 WORLD TRADE  
ORGANIZATION  G/ADP/AHG/W/161 
16 April 2004  
 
(04-1722) 
Committee on Anti-Dumping Practices 
Working Group on Implementation  Original:   English 
 
 
 
ARTICLE 2.2: USE OF EXPORT PRICES TO THIRD COUNTRIES 
 
Paper by New Zealand  
  
 The following communication, dated 15 April 2004,  is being circulated at the request of the 
Delegation of New Zealand.  
_______________ 
  
Introduction 
 
 At its meeting on 2 May 2003 the Working Group on Implementation agreed to discuss a number of new topics.  The following paper sets out New Zealand's position on the use of Article 2.2 of the AD Agreement on the choice of using expor t prices to third countries or constructed normal 
values. 
 
Legislative Framework 
 
 New Zealand's trade remedies investigations are conducted under the Dumping and 
Countervailing Duties Act 1988.  Section 5 of the Act contains the provisions by which a normal 
value is calculated.  Normally the basis for a normal value calculation is by wa y of section 5(1) of the 
Act – the price of like goods sold in the ordinary course of trade for home consumption in the country of export in sales that are arm's length transactions by the exporter or, if like goods are not sold by the exporter, by other sellers of like goods, bearing in  mind the need to make a fair comparison.   
 
 Section 5(2) of the Act deals with circumst ances where the Chief Ex ecutive Officer (of the 
Ministry of Economic Development) is satisfied that the calculation of a normal value cannot be 
ascertained by way of sales in the ordinary course of  trade.  It contains the following provisions: 
 5. Normal value—  
    
(1) Subject to this section, for the purposes of th is Act, the normal value of any goods imported 
or intended to be imported into New Zealand shall be the price paid fo r like goods sold in the ordinary 
course of trade for home consumption in the co untry of export in sales that are arm's length 
transactions by the exporter or, if like goods are not so  sold by the exporter, by other sellers of like 
goods.   
  (2) Where the Secretary is satisfied that the nor mal value of goods imported or intended to be 
imported into New Zealand cannot be determined under subsection (1) of this section because—   
 
(a) There is an absence of sales that would be  relevant for the purpose of determining a 
price under that subsection; or   
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(b) The situation in the relevant market is su ch that sales in that market that would 
otherwise be relevant for the purpose of determining a price under subsection (1) of 
this section are not suitable for use in determining such a price; or   
(c) Like goods are not sold in the ordinary course of trade for home consumption in the 
country of export in sales that are arm's length transactions by the exporter and it is 
not practicable to obtain within a reasonable time information in relation to sales by 
other sellers of like goods that would be relevant for the purpose of determining a 
price under subsection (1) of this section,—   
the Secretary may determine that the normal value, for the purposes of this Act, shall be either—   
 
(d) The sum of—   
(i) Such amount as is determined by the Secretary to be the cost of production or 
manufacture of the goods in the country of export; and   
(ii) On the assumption that the goods, instead of being exported, had been sold 
for home consumption in the ordinary course of trade in the country of 
export,—   
(A) Such amounts as the Secretary determines would be reasonable amounts for administrative 
and selling costs, delivery charges, and ot her charges incurred in the sale; and   
 (B) An amount calculated in acco rdance with such rate as the S ecretary determines would be the 
rate of profit on that sale having regard to the rate of profit normally realised on sales of goods (where 
such sales exist) of the same general category in th e domestic market of the country of export of the 
goods; or    
(e) The price that is representative of the pr ice paid for similar quantities of like goods 
sold at arm's length in the ordinary course of trade in the country of export for export 
to a third country.   
(3) … 
(4) … (5) … (6) …  Use of Provisions 
 
 New Zealand has not had to use the provisions of Section 5(2)(e) of the Act to establish a normal value in any of the cases it has undert aken since it introduced the Dumping and 
Countervailing Duties Act in 1988.  The preferred c hoice of practice would be to use sales in the 
ordinary course of trade as per section 5(1).  Where such a situation was not available, then a normal 
value based on a cost of production calculation or a sale to a third country could be used as per sections 5(2)(d) and (e) of the Act.  These two choices are alternatives and do not represent an hierarchical choice.    The provisions of Articles 2.2 of the AD Agreement lay out the basic rules to be applied when 
an investigating authority is faced with no sales of like product in the ordinary course of trade.  It 
gives examples of such sales (a particular market s ituation or a low volume of sales that do not permit 
a proper comparison) and gives the options available to the investigating authority – calculated normal value or sales to a third country.   G/ADP/AHG/W/161 
 Page 3 
 
