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China - Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (HP-SSST) from Japan - China - Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (HP-SSST) from the European Union - Reports of the Panels
日期:2015/02/13
作者:The Panel
文件編號:WT/DS454/R, WT/DS460/R
附件下載:WTDS454R.doc
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China — Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes ("HP-SSST")

from Japan

 

China — Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes ("HP-SSST")

from the European Union

reportS of the panelS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

______________________________________________________________________________

Note by the Secretariat:

 

The Panels issue these Reports in the form of a single document constituting two separate Panel Reports: WT/DS454/R; and WT/DS460/R. Each Panel Report relates to one of the two complaints in these disputes. The cover page; preliminary pages; descriptive part; Sections 1-6, 7.1-7.2, and 7.5-7.11; and the Annexes are common to both Panel Reports. The page header throughout the document bears two document symbols, WT/DS454/R and WT/DS460/R, with the following exceptions: Section 8.1 on pages 105-106, which bears the document symbol for and relates to the Panel Report WT/DS454/R; and Sections 7.3-7.4, and 8.2 on pages 24-44 and 107-109, which bear the document symbol for and relate to Panel Report WT/DS460/R.


TABLE OF CONTENTS

1   Introduction.. 13

1.1   Complaints by Japan and the European Union. 13

1.2   Panel establishment and composition. 13

1.3   Panel proceedings. 14

1.3.1   General 14

1.3.2   Working procedures on Business Confidential Information (BCI) 14

2   Factual aspects. 14

2.1   The measures at issue. 14

3   Parties' requests for findings and recommendations. 14

3.1   Japan. 14

3.2   European Union. 16

3.3   China. 17

4   Arguments of the parties. 17

5   Arguments of the thiRd parties. 17

6   Interim Review... 17

6.1   Introduction. 17

6.2   Procedural issue raised by China concerning Japan's requests for interim review in respect of claims also raised in the DS460 proceeding. 18

6.3   Requests for interim review by Japan. 18

6.3.1   Paragraph 7.105: potential for subject imports to have price effects. 18

6.3.2   Paragraph 7.114: price comparability. 19

6.3.3   Paragraph 7.130: competitive relationship. 19

6.3.4   Paragraph 7.132: clarification. 19

6.3.5   Paragraphs 7.132 and 7.137, footnotes 239 and 246 (footnotes 254 and 262 of the Final Reports): translation. 19

6.3.6   Paragraphs 7.136-7.143: scope of MOFCOM's price undercutting determination. 20

6.3.7   Paragraph 7.140: use of indefinite article. 20

6.3.8   Paragraph 7.141, footnote: request for deletion. 20

6.3.9   Paragraphs 7.145 and 7.170: the number of claims pursued by Japan. 20

6.3.10   Paragraph 7.163: Article 3.4 implementing Article 3.1. 21

6.3.11   Paragraphs 7.166-7.168: interplay between positive and negative injury factors. 21

6.3.12   Section 7.5.3 heading: inclusion of a reference to Article 3.1. 21

6.3.13   Paragraphs 7.173, 7.189, 7.192, and 7.205: independent Article 3.5 claims. 22

6.3.14   Paragraph 7.182: expansion of Panel's reasoning. 22

6.3.15   Paragraph 7.184: inclusion of citation. 22

6.3.16   Paragraphs 7.202-7.203. 22

6.3.17   Paragraphs 7.208 and 7.221: scope of arguments. 23

6.3.18   Paragraph 7.259: correction of scope of findings. 23

6.3.19   Paragraph 7.260: expansion of quote. 23

6.3.20   Paragraphs 7.277 and 7.281: judicial economy. 23

6.3.21   Paragraph 7.298, footnote 455 (footnote 475 of the Final Reports): cross-referencing between DS454 and DS460. 23

6.3.22   Paragraph 7.336: consequential claims. 24

6.3.23   Paragraphs 8.2 and 8.7: scope of conclusions. 24

6.4   Requests for interim review by the European Union. 24

6.4.1   Paragraph 7.114: price comparability. 24

6.4.2   Paragraphs 7.132 and 7.137, footnotes 239 and 246 (footnotes 254 and 262 of the Final Reports): translation. 24

6.4.3   Paragraphs 7.226, 7.235, and 7.262: clarification of argument 25

6.5   Requests for interim review by China. 25

6.5.1   Footnote 16: overlap between the complainants' claims and arguments. 25

6.5.2   Paragraph 7.27: BCI Procedures. 25

6.5.3   Paragraphs 7.39, 7.45, and 7.110: scope of China's arguments. 25

6.5.4   Footnote 88 (footnote 94 of the Final Reports): information obtained during consultations  26

6.5.5   Paragraphs 7.59 and 7.60: facts before MOFCOM.. 26

6.5.6   Footnote 128 (footnote 136 of the Final Reports): table 6-3. 26

6.5.7   Paragraph 7.95: MOFCOM's dumping determination. 26

6.5.8   Paragraph 7.112: headings of sub-sections in the complainants' submissions. 26

6.5.9   Paragraph 7.113: clarification of China's arguments. 27

6.5.10   Paragraphs 7.120, 7.134, 7.135, 7.157, 7.183, 7.210, 7.230, 7.287, footnotes 436, 437, 440, 459, 461 (footnotes 456, 457, 460, 479 and 481 of the Final Reports): clarification of China's position. 27

6.5.11   Paragraph 7.171: inclusion of a cite to Final Determination. 27

6.5.12   Paragraphs 7.180-7.188 and 7.192: market shares of subject imports. 27

6.5.13   Paragraph 7.297 and 7.298: MOFCOM's statement and relevant appendices. 28

6.5.14   Footnotes 482, 495, and 501 (footnotes 502, 515 and 521 of the Final Reports): non-confidential summaries. 28

6.5.15   Paragraphs 8.1, 8.3, 8.6, and 8.8: consequential claims. 28

7   Findings. 29

7.1   General principles regarding treaty interpretation, the applicable standard of review and burden of proof 29

7.1.1   Treaty Interpretation. 29

7.1.2   Standard of Review.. 29

7.1.3   Burden of Proof 30

7.2   BCI Procedures. 30

7.2.1   Relevant provisions of the BCI Procedures. 30

7.2.2   Main arguments of the parties. 31

7.2.2.1   European Union. 31

7.2.2.2   Japan. 31

7.2.2.3   China. 32

7.2.3   Main arguments of third parties. 32

7.2.3.1   United States. 32

7.2.4   Evaluation by the Panel 33

7.2.4.1   BCI designation. 33

7.2.4.2   Authorizing letter 35

7.3   Panel's terms of reference. 37

7.3.1   Relevant WTO provisions. 37

7.3.2   Main arguments of the parties. 38

7.3.2.1   China. 38

7.3.2.2   European Union. 39

7.3.3   Evaluation by the Panel 40

7.4   MOFCOM's dumping determination. 44

7.4.1   The use of SG&A amounts for Grade B. 44

7.4.1.1   Relevant WTO provisions. 44

7.4.1.2   Main arguments of the parties. 44

7.4.1.2.1   European Union. 44

7.4.1.2.2   China. 45

7.4.1.3   Main arguments of third parties. 45

7.4.1.3.1   Kingdom of Saudi Arabia. 45

7.4.1.3.2   United States. 45

7.4.1.4   Evaluation by the Panel 46

7.4.2   Fair comparison: SMST's sales of Grade C. 48

7.4.2.1   Relevant WTO provision. 48

7.4.2.2   Main arguments of the parties. 48

7.4.2.2.1   European Union. 48

7.4.2.2.2   China. 48

7.4.2.3   Main arguments of third parties. 49

7.4.2.3.1   Korea. 49

7.4.2.3.2   Kingdom of Saudi Arabia. 49

7.4.2.3.3   United States. 49

7.4.2.4   Evaluation by the Panel 50

7.4.3   Alleged failure to take into account certain information provided during verification. 53

7.4.3.1   Relevant WTO provisions. 53

7.4.3.2   Main arguments of the parties. 54

7.4.3.2.1   European Union. 54

7.4.3.2.2   China. 55

7.4.3.3   Main arguments of third parties. 55

7.4.3.3.1   Turkey. 55

7.4.3.3.2   United States. 55

7.4.3.4   Evaluation by the Panel 56

7.5   MOFCOM's determination that subject imports caused material injury to the domestic industry  59

7.5.1   Whether MOFCOM's consideration of the price effects of subject imports is inconsistent with Articles 3.1 and 3.2 of the Anti-Dumping Agreement 59

7.5.1.1   Introduction. 59

7.5.1.2   Relevant provisions. 59

7.5.1.3   Alleged flaws in MOFCOM's consideration of price undercutting in respect of Grade C. 60

7.5.1.3.1   The difference between the volume of Grade C subject imports and the volume of domestic Grade C products. 60

7.5.1.3.1.1   Main arguments of the parties. 60

7.5.1.3.1.2   Evaluation by the Panel 61

7.5.1.3.2   Whether Grade C subject imports had any price undercutting effect on domestic Grade C products  62

7.5.1.3.2.1   Main arguments of the parties. 62

7.5.1.3.2.2   Evaluation by the Panel 64

7.5.1.4   Whether MOFCOM improperly extended its findings of price undercutting in respect of Grades B and C to the domestic like product as a whole. 67

7.5.1.4.1   Main arguments of the parties. 67

7.5.1.4.2   Evaluation by the Panel 68

7.5.1.5   Conclusion. 70

7.5.2   Whether MOFCOM's assessment of the impact of dumped imports on the state of the domestic industry is inconsistent with Articles 3.1 and 3.4 of the Anti-Dumping Agreement 70

7.5.2.1   Introduction. 70

7.5.2.2   Relevant provisions. 71

7.5.2.3   Whether MOFCOM should have undertaken a segmented analysis of the impact of dumped imports  71

7.5.2.3.1   Main arguments of the parties. 71

7.5.2.3.1.1   Japan and the European Union. 71

7.5.2.3.1.2   China. 71

7.5.2.3.2   Main arguments of third parties. 72

7.5.2.3.2.1   Kingdom of Saudi Arabia. 72

7.5.2.3.2.2   Turkey. 72

7.5.2.3.3   Evaluation by the Panel 72

7.5.2.4   Whether MOFCOM properly evaluated the magnitude of the margin of dumping. 74

7.5.2.4.1   Main arguments of the parties. 74

7.5.2.4.1.1   Japan and the European Union. 74

7.5.2.4.1.2   China. 74

7.5.2.4.2   Main arguments of third parties. 74

7.5.2.4.2.1   United States. 74

7.5.2.4.3   Evaluation by the Panel 74

7.5.2.5   Whether MOFCOM properly weighed positive and negative injury factors. 75

7.5.2.5.1   Main arguments of the parties. 75

7.5.2.5.1.1   Japan and the European Union. 75

7.5.2.5.1.2   China. 75

7.5.2.5.2   Evaluation by the Panel 76

7.5.2.6   Conclusion. 77

7.5.3   Whether MOFCOM's causation analysis is inconsistent with Articles 3.1 and 3.5 of the Anti-Dumping Agreement 77

7.5.3.1   Introduction. 77

7.5.3.2   Relevant provisions. 78

7.5.3.3   MOFCOM's reliance on the market share of subject imports. 78

7.5.3.3.1   Main arguments of the parties. 78

7.5.3.3.1.1   Japan and the European Union. 78

7.5.3.3.1.2   China. 79

7.5.3.3.2   Main arguments of third parties. 79

7.5.3.3.2.1   United States. 79

7.5.3.3.3   Evaluation by the Panel 80

7.5.3.4   Consequential Article 3.5 claims concerning MOFCOM's reliance on its Article 3.2 and 3.4 analyses of the price effects and impact of subject imports. 83

7.5.3.4.1   Main arguments of the parties. 83

7.5.3.4.1.1   Japan and the European Union. 83

7.5.3.4.1.2   China. 83

7.5.3.4.2   Evaluation by the Panel 83

7.5.3.5   Whether MOFCOM properly ensured that the injury caused by certain known factors was not attributed to subject imports. 84

7.5.3.5.1   Main arguments of the parties. 84

7.5.3.5.1.1   Japan and the European Union. 84

7.5.3.5.1.2   China. 85

7.5.3.5.2   Evaluation by the Panel 85

7.5.3.6   Conclusion. 86

7.6   Use of facts available for the all others rate. 87

7.6.1   Introduction. 87

7.6.2   Main arguments of the parties. 87

7.6.2.1   Japan and the European Union. 87

7.6.2.2   China. 87

7.6.3   Main arguments of third parties. 88

7.6.3.1   United States. 88

7.6.4   Evaluation by the Panel 88

7.6.4.1   The complainants' principal claims. 88

7.6.4.2   Additional claims pursued by the complainants. 90

7.6.4.3   Conclusion. 91

7.7   Essential facts. 91

7.7.1   Main arguments of the parties. 91

7.7.1.1   Japan and the European Union. 91

7.7.1.2   China. 92

7.7.2   Main arguments of third parties. 92

7.7.2.1   United States. 92

7.7.3   Evaluation by the Panel 93

7.7.3.1   MOFCOM's dumping determination. 93

7.7.3.1.1   Data underlying MOFCOM's determination of dumping. 93

7.7.3.1.2   Calculation methodology. 94

7.7.3.2   Essential facts concerning MOFCOM's injury determination. 95

7.7.3.2.1   Import price data. 95

7.7.3.2.2   Domestic prices. 96

7.7.3.2.3   Price comparisons. 96

7.7.3.3   Essential facts concerning the all others rates. 97

7.8   Public notice. 99

7.8.1   Main arguments of the parties. 100

7.8.1.1   Japan and the European Union. 100

7.8.1.2   China. 100

7.8.2   Main arguments of third parties. 100

7.8.2.1   United States. 100

7.8.3   Evaluation by the Panel 101

7.8.3.1   General interpretive approach. 101

7.8.3.2   Injury determination. 103

7.8.3.3   Dumping determination. 104

7.8.3.4   Conclusion. 105

7.9   Treatment of confidential information. 105

7.9.1   Relevant WTO provisions. 105

7.9.2   Main arguments of the parties. 106

7.9.2.1   Japan and the European Union. 106

7.9.2.2   China. 106

7.9.3   Main arguments of third parties. 107

7.9.3.1   United States. 107

7.9.4   Evaluation by the Panel 107

7.9.4.1   Article 6.5 of the Anti-Dumping Agreement: showing of "good cause" with respect to the full text of certain reports. 107

