DS: European Union — Anti-Dumping Measures on Biodiesel from Argentina

This dispute concerns two sets of measures of the European Union. First, Argentina makes “as such” claims against Article 2(5), second subparagraph, of Council Regulation (EC) No. 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community (the Basic Regulation). Second, Argentina challenges certain aspects of the anti-dumping measures imposed by the European Union on imports of biodiesel from Argentina.

Terms of reference

The European Union requested that the Panel find that a number of claims set forth in Argentina's panel request fell outside the scope of the Panel's terms of reference. Argentina did not pursue certain of the claims identified in the European Union's objections. The Panel found that each of the three claims subject to the remaining objections fell within its terms of reference.

Argentina's “as such” claims

Argentina claimed that Article 2(5), second subparagraph, of the Basic Regulation is inconsistent with Article 2.2.1.1 of the Anti‑Dumping Agreement by providing that the authorities shall reject or adjust the cost data of the producers/exporters as included in their records when those costs reflect prices which are “abnormally or artificially low” because they are affected by an alleged distortion. The Panel rejected Argentina's claims, considering that the challenged provision prescribes what has to be done after the EU authorities have determined that a producer's records do not reasonably reflect the costs of production, and does not govern the determination of whether those records reasonably reflect the costs of production, as Argentina had alleged.

In addition, Argentina claimed that the provision at issue is inconsistent with Article 2.2 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994 by providing that the costs shall be adjusted or established in certain cases “on any other reasonable basis, including information from other representative markets”. The Panel also rejected these claims.

Argentina's claims with respect to anti-dumping measures on biodiesel from Argentina

Argentina made claims with regard to both the dumping and injury determinations of the EU authorities.

Regarding the EU authorities' dumping determination, Argentina claimed, first, that the EU authorities acted inconsistently with Article 2.2.1.1 of the Anti-Dumping Agreement, and as a consequence, Article 2.2 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994, by failing to calculate the cost of production of biodiesel on the basis of the records kept by the producers/exporter under investigation. The EU authorities had made this determination based on their conclusion that the Argentine domestic prices of soybeans were distorted due to the difference in the export taxes imposed by Argentina on the input (soybeans) and those imposed on the finished product (biodiesel). As a result, when constructing the Argentine producers' normal value, the EU authorities replaced the costs reported in the Argentine producers/exporters' records for soybeans with reference prices published by the Argentine Ministry of Agriculture. In the EU authorities' view, these prices reflected the level of international prices and the price that would have prevailed in Argentina but for the distortion.

The Panel upheld Argentina's claim that the European Union acted inconsistently with Article 2.2.1.1 of the Anti‑Dumping Agreement by failing to calculate the cost of production of biodiesel on the basis of the records kept by the producers/exporter under investigation. The Panel considered that the reason stated by the EU authorities for disregarding producers' costs — i.e. because the prices for the input were artificially lower than international prices due to an alleged distortion — does not constitute a legally sufficient basis under Article 2.2.1.1 for concluding that the producers' records do not reasonably reflect the costs associated with the production and sale of biodiesel. Since the Panel found a violation of Article 2.2.1.1, it found it unnecessary to consider Argentina's claims under Article 2.2 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994.

In addition, the Panel upheld Argentina's claim that the European Union acted inconsistently with Article 2.2 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994 by using a “cost” that was not the cost prevailing “in the country of origin”, Argentina, in the construction of the normal value. The Panel considered it plain from the EU authorities' reasoning that the cost used was not a cost “in the country of origin”, since it was specifically selected to remove the perceived distortion in the domestic price of soybeans caused by the Argentine export tax system. The Panel exercised judicial economy on Argentina's claim that the EU authorities acted inconsistently with Article 2.2.1.1 of the Anti-Dumping Agreement because they included costs not associated with the production and sale of biodiesel in the calculation of the cost of production.

Finally, the Panel considered it unnecessary for the effective resolution of the dispute to reach a finding on Argentina's claims under Article 2.1 of the Anti-Dumping Agreement and Article VI:1 of the GATT 1994. 

Argentina claimed that the EU authorities acted inconsistently with Article 2.4 of the Anti-Dumping Agreement by failing to make due allowance for differences affecting price comparability. The Panel rejected this claim.

The Panel upheld Argentina's claim that the European Union acted inconsistently with Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994 by imposing anti‑dumping duties in excess of the margin of dumping that should have been established under Article 2 of the Anti-Dumping Agreement. The Panel upheld these claims, reasoning that both Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994 refer to the margin of dumping established in a manner consistent with Article 2, as opposed to whatever margin (WTO-consistent or not) was actually established by the investigating authority.

