During this time, EU orders and customers can be irrevocably lost because independent importers are not normally willing to bear the burden of the additional duties. Instead, it is common for EU importers to seek alternative suppliers in other countries when producers and manufacturers have not been targeted by the anti-dumping investigation. * Special rules are, however, applied in the case of China and so-called non-market economy countries 6

10 The application of antidumping duties in practice Anti-dumping duties are calculated according to the historical sales records of specific companies being investigated in the course of the investigation period used in the particular procedure in question. This means that data cannot be manipulated by foreign manufacturers and/or exporters to achieve more favourable results. While anti-dumping investigations are carried out in relation to countries, in most cases individual producers are eligible for individual duty rates based on their behaviour during the investigation period. Consequently, it is normal in an anti-dumping investigation for there to be a broad range of antidumping duty rates to be given to all the exporting producers who cooperated in the investigation carried out by the Commission. Where particular foreign exporters or producers have not cooperated, their exports are subject to the residual duty rate that is normally set on the basis of the highest dumping margin found in the case of cooperating companies. Suppose, for example, in the course of an anti-dumping investigation into exports of telephones from Canada, four companies cooperated (Companies A to D) and received individual dumping duty rates ranging from 3% to 25%. However, suppose also that the evidence presented to the Commission showed that more than 50% of Canadian manufacturers had not cooperated in the investigation. In such circumstances, the Commission can rely on alternative information to set the residual duty rate (i.e. Eurostat import data). Hence, the profile of antidumping duty rates applied in the future to imports of these products can be shown diagrammatically as follows: Table of A/D % duty rates applied against individual exporting producers 40% 35% 30% 25% 20% Anti-dumping duties 15% 10% 5% 0% Co. A Co. B Co. C Co. D Residual Recent illustrations of anti-dumping duty levels The imposition of anti-dumping duties by the European Union can create a significant impediment to future importation of these products quite simply as a result of the additional costs imposed when importing them. To give an idea of the kinds of levels of antidumping duties imposed by the European Union in the recent past, the Table on the following page gives a variety of the different anti-dumping measures in force against selected exports at the time this Guide was prepared. 7

11 Product Country of Origin Minimum AD duty Maximum or Residual AD Duty Polyester staple fibers PRC 4.9% 49.7% Saudi Arabia Bicycles Vietnam 15.8% 34.4% Hand Pallet Trucks PRC 7.6% 46.7% and essential parts Barium carbonate PRC 6.3% 56.4% Castings PRC 0% 47.8% Finished polyester PRC 14.1% 56.2% filament fabrics Trichloroisocyanuric PRC 7.3% 42.6% acid USA Magnesia bricks PRC 2.7% 39.9% Stainless steel fasteners PRC 7.7% 27.4% and parts thereof Indonesia Taiwan Thailand Vietnam (Above examples are all new investigations concluded by the imposition of definitive duties during year of 2005) The large variety in duties is caused by the fact that in most cases, more than two exporting producers cooperate, which leads to different duty margins based on their historical exporting records. Since prices normally vary among different producers, so do individual anti-dumping duty rates. However, noncooperating producers are invariably subject to the residual duty - highest dumping rate. 8

12 How anti-dumping investigations are started Filing a complaint with the European Commission The Commission is responsible for investigating allegations of dumping by foreign exporters. The trigger for starting an antidumping investigation is the lodging of a complaint with the Commission s Anti-Dumping Unit. Complaints in all the official languages of the EU are accepted. In practice, this Unit works in English and French, and therefore when a complaint is not submitted in one of these languages, a translation is strongly recommended. The Commission does have power to start an anti-dumping investigation on its own, without a formal complaint being filed by an affected EU industry. In practice, it has rarely, if ever, done In the vast majority of cases EU industries use trade associations to represent their interests in pursuing anti-dumping complaints. so. Instead, the Commission waits for a formal complaint to be lodged on behalf of an EU industry before acting. Consequently, the starting point for an EU anti-dumping investigation is the acceptance of a properly documented complaint alleging both dumping and the existence of material injury caused by the dumped products. Basic requirements of a complaint The Complaint must be made on behalf of an European industry Anti-dumping investigations are normally carried out on an EU-wide basis. Therefore a complaint must usually be made on behalf of an EU industry representing a major proportion of the industry concerned. In practice, this means that EU producers expressly supporting the complaint must represent at least 25% of the total EU production of the product in question. This is, however, the very minimum support required and, in most cases, the Commission prefers that support comes from at least 50% of the EU industry in question. In effect, this also often means that a single company cannot usually request an antidumping investigation to be opened unless it satisfies the 25% test by itself. It also means that, even if all the manufacturers in a single EU Member State are represented by the complaint, this will not be enough unless these companies collectively pass the 25% test. In the vast majority of cases, to gather sufficient support to lodge a complaint, EU manufacturers establish trade associations to represent their interests in pursuing an anti-dumping case. Alternatively, complaints can be lodged by existing trade associations on behalf of their affected members. This is particularly common in the chemicals and metals sectors. 9

13 While anti-dumping investigations are directed against countries, the commission needs some indication and evidence of why the EU industry believes dumping is taking place. Elements necessary for prima facie anti-dumping case. Other than satisfying the 25% rule, there are certain advantages of complaints being submitted by trade associations: It is easier to coordinate the gathering of the necessary information to substantiate a complaint and the complaint itself has greater weight in the eyes of the Commission. Once a complaint is accepted by the Commission, the investigation will proceed even if individual companies change their minds about supporting the complaint. The costs of preparing the complaint can be divided among the participating companies that can result in significant cost savings. The complaint must demonstrate a prima facie case The complaint must set out the three basic requirements for establishing the existence of a prima facie case. The existence of dumping by identified non-eu producers or exporters in particular countries; Material injury to the EU industry because of the dumped products; and Dumping must be at least one of the causes of the injury being sustained by the European industry. It should be noted that each of these requirements must be satisfied to the applicable factual and evidential standards before an anti-dumping investigation will be opened by the Commission. Information supporting the claim of dumping Identity of the complaining industry The name, address and contact details of the complainant must be provided together with a statement that the complaint has been made on behalf of the EU industry making the product in question. Precise identification of the product concerned A precise description and any important specifications must be given in the complaint. This can be a difficult process because products can vary according to: the types of basic materials used to manufacture the product (i.e. leather handbags as opposed to plastic ones); individual product specifications (i.e. steel wire as opposed to steel rope); physical characteristics (i.e. ammonium nitrate as opposed to ammonium nitrate solutions). Normally products are identified by reference to their relevant EC customs nomenclature code number (CN Code). Certainly this is used as guidance by the Commission during its investigation. Identification of the countries where the dumped products originate Anti-dumping investigations are conducted against countries and not against individual companies or producers. So, for example, an investigation may be carried out into steel tubes from Hungary or photocopiers 10

14 from Japan. The country (or countries) of origin from which the dumped goods are exported must therefore be clearly identified in the complaint. It is possible to make a complaint against a number of countries. For example, a complaint could allege that dumped products come from Malaysia, Singapore, Thailand and China. However, if such a claim is being made, information and evidence supporting the claims against each country must be provided in the complaint. The identity of producers, importers and users of the product While anti-dumping investigations are directed against countries, the Commission needs some indication and evidence of why the complainant believes dumping is occurring. This takes the form of information relating to the specific identity of producers in the target country. Therefore, the identities To establish dumping, it is necessary to show that prices charged in the domestic market are higher than those charged for export. and names of producers of the product in the target countr(ies) must be provided. This need not be all the producers but should be at least those known to the complainants. So that the Commission can have a clear picture of the exporting profile of the producers alleged to be dumping, it is also necessary to provide information on the identities and contact details for importers who bring the product into the EU. The importers may be independent of the foreign producers or, alternatively, part of the exporting producers marketing operations. Imported products are, of course, used by consumers in the EU. These consumers may be industrial users or simply general consumers. Details of the main consumers must also be provided in the complaint so that the Commission can take their views on the effects of imposing anti-dumping duties. Demonstrating that dumping is taking place To establish dumping, it is necessary to show that prices charged in the domestic market are higher than those charged for export and this claim must be supported by documented evidence. There are five steps to proving the existence of dumping: Step 1: Obtain price information for sales on the local market The actual price of the goods charged by retailers to customers in the home market is the starting point for showing that dumping exists. Evidence of such prices includes copies of invoices for sales made to local customers, quotes obtained for proposed sales and actual price lists. In the absence of physical evidence of domestic prices, alternative means are available to establish such prices. This can include constructed values based on estimated costs of production together with a reasonable element of profit. For obvious reasons, however, reliable information of this nature is difficult to obtain. Price information may be acquired either through local subsidiaries of European companies or distributors and agents appointed by EU companies in these markets. The Internet also is a useful tool for gathering pricing information especially in the case of larger companies. Step 2: Deduct all expenses and costs to arrive at an ex work price for the product In most cases, information relating to sales on the local market will be at the retail or distributor level. The 11