7.9.4.1.1   Petitioners' requests. 108

7.9.4.1.2   MOFCOM's statement 109

7.9.4.1.3   Whether MOFCOM was required to examine the requests for confidential treatment, and explain its conclusions. 112

7.9.4.1.4   Conclusion. 112

7.9.4.2   Article 6.5.1 of the Anti-Dumping Agreement 113

7.9.4.2.1   Non-confidential summaries. 113

7.9.4.2.1.1   Appendix V to the petition. 114

7.9.4.2.1.2   Appendix to the petitioners' supplemental evidence of 29 March 2012. 115

7.9.4.2.1.3   Appendix VIII to the petition. 115

7.9.4.2.1.4   Appendix 59 to the petitioners' supplemental evidence of 1 March 2012. 116

7.9.4.2.1.5   Conclusion. 116

7.9.4.2.2   Statements as to why summarization was not possible. 117

7.10   Application of provisional measures. 118

7.10.1   Relevant WTO provision. 118

7.10.2   Main arguments of the parties. 118

7.10.2.1   Japan and the European Union. 118

7.10.2.2   China. 118

7.10.3   Main arguments of third parties. 119

7.10.3.1   United States. 119

7.10.4   Evaluation by the Panel 119

7.11   Consequential claims. 119

8   Conclusions and Recommendations. 120

8.1   Complaint by Japan (DS454) 120

8.1.1   Conclusions. 120

8.1.2   Recommendations. 121

8.2   Complaint by the European Union (DS460) 122

8.2.1   Conclusions. 122

8.2.2   Recommendations. 124

 

 


List of Annexes

 

ANNEX A

WORKING PROCEDURES OF THE PANELS

Contents

Page

Annex A-1

Working Procedures of the Panels

A-2

Annex A-2

Additional Working Procedures on BCI

A-7

ANNEX B

ARGUMENTS OF Japan and the European Union

Contents

Page

Annex B-1

Executive Summary of the First Written Submission of Japan

B-2

Annex B-2

Executive Summary of the Second Written Submission of Japan

B-10

Annex B-3

Executive Summary of the Statement of Japan at the First Panel Meeting

B-18

Annex B-4

Executive Summary of the Statements of Japan at the Second Panel Meeting

B-23

Annex B-5

Executive Summary of the First Written Submission of the European Union

B-28

Annex B-6

Executive Summary of the Second Written Submission of the European Union

B-34

Annex B-7

Executive Summary of the Statement of the European Union at the First Panel Meeting

B-41

Annex B-8

Executive Summary of the Statements of the European Union at the Second Panel Meeting

B-46

ANNEX C

ARGUMENTS OF China

Contents

Page

Annex C-1

Executive Summary of the First Written Submission of China

C-2

Annex C-2

Executive Summary of the Statement of China at the First Panel Meeting

C-7

Annex C-3

Executive Summary of the Second Written Submission of China

C-9

Annex C-4

Executive Summary of the Statements of China at the Second Panel Meeting

C-14

ANNEX D

ARGUMENTS OF THIRD PARTIES

Contents

Page

Annex D-1

Third-Party Statement of the Republic of Korea

D-2

Annex D-2

Third-Party Statement of the Kingdom of Saudi Arabia

D-4

Annex D-3

Third-Party Statement of Turkey

D-7

Annex D-4

Integrated Executive Summary of the Arguments of the United States

D-12

 


CASES CITED IN THESE REPORTs

Short title

Full case title and citation

China – Autos (US)

Panel Report, China – Anti-Dumping and Countervailing Duties on Certain Automobiles from the United States, WT/DS440/R and Add.1, adopted 18 June 2014

China – Raw Materials

Appellate Body Reports, China – Measures Related to the Exportation of Various Raw Materials, WT/DS394/AB/R - WT/DS395/AB/R - WT/DS398/AB/R, adopted 22 February 2012, DSR 2012:VII, p. 3295

China – X-Ray Equipment

Panel Report, China – Definitive Anti-Dumping Duties on X-Ray Security Inspection Equipment from the European Union, WT/DS425/R and Add.1, adopted 24 April 2013

EC – Bed Linen

Appellate Body Report, European Communities – Anti‑Dumping Duties on Imports of Cotton‑Type Bed Linen from India, WT/DS141/AB/R, adopted 12 March 2001, DSR 2001:V, p. 2049

EC – Fasteners (China)

Appellate Body Report, European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WT/DS397/AB/R, adopted 28 July 2011, DSR 2011:VII, p. 3995

EC – Fasteners (China)

Panel Report, European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WT/DS397/R and Corr.1, adopted 28 July 2011, as modified by Appellate Body Report WT/DS397/AB/R, DSR 2011:VIII, p. 4289

EC – Hormones

Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, p. 135

EC – Salmon (Norway)

Panel Report, European Communities – Anti‑Dumping Measure on Farmed Salmon from Norway, WT/DS337/R, adopted 15 January 2008, and Corr.1, DSR 2008:I, p. 3

EC – Tube or Pipe Fittings

Appellate Body Report, European Communities – Anti‑Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/AB/R, adopted 18 August 2003, DSR 2003:VI, p. 2613

EC – Tube or Pipe Fittings

Panel Report, European Communities – Anti‑Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/R, adopted 18 August 2003, as modified by Appellate Body Report WT/DS219/AB/R, DSR 2003:VII, p. 2701

EC and certain member States – Large Civil Aircraft

Appellate Body Report, European Communities and Certain Member States
– Measures Affecting Trade in Large Civil Aircraft
, WT/DS316/AB/R, adopted 1 June 2011, DSR 2011:I, p. 7

Egypt – Steel Rebar

Panel Report, Egypt – Definitive Anti‑Dumping Measures on Steel Rebar from Turkey, WT/DS211/R, adopted 1 October 2002, DSR 2002:VII, p. 2667

Guatemala – Cement I

Appellate Body Report, Guatemala – Anti‑Dumping Investigation Regarding Portland Cement from Mexico, WT/DS60/AB/R, adopted 25 November 1998, DSR 1998:IX, p. 3767

Korea – Alcoholic Beverages

Panel Report, Korea – Taxes on Alcoholic Beverages, WT/DS75/R, WT/DS84/R, adopted 17 February 1999, as modified by Appellate Body Report WT/DS75/AB/R, WT/DS84/AB/R, DSR 1999:I, p. 44

Korea – Dairy

Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R, adopted 12 January 2000, DSR 2000:I, p. 3

Mexico – Anti‑Dumping Measures on Rice

Panel Report, Mexico – Definitive Anti‑Dumping Measures on Beef and Rice, Complaint with Respect to Rice, WT/DS295/R, adopted 20 December 2005, as modified by Appellate Body Report WT/DS295/AB/R, DSR 2005:XXIII, p. 11007

Thailand – H‑Beams

Appellate Body Report, Thailand – Anti‑Dumping Duties on Angles, Shapes and Sections of Iron or Non‑Alloy Steel and H‑Beams from Poland, WT/DS122/AB/R, adopted 5 April 2001, DSR 2001:VII, p. 2701

US – Carbon Steel

Appellate Body Report, United States – Countervailing Duties on Certain Corrosion‑Resistant Carbon Steel Flat Products from Germany, WT/DS213/AB/R and Corr.1, adopted 19 December 2002, DSR 2002:IX, p. 3779

US – Continued Zeroing

Appellate Body Report, United States – Continued Existence and Application of Zeroing Methodology, WT/DS350/AB/R, adopted 19 February 2009, DSR 2009:III, p. 1291

US – Countervailing and Anti‑Dumping Measures (China)

Panel Report, United States – Countervailing and Anti-Dumping Measures on Certain Products from China, WT/DS449/R and Add.1, adopted 22 July 2014, as modified by Appellate Body Report WT/DS449/AB/R

US – Countervailing Duty Investigation on DRAMS

Appellate Body Report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea, WT/DS296/AB/R, adopted 20 July 2005, DSR 2005:XVI, p. 8131

US – Softwood Lumber V

Appellate Body Report, United States – Final Dumping Determination on Softwood Lumber from Canada, WT/DS264/AB/R, adopted 31 August 2004, DSR 2004:V, p. 1875

US – Softwood Lumber VI (Article 21.5 – Canada)

Appellate Body Report, United States – Investigation of the International Trade Commission in Softwood Lumber from Canada – Recourse to Article 21.5 of the DSU by Canada, WT/DS277/AB/RW, adopted 9 May 2006, and Corr.1, DSR 2006:XI, p. 4865

US – Tyres (China)

Appellate Body Report, United States – Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tyres from China, WT/DS399/AB/R, adopted 5 October 2011, DSR 2011:IX, p. 4811

US – Upland Cotton

Appellate Body Report, United States – Subsidies on Upland Cotton, WT/DS267/AB/R, adopted 21 March 2005, DSR 2005:I, p. 3

US – Wool Shirts and Blouses

Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R, adopted 23 May 1997, and Corr.1, DSR 1997:I, p. 323

 


ABBREVIATIONS USED IN THEsE REPORTS

Abbreviation

Description

Anti-Dumping Agreement

Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994

BCI

Business confidential information

BCI Procedures

Additional working procedures of the Panels concerning business confidential information

Complainants

Japan and the European Union

DSB

Dispute Settlement Body

DSU

Understanding on Rules and Procedures Governing the Settlement of Disputes

Final Determination notice

MOFCOM Notice No. 72 [2012]

GAAP

Generally accepted accounting principles

GATT 1994

General Agreement on Tariffs and Trade 1994

HP-SSST

High-performance stainless steel seamless tubes

Kobe

Kobe Special Tube Co., Ltd.

MOFCOM

Ministry of Commerce of the People's Republic of China

China

People's Republic of China

Preliminary Determination notice

MOFCOM Notice No. 21 [2012]

SMI

Sumitomo Metal Industries, Ltd.

Vienna Convention

Vienna Convention on the Law of Treaties, Done at Vienna, 23 May 1969, 1155 UNTS 331; 8 International Legal Materials 679

WTO

World Trade Organization

 


1  Introduction

1.1  Complaints by Japan and the European Union

1.1.  On 20 December 2012, Japan requested consultations[1] with China pursuant to Articles 1 and 4 of the DSU, Article XXII:1 of the GATT 1994, and Articles 17.2 and 17.3 of the Anti-Dumping Agreement with respect to the measures and claims set out below. On 13 June 2013, the European Union requested consultations[2] with China pursuant to the same, above-mentioned provisions and with respect to the measures and claims set out below. In both complaints, the consultations concerned China's measures imposing anti-dumping duties on certain HP-SSST from Japan and the European Union respectively, as set forth in MOFCOM's Preliminary Determination notice, and MOFCOM's Final Determination notice, including any and all annexes and any amendments thereof.[3]

1.2.  Consultations were held between Japan and China on 31 January and 1 February 2013, and between the European Union and China on 17 and 18 July 2013. These consultations failed to resolve the disputes.

1.2  Panel establishment and composition

1.3.  On 11 April 2013 and 16 August 2013 respectively, Japan and the European Union each requested the establishment of a panel pursuant to Articles 4.7 and 6 of the DSU, Article XXIII of the GATT 1994, and Article 17.4 of the Anti-Dumping Agreement with standard terms of reference.[4] At its meetings on 24 May 2013 and 30 August 2013, the DSB established two panels pursuant to, respectively, the request of Japan in document WT/DS454/4 and the request of the European Union in document WT/DS460/4, in accordance with Article 6 of the DSU.[5]

1.4.  The Panels' terms of reference are the following:

To examine, in the light of the relevant provisions of the covered agreements cited by the parties to the dispute, the matter referred to the DSB by Japan in document WT/DS454/4 and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements.[6]

To examine, in the light of the relevant provisions of the covered agreements cited by the parties to the dispute, the matter referred to the DSB by the European Union in document WT/DS460/4 and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements.[7]

1.5.  With respect to WT/DS454, on 17 July 2013, Japan requested the Director-General to determine the composition of the Panel, pursuant to Article 8.7 of the DSU. On 29 July 2013, the Director-General accordingly composed the Panel as follows:

Chairperson:   Mr Miguel Rodríguez Mendoza

 

Members:               Ms Stephanie Sin Far Lee

                                Mr Gustav Francois Brink

 

1.6.  With respect to WT/DS460, following the agreement of the parties, the Panel was composed with the same persons on 11 September 2013. Following consultations with the parties, the Panels in the two disputes decided to harmonize their timetables to the greatest extent possible, in accordance with Article 9.3 of the DSU.[8]

1.7.  India, Korea, the Russian Federation, the Kingdom of Saudi Arabia, Turkey and the United States reserved their rights to participate in the Panel proceedings as third parties in both disputes. In addition, the European Union reserved its rights to participate as a third party in the Panel proceedings in WT/DS454, and Japan reserved its rights to participate as a third party in the Panel proceedings in WT/DS460.

