WORLD TRADE
ORGANIZATIONTN/RL/W/47
28 January 2003
(03-0575)
Negotiating Group on Rules Original:  English
SUBMISSION FROM CANADA RESPECTING THE AGREEMENT ON
IMPLEMENTATION OF ARTICLE VI OF THE GATT 1994
(THE ANTI-DUMPING AGREEMENT)
The following communication, dated 27 January 2003, has been received from the Permanent
Mission of Canada.
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The Negotiating Group on Rules was instructed by Ministers at Doha to clarify and improve
disciplines under the Agreement on the Implem entation of Article VI of GATT 1994 (the Anti-
Dumping Agreement or ADA).  In proceeding with this mandate the Group is instructed to preserve
the basic concepts, principles and effectiveness of the Agreement and to take into account the needs of
developing and least-developed participants.
These tasks were given by Ministers “in the light of experience and of the increasing
application of these instruments by Members...”.   This statement of fact reflects the seriousness of the
challenges before this Group.  On 1 January 1995, when the ADA came into effect, there were 730
definitive anti-dumping measures in place.  As of July 2002 this number had grown to over 1100.
Moreover, our experience with this Agreement in terms of the work undertaken by the Committee on
Anti-Dumping Practices and the increasing number of dispute settlement panels, points to the broaddivergences that exist in the interpretation and application of basic provisions of the ADA.
Canada is committed to making progress in clarifying and improving anti-dumping
disciplines.  Unjustified use of these measures can serve to impair core objectives of the WTO such as
achievements in market access liberalization.  Moreover, Canada believes that significant progresscan be made in improving the disciplines while preserving the basic concepts, principles and the
effectiveness of the Agreement in addressing injurious dumping.
The mandate of the Group instructs participants to identify negotiating issues including
“disciplines on trade distorting practices”.  In this regard, it is noted that there are patterns of anti-dumping use worldwide that suggest there are systemic issues that, if addressed, could assist us in
reversing the trend in trade remedy use.  For exampl e, two sectors, steel and chemicals, comprise well
over 50 per cent of all anti-dumping actions.  Also, there is a pattern of repetition whereby several
countries are taking anti-dumping action against the same product from the same sources.  This
suggests that there may be policies both in the e xporting and importing countries that increase the
frequency of anti-dumping use.  For example, government subsidization, highly protected domestic
markets, and ineffective competition policy may promote discriminatory pricing practices that may
lead to injurious dumping in export markets.  On  the other hand, government policies that fail to
promote or, in fact, serve to impede competitive adjustment in domestic markets can lead to increased
import sensitivity and more frequent recourse to anti-dumping laws.TN/RL/W/47
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In view of this, Canada is pursuing a two-pronged  approach to negotiations in the area of anti-
dumping:
1. The examination of key provisions of the anti-dumping agreement with a view to
strengthening the disciplines so as to achieve greater international convergence ofmethodologies, greater predictability in the application of the rules, and to eliminate undue
disruptions to international trade;  and
2. identify options for addressing government activities and policies that may serve to promote
injurious dumping practices.
The Ministerial Declaration also mandates an examination of developing country issues.  In
this respect, it should be noted that the proposals presented in this paper would benefit both
developing and developed countries alike.  Canada is also willing to discuss proposals for the
consideration of the special circumstances of developing countries.
With the mandate from Ministers and these objectives in mind, Canada has identified the
following issues as possible subjects for negotiation.  They are categorized under three main headings:
transparency and procedural fairness; clarifications to existing provisions; and improvements to the
effectiveness of trade remedy measures.  The subm ission focuses primarily on anti-dumping issues,
but touches on some issues that overlap with the Agreement on Subsidies and Countervailing
Measures (the ASCM) concerning countervailing measures.  It does not purport to be an exhaustiveenumeration of negotiating issues that Canada may wish to pursue.
I. TRANSPARENCY AND PROCEDURAL FAIRNESS
General Objective :  Increase convergence among Members in the application of rules respecting
transparency and procedural fairness to reduce the possibility of unsubstantiated action at any pointin an anti-dumping investigation.
Underlying Concept/principle :  In the conduct of an anti-dumping or countervailing duty
investigation, all interested parties should be ade quately informed of the allegations against them and
be given sufficient opportunity to defend their interests before investigating authorities that are fair
and impartial.
Existing rules and disciplines relating to the transparency and fairness of anti-dumping
investigations should be strengthened in the following areas.
1. Initiation Standards:  The requirements for the initiation of an anti-dumping investigation
could be strengthened in various areas by, for example, defining the concept of information“reasonably available.”  In order to more closely parallel the scope of the injury investigation,
consideration should be given to amending Article 5 to require that, when examining an
application for the initiation of an investigation, authorities also consider information on
factors other than dumping that may be contributing to the injury being alleged.  The
investigating authorities could also be explicitly required to conduct an “objective”assessment of the degree of industry support for an application and to refrain from taking any
action that would have a foreseeable effect on the outcome of such a determination.