15 Commission normally uses ex factory prices as the basis for comparison for establishing dumping unless sales at another level of trade would be a more appropriate point for the comparison. Adjustments must therefore be made to the retail or distribution price to take into account commissions, profits, transport costs and all other costs incurred between the goods leaving the factory and being sold to the customer. Since precise information on such costs is difficult to obtain, especially in the case of companies manufacturing a number of products, these adjustments can be estimated. However, all such estimates must be reasonable and justification will be required as to how these adjustments were made. Steps 1 and 2 above can be summarised by way of an example. Suppose that an European complainant has obtained evidence of a retail price of a specific product in the domestic market of an exporting country for 140 currency units of that country. The adjustments to determine an ex works (or ex factory) price might be as follows: Normal value to ex factory price calculation Retail Price (-) VAT at 10% (140/1.10) =Net sales price (-) retailers margin at 15% (127.27/1.15) = Wholesale price (-) wholesalers margin at 12% (110.67/1.12) = Ex factory price + transport, etc (-) Transportation and insurance at 5% (98.81/1.05) = ex factory price Converted ex factory price in Euros Foreign currency unit Step 3: Obtain price information on export sales Generally speaking, information relating to export sales is far less difficult to obtain than local price information. Again actual export prices provide the best information. Copies of invoices for actual or proposed sales made to European customers by foreign suppliers are the best source of such information. Other possible sources are quotations from foreign manufacturers or price lists for export sales. Where prices are being quoted by a sales company or importer in the EU that is related to the foreign exporting producer (i.e. subsidiary company, branch, etc), it may well be that these prices are unreliable because of the existence of a relationship between the manufacturer and the EU supplier. In such cases, it is again possible to construct export prices based on the resale prices to independent customers adjusted for costs and charges beyond the ex factory price, i.e. transport to the EU, insurance, customs duties, profit margins for importers, etc. 12

16 EU Export Price to ex factory price calculation EU Retail Price (-) VAT at 12% (50/1.12) = Net wholesales price (-) Wholesales SG&A and profit at 10% (44.64/1.10) = Price to wholesaler (customs cleared) (-) EU Customs duties at 7% (40.58/1.07) = CIF Price (duty unpaid) (-) Transportation and insurance at 4% 37.93/1.04 =ex factory export price Step 4: Deduct all costs from EU price to arrive at an ex work price Export prices must also be adjusted to arrive back at ex factory prices. Obviously prices quoted DDP, CIF, FOB, etc. contain elements on transport, insurance, freight and other costs which increase these prices. These elements must be stripped out of the price to arrive back to the original ex factory prices. Properly documented evidence of these costs must be provided. If this is not available, reasonable estimates for these costs can be used but again they must be justified by reference to commercial reality. The following is an illustration of the combination of Steps 3 and 4 together, assuming that the product in question is sold in the EU to customers direct from wholesalers at a retail price of Step 5: Compare the adjusted domestic price with the adjusted export price to arrive at a dumping margin Once both the local price and the export price have been adjusted to arrive at the ex factory price, these prices are compared. The dumping margin is then determined by reference to the difference between these prices. Where the local price, as adjusted, is higher than the adjusted export price, dumping exists. In the above case, using the data obtained in Steps 2 and 4, the calculation would be as follows: Dumping margin calculation Ex factory normal value Ex factory export price Dumping margin CIF value Dumping margin as a % of CIF value % 13

17 Special rules for non-market economy countries In certain countries local prices are set by central government agencies and not by the market forces of supply and demand. These countries are described as Non-Market Economy (NME) countries and, in such cases, local prices cannot be relied on as establishing a genuine basis for a price comparison. Instead, comparable prices of the products from market economy countries are used. The country used as the substitute is called the analogue country and the prices used are termed analogue prices. Traditionally, this rule played a very significant role in EU anti-dumping law and, importantly, exports from Russia and China, as well as a number of other countries were subject to its scope.* The application of the rule, notably towards Russia and China, was changed slightly in 1998, to allow exporters from these countries to show that they operated in a true market economy environment. Since 2002 these rules no longer apply to Russia and only apply to Chinese exporters not operating on market economy principles. In terms of formulating a complaint, the EU complainant normally nominates an analogue country to make the necessary price comparison. Obviously, this selection depends on the amount of price information that the complainants can obtain from manufacturers in third countries. When selecting an appropriate analogue country, a number of basic criteria must be applied. Criteria for nominating an analogue country The GNP of the country chosen should be close to that of the country accused of dumping. The market of the analogue country should be relatively open to competition and no artificially high customs barriers should apply. Sales in the analogue country should reflect costs and levels of production should be comparable to those of the non-market economy country under investigation. In practice, much depends on the degree of cooperation that the Commission can eventually receive from manufacturers in an analogue country. If one country is more appropriate than another, but no producers from the first country will cooperate in the investigation, in relativity the Commission will use the second country if producers there will provide the necessary information. Once the analogue country is accepted, price information from manufacturers of the product in that country is substituted as the local prices for the non-market economy country and the comparison made. All interested parties providing what they believe to be confidential information must prepare a nonconfidential version of the complaint. Protecting confidential information It is almost inevitable that anti-dumping complaints will involve sensitive or confidential information. All interested parties providing what they believe to be confidential information should also prepare a non-confidential version of the complaint. Where sensitive price, production or sales data is presented, this information can be provided in an indexed form. This should be lodged at the same time as the confidential version. The nonconfidential version will form part of the public record of the investigation that is open for inspection to all interested parties. The confidential version will form the basis of the Commission s investigation, but will not be disclosed to any party without the specific permission of the supplier of the information. * The countries to which the old rules still continue to apply are: Albania, Armenia, Azerbaijan, Belarus, Georgia, North Korea, Kyrgyzstan, Moldavia, Mongolia, Tajikistan, Turkmenistan and Uzbekistan. 14

18 Other critical elements necessary in an investigation Material injury Along with proving that dumping is occurring, a complaint must also prove that the EU industry lodging the complaint is suffering injury. This is established by providing the Commission with data to demonstrate that the commercial and economic well-being of the industry is declining. Loss of jobs, financial losses, declining sales, decreasing market shares and significant price undercutting by foreign imports all show that injury is taking place. If these economic effects can be proven to have been caused by the dumped products, then this requirement is satisfied. Conversely, where an EU industry is highly profitable, efficient and has high market shares, it would be extremely difficult to show a sufficient degree of injury to satisfy this requirement. There are two standards of injury that are sufficient to support a complaint, namely actual injury or the threat of injury. In practice, the Commission tends to be rather sceptical of claims of the potential threat of injury and in most cases it is better to concentrate on showing actual injury. Few cases have been successful based on the threat of injury alone. Sources of evidence Injury information should cover the preceding 3-5 year period prior to the filing of the complaint. Evidence must be provide to indicate injury and showing deteriorating economic trends in the industry. Such trends are best displayed and highlighted in tables or charts. However, these diagrams must be capable of being substantiated with hard evidence. Obviously, to be convincing, this information should be presented in the way that best highlights the degree of injury being suffered by an EU industry. Objective and impartial statistical evidence must form the basis of the injury analysis. Internal company or industry sources of information devalue the strength of such information. The most reliable sources of information are the following: Eurostat, an EU organisation providing statistical information on a number of economic and commercial trends; The national statistical offices of the member States, for example the UK DTI; The Commission services, especially DG Trade; and Independent consultant reports which have been prepared for purposes other than the complaint. In all tables and charts, the source of the information should be clearly stated. Standard injury indicators Standard injury indicators are used to measure economic trends within the industry. These are summarised below. Standard injury economic indicator Trends in volumes of imports from the country of the exported products Trends in pricing for the products inside the EU market Production, capacity and utilisation of capacity inside the EU Prices and profitability Levels of employment in the sector Investment in the EU industry 15