1.3  Panel proceedings

1.3.1  General

1.8.  After consultation with the parties, the Panel adopted its Joint Working Procedures[9] and timetable on 27 September 2013. The Panel introduced modifications to its Joint Working Procedures and timetable on 22 May 2014.[10]

1.9.  The Panel held a first substantive meeting with the parties on 25-26 February 2014. A session with the third parties took place on 26 February 2014. The Panel held a second substantive meeting with the parties on 20-21 May 2014. On 18 July 2014, the Panel issued the descriptive part of its Report to the parties. The Panel issued its Interim Report to the parties on 19 September 2014. The Panel issued its Final Report to the parties on 7 November 2014.

1.3.2  Working procedures on Business Confidential Information (BCI)

1.10.  After consultation with the parties, the Panel adopted additional working procedures concerning BCI on 27 September 2013.[11] The Panel introduced modifications to its additional working procedures concerning BCI on 22 May 2014.

2  Factual aspects

2.1  The measures at issue

2.1.  These disputes concern China's measures imposing anti-dumping duties on certain HP-SSST, as set forth in MOFCOM's Preliminary Determination, and MOFCOM's Final Determination, including any and all annexes and any amendments thereof.

3  Parties' requests for findings and recommendations

3.1  Japan

3.1.  Japan requests the Panel to find that:

a.      China's injury determination is inconsistent with Articles 3.1, 3.2, 3.4 and 3.5 of the Anti-Dumping Agreement. Specifically:

i.        China's price effects analysis is inconsistent with Articles 3.1 and 3.2 of the Anti-Dumping Agreement;

ii.       China's impact analysis is inconsistent with Articles 3.1 and 3.4 of the Anti-Dumping Agreement;

iii.     China's demonstration of the alleged causal relationship between the imports under investigation and the alleged injury to the domestic industry is inconsistent with Articles 3.1 and 3.5 of the Anti-Dumping Agreement; and

iv.     China's attribution of the domestic industry's injury to imports under investigation is inconsistent with Articles 3.1 and 3.5 of the Anti-Dumping Agreement;

b.     China's treatment of certain information supplied by the applicants as confidential is inconsistent with Article 6.5 of the Anti-Dumping Agreement;

c.      China acted inconsistently with Article 6.5.1 of the Anti-Dumping Agreement by failing to require applicants to furnish adequate non-confidential summaries of information treated as confidential or explanations as to why summarization was not possible;

d.     China's reliance on facts available to calculate the dumping margin for all Japanese companies other than SMI and Kobe is inconsistent with Article 6.8 and Paragraph 1 of Annex II to the Anti-Dumping Agreement;

e.     China acted inconsistently with Article 6.9 of the Anti-Dumping Agreement by failing to adequately disclose essential facts in connection with:

i.        the determination of the existence of dumping and the calculation of dumping margins for SMI and Kobe, including relevant data and calculation methodologies;

ii.       the determination and the calculation of the dumping margins for all Japanese companies other than SMI and Kobe; and

iii.     China's determinations of injury and causation, including the import prices and domestic prices used therein;

f.       China's application of provisional measures for a period exceeding four months is inconsistent with Article 7.4 of the Anti-Dumping Agreement;

g.     China acted inconsistently with Article 12.2 of the Anti-Dumping Agreement by failing to set forth in sufficient detail in its Final Determination notice or a separate report China's findings and conclusions on all material issues of fact and law in connection with:

i.        the determination and the calculation of dumping margins for all Japanese companies other than SMI and Kobe; and

ii.       the determinations of injury and causation, including the import prices and domestic prices used therein;

h.     China acted inconsistently with Article 12.2.2 of the Anti-Dumping Agreement by failing to include in its Final Determination notice or a separate report all relevant information on matters of fact and law and reasons in connection with:

i.        the determination and the calculation of the dumping margins for all Japanese companies other than SMI and Kobe; and

ii.       the determinations of injury and causation, including the import prices and domestic prices used therein; and

i.        As a consequence of the inconsistencies described above, China's anti-dumping measures on HP-SSST from Japan are also inconsistent with Article 1 of the Anti-Dumping Agreement and Article VI of the GATT 1994.

3.2.  Pursuant to Article 19.1 of the DSU, Japan requests the Panel to recommend that China bring its measures into conformity with the GATT 1994 and the Anti-Dumping Agreement.[12]

3.3.  Japan also requests that the Panel make findings with respect to each of Japan's claims under the GATT 1994 and the Anti-Dumping Agreement, including each claim under Article 3.1, 3.2, 3.4, and 3.5 of the Anti-Dumping Agreement, without exercising judicial economy as to any of Japan's claims, so as to secure a prompt resolution of this dispute.[13]

3.2  European Union

3.4.  The European Union requests the Panel to find that:

a.      China's determination of certain SG&A amount is inconsistent with Articles 2.2, 2.2.1, 2.2.1.1 and 2.2.2 of the Anti-Dumping Agreement;

b.     China acted inconsistently with Articles 2.4 and 2.4.2 of the Anti-Dumping Agreement by failing to establish the existence of margins of dumping on the basis of a fair comparison between the export price and the normal value;

c.      China's volume and price effect analyses in connection with MOFCOM's injury determination are inconsistent with Articles 3.1 and 3.2 of the Anti-Dumping Agreement;

d.     China's impact analysis in connection with MOFCOM's injury determination is inconsistent with Articles 3.1 and 3.4 of the Anti-Dumping Agreement;

e.     China's determination of causal link is inconsistent with Articles 3.1 and 3.5 of the Anti-Dumping Agreement;

f.       China acted inconsistently with Article 6.4 of the Anti-Dumping Agreement by failing to disclose to interested parties all information that is relevant to the presentation of their cases and that is used by the authorities in an anti-dumping investigation;

g.     China's treatment of certain information supplied by the applicants as confidential is inconsistent with Article 6.5 of the Anti-Dumping Agreement;

h.     China acted inconsistently with Article 6.5.1 of the Anti-Dumping Agreement by failing to require applicants to furnish adequate non-confidential summaries of information treated as confidential or explanations as to why furnishing such summaries was not possible;

i.        China acted inconsistently with Article 6.7 and Paragraph 7 of Annex I to the Anti-Dumping Agreement by refusing to take into account information relevant for the determination of the margins of dumping provided during the on-the-spot investigation;

j.       China acted inconsistently with Article 6.8 and Paragraphs 3 and 6 of Annex II to the Anti-Dumping Agreement by failing to take into account certain information pertaining to the determination of the margins of dumping;

k.      China's reliance on facts available to determine the margin of dumping for all European Union companies other than those for which individual margins of dumping were determined is inconsistent with Article 6.8 and Paragraph 1 of Annex II to the Anti-Dumping Agreement;

l.        China acted inconsistently with Article 6.9 of the Anti-Dumping Agreement by failing to inform the interested parties of the essential facts under consideration which form the basis for the decision to impose definitive anti-dumping measures;

m.   China's application of provisional measures for a period exceeding four months is inconsistent with Article 7.4 of the Anti-Dumping Agreement;

n.     China acted inconsistently with Articles 12.2 and 12.2.2 of the Anti-Dumping Agreement by failing to provide in sufficient detail the findings and conclusions reached on all issues of fact and law considered material by the investigating authorities, as well as all relevant information on the matters of fact and law and reasons which have led to the imposition of final measures; and

o.     As a consequence of the inconsistencies described above, China's anti-dumping measures on HP-SSST from the European Union are also inconsistent with Article 1 of the Anti-Dumping Agreement and Article VI of the GATT 1994.

3.5.  Pursuant to Article 19.1 of the DSU, the European Union requests the Panel to recommend that China bring its measures into conformity with the GATT 1994 and the Anti-Dumping Agreement, and make appropriate suggestions to that effect, including that China refund the duties collected with respect to the period in which the provisional measure was applied inconsistently with Article 7.4 of the Anti-Dumping Agreement.[14]

3.6.  The European Union also requests the Panel to exercise its right, pursuant to Article 13.1 of the DSU, to seek information from China equivalent to full disclosure that should have been made during the underlying proceedings.[15]

3.3  China

3.7.  China requests the Panel to find that certain of the European Union's claims under Article 2 of the Anti-Dumping Agreement fall outside the Panel's terms of reference. In addition, China requests the Panel to reject Japan's and the European Union's claims in these disputes.

4  Arguments of the parties

4.1.  The arguments of the parties are reflected in their executive summaries, provided to the Panel in accordance with paragraph 19 of the Joint Working Procedures adopted by the Panel (see list of Annexes on page 3).

5  Arguments of the thiRd parties

5.1.  The arguments of Korea, the Kingdom of Saudi Arabia, Turkey and the United States are reflected in their integrated executive summaries or third-party statements, provided in accordance with paragraph 19 of the Joint Working Procedures adopted by the Panel (see list of Annexes on page 3). India and the Russian Federation did not submit third-party written submissions or statements to the Panel.

6  Interim Review

6.1  Introduction

6.1.  The Panel issued its Interim Reports to the parties on 19 September 2014. On 3 October 2014, the parties submitted written requests for review of precise aspects of the Interim Reports. On 10 October 2014, the parties submitted comments on the other parties' requests for review. None of the parties asked the Panel to hold an interim review meeting.

6.2.  The Panel explains below its response to issues raised by the parties in the context of interim review. The Panel has also corrected a number of typographical errors identified by the parties, and is grateful for their assistance in this regard.

6.3.  Due to changes as a result of our review, the numbering of the footnotes in the Final Reports has changed from the Interim Reports. The text below refers to the footnote numbers in the Interim Reports, with the corresponding footnote numbers in the Final Reports provided in parentheses for ease of reference. There is no change to the paragraph numbering of the Panel's findings.

6.4.  Before turning to the parties' requests for interim review, we address a procedural issue raised by China concerning the fact that Japan, which brought the DS454 proceeding, requested review in respect of the Panel's evaluation of claims also brought by the European Union in the DS460 proceeding.

6.2  Procedural issue raised by China concerning Japan's requests for interim review in respect of claims also raised in the DS460 proceeding

6.5.  China objects[16] to Japan being allowed to make requests for interim review in respect of the Panel's Report in DS454 that would also affect the Panel's Report in respect of DS460. China observes in this regard that Japan is a third party in the DS460 proceeding, and that third parties do not have the right to request interim review.

6.6.  We are not persuaded by China's arguments. China's approach would undermine Paragraph 1 of the Panels' Working Procedures, which specifies that:

The Panels shall, to the greatest extent possible, conduct a single panel process, with a single record, resulting in separate reports contained in a single document, taking into account the rights of all Members concerned, and in such a manner that the rights that parties or third parties would otherwise have enjoyed are in no way impaired.

6.7.  Paragraph 1 of the Working Procedures is designed to simplify the drafting of their reports, whereas China's position would complicate that task by requiring a panel to issue separate findings in respect of claims brought by both complainants when they accept to modify their findings on the basis of a request for interim review raised by only one of the complainants. China's position is inconsistent with the single panel process envisaged in Paragraph 1 of the Working Procedures. In our view, the Panels' approach should be governed by the overarching requirement in Paragraph 1 of the Working Procedures not to impair the rights of the parties or third parties. We note in this regard that China neither states nor demonstrates that its rights have been impaired by the way that the Panel has conducted Interim Review. In addition, we observe that the European Union has in any event supported Japan's requests and comments in respect of the Interim Reports.[17]

6.3  Requests for interim review by Japan

6.3.1  Paragraph 7.105: potential for subject imports to have price effects

6.8.  Japan objects to the Panel suggesting that Japan had argued that an investigating authority need only consider the potential for subject imports to have price effects. Japan asserts that an investigating authority must consider whether subject imports had actual price effects. Japan asks the Panel to amend paragraph 7.105 (and other parts) of its Interim Reports accordingly.

6.9.  In order to avoid any risk of misrepresenting Japan's argument, we have made the changes requested by Japan. In addition to amending paragraph 7.105, we have also amended the heading to Section 7.5.1.3.2, footnote 252 (of the Final Reports), and paragraphs 7.121, 7.130, 7.138, 7.144, 8.2(a)(i) and 8.7(b)(i).

6.3.2  Paragraph 7.114: price comparability

6.10.  Japan submits that record evidence with respect to pricing, which Japan relied on in the context of other issues, also demonstrates the lack of price comparability between imported and domestic Product C. Japan asks the Panel to refer to this additional evidence in support of its findings.

6.11.  China objects to Japan's request. China asserts that Japan did not rely on the relevant evidence in respect of the claim at issue.

6.12.  We reject Japan's request. Japan did not rely on the relevant evidence when advancing its claims before the Panel. In addition, the Panel's findings are adequately supported by the reasoning provided.

6.3.3  Paragraph 7.130: competitive relationship

6.13.  Japan asks the Panel to address its argument concerning the competitive relationship between subject imports and domestic like products. Japan suggests that this argument is relevant irrespective of whether the price undercutting analysis necessarily involves the examination of whether the dumped imports had an effect of placing downward pressure on domestic prices. Japan refers to paragraph 23 of its second written submission and paragraph 9 of its oral statement at the second substantive meeting to argue that its competitive relationship argument relates to comparability and the making of price comparisons, irrespective of the effect issue.

6.14.  China asks the Panel to reject Japan's request, on the basis that the Panel's position is clear, and that Japan essentially requests the Panel to assess legal and factual questions that are not at stake in the present dispute.

