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

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.