19 The Commission tends to be sceptical of claims of threat of injury and it is better to concentrate on showing of actual injury. Increasing volumes of imports Significantly increasing volumes of imports demonstrate injury. These increases can be expressed in absolute terms or relative to EU production or consumption. Equally, these trends can be measured by reference to both volumes and prices. The different ways this information can be presented can be demonstrated as follows: Economic Information Import volumes (tonnes) 1,000 2,000 3,000 4,000 5,000 Annual increase n/a 100% 50% 33% 25% Scenario 1: absolute increases In this case, the volume of imports is increasing in absolute terms. The year-on-year increase is the most important indication of injury. This can be expressed in percentage terms in the form of annual increases. Where trends establish constant or continued increases each year, the absolute increase over the period is best used. Economic Information Import volumes (tonnes) 1,000 1,100 1,200 1,300 1,400 EU consumption (tonnes) 2,000 2,000 2,000 2,000 2,000 % to EU consumption 50% 55% 60% 65% 70% Scenario 2: increase relative to consumption Here, even though the annual absolute increase in volumes of imports is far less dramatic, when expressed relative to a stable EU consumption for the product, the increases appear considerably more acute. Economic Information Import volumes (tonnes) 1,000 1,100 1,200 1,300 1,400 EU output (tonnes) 3,000 3,000 3,000 3,000 3,000 % to EU output 33.3% 36.6% 40.0% 43.3% 46.6% Scenario 3: Increase relative to EU output If EU production is stable over the five-year period, even a slight annual increase in imports looks significant when measured relative to production. Furthermore, if both increases relative to EU consumption, and EU output, show significant increasing market shares for foreign producers, the injury analysis will be more convincing. 16

20 Trends in pricing Comparatively lower prices for foreign imports and, in particular, any significant price undercutting of EU prices, is evidence of injury. Where the prices of imported products have been continually decreasing over the relevant period, this is evidence of injury if these price decreases are constant and significant when measured on a year-on-year basis. A very important indication of injury is price undercutting. Price undercutting is established by comparing average prices for EU products with similar prices for competing imports. In making such comparisons, differences in the physical characteristics, quality and, where appropriate quantity, of the products must be taken into account. The calculation of price undercutting is shown in the table that follows: Model of price undercutting Company A B C D E EU industry price Foreign exporter prices Margin of undercutting 30% 25% 20% 15% 10% Evidence of price undercutting also includes cancelled orders, the prevention of price increases by EU producers and the presence of cheaper-priced foreign imports. Price undercutting is only a measurement of the level of injury being caused. It is not a means of establishing dumping. For dumping to occur the actual price that the manufacturer is charging for the product in its home market must be greater than the price it is charging for the same product in the EU. In the absence of dumping, the level of price undercutting is irrelevant. However, the EU applies a so-called lesser duty rule. Where the level of injury is below the levels of dumping found to exist, then anti-dumping duties are set according to the level of injury. The level of injury is determined by reference to the price undercutting found to exist. Company A is found to have a dumping margin of 45% and to have a priceundercutting margin of 60%. In this case, the anti-dumping duties will be established based on the dumping margin, i.e. 45%. Example: application of the lesser duty rule Company B has a dumping margin of 45% but a price-undercutting margin of 20%. In this case the anti-dumping duties will be set by reference to the price undercutting level, i.e. 20%. 17

21 Absolute decreases in production are a strong indication of injury. Production, capacity and utilisation of capacity in the EU These three factors are linked together and are intended to measure the health of the EU industry in relation to production capabilities. It should be remembered that the total production of the companies represented in the complaint must be at least 25% of the total actual production of all the producers inside the EU. If not, the complaint will be considered inadmissible by the Commission. Actual production should be expressed in the same units as for the information presented for import volumes, i.e. tonnes, m2, litres etc. Production can also be expressed in values. To show injury, production trends should be constantly declining over a significant period, usually 3-5 years. Absolute decreases in production are a strong indication of injury. Where production volumes are stable, declining market shares can be used where the volume of imports is increasing. Where part of production is captive production, this should be shown separately. Captive production is where certain amounts of production are not sold in the open market but are instead used by integrated producers as raw materials for downstream production. For example, in the EU textile industry, a portion of production of cloth is used by EU manufacturers to produce finished clothes. Since the cloth is not sold on the EU market but instead used by the manufacturers as raw materials for further stage production, it is considered as captive production. In the event of declining production, it is likely that capacity utilisation will be decreasing. Capacity utilisation is calculated as follows: Capacity utilisation calculation actual production/total capacity x 100% Low capacity utilisation itself is an indication of injury. Increasing capacity under-utilisation over a prolonged period is considered likewise. Where capacity is declining because of plant closures, this is a serious indication of injury because this represents a permanent loss of production capacity in the EU. This is, of course, unless plants have been closed to make way for more efficient or productive units in which case the need for such rationalisation should be properly explained. Profitability formulae Prices and profitability A trend towards low profitability is a strong indication of injury as are low profit margins. What will be considered a low profit margin depends to a large extent on the nature of the complaining industry. In certain high-technology industries, large profit margins of between 10-25% may be considered normal. In commodity-producing industries lower profit margins of between 5-10% may be considered more common. There are two ways of showing the average profitability of a complaining industry. Formula 1: profitability as a % of turnover (profit of sales of the relevant product/ total turnover) x 100% Formula 2: profit as a Mark-Up Per Unit ((mark-up per unit/average unit selling price) - unit costs of production) x 100% Declining profits indicate injury. Equally, a move towards losses is a strong indication of injury, particularly if the trend is constant. 18

22 Employment Loss of employment, particularly in sensitive regional areas of the EU often indicates injury. This is unquestionably a criterion that the Commission takes very seriously indeed in its injury analysis. Investment in the industry Low profitability is often linked with an inability to invest in the industry and together these constitute evidence of injury. In making this assessment, account is taken of the interests of industries using the dumped products in their production processes, as well as the interests of importers, retailers and consumers. In the Notice of Initiation the Commission invites all interested parties to make themselves known, present their views in writing and submit information that the parties wish to be taken into account during investigation. These submissions and requests for hearings must be made within deadlines determined in the Notice of Initiation. Loss of employment...is unquestionably a criterion that the Commisson takes very seriously indeed in its injury analysis. Has the dumping caused injury? Apart from presenting information and data indicating injury, it is also necessary to show that the injury has been caused by the dumped imports. This does not mean that the dumped imports are the only reason for the injury. They need merely be a significant contributing factor to the injury. Where there are other contributing factors, these should be mentioned in order to explain the situation to the Commission. One common way of showing a causal link is to prove the fact that the declining economic situation in the complaining EU industry coincided with the appearance of, or increases in, the volume of dumped imports. The element of community interest The Commission must have regard to the complaint on the one hand and other parties submissions on the other in considering whether imposing anti-dumping duties would cause a disproportionate amount of damage to other EU industries. The following groups of economic operators are often considered: EU industries affected by anti-dumping actions It is also clear that imposing antidumping duties will affect different market operators in different ways. For example, upstream suppliers will obtain a competitive advantage, EU traders and importers will see their profit fall, industrial users will suffer increased production costs and consumers will have to pay higher retail prices. In practice, if dumping and injury are found to exist, the EU institutions rarely block the adoption of measures on the grounds that the interests of other economic operators would be disproportionately damaged. The Commission often rejects other interested parties arguments by pointing out that: EU traders and importers upstream suppliers i) the imposition of anti-dumping measures will restore fair competition to the benefit of all market players, and ii) that even if it means less profit or higher production costs for some interested parties, this will only be due to the fact that those parties have previously benefited from artificially suppressed market conditions. Nevertheless, user groups and other adversely affected parties can also lobby representatives of the various European institutions and Member States to prevent the adoption of measures and indeed the effectiveness of such action should not be underestimated. If these requirements are established, the EU institutions must then determine whether or not imposing duties is in the overall interests of the EU. This is known as the Community interest test, and not the EU interest test, because technically the EU s Basic Anti-dumping Instrument is a creature of the European Community (EC) Treaty. Hence, the original terminology has been maintained. industrial users general consumers 19