6.15.  The relevant section of the Interim Reports is concerned with the complainants' effect argument. Paragraph 23 of Japan's second written submission was also drafted in that context. We note in this regard that the preceding paragraph relates expressly to China's argument that an investigating authority is not required to establish that a price differential is an effect of dumped imports. Similarly, paragraph 9 of Japan's oral statement at the second substantive meeting states in relevant part that "[w]ithout such a competitive relationship, there can be no proper finding that the dumped imports had an effect of placing downward pressure on domestic prices". Japan's argument, therefore, was not made irrespective of the effect issue, as suggested by Japan. Since the Panel rejects the notion that an investigating authority need consider the effect of subject imports in the context of price undercutting, there is no need for the Panel to address the complainants' argument that such effect cannot not exist absent a competitive relationship between imported and domestic like products. We reject Japan's request accordingly.

6.3.4  Paragraph 7.132: clarification

6.16.  Japan has proposed a minor modification to clarify the nature of the argument being made by the complainants. Japan proposes to replace "deny" with "explain".

6.17.  China agrees with Japan's proposal to delete "deny", but suggests the use of the word "assert" instead.

6.18.  We have clarified the argument being made, as requested by Japan. We have done so by using the term "assert", as suggested by China.

6.3.5  Paragraphs 7.132 and 7.137, footnotes 239 and 246 (footnotes 254 and 262 of the Final Reports): translation

6.19.  Japan observes that the Panel failed to note Japan's objection to China's translation of part of MOFCOM's Final Determination. Japan notes that it had used "noticeable", whereas China had proposed the use of "significant" instead. Japan asks the Panel to amend footnotes 239 and 246 accordingly.

6.20.  We have amended footnotes 254 and 262 – and paragraphs 7.132 and 7.137 – of the Final Reports to address the concern raised by Japan. We have done so by including both the terms "significant" and "noticeable" in square brackets. There is no need for the Panel to choose between these terms, since the precise term used does not impact on the Panels' evaluation of the substantive matter at hand.

6.3.6  Paragraphs 7.136-7.143: scope of MOFCOM's price undercutting determination

6.21.  Japan suggests that the Panel has misunderstood the scope of the price undercutting finding made by MOFCOM. Japan asserts that MOFCOM's finding is ambiguous, and may be interpreted in a different manner. Japan also asks the Panel to rule that MOFCOM's determination is deficient because of such alleged ambiguity.

6.22.  China objects to Japan's request. China considers that Japan is essentially requesting the Panel to reach beyond what is necessary to resolve the dispute and to make certain findings assuming that the facts of the case would be different.

6.23.  We see no need for the Panel to amend its findings. First, while we observe at paragraph 7.137 that MOFCOM "might have expressed itself more clearly", our understanding of the scope of MOFCOM's finding is reasonable in light of the language used by MOFCOM. Second, the specific part of MOFCOM's finding referred to by Japan (i.e. the sentence immediately preceding the one cited by the Panel) does not refer to price undercutting per se. That sentence, therefore, should not determine our understanding of the scope of MOFCOM's price undercutting finding.

6.3.7  Paragraph 7.140: use of indefinite article

6.24.  Japan suggests that the Panel's analysis of the use of the indefinite article "a" preceding "like product" in the second sentence of Article 3.2 is "absurd", since it means that only a trivial volume of subject imports sold at undercutting prices would be sufficient to establish price effects under Articles 3.1 and 3.2.

6.25.  China asks the Panel to reject Japan's request. China suggests that Japan is merely seeking to re-argue points that it made in its submissions to the Panel.

6.26.  We are not persuaded by Japan's arguments. We consider that each case would need to be examined on its facts, and that in any event establishment of price effects for the purpose of Articles 3.1 and 3.2 is not sufficient, by itself, to establish causation under Article 3.5. Further, we consider that Japan's suggestion that the Panel's analysis is "absurd" is not an appropriate basis for requesting interim review.

6.3.8  Paragraph 7.141, footnote: request for deletion

6.27.  Japan asks the Panel to delete a footnote in paragraph 7.141, on the basis that it is unclear, and in any event not necessary to support the Panel's reasoning.

6.28.  We accept that the relevant footnote is not necessary, and have deleted it accordingly.

6.3.9  Paragraphs 7.145 and 7.170: the number of claims pursued by Japan

6.29.  Japan submits that the Panel has failed to acknowledge or address a fourth Article 3.4 claim by Japan concerning MOFCOM's alleged failure to examine whether subject imports provided explanatory force for the state of the domestic industry.

6.30.  China objects to Japan's request, on the basis that the claim was addressed in the Panel's findings.

6.31.  We consider that the relevant claim falls outside the Panel's terms of reference. The Panel's terms of reference are determined by Japan's Request for Establishment. Section 1.b of Japan's Request for Establishment provides in relevant part:

China's analysis of the impact of the dumped imports on the domestic industry: (i) failed to make an objective examination, based on positive evidence, of the impact of subject imports on the domestic industry based on the volume of such imports and their effect on prices; (ii) failed to evaluate the magnitude of the margin of dumping; and (iii) failed to objectively determine the relative importance and weight to be attached to relevant economic factors and indices, and improperly disregarded the majority of those factors and indices indicating that the domestic industry did not suffer material injury.  Accordingly, China acted inconsistently with Articles 3.1 and 3.4 of the Anti-Dumping Agreement.[18]

There is no reference in Japan's Request for Establishment to any claim concerning MOFCOM's alleged failure to examine whether subject imports provided explanatory force for the state of the domestic industry. We have reflected our analysis in footnote 274 of the Final Reports.

 

6.3.10  Paragraph 7.163: Article 3.4 implementing Article 3.1

6.32.  Japan asks the Panel to delete the phrase "To the extent that" from the final sentence of paragraph 7.163. Japan asserts that this phrase is unnecessary, since it is clear that Article 3.4 implements the requirement in Article 3.1 pertaining to "the consequent impact" of dumped imports on the domestic industry.

6.33.  China objects to Japan's request, on the basis that the relevant provision contains multiple obligations.

6.34.  We uphold Japan's request. We have replaced the relevant phrase by the word "as".

6.3.11  Paragraphs 7.166-7.168: interplay between positive and negative injury factors

6.35.  Japan disagrees with the Panel's finding that Japan failed to establish a prima facie case in support of its claim. First, Japan asserts that, contrary to the Panel's finding, Japan did demonstrate the inadequacy of specific elements of MOFCOM's analysis. Japan's assertion is based on comments it made in its second written submission in respect of China's reply to Panel question No. 34. Second, Japan suggests that the Panel's position is that provided an investigating authority supplies some explanation concerning the interplay between positive and negative factors, any Article 3.4 claim would fail.

6.36.  China suggests that Japan is seeking to re-argue points that it made during its submissions.

6.37.  Regarding Japan's first concern, we note that Panel question No. 34 was not concerned with MOFCOM's assessment of the relationship between positive and negative injury factors. Accordingly, there is no basis to conclude that Japan's comments in respect of China's reply to Panel question No. 34 constitute a prima facie case in support of the claim at issue.

6.38.  Regarding Japan's second point, the Panel manifestly did not find that any Article 3.4 claim would fail provided an investigating authority supplies some explanation concerning the interplay between positive and negative factors. The Panel's findings simply address in relevant part the complainants' argument that the Final Determination was "silent" on the interplay between the positive and negative injury factors, and their argument that MOFCOM failed to provide any explanation "whatsoever" regarding the weighing of those factors. While Japan also refers to the finding by the panel in Thailand – H-Beams that the investigating authority must provide a "compelling explanation" of the interplay between positive and negative injury factors, we recall that, even under the "compelling explanation" standard, the burden of proof is on the complainant. As explained by the Panel, the complainants did not meet this burden.

6.3.12  Section 7.5.3 heading: inclusion of a reference to Article 3.1

6.39.  Japan asks the Panel to include a reference to Article 3.1 of the Anti-Dumping Agreement in the heading of Section 7.5.3.

6.40.  Since the Panel's findings also cover Article 3.1, we have made the amendment requested by Japan.

6.3.13  Paragraphs 7.173, 7.189, 7.192, and 7.205: independent Article 3.5 claims

6.41.  Japan disagrees with the Panel's conclusion that Japan did not make independent Article 3.5 claims based on alleged flaws in MOFCOM's price effects and volume analyses. Japan explains that the purpose of the approach it adopted in its first written submission was to argue both that: (i) any instances where the Panel agrees with violations of Articles 3.2 and 3.4 result in consequent violations of Article 3.5; and (ii) any instances where the Panel rejects violations of Articles 3.2 and 3.4 result in independent violations of Article 3.5.

6.42.  China objects to Japan's request. China suggests that Japan has failed to respond to the Panel's reasoning.

6.43.  We observe that, despite Japan's explanation of the way it intended its first written submission to be read, this is not what its first written submission actually says. Furthermore, while Japan refers to its reply to Panel question No. 88, we recall that the Panel addressed Japan's reply to this question at paragraph 7.192 of its findings. The Panel concluded that the complainants' replies to that question failed either to identify any relevant independent Article 3.5 claims in their written submissions, or to identify arguments explaining how the alleged flaws in MOFCOM's price effects and impact analyses result in independent violations of Article 3.5. There is nothing in Japan's request for interim review to suggest that the Panel's assessment of those replies is inaccurate.

6.3.14  Paragraph 7.182: expansion of Panel's reasoning

6.44.  Japan asks the Panel to include an additional element in its assessment of MOFCOM's reliance on the market shares of subject imports. In particular, Japan asks the Panel to include a reference to the fact that the sales and market share of domestic Grade A increased.

6.45.  China objects to Japan's request. China does not consider the relevant facts as contrary to MOFCOM's conclusion.

6.46.  We uphold Japan's request, and have amended our findings accordingly.

6.3.15  Paragraph 7.184: inclusion of citation

6.47.  Japan asks the Panel to include a citation to Appellate Body case law concerning the rejection of ex post rationalization. Japan notes that such citation has been provided elsewhere by the Panel.

6.48.  We have included the citation identified by Japan in footnote 331 of the Final Reports.

6.3.16  Paragraphs 7.202-7.203

6.49.  Japan asks the Panel to delete the phrase "it is not meaningful" from paragraph 7.202. Japan also asks the Panel to address certain fact-based arguments made by Japan concerning MOFCOM's non-attribution analysis.

6.50.  China objects to Japan's request, on the basis that the original wording more accurately reflects the Panel's rationale for not engaging in an analysis of all aspects. China also suggests that it would be inappropriate for the Panel to address all of Japan's non-attribution arguments, since this would not be a meaningful exercise.

6.51.  We consider that Japan's first request should be accommodated by using the words "it is not necessary" instead of "it is not meaningful". Regarding judicial economy, we maintain our view that, in light of the fundamental flaw in MOFCOM's analysis, it is not necessary to address every aspect of the parties' non-attribution arguments in detail.

6.3.17  Paragraphs 7.208 and 7.221: scope of arguments

6.52.  Japan asks the Panel to include Japan's argument that MOFCOM violated Article 6.8 and Annex II by failing to use the "best information available" and "special circumspection" in applying the highest margin of dumping as the all others rate. Japan also asks the Panel to address that argument in its findings.

6.53.  China objects to Japan's requests. China asserts that Japan failed to set out these arguments in its first written submission.

6.54.  We reject Japan's request. The relevant argument was first raised by Japan in paragraphs 76-81 of its second written submission. Japan asserted that its argument raised a "fundamental point". As explained in footnote 328 of the Interim Reports (footnote 347 of the Final Reports), Japan was required by paragraph 7 of the Panel's Working Procedures to set out its case and arguments in its first written submission. This provision serves an important due process purpose. While a complainant may need to raise new arguments in its second written submission in order to respond to arguments made by the other party, this was not the context in which Japan raised its "fundamental point" in its second written submission.

6.3.18  Paragraph 7.259: correction of scope of findings

6.55.  Japan identifies an error in the Panel's description of its treatment of Japan's Article 6.9 claim. Japan suggests that this should result in parts of paragraph 7.259 being deleted.

6.56.  China objects to the point raised by Japan. China denies that there is any error in the Panel's findings.

6.57.  We have made the changes proposed by Japan, to avoid any possibility of error in the Panel's findings.

6.3.19  Paragraph 7.260: expansion of quote

6.58.  Japan asks the Panel to avoid uncertainty by including an additional part in its quotation of paragraph 102 of Japan's second written submission.

6.59.  We have included the additional language requested by Japan.

6.3.20  Paragraphs 7.277 and 7.281: judicial economy

6.60.  Japan asks the Panel to reconsider its exercise of judicial economy in respect of Japan's Article 12.2 and 12.2.2 claims, on the basis that the obligations in these provisions differ from the obligations in Article 3.2.

6.61.  China considers that the Panel's exercise of judicial economy is appropriate.

6.62.  We maintain our exercise of judicial economy. As indicated in the Panel's reasoning, MOFCOM will in any event need to revise its Final Determination in order to implement the Panel's finding under Article 3.2.

6.3.21  Paragraph 7.298, footnote 455 (footnote 475 of the Final Reports): cross-referencing between DS454 and DS460

6.63.  Japan notes that footnote 455 (footnote 475 of the Final Reports) cross-references footnote 166 (footnote 174 of the Final Reports), and that the latter relates only to the DS460 Report. For the avoidance of any doubt that the relevant footnote is pertinent to the DS454 Report, Japan suggests that the Panel repeat the entirety of the text of that footnote in footnote 455.