The Panel rejected Argentina's claims that the EU authorities acted inconsistently with Articles 2.2 and 2.2.2(iii) of the Anti-Dumping Agreement by failing to base the amount for profits component of the constructed normal value on a reasonable method within the meaning of Article 2.2.2(iii). The Panel considered that the profit margin selected by the EU authorities was the result of a reasoned analysis that was rationally directed at approximating what the Argentine producers' profit margin for the like product would have been if the like product had been sold in the ordinary course of trade in the domestic market of the exporting country.

Regarding the injury determination, Argentina claimed that the EU authorities acted inconsistently with Articles 3.1 and 3.4 of the Anti-Dumping Agreement, by excluding certain production capacity not available for use (so-called “idle capacity”) in their consideration of the domestic industry's production capacity and capacity utilization. The Panel found that the EU authorities failed to base their determination of these two injury factors on an “objective examination” of “positive evidence” in accepting revised data submitted by the EU domestic industry at a late stage of the investigation without assuring themselves of its accuracy and reliability, thereby acting inconsistently with Articles 3.1 and 3.4 of the Anti-Dumping Agreement.

Argentina also challenged the EU authorities' consideration of four factors other than dumped imported allegedly causing injury to the domestic industry, namely the domestic industry's overcapacity, the imports of the investigated product made by the domestic industry, the double-counting regimes of certain EU member States, and the lack of vertical integration of and access to raw material of the EU domestic industry. Argentina claimed that the European Union acted inconsistently with Articles 3.1 and 3.5 of the Anti-Dumping Agreement by failing to appropriately assess the injury caused by these factors other than dumped imports and to separate and distinguish that injury from the injury caused by the allegedly dumped imports. The Panel rejected Argentina's claim as it concerned each of the four “other factors”.

Argentina appealed all of the Panel's findings concerning the Basic Regulation. In addition, the European Union and Argentina each appealed several aspects of the Panel's findings concerning the anti‑dumping measure imposed by the European Union on imports of biodiesel from Argentina. However, the Panel's findings under Articles 2.2.2, 3.1, and 3.4 of the Anti‑Dumping Agreement were not subject to appeal.

Challenges to the Panel's findings on Argentina's claims with respect to the anti‑dumping measures on biodiesel from Argentina

With respect to the anti‑dumping measures on imports of biodiesel from Argentina, the European Union challenged the Panel's findings that the European Union acted inconsistently with Articles 2.2.1.1, 2.2 and 9.3 of the Anti‑Dumping Agreement, and Article VI:1(b)(ii) and VI:2 of the GATT 1994. In addition, Argentina challenged the Panel's rejection of its claims under Articles 2.4, 3.1 and 3.5 of the Anti‑Dumping Agreement.

As regards Article 2.2.1.1 of the Anti-Dumping Agreement, the Appellate Body observed that this provision governs investigating authorities' determination of the costs of producing the relevant product. Its first sentence provides that “costs shall normally be calculated on the basis of records kept by the exporter or producer under investigation” if two conditions are met. The Appellate Body considered that the second condition, “provided that such records … reasonably reflect the costs associated with the production and sale of the product under consideration”, concerns whether the records kept by the exporter or producer under investigation suitably and sufficiently correspond to or reproduce those costs incurred by the investigated exporter or producer that have a genuine relationship with the production and sale of the specific product under consideration. To the Appellate Body, the Panel's interpretation did not conflict with its understanding of this provision. The Appellate Body also agreed with the Panel that the EU authorities' determination that domestic prices of soybeans in Argentina were “artificially low” due to the Argentine differential export tax system was not, in itself, a sufficient basis for concluding that the producers' records did not reasonably reflect the costs of soybeans associated with the production and sale of biodiesel. The Appellate Body therefore upheld the Panel's finding that the European Union acted inconsistently with the first sentence of Article 2.2.1.1 of the Anti‑Dumping Agreement by failing to calculate the cost of production of biodiesel on the basis of the records kept by the Argentine producers.

The Appellate Body noted that Article 2.2 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994 require that the normal value be constructed on the basis of, inter alia, the “cost of production […] in the country of origin”. Like the Panel, the Appellate Body considered that the phrase “cost of production […] in the country of origin” does not limit the sources of information or evidence that may be used in establishing such cost to sources inside the country of origin. The Appellate Body further considered that, when relying on any out-of-country information, an investigating authority has to ensure that such information is used to arrive at the cost of production in the country of origin, and this may require the investigating authority to adapt that information. The Appellate Body also agreed with the Panel that the surrogate price for soybeans used by the EU authorities to calculate the cost of production of biodiesel in Argentina was not a cost “in the country of origin”. The Appellate Body therefore upheld the Panel's finding that the European Union acted inconsistently with Article 2.2 of the Anti‑Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994 because the EU authorities did not use the cost of production in Argentina when constructing the normal value of biodiesel.