23 Outline of an investigation Initial contact with the European Commission Complaints are lodged with the Commission s Anti-Dumping Unit in Brussels. While it is permissible to simply lodge the complaint, in practice it is more effective to organise a preinitiation meeting with the Commission s officials and provide them with a draft complaint. The Commission is generally willing to review draft complaints to make sure that it is properly documented and that the necessary proof of dumping, injury and causation is presented. Where the draft complaint is lacking in detail or supporting evidence, additional information and data can be added to make sure that the complaint is admissible. Proceeding in this way substantially reduces the possibility of the complaint being formally rejected as inadequate by the Commission s services. Consultations at this stage will also reveal the degree of support that the Commission feels for the complaint. Consultations at this stage will also reveal the degree of support that the Commission feels for the complaint. The Commission may even recommend changes to the complaint because of political reasons. For example, it may suggest that claims against some countries are dropped because of important diplomatic or political considerations. After consultations with the Commission services, the complaint can be formally submitted to the Anti- Dumping Unit. Normally, the complaint should be sent by registered mail or courier and a formal receipt should be obtained. Once the complaint is lodged, the Commission has 45 days to conduct its provisional investigation into whether the allegations contained in it warrant the opening of an official anti-dumping investigation. Within this period, the Commission must accept the complaint, and open an investigation, or reject the complaint. Publication of the notice of initiation The official anti-dumping investigation is started by the publication of a Notice of Initiation in the EU s Official Journal. This Notice summarises information relating to: Contents of a Notice of Initiation the identity of the complainants the product which will be subject to investigation the countries of origin for the allegedly dumped goods the main allegations concerning dumping and injury procedural issues such as sampling, the sending out of questionnaires to exporter and other interested parties, collection of information and the holding of hearings Most importantly, the Notice of Initiation sets the clock running. Exporters, importers and other interested parties have 15 days from the date of publication to inform the Commission of their interest in the case. Please note all time periods mentioned here refer to calendar days, not working days. This is particularly important for non- EU exporters who must also request a questionnaire from the Commission within this period. If they do not do so, they are excluded from participating in the investigation and will not be able to obtain an individual dumping margin. This will mean that, after the investigation is concluded, exports by non-co-operating exporters will be subject to the residual duty rates. Residual duty rates can be very high which can mean virtual exclusion from the EU market. 20

24 The decision to grant time extensions is wholly discretionary and will not be exercised unless justifiable and credible reasons are given for such a request. Initial time periods and deadlines The Notice of Initiation starts the clock running for the whole investigation which must normally be completed within one year, or exceptionally fifteen months, of the date of the Notice s publication. Because of the tight time limit for investigations being carried out, each stage in the investigation is also subject to strict deadlines. This is especially so at the opening of the investigation where most of the initial decisions on who will be allowed to participate, and the procedure to be followed, are taken. The following deadlines are applied at this stage: Exporting producers and other interested parties (i.e. importers, users, etc) intending to complete a questionnaire have 15 days to request a questionnaire from the Commission. Where sampling is being carried out requests to be included in the sample must be made immediately and certain basic economic information furnished within 15 days. Where a claim for Market Economy Treatment is being made by a Russian or Chinese exporter, a claim form must be requested immediately and also completed and lodged with the Commission within 21 days. All other interested parties (industrial consumers, importers, consumer organisations, etc.) must inform the Commission of their views and submit appropriate information within 40 days. Exporting producers must complete and file their questionnaires with the Commission within 40 days, i.e. within 25 days of the last day for requesting a questionnaire. These deadlines are rigorously enforced, especially the time periods given to exporting producers for requesting and completing questionnaires. The Commission has, however, shown some flexibility in granting extensions of time to allow questionnaires to be completed and filed. This is particularly so when the information that has to be gathered is complex or excessively voluminous, or if the exporting producer is a small company without the IT resources to quickly collate this information. The decision to grant time extensions is wholly discretionary and will not be exercised unless justifiable and credible reasons are given for such a request. A request for a time extension should be made to the casehandler in charge of the investigation and normally a decision on this issue is made shortly after the request has been made. Taking the decision to co-operate or not in the investigation Producers in the EU If an EU producer is represented or identified in the complaint, the Commission will automatically send it a questionnaire (known as an EU Producer Questionnaire) without a specific request having to be made. EU producers not represented or identified in the complaint must expressly request such a questionnaire. It is not always the case that individual EU producers will agree that an antidumping investigation should be started. This can be for one of the following reasons: The commercial structure of the company is such that imposing duties will adversely affect another aspect of its activities inside the EU. For example, the company making finished products may not agree that input products sourced from other countries should be subject to anti-dumping duties even if it makes the inputs itself in Europe; The company is also an importer of the product from the country which is subject to investigation and these imports represent a significant proportion of its own turnover; or Direct foreign investment may have been made by the EU company in manufacturing facilities located inside the country targeted for investigation. The benefits of protecting production in the EU may be offset by the additional costs of paying duties when importing foreign production from these facilities. In each of these cases, the company will have to weigh up the pros and cons of participating in the investigation. The benefits of doing so are that the company s representations should be taken into account by the Commission during the investigation. 21

25 EU importers, industrial consumers and distributors/retailers All three of these groups can make representations to the Commission and normally the Commission will also ask them to complete a special questionnaire (known as an EU Interest Questionnaire). Unless they are willing to do so, their representations will not be taken into account by the Commission. For industrial users in particular, it is important to make their views known to the Commission otherwise they will find themselves facing the additional costs of paying anti-dumping duties. This can lead to significant increases in costs of production. If an exporting producer decides not to co-operate, its future exports will be subject to the residual duty rates that are based on the highest dumping margins found to exist. It will therefore normally be in the worst off group. Sampling Sampling can be used by the Commission where there is a large number of parties involved or product types. Because an investigation is carried out according to strict time limits, it simply might not be feasible for the Commission to accept and investigate all the companies wishing to participate. To solve this problem, the Commission is authorised to resort to sampling in order to obtain For industrial users in particular, it is important to make their views known to the Commission otherwise they will find themselves facing the additional costs of paying anti-dumping duties. Importers should also consider making representations to protect their commercial interests. This is especially so where the imports being investigated are the principal source of business. Exporting producers The position of exporting producers from the country under investigation is perhaps the most difficult. These producers must also balance the advantages and disadvantages of participating in the proceedings. The main advantage is that, if an exporting producer participates, unless sampling is applied, it is entitled to a specific dumping margin finding. In other words, the margin of dumping which will be attributable to its future exports is a matter that it can itself, to a certain extent, control. If it participates in the investigation, the findings will be based on its own commercial strategies for export. the necessary information for pursuing an investigation. For EU producers, this is not so important. Inclusion or exclusion from the sample will not really prejudice their commercial interests. On the other hand, for exporting producers, the issue can be critical because exclusion from the sample means that an individual dumping margin, based on its own commercial activities, cannot be granted. For exporters requesting inclusion in the sample whose applications are accepted, individual dumping margins are granted to them. Exporters not included in the sample, but who made a request to be included and co-operated by providing relevant information, are given an anti-dumping duty rate based on the weighted average dumping margin for all the exporters actually included in the sample. This penalises those exporting producers who would have a lower individual anti-dumping duty rate had they been allowed to participate in the sample. 22