6.64.  China agrees with Japan's requests.

6.65.  We have amended footnote 475 of the final Reports in the manner requested by Japan.

6.3.22  Paragraph 7.336: consequential claims

6.66.  Japan notes an inconsistency between the Panel's exercise of judicial economy in paragraph 7.336 and the summary of its conclusions in paras. 8.1 and 8.6. Japan asks the Panel to amend paragraph 7.336, and make the appropriate findings instead of exercising judicial economy.

6.67.  China objects to Japan's request, in the sense that China asks[19] the Panel to make its conclusions in paragraphs 8.1 and 8.6 consistent with its findings in paragraph 7.336, and therefore continue to exercise judicial economy.

6.68.  We have amended paragraph 7.336 in order to ensure consistency with Section 8 of the Final Reports.

6.3.23  Paragraphs 8.2 and 8.7: scope of conclusions

6.69.  Japan notes that the Panel has failed to include certain claims in its conclusions, and asks the Panel to adjust its conclusions accordingly.

6.70.  China objects to Japan's request to the extent that it also concerns the Panel's conclusions in respect of a claim brought by the European Union in the DS460 proceeding.

6.71.  As explained above, we do not consider that China's objection is consistent with the Paragraph 1 of the Panel's Working Procedures. We have included the additional elements proposed by Japan.

6.4  Requests for interim review by the European Union

6.4.1  Paragraph 7.114: price comparability

6.72.  The European Union requests the addition of a reference to record evidence about prices regarding the lack of comparability between domestic and imported Grade C products.

6.73.  China objects to the European Union's request, on the ground that it is not sufficiently specific. China also asserts that the European Union did not rely on the relevant evidence in respect of the claim at issue.

6.74.  We reject the European Union's request. We note that the same request was made by Japan. Like Japan, the European Union did not rely on the relevant evidence when advancing its claims before the Panel. In addition, the Panel's findings are adequately supported by the reasoning provided.

6.4.2  Paragraphs 7.132 and 7.137, footnotes 239 and 246 (footnotes 254 and 262 of the Final Reports): translation

6.75.  The European Union observes that the Panel failed to note its objection to China's translation of part of MOFCOM's Final Determination. The European Union asks the Panel to amend footnotes 239 and 246 of the Interim Reports accordingly.

6.76.  We note that the same request was made by Japan. As explained in respect of Japan's request, we have amended footnotes 254 and 262 – and paragraphs 7.132 and 7.137 – of the Final Reports to address this issue.

6.4.3  Paragraphs 7.226, 7.235, and 7.262: clarification of argument

6.77.  The European Union asks the Panel to clarify that the European Union's argument described in the second sentence of paragraph 7.226 – concerning the disclosure of a spread sheet by the investigating authority - relates to Article 6.4, rather than Article 6.9.

6.78.  China states that it has no objection to the Panel clarifying that the relevant argument relates to Article 6.9 (whereas we observe that the European Union's request states that the argument actually relates to Article 6.4).

6.79.  We are not persuaded that the relevant argument should necessarily be understood to relate to Article 6.4, as opposed to Article 6.9. The argument is made in paragraph 111 of the European Union's first written submission. That paragraph is found in a section whose heading refers to alleged inconsistencies with both Articles 6.4 and 6.9. The first sentence of paragraph 111 contains a reference to Article 6.4. The relevant argument is contained in the second sentence. While the proximity to the first sentence of paragraph 111 might suggest that the argument set forth in the second sentence relates to Article 6.4, the third sentence of paragraph 111 then refers to an Appellate Body Report concerning Article 6.9. In addition, the second sentence of paragraph 111 (in which the relevant argument is set forth) refers to the "disclosure" of a spread sheet by the investigating authority. The term "disclos[e]" is found in Article 6.9, not Article 6.4. In these circumstances, there is no basis to conclude that the Panel should necessarily understand the relevant argument to relate to Article 6.4, rather than Article 6.9. The European Union does not explain why this should be the case.

6.5  Requests for interim review by China

6.5.1  Footnote 16: overlap between the complainants' claims and arguments

6.80.  China suggests that footnote 16 does not reflect the extent to which the complainants' claims and arguments differ, and proposes amended text.

6.81.  In order to avoid any uncertainty, we have deleted the relevant footnote from the Final Reports.

6.5.2  Paragraph 7.27: BCI Procedures

6.82.  China objects to the Panel's statement that "[f]or purposes of Article 17.7, China's interpretation effectively results in equating the term 'provided' with 'disclosed'". China agrees with the Panel that the term "provided" has a different meaning from the term "disclosed". China asks the Panel to delete this sentence, so as to prevent any suggestion that China took the position that the term "provided" could be equated with "disclosing".

6.83.  In order to avoid any misunderstanding of China's position, we have deleted the relevant sentence.

6.5.3  Paragraphs 7.39, 7.45, and 7.110: scope of China's arguments

6.84.  China asks the Panel to include additional elements in its summary of China's main arguments.

6.85.  We accept China's request with respect to paragraphs 7.39 and 7.110. However, we reject China's request relating to paragraph 7.45. First, this paragraph introduces the Panel's evaluation by setting out the main issue before it. Introducing a detailed explanation of one of China's arguments would not necessarily help to identify the main issue in dispute. Second, the argument China would like the Panel to include in paragraph 7.45 is already explained and addressed in footnote 108 of the Final Reports. Third, by including a detailed summary of this argument in paragraph 7.39, we see no need to include another detailed summary of it – beyond what is already included in the above-mentioned footnote 108.

6.5.4  Footnote 88 (footnote 94 of the Final Reports): information obtained during consultations

6.86.  China asks the Panel to first cite to the European Union's first written submission, instead of China's opening statement at the first meeting of the Panel, because the European Union was the first party to refer to information obtained during the consultations.

6.87.  We have amended footnote 94 of our Final Reports accordingly.

6.5.5  Paragraphs 7.59 and 7.60: facts before MOFCOM

6.88.  China asks the Panel to amend its summary of China's argument to include that China considers that MOFCOM relied on the facts that were before it during the investigation.

6.89.  We have amended our Reports accordingly.

6.5.6  Footnote 128 (footnote 136 of the Final Reports): table 6-3

6.90.  China disagrees with the Panel's interpretation of China's position in this footnote. China contends that its statement did not directly concern whether MOFCOM's determination complied with Article 2.2.2 of the Anti-Dumping Agreement. Rather, according to China, its statement rebutted the argument put forward by the European Union in support of its claim that MOFCOM did not verify the SG&A data in table 6.3.

6.91.  The Panel has not interpreted China's position in this footnote. Instead, the Panel quoted China's argument directly from China's response to Panel question No. 22(a), paragraph 74, and paragraph 52 of its second written submission. Further, this discussion took place in the context of the European Union's Article 2.2.2 claim. As explained in paragraph 7.65 of the Panel Report, the issue before the Panel, concerning Article 2.2.2 of the Anti-Dumping Agreement, was whether table 6-3, which China submits was the basis for the SG&A amounts used in MOFCOM's calculation of normal value, can be said to be based on "actual data pertaining to production and sales in the ordinary course of trade of the like product". Thus, whether or not table 6-3 was verified may be relevant in addressing this claim. In fact, in footnote 134 of the Final Reports, the Panel noted that "nothing in the Panel record indicates that MOFCOM verified table 6.3". Nevertheless, it was unclear how China's statement would excuse China from complying with the Article 2.2.2 requirements or justify MOFCOM's failure to meet such requirements. This is exactly what the last sentence of footnote 128 of the Interim Reports (footnote 136 of the Final Reports) states. Nevertheless, we have included text at the beginning of footnote 136 of the Final Reports for clarification.

6.5.7  Paragraph 7.95: MOFCOM's dumping determination

6.92.  China asks the Panel to further develop the summary of China's argument in the section summarizing China's main arguments.

6.93.  We have amended paragraph 7.95 accordingly.

6.5.8  Paragraph 7.112: headings of sub-sections in the complainants' submissions

6.94.  China disagrees with the relevance attached by the Panel to the titles of the relevant sub-sections of the complainants' submissions. China asks the Panel to clarify that the relevant sub-sections are not limited to the claim at issue.

6.95.  Japan submits that China's request is unnecessary, and should be rejected by the Panel. Japan asserts that the fact that Japan made two claims within the relevant sub-section of its written submission does not detract from the fact that one of those claims relates to the claim at issue.

6.96.  We consider that it is appropriate for the Panel to refer to the headings of the relevant sub-sections of the complainants' submissions to understand the scope of a particular claim, even if those sub-headings also cover other claims. We therefore reject China's request.

6.5.9  Paragraph 7.113: clarification of China's arguments

6.97.  China suggests that the Panel has misrepresented the position taken by China regarding the effect of quantitative differences on comparability.

6.98.  We do not consider that the Panel has misrepresented China's position. Notably, China does not ask the Panel to delete the phrase "[t]here is no disagreement between the parties regarding the potential for a large difference in the volume of imports and domestic sales to affect price comparability". However, in order to avoid any risk of misunderstanding, we have amended the relevant part of paragraph 7.113.

6.99.  China has also suggested the inclusion of additional argumentation from paragraph 132 of its second written submission, and its reply to Panel question No. 33. Rather than including such arguments in the Panel's evaluation, we have included them in the description of China's arguments at paragraph 7.110.

6.5.10  Paragraphs 7.120, 7.134, 7.135, 7.157, 7.183, 7.210, 7.230, 7.287, footnotes 436, 437, 440, 459, 461 (footnotes 456, 457, 460, 479 and 481 of the Final Reports): clarification of China's position

6.100.  China asks the Panel to include additional argumentation in the Panel's summary of the main arguments made by China. For the most part, we have acceded to China's requests.

6.101.  In respect of paragraph 7.135, Japan objects to China's formulation of the additional argument at issue. Japan asserts that China's formulation does not properly reflect the findings in MOFCOM's Final Determination. In order to accommodate Japan's request, we have used language making it clear that the additional argument concerns China's understanding of the scope of MOFCOM's findings.

6.5.11  Paragraph 7.171: inclusion of a cite to Final Determination

6.102.  China asks the Panel to include a citation to the Final Determination.

6.103.  We have included the relevant citation in footnote 306 of the Final Reports.

6.5.12  Paragraphs 7.180-7.188 and 7.192: market shares of subject imports

6.104.  China disagrees with the Panel's reliance on elements relating to the price effects and impact analyses when addressing the claim in respect of MOFCOM's reliance on market shares in its causation analysis. China asserts that it has been unable to identify any arguments by the complainants referring to those items in such context. China asserts that the complainants' claims with respect to market share relate to only "two elements", namely: (i) whether the market share retained by subject imports may be relevant for the causation analysis; and (ii) whether a causation finding may be made absent a significant increase in subject import volume. In the event that the Panel rejects China's request, China asks that the Panel should at least amend footnote 325 of the Interim Reports (footnote 344 of the Final Reports) to clarify that China objects to the scope of the claim as addressed by the Panel. China also asks the Panel to amend the wording of paragraph 7.181, to avoid any suggestion that the Panel is "agreeing" with arguments that the complainants did not make. China further observes that the Panel should only refer to arguments made by Japan in this context.

6.105.  Japan asserts that it should be evident from several aspects of its submissions that Japan's causation claim as it related to market share was broader than the two elements identified by China. Japan refers to a series of extracts from its written submissions and oral statements in support.

6.106.  We are not persuaded that we should amend our findings in the precise manner requested by China. In respect of MOFCOM's findings on the market share of subject imports, both complainants referred to the relevance of market share data in the context of price effects.[20] The Panel's reasoning picks up on this point, and addresses the issue of whether or not MOFCOM showed that the market shares of subject imports "enabled those imports, through price effects, to cause injury to the domestic industry". While the Panel's reasoning may be more detailed than the arguments of the complainants, the basis for the Panel's reasoning nevertheless lies in the complainants' submissions.

6.107.  Regarding footnote 325 of the Interim Reports (footnote 344 of the Final Reports), the matter raised by China relates to interim review, and should therefore only be addressed in Section 6 of the Panel's Final Reports. It should not feature in Section 7, which concerns the Panel's findings.

6.108.  Concerning the word "agree" in paragraph 7.181, we have replaced the phrase "agree with the complainants" by the word "consider".

6.5.13  Paragraph 7.297 and 7.298: MOFCOM's statement and relevant appendices

6.109.  China submits that it does not consider that it adopted a narrower approach, as suggested in paragraph 7.297; rather China merely clarified its position. Thus, China proposes certain amendments to paragraphs 7.297 and 7.298.

6.110.  Japan considers that the Panel should not delete the final sentence of paragraph 7.298 as proposed by China, but rather rephrase it.

6.111.  We have amended paragraph 7.297 of the Final Reports according to China's request. We have rephrased the relevant part of paragraph 7.298 of the Final Reports in accordance with Japan's suggestion.

6.5.14  Footnotes 482, 495, and 501 (footnotes 502, 515 and 521 of the Final Reports): non-confidential summaries

6.112.  China understands the Panel to refer to the lack of an explicit statement by China as to whether the relevant information should have been included in the non-confidential summary. In addition, China notes that it has generally taken the position that "the non-confidential summaries of the four appendices at issue are sufficiently detailed to provide a 'reasonable understanding' of the substance of the information submitted in confidence".[21] Thus, China asks the Panel to amend these footnotes accordingly.

6.113.  We have amended footnotes 502, 515 and 521 of the Final Reports, as requested by China.

6.5.15  Paragraphs 8.1, 8.3, 8.6, and 8.8: consequential claims

6.114.  As noted above in respect of Japan's request for interim review of paragraph 7.336, China asks the Panel to record the exercise of judicial economy in respect of certain consequential claims in the summary of its conclusions set forth in Section 8.