2. Disclosure of Information:   The ability of interested parties to defend their interests in an
anti-dumping investigation requires adequate knowledge of the case being made by partiesadverse in interest.  Consideration should be given as to how access to information might be
improved to ensure that parties have a proper understanding of the matter.  This might includeTN/RL/W/47
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greater recourse to disclosure of information under protective order with appropriate penalties
to discourage the misuse of such information.
3. Public Hearings:   While Article 3 of the AD Agreement requires the injury determination to
be based on “positive evidence” and on “an objective examination” of all relevant factors, it issilent on the issue of public hearings.  Article 6, which sets out various procedural fairness
requirements, is equally silent on the issue of hearings.  Public hearings provide an important
opportunity to test evidence in an adversarial and quasi-judicial setting.  Hearings are
especially important in injury determinations given the nature of the facts in issue.
Consideration should, therefore, be given to including a requirement in Article 6 of the AD
Agreement similar to Article 3 of the Agreement on Safeguards , which  requires a public
hearing or other appropriate means by which interested parties can present evidence andviews, including the opportunity to respond to the submissions of other parties.
4. Explanation of Determinations and Decisions:   The ability of a party to effectively defend
its interests throughout an anti-dumping investigation depends, of course, on the sufficiency
of explanations issued by the investigating authority of a Member for the decisions taken ateach key stage of the process.  Consideration should, therefore, be given to bolstering the
information requirements in Article 12 of the AD Agreement in order to ensure greater
transparency and procedural fairness.
II. CLARIFICATION
General Objective :  Clarify and simplify the rules to promote the convergence of common practices in
the conduct of investigations and the application of anti-dumping measures.
Underlying Concept/Principle :  The Anti-Dumping Agreement shou ld provide predictable, consistent
measures to counteract the injurious effects of dumped imports without unduly hindering legitimatetrade.
Several aspects of the ADA and ASCM require clarification in order to promote a greater
international convergence in investigation methodologies and the application of anti-dumping and
countervail measures.
1. Ordinary Course of Trade:  Sales of like products in the domestic market can be rejected
for purposes of establishing normal values if these sales are not made in “the ordinary course
of trade” or, because of a “particular market situation”, such sales do not permit a proper
comparison.  The Agreement provides no guidance as to what does not constitute “the
ordinary course of trade”, except for reason of price in Article 2.2.1, or what constitutes a
“particular market situation”.  Members have interpreted and implemented these criteria invarious ways to cover, for example, sales to related persons or sales made to a single
customer in the domestic market.  It would be useful to identify the manner in which
Members have operationalized these criteria and to arrive at an agreement as to the conditions
and circumstances of sales that are to be considered under these specific provisions.
2. Profitability Test:  Article 2.2.1 permits the exclusion, under certain circumstances, of sales
of like products in the domestic market that are not made in the ordinary course of trade by
reason of price.  This recognizes the principle that the margin of dumping should not be
established on the basis of domestic sales that are unprofitable over an extended period of
time.
The test for profitability in Article 2.2.1 envisages that the transactions under consideration
for the determination of normal value should recover their full costs within an extendedTN/RL/W/47
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period of time, normally a period of one year, which typically coincides with the period of the
dumping investigation.  However, the test also recognizes that sales made at a loss at the time
of sale should not be excluded if they do not occur in substantial quantities or if they
ultimately recover their costs over a reasonable period of time.
It would be useful to explore the possibility of further expanding the conditions under which
sales made at a loss would not be excluded for purposes of determining normal values.  This
has particular implications for those industries whose product pricing is extremely sensitive to
shifts in supply and demand and for agricultural and other commodity sectors whose
producers are typically “price takers” and who usually have fixed costs that cannot be easily
reduced over the short term when there is a decline in selling prices.
3. Cost Allocation:   Article 2.2.1.1 offers useful direction regarding the establishment of costs
for purposes of Article 2 of the Agreement by providing, inter alia, that costs shall normally
be calculated on the basis of records kept by the exporter or producer under investigation.
However, it must be recognized that the inve stigating authorities are typically required to
establish or verify product costs that require the allocation of production costs, andadministrative, selling and general expenses, to the specific product(s) under investigation.
This may often necessitate costing information which the producer or exporter would not
normally maintain other than for purposes of an anti-dumping investigation.  It would be
useful to provide more comprehensive direction concerning the determination and allocation
of costs.
