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DISPUTE SETTLEMENT: DISPUTE DS141

European Communities — Anti-Dumping Duties on Imports of Cotton-type Bed Linen from India

This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

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See also: One-page summary of key findings of this dispute

Appellate Body and Panel Reports Adopted

Complaint by India.

On 3 August 1998, India requested consultations with the EC in respect of Council Regulation (EC) No 2398/97 of 28 November 1997 on imports of cotton-type bed-linen from India. India asserted that the EC initiated anti-dumping proceedings against imports of cotton- type bed-linen from India by publishing a notice of initiation in September 1996. Provisional anti-dumping duties were imposed by EC Council Regulation No 1069/97 of 12 June 1997. This was followed by the imposition of definitive duties in accordance with the above-mentioned EC Council Regulation No 2398/97 of 28 November 1997. India contended that:

• the determination of standing, the initiation, the determination of dumping and injury as well as the explanations of the EC authorities’ findings are inconsistent with WTO law.
   
• the EC authorities’ establishment of the facts was not proper and that the EC’s evaluation of facts was not unbiased and objective.
   
• the EC has not taken into account the special situation of India as a developing country.
   
• there were violations of Articles 2.2.2, 3.1, 3.2, 3.4, 3.5, 5.2, 5.3, 5.4, 5.8, 6, 12.2.2, and 15 of the Anti-Dumping Agreement, and Articles I and VI of the GATT 1994.

On 7 September 1999, India requested the establishment of a panel. At its meeting on 22 September 1999, the DSB deferred the establishment of a panel. Further to a second request to establish a panel by India, the DSB established a panel at its meeting on 27 October 1999. Egypt, Japan and the US reserved their third-party rights. On 12 January 2000, India requested the Director-General to determine the composition of the Panel. On 24 January 2000, the Panel was composed. The panel report was circulated on 30 October 2000. The panel concluded that:

1. the EC did not act inconsistently with its obligations under Articles 2.2, 2.2.2, 3.1, 3.4, 3.5, 5.3, 5.4, and 12.2.2 of the AD Agreement in:

• calculating the amount for profit in constructing normal value;
   
• considering all imports from India (and Egypt and Pakistan) as dumped in the analysis of injury caused by dumped imports;
   
• considering information for producers comprising the domestic industry but not among the sampled producers in analyzing the state of the industry;
   
• examining the accuracy and adequacy of the evidence prior to initiation;
   
• establishing industry support for the application; and
   
• providing public notice of its final determination.

2. The panel, however, also concluded that the EC acted inconsistently with its obligations under Articles 2.4.2, 3.4, and 15 of the AD Agreement in:

• determining the existence of margins of dumping on the basis of a methodology incorporating the practice of zeroing;
   
• failing to evaluate all relevant factors having a bearing on the state of the domestic industry, and specifically all the factors set forth in Article 3.4;
   
• considering information for producers not part of the domestic industry as defined by the investigating authority in analyzing the state of the industry; and
   
• failing to explore possibilities of constructive remedies before applying anti-dumping duties.

On 1 December 2000, the EC notified the DSB of its intention to appeal certain issues of law covered in the Panel Report and legal interpretations developed by the Panel. The Appellate Body circulated its report on 1 March 2001. The Appellate Body:

1. upheld the finding of the Panel that the practice of “zeroing” when establishing “the existence of margins of dumping”, as applied by the EC in the anti-dumping investigation at issue in this dispute, is inconsistent with Article 2.4.2 of the Anti-Dumping Agreement;

2. reversed the findings of the Panel that:

• the method for calculating amounts for administrative, selling and general costs and profits provided for in Article 2.2.2(ii) of the Anti-Dumping Agreement may be applied where there is data on administrative, selling and general costs and profits for only one other exporter or producer; and
   
• in calculating the amount for profits under Article 2.2.2(ii) of the Anti-Dumping Agreement, a Member may exclude sales by other exporters or producers that are not made in the ordinary course of trade; and

3. as a consequence, concluded that the EC, in calculating amounts for administrative, selling and general costs and profits in the anti-dumping investigation at issue in this dispute, acted inconsistently with Article 2.2.2(ii) of the Anti-Dumping Agreement.

The DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report, on 12 March 2001.

Appellate Body and Panel Compliance Reports (Article 21.5) Adopted

On 8 March 2002, India requested consultations under Article 21.5 of the DSU. On 4 April 2002, India requested the establishment of a compliance panel. In particular, India claimed that the EC had violated Articles 2, 3, 5.7, 6, 9, 12 and 15 of the Anti-Dumping Agreement.