6.115.  As explained above in respect of Japan's request, we have amended paragraph 7.336 to reflect Section 8 (as requested by Japan), rather than the other way round (as requested by China).

7  Findings

7.1.  These disputes concern China's measures imposing anti-dumping duties on certain imports of HP-SSST from Japan and the European Union in the context of the investigation at issue. The complainants' claims pertain to various procedural and substantive provisions of the Anti-Dumping Agreement and, consequently, to Article 1 of the Anti-Dumping Agreement and Article VI of the GATT 1994. China asks the Panel to reject the complainants' claims.

7.2.  We shall begin by examining certain requests relating to (i) the Panel's Joint Working Procedures, and (ii) the Panel's terms of reference. Thereafter, we shall turn to the claims relating to MOFCOM's dumping and injury determinations. Finally, we shall examine the remaining, mostly procedural claims. Before examining the issues before us, though, we recall a number of general principles regarding treaty interpretation, standard of review and burden of proof in WTO dispute settlement proceedings.

7.1  General principles regarding treaty interpretation, the applicable standard of review and burden of proof

7.1.1  Treaty Interpretation

7.3.  Article 3.2 of the DSU provides that the dispute settlement system serves to clarify the existing provisions of the covered agreements "in accordance with customary rules of interpretation of public international law". It is generally accepted that the principles codified in Articles 31 and 32 of the Vienna Convention are such customary rules.

7.1.2  Standard of Review

7.4.  Panels generally are bound by the standard of review set forth in Article 11 of the DSU, which provides, in relevant part:

[A] panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements. (emphasis added)

7.5.  The Appellate Body has stated that the "objective assessment" to be made by a panel reviewing an investigating authority's determination is to be informed by an examination of whether the agency provided a reasoned and adequate explanation as to: (i) how the evidence on the record supported its factual findings; and (ii) how those factual findings supported the overall determination.[22]

7.6.  The Appellate Body has also commented that a panel reviewing an investigating authority's determination may not conduct a de novo review of the evidence or substitute its judgment for that of the investigating authority. A panel must limit its examination to the evidence that was before the agency during the course of the investigation and must take into account all such evidence submitted by the parties to the dispute.[23] At the same time, a panel must not simply defer to the conclusions of the investigating authority. A panel's examination of those conclusions must be "in-depth" and "critical and searching".[24]

7.7.  Further to Article 11 of the DSU, Article 17.6 of the Anti-Dumping Agreement sets forth a specific standard of review applicable to anti-dumping disputes, namely:

(i)   in its assessment of the facts of the matter, the panel shall determine whether the authorities' establishment of the facts was proper and whether their evaluation of those facts was unbiased and objective. If the establishment of the facts was proper and the evaluation was unbiased and objective, even though the panel might have reached a different conclusion, the evaluation shall not be overturned; and

(ii)   the panel shall interpret the relevant provisions of the Agreement in accordance with customary rules of interpretation of public international law. Where the panel finds that a relevant provision of the Agreement admits of more than one permissible interpretation, the panel shall find the authorities' measure to be in conformity with the Agreement if it rests upon one of those permissible interpretations.

7.1.3  Burden of Proof

7.8.  The general principles applicable to the allocation of the burden of proof in WTO dispute settlement require that a party claiming a violation of a provision of a WTO Agreement must assert and prove its claim.[25] Therefore, as the complaining parties, Japan and the European Union bear the burden of demonstrating that the Chinese measures are inconsistent with the WTO agreements invoked by the complainants. The Appellate Body has stated that a complaining party will satisfy its burden when it establishes a prima facie case, namely a case which, in the absence of effective refutation by the defending party, requires a panel, as a matter of law, to rule in favour of the complaining party.[26] Finally, it is generally for each party asserting a fact to provide proof thereof.[27]

7.2  BCI Procedures

7.9.  The European Union takes issue with two aspects of the BCI Procedures originally adopted by the Panel, namely (i) the designation of BCI, and (ii) the requirement to provide authorizing letters from entities participating in the underlying anti-dumping proceedings. The European Union requests that the Panel amend the BCI Procedures accordingly. While Japan generally agrees with the European Union's requests, China asks the Panel to reject the European Union's requests.

7.2.1  Relevant provisions of the BCI Procedures

7.10.  Paragraphs 1 and 2 of the BCI Procedures originally provided:

1.    These procedures apply to any business confidential information (BCI) that a party wishes to submit to the Panels. For the purposes of these procedures, BCI is defined as any information that has been designated as such by the Party submitting the information, that is not available in the public domain, and the release of which could seriously prejudice an essential interest of the person or entity that supplied the information to the Party. In this regard, BCI shall include information that was previously submitted to China's Ministry of Commerce ("MOFCOM") as BCI in the anti-dumping investigation at issue in these disputes. However, these procedures do not apply to information that is available in the public domain. In addition, these procedures do not apply to any BCI if the person who provided the information in the course of the aforementioned investigation agrees in writing to make the information publicly available.

2.    The first time that a party submits to the Panels BCI as defined above from an entity that submitted that information in the anti-dumping investigation at issue in these disputes, the party shall also provide, with a copy to the other parties, an authorizing letter from the entity. That letter shall authorize China, the European Union and Japan to submit in these disputes, in accordance with these procedures, any confidential information submitted by that entity in the course of the investigation at issue. (emphasis added)

7.2.2  Main arguments of the parties

7.2.2.1  European Union

7.11.  The European Union claims that the provisions in the BCI Procedures concerning (i) designation of BCI, and (ii) authorizing letters from entities participating in the underlying anti-dumping proceedings are WTO-inconsistent.[28]

7.12.  The European Union objects to the Panel automatically classifying as BCI information that was submitted as confidential in the underlying anti-dumping proceedings, because the designation of confidential information cannot be delegated, in absolute terms, to non-WTO entities or persons. The European Union recalls that, pursuant to Article 18.2 of the DSU, in dispute settlement, Members shall treat as confidential information submitted by another Member which the latter has designated as confidential. In addition, the European Union submits that, in case of disagreement, WTO adjudicators should ultimately decide on BCI designation, on the basis of objective criteria, without delegating this decision to any other entity or person.[29] The European Union requests that the relevant sentence in paragraph 1 of the BCI Procedures be modified to read: "In this regard, parties and third parties are encouraged to designate as BCI information that was previously submitted to China's Ministry of Commerce ('MOFCOM') as BCI in the anti-dumping investigation at issue in these disputes".[30] The European Union also requests that the following final sentence be added to this paragraph: "In case of disagreement, the Panels shall decide on BCI designation".[31]

7.13.  The European Union also objects to the requirement that a party must seek and provide prior written authorization from the entity that submitted the confidential information in the underlying anti-dumping proceedings when submitting such information to the Panel. Regardless of whether the BCI designation was appropriate or not, the European Union contends that a particular firm could simply withhold authorization and effectively limit the information that may be submitted in WTO dispute settlement. According to the European Union, this is particularly relevant when, as in these disputes, a Member challenges another Member to disclose certain information that was originally submitted by private firms in the underlying anti-dumping proceedings.[32] The European Union also contends that Article 17.7 of the Anti-Dumping Agreement makes clear that a Member is not required to obtain authorization before providing confidential information to panels.[33] The European Union requests that paragraph 2 of the BCI Procedures be deleted or modified by replacing the verb "shall" with "may" in both sentences.[34] Finally, to the extent the Panel is concerned about protecting the WTO from any consequences of disclosure, the European Union suggests that the following sentence be added: "Each party and third party shall be solely responsible for ensuring its own compliance with any applicable confidentiality rules and solely responsible for the confidentiality designation it makes when submitting information to the Panel, and any consequences thereof".[35]

7.2.2.2  Japan

7.14.  Japan generally agrees with the European Union's requests to modify paragraphs 1 and 2 of the BCI Procedures. Japan recalls that it is Members that have the right to designate information as confidential in DSU proceedings. According to Japan, "a panel may not give total deference (or an absolute delegation) for the resolution of the issue of the designation of BCI to some other party, such as the firm submitting the information in the underlying proceeding or even the investigating authority".[36] With respect to paragraph 2 of the BCI Procedures, to the extent it effectively takes out of the hands of the submitting Member and the Panel the question of what may be submitted in DSU proceedings, Japan agrees with the European Union. Japan notes that a firm that submitted information in the underlying domestic proceeding could withhold authorization by simply refusing the issuance of an authorizing letter.[37]

7.2.2.3  China

7.15.  China notes that, after consulting with the parties, the Panel adopted additional protection for certain confidential information, while at the same time balancing the interests of all WTO Members by requiring the submission of non-confidential versions of any written submission containing BCI.[38] China contends that the challenged aspects of the BCI Procedures add to rather than detract from the protection provided by the DSU, as they do not deprive Members of the possibility to designate information as confidential under Article 18.2 of the DSU. China also submits that the additional protection in the BCI Procedures for information previously submitted to MOFCOM as BCI is in line with the confidentiality requirements set forth in Article 6.5 of the Anti-Dumping Agreement.[39] Specifically with regard to paragraph 2 of the BCI Procedures, China submits that "an authorizing letter is a necessary instrument to ensure compliance by the investigating authority with its obligations under Article 6.5 of the Anti-Dumping Agreement".[40] China contends that it is not uncommon to require the presentation of such an authorizing letter in WTO dispute settlement proceedings concerning trade remedies, and this requirement, to China's knowledge, has never been found to be WTO-inconsistent.[41]

7.2.3  Main arguments of third parties

7.2.3.1  United States

7.16.  The United States submits that it is sympathetic to the concern that it could be difficult for Members and panels to evaluate compliance with obligations under the Anti-Dumping Agreement where a Member fails to meet its transparency obligations. However, the United States submits that "the correct course of action is not for the Panel to request China to submit to the Panel information which MOFCOM treated as confidential during the antidumping proceedings without permission of the party that submitted the information to MOFCOM".[42] The United States contends that such course of action would implicate Article 6.5 of the Anti-Dumping Agreement, which requires investigating authorities to not disclose information accepted as confidential during anti-dumping proceedings without permission of the party that submitted such information. The United States notes that Article 6.5 does not contain any exception for WTO proceedings.[43] The United States observes that if a Member has failed to meet its Anti-Dumping Agreement transparency obligations, complaining Members may, as in these disputes, bring claims under such transparency obligations. Should a panel find a breach of these obligations, the responding party would then be required to bring its measures into compliance with those transparency obligations.[44]

7.2.4  Evaluation by the Panel

7.17.  There are two main issues before the Panel: (i) whether the Panel may delegate, in absolute terms, the BCI designation to non-WTO entities; and (ii) whether disputing parties should be required to provide an authorizing letter from the entity that submitted confidential information in the underlying anti-dumping proceedings, when providing such information to the Panel. We address below each of these issues.

7.2.4.1  BCI designation

7.18.  The European Union takes issue with the "absolute" delegation of BCI designation to entities participating in the underlying anti-dumping proceedings. The sentence at issue in paragraph 1 of the BCI Procedures originally provided in relevant part: "BCI shall include information that was previously submitted to … MOFCOM … as BCI in the anti-dumping investigation at issue in these disputes". (emphasis added) We agree with the European Union that the original wording of this sentence suggests that BCI designation is determined by the party submitting information to MOFCOM.[45] Thus, we have amended this sentence to read as follows in relevant part: "BCI shall include information that was previously treated by … MOFCOM … as BCI in the anti-dumping investigation at issue in these disputes".[46] (emphasis added)

7.19.  However, the European Union submits that it is for the submitting Member, in the first place, to designate information as confidential. Thus, the European Union considers that its concerns would not be addressed if the designation of BCI were dependent on the investigating authority's determination to treat information as confidential in the underlying anti-dumping proceedings.[47]

7.20.  We agree with China that the BCI Procedures do not detract from the ability of Members to designate information as confidential under Article 18.2 of the DSU. It is clear that the designation of confidential information in anti-dumping proceedings, as provided for in Article 6.5 of the Anti-Dumping Agreement, is distinct from the designation of BCI for purposes of DSU proceedings. However, we consider that these designations are closely related because in disputes under the Anti-Dumping Agreement the Panel is not the initial trier of facts. Rather, according to the proper standard of review, the Panel must review whether the investigating authority's establishment of the facts was proper, and whether its evaluation of those facts was unbiased and objective.[48] The Panel's review must be based on the record developed by the investigating authority. The Panel may not have regard to new information that was not on the authority's record.

7.21.  In our view, Article 17.7 of the Anti-Dumping Agreement reflects this relationship when it provides that "[c]onfidential information provided to the panel shall not be disclosed without formal authorization from the person, body or authority providing such information". We note that this provision is included as a special or additional rule and procedure in Appendix 2 of the DSU, which prevail over the rules and procedures in the DSU to the extent that there is a difference between these two sets of provisions.[49] We understand that, in the context of a dispute brought under the Anti-Dumping Agreement, the phrase "confidential information" in Article 17.7 refers to the confidential information previously examined by the investigating authority and treated as confidential pursuant to Article 6.5 – and which is now provided to a dispute settlement panel pursuant to Article 17.7. This understanding is supported by the terms of Article 17.7 of the Anti-Dumping Agreement and Article 18.2 of the DSU. Article 17.7 refers to confidential information provided by a "person, body or authority"; whereas Article 18.2 refers to confidential information provided by a "Member". In other words, Article 17.7 envisages that confidential information on the authority's record – obtained from a "person, body or authority" - may be provided to a panel, and imposes on the panel a non-disclosure obligation[50] similar to that imposed on the authority by the last sentence of Article 6.5. Considering that a panel's review is limited to the authority's record, in practice the designation under Article 18.2 of the DSU should generally not arise in a case brought under the Anti-Dumping Agreement, since the issue of designation of the information on the authority's record is already addressed by Articles 6.5 and 17.7 of the Anti-Dumping Agreement.

