DS Australia — Anti-Dumping Measures on A4 Copy Paper

This dispute concerned Australia's anti-dumping measures imposed on A4 copy paper exported from Indonesia following an investigation by the Australian Anti-Dumping Commission.

One of Indonesia's claims in this dispute concerned the second clause of Article 2.2 of the Anti-Dumping Agreement, which provides for the discarding of domestic sales as the basis for normal value when “because of a particular market situation, … such sales do not permit a proper comparison”. Australia found a “particular market situation” to exist in Indonesia's A4 copy paper market because certain alleged government-induced distortions affected Indonesia's pulp and paper industries, and the price of Indonesia's A4 copy paper was lower than regional benchmarks. Indonesia contested Australia's determination of the “particular market situation” because, in its view, the proper interpretation of that expression necessarily excludes: (i) situations where input costs of the product are allegedly distorted; (ii) situations that affect both domestic market sales and export sales of the product; and (iii) situations arising from government action. The Panel found that none of these situations are necessarily excluded from constituting a “particular market situation” and, on that basis, concluded that Indonesia did not demonstrate that Australia had acted inconsistently with Article 2.2 of the Anti-Dumping Agreement when the Anti-Dumping Commission found that a “particular market situation” existed in the Indonesian domestic market for A4 copy paper.

In respect of the requirement to examine whether the domestic sales affected by the “particular market situation” “permit a proper comparison”, Indonesia argued that, even if the “particular market situation” existed in the A4 copy paper market of Indonesia, Australia should have considered whether the domestic sales permitted “a proper comparison” by examining whether an individual exporter's domestic prices can properly be compared to that individual exporter's export prices. The Panel found that, when a particular market situation affects domestic market sales prices solely as a result of a decreased cost for an input used identically to produce merchandise for the domestic and export markets, the investigating authority must assess the effect of the particular market situation on the domestic price in relation to the effect on the export price. The Panel concluded that Australia had acted inconsistently with Article 2.2, first sentence, of the Anti-Dumping Agreement because the Anti-Dumping Commission did not conduct the required analysis and disregarded domestic sales of A4 copy paper without properly determining that such sales did “not permit a proper comparison”.

Another claim advanced by Indonesia in this dispute was that in constructing the normal value of the exporters, Australia's Anti-Dumping Commission disregarded their properly recorded cost information in violation of Article 2.2.1.1 of the Anti-Dumping Agreement. Indonesia argued that Article 2.2.1.1 requires an investigating authority to use an exporter's actual costs unless they fail to meet one of the two express conditions set out in this provision. Australia countered that the term “normally” in Article 2.2.1.1 provides a separate ground to disregard an exporter' records where the circumstances are not “normal and ordinary”, and that the circumstances in respect of Indonesian exporters' pulp records were not “normal and ordinary” as they reflected the particular market situation. The Panel found that when the two conditions in the first sentence of Article 2.2.1.1 are satisfied, recorded costs may be rejected in some circumstances on the basis of the term “normally”. For purposes of resolving this dispute, the Panel found it unnecessary to define what those circumstances could be. However, the Panel found that Australia was not permitted to reject the recorded pulp costs on the basis of the term “normally” in the present investigation because it had not established that the prerequisite first and second express conditions in the first sentence of Article 2.2.1.1 of the Anti-Dumping Agreement were satisfied.  Thus, the Panel found Australia had acted inconsistently with Article 2.2.1.1, first sentence, of the Anti-Dumping Agreement.

Finally, the Panel upheld Indonesia's claim that Australia's calculation of the cost of production of A4 copy paper in Indonesia, using a substitute for the rejected pulp costs of Indonesian producers, was inconsistent with Article 2.2 of the Anti-Dumping Agreement. As noted above, the Panel found that there was no basis to use substitute costs because the recorded costs had been rejected inconsistently with Article 2.2.1.1. The Panel also found that a reasoned and adequate explanation was lacking in relation to using substitute costs that included a profit component for one of the Indonesian integrated producers that produced its own pulp inputs. In relation to another producer that purchased pulp inputs, the Panel found that Indonesia had not demonstrated that Australia acted inconsistently with Article 2.2 of the Anti-Dumping Agreement when using substitute costs which included a profit component. The Panel found that a reasoned and adequate explanation was lacking as to why, with regard to the integrated producer's cost of producing pulp internally, the investigating authority did not utilize substitute woodchips costs in conjunction with the other recorded costs of producing pulp internally which were not affected by the particular market situation instead of utilizing substituted pulp costs.

In light of the above findings, the Panel found addressing Indonesia's consequential claim under Article 2.2 of the Anti-Dumping Agreement and Indonesia's claim under the chapeau of Article 9.3 of the Anti-Dumping Agreement was not necessary to resolve this dispute.

The Panel recommended that Australia bring its measure into conformity with its obligations under the Anti-Dumping Agreement but denied Indonesia's request to suggest ways in which Australia could implement the Panel's recommendations.