26 Non-co-operating exporting producers, on the other hand, are not entitled to the average dumping margin of the sample. Instead, they are given the residual rates which are the highest rates found in the course of the investigation. Interested parties rights During the anti-dumping proceedings any interested parties, i.e. complainants, exporters, importers, their associations, industrial users and consumer organisations, have the right to make formal submissions in which they make their views known to the Commission. They also have procedural rights such as: (i) the right to have access to nonconfidential files; (ii) the right to be heard by the Commission at a formal hearing; and (iii) the right to have all facts and considerations on the basis of which decisions are taken disclosed to them in advance of the final decision. Access to non-confidential files All interested parties that made themselves known to the Commission may, upon written request, inspect all information made available to any party to an investigation, except confidential information and internal documents prepared by the authorities of the Commission or the Member States. All interested parties who provide confidential information to the Commission are requested to submit a non-confidential version of their submissions, which should be detailed enough to enable a reasonable understanding of the substance of information provided in confidence. Any piece of information can be treated by the Commission as confidential if its disclosure could adversely affect a person supplying it, or because it was provided on a confidential basis. The parties must always justify their request to treat information as confidential. The Commission may disregard a particular Interested parties have a right to make their views known to the Commission as part of the regulatory process. piece of information if its provider is unwilling either to make it available to the others or to authorise its disclosure in a summary form. Hearings Interested parties may request to be heard by the Commission provided that their requests are well grounded and have been made within the time limit prescribed by the Commission in the Notice of Initiation. In theory, there are two types of hearings: oral hearings and confrontational hearings. Oral hearings are attended by an interested party who presents its views to the Commission s staff. Confrontational hearings are attended by the parties presenting opposing views and presided over by the Commission officials but, in reality, rarely happen. Disclosure of material facts and findings This right guarantees that all material facts and findings on the basis of which provisional or definitive anti-dumping measures have been adopted will be disclosed to a qualifying interested parties on request. Rights to disclosure of findings Requests for disclosure can be made to the Commission: a f t e r t he C o m m i s s io n h a s adopted provisional anti-dumping measures; before the introduction of definitive anti-dumping measures; and if the Commission intends to terminate an investigation without measures Where provisional measures have been applied, the request for final disclosure should be made no later than one month after the imposition of those measures. Unless indicated otherwise by the Commission, requests for final disclosure must be made in writing not later than one month prior to a definitive decision. The parties may make comments on disclosure documents. In theory, these comments will be taken into account provided they were received by the Commission within a specified period, normally not less than 10 days. Procedural time frame Once initiated, the anti-dumping investigation itself proceeds along the timeframe set out in the table on the following page. 23

27 Anti-dumping investigation proceedural timeframe Complaint by the EU industry submitted 45 days Publication of notice in official journal Day 1 Exporters questionaire Community industry/user group Analysis of responses Verification abroad Verification Europe Provisional findings = provisional duties Additional analysis of dumping injury and community interest Final conclusions and preparation of proposal for action No action, end of investigation Action, proposal for a/d duties Adoption of a/d duties, Council of Ministers 12/15 months 24

28 On-the-spot verification In practice, the Commission will carry out on-the-spot verification visits of all participating exporters. The Commission s teams Once the Commission has received the questionnaires from all the parties eligible to lodge them, the Commission analyses the information and data provided to ascertain whether dumping and injury are present and to decide the issue of EU interest. This is done by a special unit of the Commission s Directorate-General for Trade. The normal procedure is for a number of officials to be allocated as case-handlers for the investigation, supervised by a senior official (either Deputy Head of Unit or one of the Head of Sectors). One part of the team investigates the dumping aspects and the other carries out the evaluation of material injury, causation and EU interest. In addition, other Directorates may be asked for opinions and views in the course of the investigation. This is particularly true in the case of DG Enterprise and DG Competition. The importance of co-operation The Commission has no legal powers to compel interested parties to disclose certain information. However, in the absence of co-operation from the interested parties, the Commission may make its provisional or final findings on the basis of the facts available to it. In practice, available facts mean reliance on allegations raised in a complaint, or data found in customs returns or official imports statistics. Since these sources are general, and often not sufficiently objective, this practice tends to result in findings which are largely adverse to foreign exporters. Interested parties are deemed not to have co-operated when they provide false or misleading information, as well as when they refuse access to necessary information within specified time limits. Lack of cooperation may have serious consequences not only for exporting producers but also for EU producers. The former will face the imposition of residual duty rates, whilst the latter may see the Commission repealing duties previously imposed or terminating proceedings without applying any antidumping measures. On-the-spot verification investigations Where the Commission finds it appropriate, it may carry out verification visits at the premises of the complainants, exporters, traders or importers. In practice, the Commission will certainly carry out on-the-spot verification visits to the premises of all participating exporters as well as a majority of EU enterprises supporting the complaint. This is because the information provided by these entities lies at the heart of any antidumping investigation. The interests of the other parties are considered more marginal. The exclusive purpose of such visits is to examine the records of the parties concerned and to check whether these statements are true. This is, of course, reasonable in order to verify that the information provided in the questionnaire responses is correct and accurate since the imposition of anti-dumping duties is not something that should be taken lightly. 25

29 Preparing for the visit Verification visits are very important for the final outcome of the anti-dumping proceedings. Therefore, for the host of such a meeting it is extremely important to make all necessary preparations in advance. The Commission usually notifies interested parties in advance of: (a) the date of its visit; and (b) the type of information that it intends to verify. The companies concerned should prepare all required documents and ensure that selected members of their staff are available to explain them. This is particularly important where discrepancies arise between data provided in the questionnaires and that contained in the source materials. It is a sensible precaution for companies to secure the assistance of an experienced legal counsel during the investigation. The parties should do their best to provide all the information and documents required as the Commission tends to disregard all data that it was unable to verify during the verification visit. It should also be kept in mind that the Commission is unwilling to carry out on-the-spot verification at a party s premises for a second time for the same purpose. customers and suppliers. Steps to make these records available should be taken in advance because the verification visit takes place within a very short time frame (normally one or, at most, two days). This time should therefore be used as efficiently as possible. Where requested documents cannot be produced or are unavailable, the Commission is entitled to disregard the information submitted in the absence of essential supporting documents. In such circumstances, by default, the Commission will rely on the best information available rule or, alternatively, reject any application where the missing supporting documentation is critical to the interested party s case. Limits of the investigation As mentioned above, the Commission requests access to specified documents and data before a verification visit. In practice, however, the Commission investigators are not precluded from making further requests for related documents during the visit itself. There appears to be no legal grounds for denying such requests on the basis that they were not raised sufficiently in advance. Again, full co-operation with the Commission s officials, within reasonable limits, seems to be a better strategy to adopt. of not less than six months immediately prior to the initiation of the proceedings. In reality, usually, this is at least a one year period. The Commission s officials are not entitled to gain access to legally privileged documents. These should be kept in separate, clearly marked files away from the documents to be inspected. Translation of documents The working language of the Commission s Anti-Dumping Unit is mainly English. Consequently, especially in the case of verification visits carried on outside the EU, any important documents have to be translated from their original language into English. For certain key documents, certified English translations must be provided. This is obviously an expensive undertaking. In the course of the one-the-spot investigation, the Commission can request to see the originals of the documents that have been furnished. It is not uncommon for English translations to be double-checked for accuracy during such visits. For this purpose, the Commission s team may include a qualified translator to facilitate such inspections. It is a sensible precaution for companies to secure the assistance of an experienced legal counsel during the investigation.. Documents required During verification visits, the Commission s investigators will request the documents relating to sales and production costs such as invoices, contract sheets, internal accounting ledgers, company books and any correspondence with However the investigation powers of the Commission are not unlimited. The Commission s investigators must not ask for documents or information relating to periods other than the investigation period. The investigation period, which is specified at the start of the antidumping proceedings, covers a period 26

30 How exporters defend their interests Special problems for exporters Foreign exporting producers are at a disadvantage from the very outset of the opening of an anti-dumping investigation for three reasons: Notices of Initiation are published in the EU s Official Journal which has a very limited circulation. Unless the exporting producers are expressly identified in the complaint, they will, generally speaking, be unaware that the investigation has been opened and no questionnaire is automatically sent to them; Only the most sophisticated commercial operators are aware of the effect antidumping duties will have on their export activities. Small and medium sized companies often have little knowledge or experience of this type of investigation. They may even not take the investigation seriously and end up being subject to the large anti-dumping duty rates set for non-co-operating companies; and Especially in view of the distances involved, it is frequently difficult for exporting producers to respond within the tight deadlines that apply in these investigations. Completing exhaustive questionnaires within 40 days, and having these delivered to the Commission s offices in Brussels, is often too much for these companies to handle. Despite these difficulties, it must be made absolutely clear that failing to participate in the investigation will have severe consequences for future exporting prospects. The following are the most obvious disadvantages: Future exports by non-co-operating exporters will be subject to the maximum anti-duty rates applied after the investigation is concluded. In recent years, these duty rates have been as high as 30-40%. Relatively speaking, non- cooperating producers will be at a competitive disadvantage compared to co-operating exporters who are granted individual treatment and lower individual dumping margins. European customers will prefer to do business with companies with the lowest duty rates. Anti-dumping duties are normally applied for a minimum period of 5 years. Even after five years, it is not unusual for these measures to be extended for additional periods. While reviews can be requested after one year, these reviews can themselves take an additional year to complete. Moreover the procedure for requesting and completing a review is much the same as that involved in participating in the initial investigation. It is therefore almost invariably the case that exporting producers should participate to the fullest extent possible in the investigation in order to protect their commercial interests. Basic elements of co-operation Completing the Questionnaire This is normally the most time-consuming aspect for co-operating exporting producers simply because of the amount of detailed information normally required and the need for this information to be completely accurate. Failing to participate in the investigation will have severe consequences for future export prospects. 27

