DISPUTE SETTLEMENT

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

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.

  

See also:

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Current status

 

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Key facts

Short title:
Complainant:
Respondent:
Third Parties:
Agreements cited:
(as cited in request for consultations)
Request for Consultations received:
Panel Report circulated: 25 January 2018

  

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Latest document

  

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Summary of the dispute to date

The summary below was up-to-date at

Consultations

Complaint by Indonesia.

On 10 June 2014, Indonesia requested consultations with the European Union on: (a) provisions of Council Regulation (EC) No 1225/2009 on protection against dumped imports from countries not members of the European Community; and (b) anti-dumping measures imposed in 2013 by the European Union on imports of biodiesel originating in, inter alia, Indonesia.

Indonesia claims that the measures are inconsistent with:

  • Articles 1, 2, 2.1, 2.2, 2.2.1.1, 2.2.2, 2.3, 2.4, 3.1, 3.2, 3.4, 3.5, 6.5, 6.5.1, 7.1, 7.2, 9.2, 9.3, 15 and 18.4 of the Anti-Dumping Agreement;
     
  • Article XVI:4 of the WTO Agreement; and
     
  • Articles VI, VI:1 and VI:2 of the GATT 1994.

On 30 June 2015, Indonesia requested the establishment of a panel. At its meeting on 20 July 2015, the DSB deferred the establishment of a panel.

 

Panel and Appellate Body proceedings

At its meeting on 31 August 2015, the DSB established a panel. Argentina, Australia, Canada, China, India, Japan, Norway, the Russian Federation, Singapore, Turkey and the United States reserved their third-party rights.

Following the agreement of the parties, the panel was composed on 4 November 2015.

On 15 April 2016, the Chair of the panel informed the DSB that the panel's work had been delayed as a result of a lack of available experienced lawyers in the Secretariat and that it expected to issue its final report to the parties by mid-2017. On 11 July 2017, the Chair of the panel informed the DSB that the panel's work was subsequently delayed due to the request of the complaining party to suspend the proceedings while awaiting the issuance of the Appellate Body Report in EU – Biodiesel (Argentina) (DS473), which was circulated on 6 October 2016. On 4 November 2016, Indonesia requested the Panel to resume its work. On 11 July 2017, the Chair of the Panel informed the DSB that the Panel expected to issue its final report to the parties by the end of 2017.

On 25 January 2018, the panel report was circulated to Members.

This dispute concerns the anti-dumping measures imposed by the European Union on imports of biodiesel from Indonesia. The European Commission imposed the measures following an anti-dumping investigation into biodiesel imports from Argentina and Indonesia. This investigation was previously the subject of the dispute EU – Biodiesel (Argentina) (DS473) concerning a complaint brought by Argentina, in respect of imports of biodiesel from Argentina.

Indonesia makes claims with regard to the dumping and injury determinations of the EU authorities for Indonesian importers, the collection of definitive anti-dumping duties, as well as the imposition and collection of provisional anti-dumping duties for one Indonesian exporter.

Regarding the EU authorities' dumping margin determination, Indonesia 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 Indonesian domestic prices of crude palm oil were distorted due to the difference in the export taxes imposed by Indonesia on the input (crude palm oil) and those imposed on the finished product (biodiesel). As a result, when constructing the Indonesian producers' normal value, the EU authorities replaced the costs reported in the Indonesian producers/exporters' records for crude palm oil with reference prices published monthly by the Indonesian Government. In the EU authorities' view, these prices reflected the level of international prices and the price that would have prevailed in Indonesia had it not been for the distortion.

The Panel upheld Indonesia'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 observed that the EU authorities had applied the same rationale for deciding not to use the recorded cost of the main raw material to establish the cost of production of biodiesel for Argentine investigated producers in EU – Biodiesel (Argentina) and saw no basis to deviate from the findings in that dispute. 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. The Panel found it unnecessary to consider Indonesia's consequential 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 Indonesia's separate claims 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” in the construction of the normal value. The Panel considered that the cost used by the EU authorities was specifically chosen to remove the perceived distortion in the domestic price of crude palm oil caused by the Indonesian export tax system, and thus was not a cost “in the country of origin”.