7.22.  The European Union submits that "[s]hould [the European Union] choose to un-designate information from [its] own firms (for example because, with the passage of time, it is no longer sensitive or has come into the public domain) [the European Union] fail[s] to see what interest any other party or third party might have in objecting to such course of action".[51] We are not persuaded by the European Union's argument. First, we recall that paragraph 1 of the BCI Procedures provides that "these procedures do not apply to information that is available in the public domain". Second, if the information from the European Union's firms "is no longer sensitive", we agree with the European Union and also fail to see the "interest any other party or third party might have in objecting to [the 'un-designation']". In our view, the hypothetical scenario raised by the European Union should not result in any disagreement between the parties. Indeed, if the information is no longer sensitive, even the entity that initially provided the information would agree. The situation envisaged by the European Union would then fall within the scope of paragraph 1 of the BCI Procedures, which provides that "these procedures do not apply to any BCI if the person who provided the information in the course of the … investigation agrees in writing to make the information publicly available". This safeguard is important, for a WTO Member is not necessarily best placed to determine whether or not information submitted on a confidential basis in the context of an anti-dumping proceeding remains sensitive. Indeed, the relevant Member may not even be aware of the specific reasons why confidentiality was requested in the first place.[52]

7.23.  Furthermore, we fail to see the concern relating to designation by WTO Members, as raised by the European Union in the present case, because China, as a party to these disputes, has designated all information treated as confidential in the underlying anti-dumping proceedings as BCI for purposes of these DSU proceedings.[53] This constitutes designation by a WTO Member, as proposed by the European Union.

7.24.  The European Union also submits that "[i]f … information is automatically to be designated as BCI in the present proceedings, then that would seriously risk to pre-judge one of the very issues that is supposed to be in dispute".[54] Similarly, Japan contends that to "categorically include within the definition of BCI any information accepted by the investigating authority as confidential in an underlying proceeding would be problematic, because this would presume or prejudge the propriety of the BCI designation by the investigating authority in a dispute like the present one in which the WTO consistency of the confidential treatment of information by the investigating authority is itself in dispute".[55] The European Union and Japan appear to conflate the question of proper BCI designation in the present DSU proceedings with the question of proper treatment of confidential information in the underlying anti-dumping proceedings.[56] Designating information as BCI in the present proceedings allows the Panel, the parties and third parties to receive and examine such information, while controlling its disclosure to any person not authorized under the BCI Procedures. We agree with China[57] that this has no bearing on the Panel's assessment of whether MOFCOM treated information as confidential in the underlying anti-dumping proceedings consistently with the provisions of the Anti-Dumping Agreement. In fact, contrary to the apparent suggestion by the complainants, we consider that the BCI Procedures assist the Panel in accessing all necessary information for a proper and objective examination of the claims, in the present disputes, relating to the treatment of confidential information in the underlying anti-dumping proceedings.

7.25.  In light of the foregoing, we have decided not to modify paragraph 1 of the BCI Procedures in the manner proposed by the European Union. We have amended paragraph 1 of the BCI Procedures only in the manner explained above in paragraph 7.18.  

7.2.4.2  Authorizing letter

7.26.  With respect to paragraph 2 of the BCI Procedures, the European Union takes issue with the requirement for parties to provide an authorizing letter from the entity that submitted confidential information in the underlying anti-dumping proceedings, when submitting such information to the Panel.

7.27.  With respect to WTO dispute settlement, Article 17.7 of the Anti-Dumping Agreement sets forth that "[c]onfidential information provided to the panel shall not be disclosed without formal authorization from the person, body or authority providing such information". (emphasis added) With respect to anti-dumping proceedings, Article 6.5 of the Anti-Dumping Agreement uses the same terms, setting forth that "[a]ny information which is by nature confidential …, or which is provided on a confidential basis … shall … be treated as such by the authorities. Such information shall not be disclosed without specific permission …". (emphasis added) China argues that the authorizing letter is necessary to ensure compliance by the investigating authority with its obligations under Article 6.5, including when information is "disclosed" to the Panel in the context of a dispute under the Anti-Dumping Agreement.[58] In China's view, "when … information is 'disclosed' to the panel under Article 6.5, it is 'provided' to the panel under Article 17.7".[59] However, in our view, the use of different terms – i.e. "provided" and "disclosed" – in the same sentence in Article 17.7 strongly suggests that they have different meanings.

7.28.  In addition, we consider there is a clear relationship between Articles 6.5 and 17.7. While the former provision regulates when confidential information may be disclosed by investigating authorities, the latter provision regulates when such information may be disclosed by a panel. As stated above, panels are not the initial triers of facts. Rather, panels review an investigating authority's establishment and evaluation of facts. Thus, it would seem logical that a panel should be subject to similar non-disclosure obligations when reviewing the investigating authority's assessment of the body of information, including confidential information, available on the record of the anti-dumping proceedings.[60] In our view, this indicates that the "provision" of confidential information to the panel in the context of a dispute under the Anti-Dumping Agreement does not amount to its "disclosure" under Article 6.5.[61] Accordingly, we do not consider that a Member "providing" confidential information to a panel under Article 17.7 of the Anti-Dumping Agreement would cause its investigating authority to violate its obligation under Article 6.5 not to "disclose" that information.

7.29.  In light of the foregoing, we have decided to accommodate the European Union's request to delete paragraph 2 of the original version of the BCI Procedures.[62]


7.3  Panel's terms of reference

7.30.  China submits that certain claims under Article 2 of the Anti-Dumping Agreement[63] advanced by the European Union in its first written submission fall outside the Panel's terms of reference.[64] China's request is based on Article 6.2 of the DSU.

7.31.  In its request for the establishment of a panel[65], the European Union alleged a violation of:

Articles 2.2, 2.2.1, 2.2.1.1 and 2.2.2 of the Anti-Dumping Agreement because China did not determine the amounts for administrative, selling and general costs and for profits on the basis of records and actual data by the exporters or producers under investigation. In particular, the amounts for administrative, selling and general costs and for profits as constructed by China do not reflect the records and the actual data of the exporters or producers under investigation.

7.32.  In its first written submission, the European Union claims that China acted inconsistently with the following provisions of the Anti-Dumping Agreement:

Article 2.2 because the unrepresentative and rejected data used by MOFCOM did not permit a proper comparison, and the SG&A amount was not reasonable[66];

Article 2.2.1 because MOFCOM used free samples, which by definition are not sales in the ordinary course of trade[67];

Article 2.2.1.1 because MOFCOM used unrepresentative and rejected data which (i) did not correspond to the records kept by SMST, (ii) were not in accordance with GAAP, (iii) did not reasonably reflect the costs associated with the product under consideration, and (iv) had been historically utilized by SMST[68]; and

Article 2.2.2 because MOFCOM failed to determine an SG&A amount for SMST on the basis of actual data pertaining to production and sales in the ordinary course of trade of the like product.[69]

7.3.1  Relevant WTO provisions

7.33.  Article 6.2 of the DSU provides:

The request for the establishment of a panel shall … identify the specific measures at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly.

7.34.  Article 2.2 of the Anti-Dumping Agreement provides:

When there are no sales of the like product in the ordinary course of trade in the domestic market of the exporting country or when, because of the particular market situation or the low volume of the sales in the domestic market of the exporting country, such sales do not permit a proper comparison, the margin of dumping shall be determined by comparison with a comparable price of the like product when exported to an appropriate third country, provided that this price is representative, or with the cost of production in the country of origin plus a reasonable amount for administrative, selling and general costs and for profits. (footnote omitted)

7.35.  Article 2.2.1 of the Anti-Dumping Agreement provides:

Sales of the like product in the domestic market of the exporting country or sales to a third country at prices below per unit (fixed and variable) costs of production plus administrative, selling and general costs may be treated as not being in the ordinary course of trade by reason of price and may be disregarded in determining normal value only if the authorities determine that such sales are made within an extended period of time in substantial quantities and are at prices which do not provide for the recovery of all costs within a reasonable period of time.  If prices which are below per unit costs at the time of sale are above weighted average per unit costs for the period of investigation, such prices shall be considered to provide for recovery of costs within a reasonable period of time. (footnotes omitted)

7.36.  Article 2.2.1.1 of the Anti-Dumping Agreement provides:

For the purpose of paragraph 2, costs shall normally be calculated on the basis of records kept by the exporter or producer under investigation, provided that such records are in accordance with the generally accepted accounting principles of the exporting country and reasonably reflect the costs associated with the production and sale of the product under consideration.  Authorities shall consider all available evidence on the proper allocation of costs, including that which is made available by the exporter or producer in the course of the investigation provided that such allocations have been historically utilized by the exporter or producer, in particular in relation to establishing appropriate amortization and depreciation periods and allowances for capital expenditures and other development costs.  Unless already reflected in the cost allocations under this sub‑paragraph, costs shall be adjusted appropriately for those non‑recurring items of cost which benefit future and/or current production, or for circumstances in which costs during the period of investigation are affected by start‑up operations. (footnote omitted)

7.37.  Article 2.2.2 of the Anti-Dumping Agreement provides in relevant part:

For the purpose of paragraph 2, the amounts for administrative, selling and general costs and for profits shall be based on actual data pertaining to production and sales in the ordinary course of trade of the like product by the exporter or producer under investigation.

7.3.2  Main arguments of the parties

7.3.2.1  China

7.38.  China submits that certain of the claims in the European Union's first written submission concerning Articles 2.2, 2.2.1, 2.2.1.1, and 2.2.2 of the Anti-Dumping Agreement fall outside the Panel's terms of reference because the European Union's panel request failed to comply with the requirements of Article 6.2 of the DSU in respect of those claims.

7.39.  China understands the European Union to have presented two sets of claims in its first written submission: (i) main claims under Article 2.2.2, and (ii) "additional/support claims" under Articles 2.2, 2.2.1, and 2.2.1.1 in support of its main claims. With regard to the European Union's main claims, China accepts that the European Union's claim under Article 2.2.2 that the SG&A amount was not based on actual data falls within the Panel's terms of reference.[70] However, China contends that the European Union's panel request does not include a claim under Article 2.2.2 that the SG&A amount did not pertain to production and sales in the ordinary course of trade.[71] With regard to the European Union's "additional claims", China accepts that the European Union's claim under Article 2.2.1.1 that data used did not correspond to the records kept by SMST falls within the Panel's terms of reference.[72] However, China contends that all remaining "additional claims" under Articles 2.2, 2.2.1, and 2.2.1.1 were not included in the European Union's panel request.[73] China submits that such non-inclusion is not a matter of a lack of any clarity or precision in the European Union's request for establishment of a panel. Rather, China asserts that the European Union clearly specified the claims included in its request for establishment. According to China, the European Union expressly limited its claims under Articles 2.2, 2.2.1, 2.2.1.1 and 2.2.2 of the Anti-Dumping Agreement to the claims that the SG&A amounts "do not reflect the records and the actual data". China contends that the use of the term "in particular" clearly defined the claims raised by the European Union.[74]

7.3.2.2  European Union

7.40.  The European Union submits that its panel request complies with the requirements of Article 6.2 of the DSU in respect of the claims at issue.

7.41.  With regard to Article 2.2.2 of the Anti-Dumping Agreement, the European Union submits three main arguments.[75] First, the European Union contends that certain contextual elements permitted China to fully understand the nature of the problem raised by the European Union in its panel request before receiving the European Union's first written submission. The European Union initially notes that China itself demonstrated that MOFCOM acted inconsistently with China's WTO obligations, since "China expressly acknowledges … that it was relying on data that was not actual and that it had already rejected as unrepresentative and unreliable".[76] Moreover, the European Union contends that the defending Member's disclosure of the legal and factual basis for its measure "sets the parameters for what the complaining Member may have to do in order to fulfil the standard set out in Article 6.2 of the DSU".[77] Finally, the European Union argues that "the sufficiency of a panel request must be assessed in the light of the discussion between the investigating Member and the interested party during the administrative proceedings, as reflected in the measure at issue".[78]

7.42.  Second, the European Union submits that complaining Members are entitled to refer in their panel requests "to provisions of a covered agreement, in effect incorporating them by reference, without writing them out verbatim in the Panel Request".[79] Thus, the European Union's reference to "actual data" in its panel request does not limit the request only to this part of the single sentence in Article 2.2.2.[80]

7.43.  Third, the European Union contends that Article 2.2.2 contains one single obligation. The European Union argues that the terms "shall", "this basis", "be based on", and "pertaining to" support the European Union's understanding.[81] The European Union "does not generally consider that it makes much sense to attempt to deconstruct complex, interlinked, compound rules into different parts and characterise some … as an obligation, and … other … as a condition or separate qualifier".[82]

7.44.  Turning to the European Union's "additional claims" under Articles 2.2, 2.2.1 and 2.2.1.1, the European Union submits that these provisions are clearly referenced in its panel request. The European Union recalls that panel requests need not set out the text of the provisions verbatim, particularly when the defending Member has failed to properly disclose the reasons for the measure at issue.[83] In addition, the European Union submits that these provisions contain a single operative phrase with mandatory language, apparently suggesting that they contain each one single obligation.[84] Finally, with regard to "China's attempt to split the terms of Article 2.2.1.1", the European Union contends that the reference to a particular obligation in Article 2.2.1.1 must be also understood as a reference to any related conditions included in this provision.[85]

7.3.3  Evaluation by the Panel

7.45.  The main issue before the Panel is whether the European Union's panel request provides "a brief summary of the legal basis of the complaint sufficient to present the problem clearly" in respect of each of the claims at issue made by the European Union in its first written submission.[86] This issue arises principally because China and the European Union disagree on whether Articles 2.2, 2.2.1, 2.2.1.1 and 2.2.2 of the Anti-Dumping Agreement each contain single or multiple obligations. Therefore, we now examine each of these provisions separately below to determine whether they contain single or multiple obligations.