31 General information requirements In this section, an exporting producer must provide detailed information on the following points: its corporate structure (i.e. legal form, list of shareholders); its internal organisation; any financial or contractual links and joint ventures with other companies relating to production, sales, licensing and technical and patent agreements for the product in question; a list of all products manufactured; a description of the characteristics of the product in question. Economic information This information allows the Commission to ascertain the internal financial structure of the company being investigated. This information should be tied to the company s audited annual accounts to ensure that all economic activity has been captured and reported in the The general rule is that the actual export price is the price of the product concerned when sold from the exporting country to the EU. completed questionnaire. Hence, the questionnaire response must report the total company turnover for all products and then break this down into sales on the domestic market, to EU customers and all other non-eu customers. The same process is then carried out for the sales of the product under investigation. Normally, this data is required for the year preceding the investigation period as well as the investigation period itself. Normal value price information After deriving figures for total domestic sales in the investigation period, the Questionnaire then requires that information is provided for: Total invoice sales on the domestic market in value and volume Sales information (e.g. payment terms, transport costs, rebates, discounts, etc) General costs of production and other expenses. In fact, the information requirements are very detailed indeed and are designed to allow the Commission to calculate an adjusted normal value, normally at ex factory or ex work level. EU export price information A co-operating exporting producer is asked to report export prices for the product in question to its EU customers. The general rule is that the actual export price is the price of the product concerned when sold from the exporting country to the EU. Again detailed information is also required relating to the costs involved in exporting the products to the EU. This information is used to adjust the CIF or FOB export price to the ex factory or ex works level, depending on the level applied in the case of the normal value determination. Related company pricing In some instances, however, it is not possible to determine the actual export price or the export price is unreliable. This is frequently the case where the foreign exporter has a related company inside the EU which it sells its products to prior to the products themselves being resold to independent customers. In such instances a so-called constructed export price will have to be determined, which is normally on the basis of the price at which the imported products are first sold on to an independent purchaser. To arrive at this determination, the 28

32 related EU company must complete its own questionnaire. Again, various adjustments are made to the final independent resale price to arrive at a value at the ex factory or ex works level of trade. Supporting documentation An exporting producer is also asked to attach to the questionnaire the following documents: Supporting documentation Constitutional Documents, such as a Company Statute, Memorandum or Articles of Association Financial Statements with the Auditor s Opinions covering the Investigation Period Business Licences and Permits for carrying on Business Activities Transaction-by-Transaction Listings of Domestic and Export Sales Computer Format Lists of Domestic and Export Sales Response to deficiency requests It is not unusual for Questionnaire Responses to be incomplete or unclear in some way or another. In such circumstances, the Commission will issue a deficiency letter requesting additional information, documentation or clarifications. Again a deadline is specified for submitting the response. Upon receipt of a deficiency letter, it is extremely important to respond in full to the Commission s request for additional information. Failure to submit a complete and accurate response can lead to rejection of the application as a whole and for the Commission to deem the exporter in question to be non-cooperating. Co-operation in on-the-spot verification It is absolutely crucial that foreign exporting producers co-operate with the Commission and facilitate on-the-spot verification of the information provided in the Questionnaire Response. Failure to do so will result in the application being rejected. On-the-spot verification takes place in the home country of the exporting producer in question. Commission officials travel to these countries expressly for this purpose. Normally, they work in teams of two, or at most three, investigators. The object of this exercise is to confirm On-the-spot verification takes place in the home country of the exporting producer in question. the validity of the information, data and statements made in the Questionnaire Responses. To this end, they will normally wish to examine sales records, specific invoices, customer lists, freight and transport documentations, ledgers and other accounting records, banks statements, etc. Ultimately, the documents produced in the course of the on-the-spot verification investigation should correspond, and corroborate, the statements and claims that have been made. When possible, they will also cross check business records to confirm that sales have actually been made at the prices claimed and payment has been received. In the case of exporters from Russia and China, they will also examine relevant documents to verify that claims for individual or market economy treatment can be granted. * The EU granted Russia full market economy status in late

33 Special rules for Chinese exporters* The general rule Unless a special claim is made for individual treatment, on the one hand, or market economy treatment on the other, Chinese exporters are treated by the Commission as not having sufficient independence from the state authorities to warrant an individual dumping duty rate. The rationale for this approach is simply that, if nonindependent exporters were awarded reduced dumping duty rates, the central government authorities could switch production or sales to the enterprises that have the lowest duty rate. Inevitably exporting producers that are not able to secure individual or market economy treatment are subject to the highest anti-dumping duty rates. The situation is made worse by the application of the analogue country rule which means that domestic prices in China are disregarded for the purposes of the dumping margin calculation. Individual treatment Chinese exporters may qualify for individual treatment if they fulfil certain requirements. Eligible producers must show that the elements listed overleaf apply to their circumstances during the investigation period. Criteria for individual treatment for Chinese manufacturers Export prices, quantities and terms and conditions of sale, are freely determined without interference from the Chinese government and its agencies; Exchange rate conversions must be carried out at market rates; Any government interference must not permit the possibility of the circumvention of anti-dumping duties if exporters are given different rates; In the case of foreign wholly-owned companies and joint ventures, exporters must be free to repatriate capital and profits. All these conditions must be met before an award of individual treatment can be made to a Chinese exporter. Ultimately, these requirements are designed to identify the degree of control, if any, exercised by government bodies and agencies in the commercial operations of a manufacturer or exporter. State officials appearing on the board or in key management positions must be in a clear minority and outside the scope of the day-to-day commercial decisionmaking processes. In the case of a state-owned company, the presumption is that its independence from state interference cannot be guaranteed and the burden rests with the company to prove otherwise. Where these conditions are met, the actual export prices of these companies can be used for the dumping calculation. However, the domestic prices are still taken from the analogue country. Since export prices will vary among different enterprises, dumping margins for each exporter will be different. Nevertheless, the fact that analogue country prices are substituted for Chinese normal value prices still means that dumping margins for exporting producers qualifying under this rule remain relatively high. Market economy treatment Additional special rules have applied to producers in China since 1 July, 1998, to allow manufacturers and exporters in these countries who truly operate under market economy conditions to obtain Market Economy Treatment (MET). This status is different from that of individual treatment because actual domestic prices in China are used as the normal values. Since actual export prices are also used, dumping margins in these circumstances are effectively determined in accordance with the normal EU anti-dumping rules applied to market economy countries. 30

34 The criteria for obtaining market economy treatment are rigorous which explains why so few manufacturers and exporters from China have been successful in achieving such status in EU anti-dumping cases. Eligibility is determined by reference to five principal criteria: Criteria for market economy treatment Decisions concerning prices, costs and inputs (including raw materials, cost of technology and labour), output, sales and investment are all made in response to market factors of supply and demand and without significant state interference Companies have one clear set of basic accounting records that are properly audited in line with international accounting standards The production costs and financial situation of such companies are not significantly distorted by the former non-market economy system particularly as regards depreciation of assets, write-offs and barter trade The companies in question are subject to bankruptcy and property laws that guarantee legal certainty and stability Exchange rate conversions are carried out at market rates Naturally, there is a degree of overlap between the criteria for individual treatment and those for MET. This is understandable since both tests are underpinned by the principle of establishing the independence of a manufacturer or exporter s operations from the influence of the government. MET is, however, the more difficult standard to meet because of the more detailed nature of the scrutiny undertaken and the requirements imposed. If these five factors can be shown to exist, both actual local prices and export prices are used to determine margins of dumping. Analogue country domestic sales prices are no longer substituted for Chinese domestic prices. The result is a more favourable methodology for determining dumping margins for individual Chinese exporters. In the event that a Chinese exporter is unable to satisfy the requirements for achieving MET treatment, it still has the option of requesting individual treatment. If, however, the request for individual treatment is also refused by the Commission, dumping margins are determined by reference to the original rules. An illustration of the application of these rules The following example is designed to illustrate the methodology used by the Commission when applying the three separate regimes to Chinese exporting producers, namely the old NME rules, the concept of individual treatment and the new market economy treatment Example: zinc oxides from China An anti-dumping investigation was initiated by the Commission into exports of certain kinds of zinc oxides from China. 5 Chinese companies requested market economy treatment. Of these companies, 3 qualified for Market Economy Treatment (MET) and 2 were rejected. Both of the companies rejected for MET also requested individual treatment and this was granted to one of them. The remaining company was therefore subject to the original non-market economy country rules. For the three companies granted MET, the individual dumping margins were as follows: Company A: 6.9% Company B: 11.0% Company C: 19.3% For the company granted individual treatment, the following individual dumping margin was determined: Company D: 26.3% In the case of the company not qualifying for MET or individual treatment, its dumping margin was determined to be: Company E: 64.5%* The residual duty rate was determined by reference to the analogue country producers prices and the weighted average price of the most dumped products of Company E. Since only 65% of the Chinese zinc oxide industry co-operated in the investigation, the remaining 35% of Chinese exporters were found to have the following dumping margin. Residual duty rate: 69.8%* approach. * The final dumping duties applied were reduced by virtue of the lesser duty rule. 31