Accordingly, India requested the Panel to conclude that:

• The re-determination, as amended, and the subsequent actions as identified above, are inconsistent with the above provisions of the Anti-Dumping Agreement and GATT 1994; and
   
• By failing to withdraw the measures found to be inconsistent with the Anti-Dumping Agreement and to bring its measures into conformity with its obligations under the Anti-Dumping Agreement and GATT 1994, the EC has failed to comply with the DSB recommendations and rulings in this dispute.

At the DSB meeting on 17 April 2002, India informed the DSB that pursuant to an understanding reached between the EC and India, it was requesting the withdrawal of the item from the agenda in accordance with Rule 6 of the Rules of Procedure for WTO meetings. The DSB agreed to India’s request.

On 7 May 2002, India again requested the establishment of a compliance panel. At the DSB meeting on 22 May 2002, it was agreed that, if possible, the matter would be referred to the original panel. Japan and the United States reserved their third party rights to participate in the proceedings. On 27 May 2002, Korea reserved its third party rights. On 25 June 2002, the compliance panel was composed. On 19 August 2002, the Chairman of the Panel informed the DSB that it expected to complete its work in November 2002. On 29 November 2002, the report was circulated to Members. The Panel concluded that the EC’s definitive anti-dumping measure on imports of bed linen from India, EC Regulation 1644/2001, is not inconsistent with the AD Agreement or the DSU and that, therefore, the EC had implemented the recommendation of the original Panel, the Appellate Body, and the DSB to bring its measure into conformity with its obligations under the AD Agreement.

On 8 January 2003, India informed the DSB that it intended to apeal certain issues of law and legal interpretations developed by the Panel in its Report. On 6 March 2003, the Appellate Body informed the DSB that it was not able to circulate its report within the 60-day deadline and that it intended to do so no later than 8 April 2003. On 8 April 2003, the Appellate Body circulated its Report. The Appellate Body:

• upheld the Panel’s finding that India’s claim under Article 3.5 was not properly before the Panel and, consequently, declined to rule on it,
   
• reversed the Panel’s finding that the EC did not act inconsistently with paragraphs 1 and 2 of Article 3 of the Anti-Dumping Agreement,
   
• declined to rule on the Panel’s finding that the EC applied the second alternative in the second sentence of Article 6.10 for limiting its examination in this investigation; and
   
• found that the Panel properly discharged its duties under Article 17.6 of the Anti-Dumping Agreement and Article 11 of the DSU and, therefore, upheld the Panel’s finding that the EC had information before it on the relevant economic factors listed in Article 3.4 of the Anti-Dumping Agreement when making its injury determination.

The Appellate Body recommended that the DSB request the EC to bring its measure into conformity with the Anti-Dumping Agreement. At its meeting on 24 April 2003, the DSB adopted the Appellate Body Report and the Panel Report, as modified by the Appellate Body Report.

Implementation Status of Adopted Reports

At the DSB meeting of 5 April 2001, the EC announced its intention to implement the DSB’s recommendations in this case and said that it would need a reasonable period of time to do so. India said that the EC could complete its implementation process within a very short period of time. On 26 April 2001, the parties to the dispute notified the DSB that they had mutually agreed that the reasonable period of time shall be five months and two days, that is from 12 March 2001 until 14 August 2001.

The EC amended its regulation imposing a definitive anti-dumping duty on imports of cotton-type bed linen originating in Egypt, India and Pakistan and suspending its application with regard to imports originating in India by the deadline of 14 August 2001. However, India, at the 23 August meeting of the DSB, made a statement whereby it expressed the view that the new EC Regulation did not bring the EC legislation into full compliance with the DSB’s recommendations.

On 13 September 2001, India and the EC informed the DSB that they had reached an understanding regarding the procedures under Articles 21 and 22 of the DSU. This understanding foresees that if on the basis of the results of proceedings under Article 21.5 that might be initiated by India, India decides to initiate proceedings under Article 22, the EC would not assert that India is precluded from doing so because its request was made outside the 30 day time-period.

On 8 March 2002, India requested consultations under Article 21.5 of the DSU. On 4 April 2002, India requested the establishment of a compliance panel. At the DSB meeting on 17 April 2002, India informed the DSB that pursuant to an understanding reached between the EC and India, it was requesting the withdrawal of the item from the agenda in accordance with Rule 6 of the Rules of Procedure for WTO meetings. The DSB agreed to India’s request.

On 7 May 2002, India again requested the establishment of a compliance panel. At the DSB meeting on 22 May 2002, it was agreed that, if possible, the matter would be referred to the original panel. The United States reserved its third party rights to participate in the proceedings.

For details of the Article 21.5 panel and Appellate Body proceedings, see above.

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