In addition, it would be beneficial if the Agreement specifically provided for the
determination of costs giving recognition to the type of manufacturing or production process
used in respect of the goods under investigation.  For example, certain production processes
result in joint-production where multiple products, that may have significantly different salesvalues, are produced simultaneously using the same inputs and incur the same average
production costs on a per unit basis.  This occurs in industries such as chemicals, lumber,
petroleum products, meatpacking and canneries.  In such cases, an allocation of costs made on
the basis of sales values results in a more meaningful comparison of costs to prices than an
allocation of costs based on production volumes, provided that this allocation is made in
accordance with generally accepted accounting principles.
4. Like Product:  Article 2.6 of the ADA and footnote 46 of the ASCM define “like product” as
a product which is identical, i.e. alike in all respects to the product under consideration, or in
the absence of such a product, another product which, although not alike in all respects, has
characteristics closely resembling those of the product under consideration.  The definition of
like products would benefit from clarification to limit the scope of product types that can beconsidered as a single “like product”.  This would help reduce the instances where products
are grouped together and treated as the same product when they, in fact, compete in different
markets.
5. Domestic Industry:   The issue of like product also affects the determination of what
constitutes the domestic industry, which is defined in Articles 4.1 and 16.1 of the ADA and
ASCM, respectively, in part, “as the domestic producers as a whole of the like products, or
those of them whose collective output of the produc ts constitutes a major proportion of the total
domestic production of those products, …”.  The Articles are not clear with respect to what
proportion of the domestic producers could be considered as constituting the domestic industry.It would be useful to provide more specific para meters as to what minimum percentage of the
domestic production can be considered to be “a major proportion”.TN/RL/W/47
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Article 5.4 of the ADA and Article 11.4 of the ASCM allow investigating authorities to
initiate investigations on the basis of a petition by domestic producers whose collective output
constitutes more than 50 per cent of the total production of the like product produced by that
portion of the domestic industry expressing either support for or opposition to the application,
as long as those producers supporting the application account for at least 25 per cent of thetotal production produced by the domestic industry.  Thus, an investigation may be initiated
based on an application by producers that may represent as little as 25 per cent of the total
domestic production of like products.  The standing requirement for the initiation of an
investigation should be discussed to determine whether the concept of “standing” is
appropriately defined to ensure that domestic producers representing a relatively small
proportion of the domestic production of like products cannot successfully apply for an
investigation.
In a related issue, it would be desirable, in instances where an application is made on behalf
of a domestic industry by one or more industry associations, that the members of the industry
association(s) be identified in the application, with a statement of support for the application.
6. Lesser Duty:  Article 9.1 of the ADA states that “… It is desirable that the imposition be
permissive in the territory of all Members, and that the duty be less than the margin if such
lesser duty would be adequate to remove the injury to the domestic industry.”  While some
Members have incorporated lesser duty provisions in their domestic legislation, there is no
mutually agreed methodology for determining a du ty that is sufficient to remove the injury
caused by dumping.  Canada is of the view that before we consider wider application of lesser
duty, as proposed by some members, the group should consider ways to provide appropriate
methodologies for the calculation of a duty that is less than the full margin of dumping but
which is adequate to remove the injury to the domestic industry.  Such a methodology might
also be useful in the application of price undertakings at a level sufficient to remove injury.
7. ADA – ASCM Harmonization:  There are numerous divergences between similar provisions
of the ADA and the ASCM.  Consideration should be given to addressing these divergences
in these negotiations so that, where appropriate, differences in similar provisions of the two
agreements are eliminated.
8. Sunset Reviews :  Anti-dumping and countervail measures are intended to provide temporary
relief from the injurious effects of dumped or subsidized imports.  The ADA and ASCM
require that such measures be terminated after 5 years unless a review indicates that the
expiry of the duty would be likely to lead to continuation or recurrence of dumping or
subsidization and injury.  However, even with these 5-year “sunset” reviews, in many
jurisdictions, anti-dumping and countervailing measures may be kept in place for much longerperiods of time.  Consideration should be given to clarifying the circumstances that might
lead to the continuation of a measure and providing an indicative list of factors that authorities
should consider in determining whether the ex piry of the duty would be likely to lead to
continuation or recurrence of dumping or subsidization and injury.
9. Reviews:  Under the provisions of the ADA and the ASCM, administering authorities
undertake a variety of review functions rang ing from the review of individual importations
(Articles 9 and 19, respectively) to 5-year “sunset” reviews to determine whether the measure
should be extended beyond an initial or subsequent 5-year period (Articles 11 and 21,
respectively).  There is a great deal of debate as to which, if any, provisions of the ADA andASCM related to initial investigations, also apply to the various review proceedings under the
Agreements.  In some instances the drafters of the Agreements felt it necessary to explicitly
state that certain provisions of the ADA and ASCM with respect to initial investigations also
specifically apply to reviews.  For example, Article 11.4 of the ADA states that the provisionsTN/RL/W/47
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of Article 6 regarding evidence and procedure shall apply to any review carried out under this
Article.  The Agreements should be clarified to stipulate which, if any, provisions that were
originally intended to apply to initial investigations also apply to the various review
provisions under the Agreements.  In cases wh ere, because of the fundamental differences
between initial investigations and reviews, certain provisions of the Agreements cannot bereasonably applied to reviews, consideration should be given to providing rules that apply
specifically to reviews.