35 The imposition of anti-dumping duties If the findings made during the course of investigation confirm the allegations made in the complaint with respect to dumping and consequential injury for the EU industry, anti-dumping duties will be imposed on products originating from the exporting country in question. Definitive anti-dumping measures will be imposed when all information obtained has been established and verified. Before this happens, the Commission may decide to apply provisional duties. Provisional anti-dumping duties The Commission may impose provisional anti-dumping duties on products that enter free circulation into the EU, provided that: Basic requirements for imposing provisional anti-dumping duties the anti-dumping proceedings have been formally initiated (through a publication of the Notice of Initiation); the interested parties have been given the opportunity to make their submissions and comments; the occurrence of dumping and consequent injury to the EU industry have been provisionally ascertained; and the EU interest calls for intervention to prevent injury during the proceedings. Provisional duties may not be imposed within 60 days of the initiation of proceedings nor later than 9 months after that date. They are usually imposed for 6 months although an extension for a further 3 months is also possible provided that exporters representing a significant percentage of trade involved so request or do not object to it. The Commission regulation imposing provisional duties is published in the Official Journal of the European Communities and contains, inter alia, the names of exporters, a description of the product in question and the summary of material facts and findings with respect to dumping and injury. The provisional duties will not exceed the dumping margins found to exist after the preliminary investigation. If, however, a lower duty would be sufficient to remove the injury to the EU industry, duties will be imposed on the basis of the price undercutting margins used in the injury calculations. A product on which the provisional antidumping duty has been imposed may be released into free circulation in the EU as long as the exporter can provide a guarantee (i.e. a bank guarantee). Definitive anti-dumping duties If dumping is established during the investigation period, which caused injury to the EU industry then, provided it is in the interest of the EU, the Council, on the Commission s advice, can impose a definitive anti-dumping duty on the products in question. If provisional duties have been imposed, the Commission is obliged to submit its proposal with respect to imposing definitive duties no 32

36 The Commission can conclude its investigation without imposing any duties if it receives satisfactory price undertakings from exporters to revise their future prices. later than one month before the expiry of the provisional duties. The Council regulation imposing definitive duties is published in the Official Journal of the European Communities and contains the same elements as the Commission regulation imposing provisional duties. As with provisional duties, definitive duties will be at the rate of the dumping margin unless the lower duty is sufficient to remove the injury. The regulation imposing definitive anti-dumping duties will specify the duty for each exporter and will set the residual duty rate applicable to non-cooperating exporters. The definitive duties are imposed for a five-year period and will automatically expire if no interested party requests an expiry review. Provisional or definitive anti-dumping duties are collected by Member States, independently of other charges imposed on imports (i.e. customs duties, taxes etc.). When definitive anti-dumping duties are being imposed, the Council will decide what proportion of provisional duties is to be collected. If the definitive duty is higher than the provisional duty, the difference will not be collected. If it is the other way round, the duty will be recalculated. Price undertakings The Commission has power to terminate its investigation without imposing any duties if it receives satisfactory minimum price undertakings from the exporters concerned to revise their prices or to cease exports at the dumped price. Exporters are not obliged to offer any undertakings to the Commission. Neither is the Commission obliged to accept them. For example, the Commission is unlikely to accept undertakings where it would be impractical (i.e. the number of potential and actual exporters is too large). However if the Commission accepts an exporter s undertaking, the investigation will be terminated without any duties being imposed. The exporter whose undertaking has been accepted will periodically be obliged to provide the Commission with proof that the undertaking is being adhered to. In the case of the withdrawal or breach of an undertaking, the final anti-dumping duty will be imposed on the basis of the original findings. For an exporter the main advantage of an undertaking is that, if market conditions change, the undertaking could be terminated relatively quickly, whereas duties remain in force for at least five years. Also, instead of anti-dumping duties being paid into the European Union, price undertakings allow the exporter to retain the benefits resulting from the increased prices themselves. However, the key question is whether or not importers will still continue to purchase products at the higher prices. Other cases of termination without measures Withdrawal of the Complaint If the complainants decide to withdraw their complaint, the proceedings will be terminated unless this would not be in the EU interest. Normally, the Commission respects the wishes of the complainant in such cases and in fact orders the termination after the withdrawal of the complaint. De minimis dumping levels Anti-dumping proceedings will also be terminated without any measures when the Commission finds no dumping or establishes that the injury or dumping margin is negligible. The injury is regarded as negligible where the imports concerned represent less than 1% of the market share. The dumping margin is negligible when it is less than 2%, expressed as a percentage of the export price. Suspension All anti-dumping measures may be suspended by the Commission for nine months if market conditions have changed to the extent that the injury is unlikely to continue. Measures may, at any time, be reinstated. Suspension does not affect the expiry date of any duty. Anti-circumvention measures Anti-dumping duties may be extended to imports of the product in question from third countries in the event of circumvention of the measures. Examples of circumvention of antidumping measures include: instead of shipping a finished product directly to the EU, an exporting producer sends it to a third country for onward consignment to the customers the finished product is broken down into parts which are shipped individually to the EU imported parts are assembled inside the EU When suspicion of circumvention arises, a special investigation may be opened. The Commission, while opening the investigation, will instruct customs authorities to register imports of the product in question or to request guarantees from exporters. Such an investigation must be terminated within nine months. 33

37 Revision of anti-dumping measures The anti-dumping measures definitively imposed may need to be extended, amended, or repealed in special review proceedings due to changed circumstances. Interim reviews An interim review aims to verify the need for the continued imposition of antidumping measures. It may be started by the Commission, or at the request of a Member State. Exporters, importers or EU producers may also file a request for an interim review provided that a reasonable time has elapsed (at least one year) since the imposition of the anti-dumping measures. A request for an interim review must be substantiated with sufficient evidence that anti-dumping duties are no longer necessary to offset dumping and that injury is unlikely to recur. An interim review will be closed within 12 months of its initiation. It may result in maintaining, repealing or amending of measures. Newcomer reviews If an exporter wishes to start to export the product on which anti-dumping duties have been imposed, then it can request a new exporter review. The exporter is required to show that it is not related or linked to any exporters or producers in the exporting country against whom anti-dumping duties have been imposed and that its exports started after the end of the original investigation period. Alternatively, an exporter may claim that it has entered into an irrevocable contractual obligation to export a significant quantity to EU customers after the introduction of the measures. A new exporter review should be carried out within 12 months of its initiation. If the new exporter is successful, it will be given an individual dumping margin by way of an amendment to the original regulation imposing definitive duties. Expiry reviews A definitive anti-dumping duty will expire five years from its imposition. If there is a justified suspicion (substantiated by evidence) that the expiry of the duty would lead to a recurrence of dumping and injury, then either the Commission can initiate its own expiry review or the EU industry can request that one is started. In such an event the antidumping measure will continue to apply until the end of this review investigation The request for an expiry review must be filed no later than three months before the end of the five-year period. Upon opening an investigation all interested parties may present their views and comments with respect to whether dumping and injury would be likely to recur if anti-dumping measures expired. An expiry review should normally be closed within 12 months of its initiation. It may result in either maintaining the measures or repealing them but the applicable measures may not be otherwise changed. Anti-absorption review An EU industry may request an antidumping investigation to be reopened if it submits sufficient information to show that anti-dumping duties previously imposed have not led to any significant changes in resale prices or subsequent selling prices in the EU. If, after a reinvestigation, this is found to be correct, export prices will be reassessed and the dumping margin will be recalculated on the basis of the reassessed export prices. Refunds If duties imposed turn out to be excessive because the dumping margin has been reduced, or even eliminated, an importer may request a refund of duties that have been collected. This is done through an application submitted to the Commission via the Member State on the territory of which the product in question was first released into free circulation. A request for a refund has to be made within 6 months of either: the date on which the amount of definitive duties was determined or the date a decision was made to collect the amounts secured by way of provisional duties. A request for a refund has to be substantiated with sufficient evidence of normal values and export prices of the product concerned. The request should be accompanied by relevant customs documentation. 34

