DISPUTE SETTLEMENT

DS: European Union — Cost Adjustment Methodologies and Certain Anti-Dumping Measures on Imports from Russia — (Second complaint)

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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Summary of the dispute to date

The summary below was up-to-date at

Consultations

Complaint by the Russian Federation. (See also DS474)

On7 May 2015, the Russian Federation requested consultations with the European Union regarding “cost adjustment” methodologies used by the European Union for the calculation of dumping margins in anti-dumping investigations and reviews. This is the second request for consultations by the Russian Federation with the European Union concerning the use of “cost adjustment” methodologies by the European Union for the calculation of dumping margins.

The Russian Federation claims that the measures are inconsistent with:

  • Articles 1, 2.1, 2.2, 2.2.1, 2.2.1.1, 2.2.2, 2.3, 2.4, 3.1, 3.2, 3.4, 3.5, 5.8, 6.8, 9.2, 9.3, 11.1, 11.2, 11.3, 11.4, 17.6, 18.1 and 18.4, and Annex II, of the Anti‑Dumping Agreement;
     
  • Articles 10 and 32.1 of the SCM Agreement;
     
  • Articles I, VI:1, VI:2, VI:6 and X:3(a) of the GATT 1994; and
     
  • Article XVI:4 of the WTO Agreement.

On 29 May 2015, Ukraine requested to join the consultations. Subsequently, the European Union informed the DSB that it had accepted the request of Ukraine to join the consultations.

 

Panel and Appellate Body proceedings

On 7 November 2016, the Russian Federation requested the establishment of a panel. At its meeting on 23 November 2016, the DSB deferred the establishment of a panel.

At its meeting on 16 December 2016, the DSB established a panel. Argentina, Australia, Brazil, Canada, China, Egypt, India, Indonesia, Japan, Korea, Mexico, Norway, Ukraine, the United States and Viet Nam reserved their third-party rights.

Following the agreement of the parties, the panel was composed on 17 December 2018. On 30 January 2020, the Chair of the panel informed the DSB that due to substantive and procedural complexities of this dispute, and in accordance with the timetable adopted by the panel in consultations with the parties, the panel expected to issue its final report to the parties in June of 2020. The Chair also informed the DSB that the report would be available to the public once it was circulated to the Members in all three official languages, and that the date of circulation depends on completion of translation.

On 24 July 2020, the panel report was circulated to Members.

This dispute concerns two aspects of the European Union's anti-dumping practice: (i) the adjustment, by the European Commission, of input costs (usually gas or electricity) incurred by investigated producers/exporters, whenever these costs are deemed artificially low or affected by government intervention; and (ii) specific determinations made by the European Union in two expiry reviews: the third expiry review of anti-dumping measures on imports of ammonium nitrate from Russia (as reflected in EU Regulation 999/2014 of 23 September 2014) and the expiry review of anti-dumping measures on imports of welded tubes and pipes from, inter alia, Russia (as reflected in EU regulation 2015/110 of 26 January 2015).

Russia's “as such” claims regarding the consistency of the basic EU AD Regulation with the Anti-Dumping Agreement

Russia made three claims related to the provisions of the basic EU AD Regulation: two claims concerned Article 2(3) and one concerned Article 2(5) of the basic Regulation.