10. Codifying Recommendations and Decisions:  The Anti-Dumping Committee, through its
Working Group on Implementation has completed several recommendations concerning
mutually agreeable practices with respect to the application of the Anti-Dumping Agreement.
Canada believes that this important work, as well as any further recommendations madeduring the course of these negotiations, should be codified in the Agreement.
Further, the Dispute Settlement Body, through dispute settlement panels and the Appellate
Body, has interpreted numerous aspects of the ADA and ASCM.  Members should consider
whether some or all of these interpretations should be incorporated into the appropriateAgreement.
III. IMPROVEMENT
General Objective :  These negotiations should aim to enhance the effectiveness of legitimate anti-
dumping measures and limit the inconsistent, sometimes unwarranted, application of anti-dumpingmeasures.
Underlying Concept/Principle :  Anti-dumping measures are intended to provide temporary remedial
action against material injury to domestic producer s resulting from the dumping of imports of clearly
defined goods.
1. Initiation Standards:  There have been numerous disputes before the Dispute Settlement
Body concerning whether the investigating authorities had sufficient cause to initiate an
investigation.  The improper initiation of an investigation can have serious detrimental effects
on trade.  In this regard, consideration should be  given to whether, and under what conditions,
initiations of investigations could be made subject to a swift dispute settlement procedure
under the Understanding on the Settlement of Disputes.
2. De minimis  Margin of Dumping:  Article 5.8 of the ADA provides for the termination of an
investigation where it is determined that the margin of dumping is de minimis .  The
de minimis  dumping margin level is specified as less than 2 per cent. There continues to be a
debate as to what the appropriate de minimis  margin level should be.  These negotiations
should include consideration of the de minimis  issue, with a view to making any adjustments
to this provision applicable to imports from all Members.
3. Repeated Dumping:  The increase in the use of anti-dumping measures indicates that there
may be systemic issues that need to be addressed in order to reduce the need for, or use of,trade remedy measures.  The underlying trade distorting practices that cause trade remedy
responses need to be examined.  In this respect, it would be useful for members to examine
the issue of exporters of products that are foun d to be injuriously dumping a product in three
or more other Member jurisdictions.  Repeated dumping findings against the products of the
same exporter and country may indicate an underlying practice or policy in the exportingcountry that should be addressed.TN/RL/W/47
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4. Public Interest and Competition Policies:  Article 6.12 of the ADA, instructs members to
provide opportunity for representations from industrial users and consumer organizations
regarding the evidence of dumping, injury and causality.  While this obligation is limited in
scope, many members have taken steps to allow interested parties to submit relevant
arguments on a broad range of economic issues related to the imposition of anti-dumpingduties.  Key issues, which are often referred to as public interest issues, may include the
possibility of supply shortages, increasing prices to industrial users and consumers, and
competition policy concerns.
In Canada’s view, efforts to improve the ADA should include an examination of the
unintended effects of anti-dumping action and efforts to strengthen existing provisions of the
Agreement so as to fully consider the consequences of anti-dumping duties for broadereconomic, trade and competition policy concerns.
5. Duty Refunds:  Under the present agreements, adverse DSB decisions are implemented on a
prospective basis.  At the present time, the Agreements do not specifically direct Members to
return duties or duty deposits that were collected pursuant to what is eventually found to be aWTO inconsistent measure.  Consideration should be given to having special dispute
settlement provisions for the ADA and ASCM in  cases where the imposition of duties under
these agreements has been found to be inconsistent with the provisions of the relevant
agreement.  These new provisions would require the return of anti-dumping and
countervailing duties or duty deposits in cases where a Member’s compliance action with aDSB decision results in the measure being withdr awn, or a partial return of duties or duty
deposits where the amount of duties/deposits that would have been collected under a WTO-
compliant measure is less than the amounts actually collected.
6. Duty Imposition:  Article 9.3 of the ADA provides for the assessment of anti-dumping duties
on either a retrospective or prospective basis.  The different assessment methodologies have
fundamentally different effects on trade.  Negotiations should include a discussion of this
issue with a view to creating more predictable duty enforcement systems so that exporters and
importers can operate in a more certain environment, while providing the requisite protection
from material injury to the domestic industry.  This would help reduce uncertainties in the
market and more readily allow for the resumption of non-injurious trade.
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