38 As a general rule, complaints, exporters and importers may institute court proceedings against any decision that is of direct and individual concern to them. Sometimes it is difficult for an importer applying for a refund to receive all the necessary information and documents from an exporter. In such an event the evidence may be sent by an exporter directly to the Commission. If, however, the Commission does not receive this evidence within reasonable time, a refund application will be rejected. Refunds of duties should take place within 12 months, but in no event within more than 18 months of the date on which a refund application, substantiated by evidence, was made. The Commission s decision is addressed to the Member State concerned which should make the payment of refunds within 90 days of this decision. Judicial review All decisions of the Commission and the Council are subject to judicial control. Generally, the Court has jurisdiction over actions brought before it directly as well as over actions brought in a national court from which a reference for a preliminary ruling has been made to the Court. Direct actions All direct actions in anti-dumping cases may be brought before the Court of First Instance (CFI). This concerns actions for annulment, actions for failure to act and actions for damages. As a general rule, complainants, exporters and importers may institute court proceedings against any decision that is of direct and individual concern to them. There is well-developed case law indicating which parties have sufficient standing to bring a direct action before the CFI. Typical grounds for direct action are: Lack of competence; Infringement of procedural requirements; and Misuse of power. In practice, it is extremely difficult to challenge an EU anti-dumping regulation and obtain its annulment. Only a handful of such actions have been successful. This is because the European Court grant the Commission considerable latitude as to how it evaluates the complex economic determinations involved in anti-dumping investigations. This wide margin of discretion effectively means that the Courts will not interfere with the Commission s evaluations except in exceptional circumstances. Time limits for filing the appeal with CFI vary depending on the type of action concerned. An action for annulment must be lodged within two months of the publication of the measure, or of its notification to the plaintiff. In the absence of notification or publication, the action must be lodged within two months of the day on which it came to the knowledge of the plaintiff. An action for damages must be filed within five years from the occurrence of events justifying such action. Decisions of the CFI may be appealed against to the European Court of Justice ( the ECJ ) on point of law only. Preliminary rulings The ECJ has exclusive competence to interpret EU law and annul EU regulations imposing anti-dumping duties. Whenever a national court considers that a decision on a question of EU law is necessary for it to render a judgment, it may request a preliminary ruling from the ECJ. A national court from which there is no appeal must make such a request. The request for a preliminary ruling causes the proceedings before a national court to be suspended until the ECJ gives judgment. Once the preliminary ruling has been delivered, the case is sent back to the national court that applies the ruling to the facts of the case and subsequently gives its judgment on the case. Interim measures An applicant, who filed his appeal with the Court of First Instance may request that a contested measure be suspended or that other interim measures should be implemented. In practice, however, it is very difficult for applicants to persuade the Court that interim measures should be ordered. 35

39 Other variations of EU trade protection laws The Commission s ability to respond to unfair trade practices is not restricted to the imposition of anti-dumping measures. Below is a brief overview of other EC trade protection laws. All these instruments are modelled on measures covered by the WTO Agreement. Anti-subsidy investigations Certain types of subsidies are not subject to measures, such as aid for either research activities or underdeveloped regions. EU countries and whose import into the EU causes or threatens injury to EC producers of the goods in question. In order for these duties to be imposed, three conditions must be met: the subsidy must be specific (i.e. limited to a company, an industry, or their groups); the import sales must have caused injury to a substantial part of the EU industry; and the cost of adopting anti-subsidy measures must be proportionate to the benefits. Typical forms of subsidies that can be counteracted include tax concessions, loans below market value and redemption The EC regulation on protection against subsidised imports provides for the possibility of imposing countervailing duties on goods which have been subsidised by the governments of nonof debts or social security obligations. All these subsidies must constitute a financial contribution by the government of an exporting country. Certain types of subsidies are not subject to measures, such as aid for either research activities or underdeveloped regions. The complaint and investigation procedures are similar to those in antidumping proceedings. Provisional and definitive duties may also be applied to remedy the situation. Counterfeit and pirated goods investigations Counterfeit goods breach the rights of the holder of the EU or national trademark because they bear, without authorisation, a mark that is identical to or indistinguishable from a validly registered trademark for the same type of goods (including trade symbols and packaging materials). Pirated goods are unauthorised copies infringing copyright, neighbouring right or design right under EU or national law. What makes this trade protection instrument different from other measures is that: (i) all investigation is conducted by the competent authorities at the national level, rather than by the Commission; and (ii) there is no injury test. What has to be proved is the authorship or trademark registration. Counteracting measures may be applied to both imports and exports. An applicant should lodge an application with the customs authorities of a Member State, requesting a detention or 36

40 Trade Barrier Regulation (TBR) enables EU companies and industries to counter trade barriers affecting their access to third country markets or the EC market. suspension of the release of counterfeit or pirated goods entered for clearance in that State. When the goods in question have been detained, or suspended, by the customs authorities, a competent national authority must make a decision as to whether the goods concerned are counterfeit or pirated. After the referral for the decision has been made, an importer or consignee may have the goods released provided it grants sufficient security to protect the interest of the holder of the rights. Goods found to be counterfeit or pirated will be disposed of and destroyed. Trade barrier regulation investigations Trade Barrier Regulation (TBR) enables EU companies and industries to counter trade barriers affecting their access to third country markets or the EC market. They may request the Commission to investigate their complaints and to seek redress. Trade Barrier Regulation covers a wide range of trade barriers or obstacles to trade including, but not limited to, practices forbidden under the WTO Agreement (e.g. restrictions on exports of raw materials, import restrictions). If such obstacles or barriers affect a company s trading activity in a third country, or if there is a threat of future damage, the company may submit a formal complaint to the Commission for investigation. A market access complaint may also be submitted by a group of firms or a Member State. In order to justify the Commission s action, a complainant has to provide evidence that the alleged trade barriers adversely affect not only the complainant, but also the economy of the EU, its region or an industry sector. The occurrence of injury or a threat thereof also has to be proved. If allegations raised in the complaint have been confirmed in the course of investigation, the Commission will start talks with the government concerned. Depending on the outcome of such negotiations, the Commission may adopt the following measures to cure the situation: suspend the procedure in case of unilateral removal of trade obstacles by the government in question; negotiate a bilateral agreement to be concluded between the EU and the third country concerned; bring an action under the WTO dispute settlement procedure; or adopt retaliation measures (e.g. withdrawal of trade concessions, increasing customs duties for imports, imposing imports or exports quota). The TBR is therefore a means by which private enterprises and EU industries may initiate WTO action through the Commission services. If, however, such action is taken, the Commission assumes complete responsibility and control for prosecuting the case before the WTO Dispute Settlement Body. In 2005, headed by Dr Robert MacLean, Crowell & Moring completed evaluation report on EU s TBR policy under assignment by the European Commission. To read the whole report, please visit:

41 Offices.Brussels 71, Rue Royale B-1000 Brussels Belgium Tel + 32 (0) Fax + 32 (0) Offices.London 11 Pilgrim Street London EC4V 6RN United Kingdom Tel + 44 (0) Fax + 44 (0) Offices.Washington, DC 1001 Pennsylvania Ave, NW Washington, DC Tel + 1 (0) Fax + 1 (0) Offices.Irvine, CA 3 Park Plaza, 20th Floor Irvine, CA Tel + 1 (0) Fax + 1 (0)