Indonesia also raised claims with respect to the determination of the amount for profits in the construction of normal value for investigated Indonesian producers, and the construction of the export price for one Indonesian producer.

In constructing normal value, Indonesia claimed that the EU authorities also acted inconsistently with Articles 2.2 and 2.2.2(iii) of the Anti-Dumping Agreement in two respects: first, by failing to calculate a profit cap referred to in Article 2.2.2(iii) when determining an amount for profits for investigated Indonesian producers; and second, by failing to determine an amount for profit based on a “reasonable method” as stipulated by Article 2.2.2(iii). The Panel upheld Indonesia's claim that the European Union acted inconsistently with Articles 2.2 and 2.2.2(iii) by failing to consider the calculation of the cap at the time of the determination, i.e. “the profit normally realized by other exporters or producers on sales of products of the same general category in the domestic market of the country of origin”. The Panel rejected Indonesia's claim that the EU authorities failed to base the amount for profits on a “reasonable method” within the meaning of Article 2.2.2(iii).

The Panel also upheld Indonesia's claim that the European Union acted inconsistently with Article 2.3 of the Anti-Dumping Agreement by failing to include an additional premium amount that was paid at the time of purchase of biodiesel produced from palm fatty acid distillate, as part of the price at which the biodiesel was first resold to independent buyers, when constructing the export price for one Indonesian producer.

With respect to the injury determination, the Panel upheld in part Indonesia's claim that the EU authorities acted inconsistently with Articles 3.1 and 3.2 of the Anti-Dumping Agreement by failing to establish the existence of significant price undercutting. The Panel found that the EU authorities failed to take into account differences between imported and domestic biodiesel in its determination of the existence of significant price undercutting, while rejecting an additional argument by Indonesia that the EU authorities failed to ensure price comparability through the calculation of a price adjustment for Indonesian imports.

The Panel upheld Indonesia'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 considered that Article 9.3 of the Anti-Dumping Agreement requires that the margin of dumping is established in a manner that is consistent with the disciplines in Article 2 of the Anti-Dumping Agreement and sets the maximum level at which anti-dumping duties may be levied. The Panel applied its reasoning mutatis mutandis to Indonesia's claim under Article VI:1 of the GATT 1994.

Finally, the Panel addressed several claims raised by Indonesia under Articles 7 and 9 of the Anti-Dumping Agreement in relation to the decision of the European Union to definitively collect provisional anti-dumping duties imposed on one Indonesian producer. The EU authorities acknowledged that it had initially made several errors when calculating a provisional margin of dumping for the sampled Indonesian producer, but did not revise the provisional duty rate at which the provisional duty had previously been secured. The EU authorities subsequently ordered the definitive collection of the provisional duty that had been provisionally secured at the original duty rate, on the basis that the definitive anti-dumping duty that was calculated was higher than the provisional duty. The Panel rejected claims that the European Union acted inconsistently with Articles 7.1(ii), 7.2, 9.2 and the chapeau of Article 9.3 of the Anti-Dumping Agreement, reasoning that the definitive collection of provisional duties paid or payable is governed by Articles 10.3 and 10.5 of the Anti-Dumping Agreement.

At its meeting on 28 February 2018, the DSB adopted the panel report.

 

Reasonable period of time

On 1 March 2018, Indonesia and the European Union informed the DSB that they had agreed that the reasonable period of time to implement the DSB's recommendations and rulings would be 8 months. Accordingly, the reasonable period of time is set to expire on 28 October 2018.

 

Implementation of adopted reports

On 8 November 2018, the European Union informed the DSB that it had adopted the measure necessary to comply with the DSB's recommendations and rulings within the reasonable period of time. The European Union explained that it had done so through Implementing Regulation (EU) 2018/1570, adopted by the European Union Commission on 18 October 2018, which terminated the proceedings concerning imports of biodiesel originating in Argentina and Indonesia and repealed Implementing Regulation (EU) No 1194/2013. The Regulation was published in the Official Journal of the European Union on 19 October 2018 (OJ L 262, 19.10.2018, p. 40) and entered into force on 20 October 2018.

 

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