  1. The first subparagraph of Article 2(3) of the Basic AD Regulation describes two alternative methods to determine normal value (i) the cost of production in the country of origin; and (ii) the export prices, in the ordinary course of trade, to an appropriate third country. Russia claimed that the phrase “provided that those prices are representative” in the final part of the first subparagraph of Article 2(3) sets out a requirement, applicable to both alternative methods, that “prices” must be “representative”. In Russia's view this made the first subparagraph of Article 2(3) of the Basic AD Regulation inconsistent “as such” with Article 2.2 of the Anti-Dumping Agreement. The Panel disagreed with Russia's reading that Article 2(3) requires only “representative” prices be used in the construction of normal value of the like product.
  2. The Panel also disagreed with Russia that the second subparagraph of Article 2(3) of the Basic AD Regulation introduces an additional circumstance, not provided for by Article 2.2 of the Anti-Dumping Agreement, allowing authorities to use alternative methods in the determination of the normal value (namely that “a particular market situation for the product concerned” exists “when prices are artificially low”). On this aspect of Russia's claim, the Panel disagreed that “the particular market situation” within the meaning of Article 2.2 of the Anti-Dumping Agreement refers exclusively to the specific circumstance described in the second Ad Note to Article VI:1 of the GATT 1994, i.e. “a country which has a complete, or substantially complete, monopoly of its trade and where all domestic prices are fixed by the State”.
  3. Finally, with regard to Russia's claim concerning Article 2(5) of the basic AD Regulation, the Panel disagreed that the final part of the second subparagraph of Article 2(5) prevents the European Commission from (i) calculating the cost of production based on the cost “associated with the production” of the product under consideration (Article 2.2.1.1 of the Anti-Dumping Agreement), and from (ii) constructing the normal value based on the cost of production of the like product in the “country of origin” of the product under consideration (Article 2 of the Anti-Dumping Agreement). In particular, the Panel considered that although the second subparagraph of Article 2(5) does not require adapting out country information to arrive at the cost of production in the country of origin, this was not sufficient to render the challenged provision inconsistent “as such” with Article 2.2.

Russia's “as such” claims regarding the European Union's “Cost Adjustment Methodology”

Russia also requested the Panel to find that the European Union systematically relied on an unwritten measure which led to:

  1. The rejection of certain costs reflected in the records kept by the exporter or producer under investigation when these costs were deemed artificially low or affected by government intervention.  
  2. The use of costs other than the costs associated with the production and sale of the product under consideration reasonably reflected in the records kept by the exporter or producer under investigation.  

Russia asked the Panel to find that this unwritten measure was inconsistent with the first sentence of Article 2.2.1.1 of the Anti-Dumping Agreement. In addition, Russia claimed that the Cost Adjustment Methodology was inconsistent with Article 2.2 of the Anti-Dumping Agreement because in applying the alleged Cost Adjustment Methodology, the European Commission used, for the construction of the normal value, costs other than “the cost of production in the country of origin”.

The Panel considered that Russia had demonstrated the existence of this Methodology, as well as its general and prospective application and noted that the European Union has not been able to identify any instance of non‑application of this Methodology. The Panel went on to find that the alleged unreasonableness of the costs did not constitute an adequate or sufficient basis to conclude that the records of the investigated companies did not reasonably reflect the costs associated with the production and sale of the product concerned within the meaning of Article 2.2.1.1. The Panel also upheld Russia's claim that the Cost Adjustment Methodology was inconsistent with Article 2.2 of the Anti‑Dumping Agreement, by providing for the use of out‑of‑country input price information without establishing whether or explaining how such information is adequate to reflect or represent the costs of production in the country of origin.

Russia's “as applied” claims regarding the expiry review of anti-dumping measures on welded tubes and pipes

The Panel found that the European Commission had acted inconsistently with Article 2.2.1.1 of the Anti-Dumping Agreement, by rejecting the costs reflected in the records of a Russian producer in a manner inconsistent with the second condition in the first sentence of Article 2.2.1.1. The Panel also found that the European Commission had acted inconsistently with Article 2.2.1 of the Anti-Dumping Agreement because, in its ordinary-course-of-trade determination under this provision, it had relied on costs that were calculated inconsistently with Article 2.2.1.1 of the Anti-Dumping Agreement. Finally, the Panel found that the European Commission had acted inconsistently with Article 11.3 of the Anti-Dumping Agreement (the provision governing expiry reviews), by basing its conclusion that dumping was likely to recur on costs of production calculated inconsistently with Articles 2.2.1.1 and 2.2.1 of the Anti-Dumping Agreement.

Russia's “as applied” claims regarding the third expiry review of anti-dumping measures on ammonium nitrate

On the third expiry review on imports of ammonium nitrate, Russia made 21 claims challenging the likelihood of recurrence of injury and dumping determinations reached by the European Commission, as well as the conduct of the expiry review. The Panel disagreed with Russia that the European Union had breached Article 11.3 of the Anti-Dumping Agreement by finding that there was a likelihood of recurrence of dumping and injury, should the anti-dumping measures lapse. However, the Panel upheld certain procedural claims made by Russia.

On 28 August 2020, the European Union informed the DSB of its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the panel report. On 2 September 2020, the Russian Federation informed the DSB of its decision to cross-appeal.

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