Having upheld the Panel findings above, and notwithstanding its reservations about certain aspects of the Panel's analysis under Article 2.4 of the Anti‑Dumping Agreement, the Appellate Body did not consider it fruitful to further examine whether the EU authorities also failed to conduct a “fair comparison” in comparing the constructed normal value to the export price. The Appellate Body therefore found it unnecessary to rule on Argentina's claim regarding the Panel's finding under Article 2.4 of the Anti‑Dumping Agreement.

As regards the imposition of anti‑dumping duties, the Appellate Body upheld the Panel's finding that the European Union acted inconsistently with Article 9.3 of the Anti‑Dumping Agreement and Article VI:2 of the GATT 1994 by imposing anti‑dumping duties in excess of the margin of dumping that should have been established under Article 2 of the Anti‑Dumping Agreement and Article VI:1 of the GATT 1994, respectively. The Appellate Body agreed with the Panel that the reference to “margin of dumping” in Article 9.3 of the Anti‑Dumping Agreement relates to a margin that is established consistently with Article 2. The Appellate Body concurred with the Panel that, in light of the specific circumstances of this dispute, Argentina had made a prima facie case that the European Union acted inconsistently with Article 9.3 of the Anti‑Dumping Agreement, which the European Union had failed to rebut.

With respect to the European Union's non-attribution analysis on one of the four factors other than dumped imports allegedly causing injury, the Appellate Body upheld the Panel's finding that Argentina had not established that the European Union's non-attribution analysis was inconsistent with Articles 3.1 and 3.5 of the Anti‑Dumping Agreement. The Appellate Body found that the Panel did not err in interpreting Articles 3.1 and 3.5 because, contrary to Argentina's argument, the Panel did not articulate a legal standard pursuant to which it is relevant to examine whether the revised data played a significant role in the EU authorities' non-attribution analysis. The Appellate Body also rejected Argentina's claim that the Panel erred in its application of Articles 3.1 and 3.5 because Argentina did not establish that the Panel erred: (i) in concluding that the EU authorities' non-attribution analysis concerning overcapacity in the Definitive Regulation was not “based on” or “affected by” the revised data; or (ii) in finding that the EU authorities were not required to give priority to the evolution of the domestic industry's overcapacity in absolute terms as opposed to its evolution in relative terms.

Challenges to the Panel's findings regarding Argentina's “as such” claims:

Concerning the second subparagraph of Article 2(5) of the Basic Regulation, Argentina challenged the Panel's findings that Argentina had not established that this measure is inconsistent “as such” with Articles 2.2.1.1, 2.2, and 18.4 of the Anti‑Dumping Agreement, Article VI:1(b(ii) of the GATT 1994, and XVI:4 of the WTO Agreement.

The Appellate Body upheld the Panel's finding that Argentina had not established that the second subparagraph of Article 2(5) of the Basic Regulation is inconsistent “as such” with Article 2.2.1.1 of the Anti‑Dumping Agreement. The Appellate Body considered that the Panel did not err in finding that the second subparagraph of Article 2(5) of the Basic Regulation does not require the European Union to determine that a producer's records do not reasonably reflect the costs associated with the production and sale of the product under consideration when these records reflect prices considered to be “artificially or abnormally low” as a result of a distortion. Like the Panel, the Appellate Body found no support in the text of the Basic Regulation, or in the other elements relied on by Argentina, for the view that the second subparagraph of Article 2(5) applies to such a determination by the EU authorities. The Appellate Body also rejected Argentina's claim that the Panel acted inconsistently with Article 11 of the DSU in ascertaining the meaning of the second subparagraph of Article 2(5) of the Basic Regulation.

Regarding Argentina's claim under Article 2.2 of the Anti‑Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994, the Appellate Body considered that the Panel did not err in finding that the second subparagraph of Article 2(5) of the Basic Regulation does not require the EU authorities to establish the costs of production so as to reflect costs prevailing in other countries outside the country of origin. The Appellate Body also rejected Argentina's claim that the Panel acted inconsistently with Article 11 of the DSU in ascertaining the meaning of the second subparagraph of Article 2(5) of the Basic Regulation. Furthermore, the Appellate Body found that Argentina had not satisfied its burden of proving that the second subparagraph of Article 2(5) of the Basic Regulation restricts, in a material way, the discretion of the EU authorities to construct the costs of production in a manner consistent with Article 2.2 of the Anti‑Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994. For these reasons, the Appellate Body upheld the Panel's finding that Argentina had not established that the second subparagraph of Article 2(5) of the Basic Regulation is inconsistent “as such” with Article 2.2 of the Anti‑Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994.

Having upheld the Panel findings above, the Appellate Body also upheld the Panel's consequential finding that Argentina had not established that the second subparagraph of Article 2(5) of the Basic Regulation is inconsistent with Article XVI:4 of the WTO Agreement and Article 18.4 of the Anti‑Dumping Agreement.