 
Negotiating History 
 
 Article 2.2 of the current AD Agreement is b asically the same as Article 2.4 of the Tokyo 
Round text although the last sentence of the latter incorporating the general rule on profit has been 
omitted and Footnote 2 has been added to Article 2.4.  During  the Uruguay Round negotiations 
several delegations sought clarification in the area of "ordinary course of trade" and Footnote 2 to 
Article 2.2 and Article 2.2.1 of the Agreement are the result of this negotiation.  Footnote 2 deals with 
the volume of sales of like product that shall norma lly be considered a sufficient quantity for the 
determination of normal value.  Article 2.2.1 expands on the basic premise by outlining when 
authorities can treat sales as not being in the ordinary course of trade by reason of price and may be 
disregarded in determining normal value.  It also  describes a process for authorities to follow in order 
to determine this fact.  The followi ng decision tree illustrates this process: 
 
Are there any sales 
of the like product 
in the domestic 
market in the 
ordinary course of 
trade*?
(Art. 2.2)
Do sales in the
domestic market (or to a 
third country) account for 
at least 5% of export 
sales to the country of 
import in volume terms? 
(footnote 2
Art. 2.2)Can sales in the 
domestic market (or to 
a third country) be 
seen as sufficient 
nonetheless? 
(footnote 2 Art. 2.2)Yes No
No
Select alternative 
for determining 
normal valueNoYes
Calculate normal value Calculate normal valueYes
Export price to a third 
country (Art. 2.2)
Devise method for 
identifying appropriate 
third country. For 
example, select largest 
third country market. 
Could also choose third 
country with highest 
export prices. Whatever 
the method, prices must 
be representative.Calculate normal value on the 
basis of the remaining sales
(Art. 2.2.1)
Calculate constructed value 
by calculating:
Cost of production, plus a 
reasonable amount for 
administrative, selling and 
general costs and for 
profits (Art. 2.2)
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  In order to ensure that sales are in the ordinary  course of trade (the first decision) an authority 
would have to calculate a value using the guidelines of  Article 2.2.1 in order to determine if the sales 
made within an extended period of time, in substantial quantities, and are at prices which cover all the 
costs incurred in production over a reasonable period of  time.  Once this fact has been established the 
investigating authority has, in effect, complete d one of the options it has at its disposal for 
establishing a normal value for sales not in the ordinary  course of trade.  Given that it has a figure that 
it can use to easily establish normal value in these circumstances, an administration would possibly 
opt to use the calculation option, rather than use th e prices of a sale to a third country which may or 
may not be at a dumped price. 
 
 It would be of use to Members of th e Working Group on Implementation if those 
investigating authorities that have used the provision allowing the use of sales to a third country could 
explain why they opted to use that price rather th an a cost of production figure.  If no Member has 
used the provision, or there is general agreement that this methodology will not be used to establish 
normal value, the question is whether or not such a methodology is necessary. 
  Another issue that is worthy of discussion is the situation faced by many small countries whose economies are based on export industries.  Such  industries will normally not be able to meet 
the sufficiency test of Footnote 2 to Article 2.2 as the product is either not normally consumed on the domestic market or because the domestic market is not large enough, domestic sales cannot meet the 
necessary level.  Although the footnote states that  a lower ratio of sales can be acceptable if 
considered of sufficient magnitude to provide for a proper comparison, administering authorities generally still use a constructed value calculation.  Is this procedure then appropriate given that the 
difference between markets is completely out of the control of the exporting country?  
 Summary 
 
 It is unlikely that New Zealand would rely on the provisions of Article 2.2 and section 5(2)(e) 
of the Dumping and Countervailing Duties Act which deal with the calculation of normal value using 
sales of like product when exported to an appropriate  third country.  New Zealand has so far not 
needed to use sales to a third co untry as a basis for normal value,  and it is unlikely that this 
methodology would be used if, because of the market situation or the low volume of sales, such sales 
did not permit a proper comparison.   As information is generally available on sales in  the ordinary course of trade or for calculating 
a normal value these methodologies are preferred.   
 
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