7.46.  Article 2.2 of the Anti-Dumping Agreement identifies the circumstances where an investigating authority may be entitled to determine the margin of dumping through a comparison between export price and (i) the export price of the like product exported to a third country, or (ii) the constructed normal value.[87] We agree with China that this provision contains multiple obligations. The European Union emphasizes that "Article 2.2 contains a single operative phrase with mandatory language ('shall be determined')".[88] In our view, the fact of whether or not a particular provision contains a "single operative phrase with mandatory language" is not necessarily determinative of whether such provision contains one or more distinct legal obligations. Indeed, we note that elsewhere, where the European Union explains its claim and arguments under Article 2.2, even the European Union appears to suggest that Article 2.2 contains multiple obligations.[89]

7.47.  While the Appellate Body has explained that when "a provision contains not one single, distinct obligation, but rather multiple obligations, a panel request might need to specify which of the obligations contained in the provision is being challenged"[90], the Appellate Body has also indicated that "compliance with the requirements of Article 6.2 [of the DSU] must be determined on the merits of each case, having considered the panel request as a whole, and in the light of attendant circumstances".[91] Thus, the mere fact that the European Union referred to a particular provision in its panel request, allegedly without specifying the particular obligation being challenged, does not necessarily mean that the European Union's panel request fails to meet the requirements of Article 6.2 of the DSU. This is because the relevant WTO obligations may nevertheless be identifiable from a careful reading of the panel request as a whole.[92] Accordingly, we examine whether a careful reading of the European Union's panel request, including any narrative explanation contained therein[93], permits a sufficiently clear identification of the legal basis regarding each of the Article 2 claims pursued in the European Union's first written submission.[94]

7.48.  With respect to the European Union's Article 2.2 claim, we do not consider that the narrative explanation contained in the European Union's panel request refers to this claim. We are unable to see, and the European Union has not explained, how this narrative explanation specifies which of the multiple obligations contained in Article 2.2 is being challenged.[95] Thus, we find that the European Union's panel request does not comply with the requirement of Article 6.2 of the DSU to "provide a brief summary of the legal basis of the complaint sufficient to present [any] problem clearly" in respect of the European Union's Article 2.2 claim. Consequently, we conclude that the Article 2.2 arguments in the European Union's submissions[96] relate to a claim that is not within the Panel's terms of reference.

7.49.  With regard to the European Union's Article 2.2.1 claim, we observe that Article 2.2.1 of the Anti-Dumping Agreement describes a methodology for determining whether below-cost sales may be treated as not being made in the ordinary course of trade, setting forth the only circumstances under which sales of the like product may be disregarded.[97] We consider that Article 2.2.1 contains one single obligation relating to when sales of the like product may be treated as not being in the ordinary course of trade.[98] In our view, a reference to Article 2.2.1 is sufficient to clearly present a problem pertaining to the treatment of below-cost sales. Thus, it puts the responding party on notice that the treatment of below-cost sales, i.e. sales "below per unit … costs of production plus administrative, selling and general costs", of the like product outside the ordinary course of trade will be an issue in dispute. China accepts that "[w]here a provision contains only a single obligation, a simple reference to the provision may be a sufficient summary of the legal basis of the complaint".[99] Thus, we find that, the European Union's panel request complies with the requirement of Article 6.2 of the DSU to "provide a brief summary of the legal basis of the complaint sufficient to present [a] problem clearly" in respect of the European Union's Article 2.2.1 claim. Consequently, we conclude that the Article 2.2.1 arguments in the European Union's submissions[100] relate to a claim that is within the Panel's terms of reference.

7.50.  Article 2.2.1.1 of the Anti-Dumping Agreement concerns the calculation of costs of production for the purpose of constructing normal value, and for the purpose of determining whether below-cost sales may be treated as not being made in the ordinary course of trade.[101] This provision contains three sentences. In our view, the wording of each sentence makes it clear that this provision contains multiple legal obligations. The first sentence provides that "cost shall normally be calculated on the basis of records kept by the exporter or producer under investigation". The second sentence provides that "[a]uthorities shall consider all available evidence on the proper allocation of cost". The third and final sentence provides that "cost shall be adjusted appropriately" for those non-recurring cost and start-up costs. We note that the narrative explanation contained in the European Union's panel request states that "China did not determine the amounts for administrative, selling and general costs and for profits on the basis of records … by the exporters or producers under investigation". We also note that China accepts that the European Union's claim under Article 2.2.1.1 relating to the obligation that "cost shall normally be calculated on the basis of records kept by the exporters" is within the Panel's terms of reference.[102] However, we are not persuaded that the European Union's panel request as a whole, including the narrative explanation contained therein, clearly presents any problem pertaining to the remaining obligations contained in Article 2.2.1.1. In our view, the European Union's panel request is not sufficient to bring these remaining obligations within the Panel's terms of reference.[103] Thus, we find that the European Union's panel request does not comply with the requirement of Article 6.2 of the DSU to "provide a brief summary of the legal basis of the complaint sufficient to present [a] problem clearly" pertaining to these remaining Article 2.2.1.1 obligations. Consequently, we conclude that the Article 2.2.1.1 arguments in the European Union's submissions referring to such obligations[104] relate to claims that are not within the Panel's terms of reference.

7.51.  Article 2.2.2 of the Anti-Dumping Agreement sets forth how the amounts for SG&A and profits are to be calculated for purposes of a constructed normal value.[105] This provision provides that SG&A amounts "shall be based on actual data pertaining to production and sales in the ordinary course of trade of the like product".[106] We note that the narrative explanation contained in the European Union's panel request states that "China did not determine the amounts for administrative, selling and general costs and for profits on the basis of … actual data by the exporters or producers under investigation". We also note that China accepts that the European Union's claim under Article 2.2.2 relating to "actual data" is within the Panel's terms of reference.[107] We recall that the European Union's panel request includes a reference to Article 2.2.1 of the Anti-Dumping Agreement. With regard to the latter provision, we have concluded above that a reference to Article 2.2.1 puts the responding party on notice that below-cost sales, i.e. sales "below per unit … costs of production plus administrative, selling and general costs", of the like product outside the ordinary course of trade will be an issue in dispute. Although the narrative explanation contained in the European Union's panel request does not refer to "administrative, selling and general costs … pertaining to production and sales in the ordinary course of trade of the like product", in our view, a reasonably informed reader would understand from the reference to Article 2.2.1 that the European Union also takes issue, in its panel request, with whether or not SG&A amounts are based on data pertaining to the production and sales in the ordinary course of trade.[108] Thus, we find that the European Union's panel request complies with the requirement of Article 6.2 of the DSU to "provide a brief summary of the legal basis of the complaint sufficient to present [a] problem clearly" pertaining to the European Union's Article 2.2.2 claim. Consequently, we conclude that the Article 2.2.2 arguments relating to "actual data pertaining to production and sales in the ordinary course of trade" in the European Union's submissions relate to claims that are within the Panel's terms of reference.

7.4  MOFCOM's dumping determination

7.52.  The European Union makes a number of claims in respect of MOFCOM's dumping determination for SMST, one of the European Union exporters/producers. These claims concern (i) the use of SG&A amounts for Grade B; (ii) the fair comparison concerning Grade C; and (iii) the alleged double-counting of certain administrative expenses concerning Grade B.

7.4.1  The use of SG&A amounts for Grade B

7.53.  The European Union claims that China acted inconsistently with Articles 2.2.1, 2.2.1.1, and 2.2.2 of the Anti-Dumping Agreement because "China did not determine the amount for [SG&A] on the basis of records and actual data kept by the exporter or producer under investigation (SMST) or in a manner that reasonably reflects the costs associated with the production and sale of [Grade B]".[109] China asks the Panel to reject the European Union's claims.

7.4.1.1  Relevant WTO provisions

7.54.  Articles 2.2.1, 2.2.1.1, and 2.2.2 of the Anti-Dumping Agreement are set forth above.[110]

7.4.1.2  Main arguments of the parties

7.4.1.2.1  European Union

7.55.  The European Union claims that China acted inconsistently with Article 2.2.2 of the Anti-Dumping Agreement by failing to determine an SG&A amount for SMST on the basis of actual data pertaining to production and sales in the ordinary course of trade of the like product.[111] The European Union submits that the data from table 6-3 of SMST's questionnaire response, which was used by China to construct normal value, was not "actual data pertaining to production and sales in the ordinary course of trade". This is because, the European Union argues, table 6-3 (i) included SG&A amounts derived from planned rates – i.e. hypothetical projected administrative expense – and not the actual expense;[112] and (ii) was based on abnormally high cost of production, as it included two free sample product transactions, which are unrepresentative and cannot be used to construct normal value.[113]

7.56.  The European Union also claims that China acted inconsistently with Article 2.2.1.1 of the Anti-Dumping Agreement because "it is the representative and duly verified data in [Table 6-5 of SMST's Questionnaire Response] that corresponds to the records kept by SMST, and that is in accordance with GAAP and reasonably reflects the costs associated with the production and sale of the product under consideration".[114]

7.57.  Finally, the European Union claims that China acted inconsistently with Article 2.2.1 of the Anti-Dumping Agreement. The European Union submits that this provision "expressly provides for the treatment of sales made below cost as being not made in the ordinary course of trade …, and further indicates that they should be disregarded. By definition, free samples are below cost, and thus not sales in the ordinary course of trade".[115]

7.4.1.2.2  China

7.58.  China submits that MOFCOM determined the SG&A amount on the basis of actual data reported by SMST for Grade B sold in the European Union, which according to China was included in table 6-3 of SMST's Questionnaire Response. China also submits that there was no evidence that such data were neither actual nor based on SMST's records.[116]

7.59.  China contends that, on the basis of the facts before MOFCOM during the investigation[117], the costs of production included in table 6-3 are actual data. According to China, since the SG&A amounts at issue were based on costs of production in table 6-3, it is clear that the SG&A amounts used by MOFCOM were based on "actual data".[118] China considers that it is irrelevant whether or not the coefficients used to determine the SG&A amounts are also actual data, because the SG&A amounts at issue were "based on" actual data, i.e. actual costs of production, and Article 2.2.2 does not require the SG&A amount to be actual data in itself. In any event, China contends that the coefficients themselves also constitute "actual data", because "[t]he coefficients were used by SMST in its daily operations and are data that pertained to acts, existed in fact, are real, and were in existence at the time".[119]

7.60.  Moreover, China submits that, on the basis of the facts before MOFCOM during the investigation[120], the data used by MOFCOM were based on SMST's records. China contends that it was reasonable for MOFCOM to conclude that the source of the SG&A amount was SMST's records because SMST stated that "[t]he figures reported in Table 6-3 were taken from cost calculations for the individual orders of subject merchandise produced during the POI".[121]

7.4.1.3  Main arguments of third parties

7.4.1.3.1  Kingdom of Saudi Arabia

7.61.  Saudi Arabia submits that Article 2.2.1.1 of the Anti-Dumping Agreement imposes an obligation on investigating authorities to use an exporter's records when such records (i) are in accordance with GAAP, and (ii) reasonably reflect the costs associated with the production and sale of the product under consideration.[122] Saudi Arabia contends that the "second condition is met where there is a sufficiently close relationship between the recorded cost and the actual cost to the company for the production and sale of the product at issue".[123]

7.4.1.3.2  United States

7.62.  With respect to the European Union's claim under Article 2.2.2 of the Anti-Dumping Agreement, the United States contends that the Anti-Dumping Agreement does not require an investigating authority to treat all sample sales as outside the ordinary course of trade. According to the United States, an authority must instead evaluate the record evidence to determine whether it supports finding that the sample sale was concluded on terms and conditions that are incompatible with normal commercial practice for sales of the like product, in the market in question, at the relevant time.[124] The United States understands that "China acted inconsistently with Article 2.2.2 of the [Anti-Dumping] Agreement to the extent that MOFCOM relied on information for sales outside the ordinary course of trade when information on sales in the ordinary course of trade were available".[125]

7.63.  With respect to the European Union's claim under Article 2.2.1.1 of the Anti-Dumping Agreement, the United States submits that if the evidence establishes that the records of the exporter or producer under investigation were in accordance with GAAP and reasonably reflected the costs associated with the production and sale of the products under consideration, "MOFCOM would have been obligated to use those records … or … provide a reason supported by the record evidence to depart from the 'normal' methodology provided for in Article 2.2.1.1".[126]

7.4.1.4  Evaluation by the Panel

7.64.  The disagreement between the European Union and China concerns the SG&A amounts used by MOFCOM in its calculation of normal value for Grade B produced and sold by SMST. As Article 2.2.2 of the Anti-Dumping Agreement sets forth how the amounts for SG&A are to be calculated for purposes of a constructed normal value, we start our assessment with this provision.

7.65.  Concerning Article 2.2.2 of the Anti-Dumping Agreement, the issue before the Panel is whether table 6-3, which China submits was the basis for the SG&A amounts used in MOFCOM's calculation of normal value[127], can be said to be based on "actual data pertaining to production and sales in the ordinary course of trade of the like product". It is undisputed that the SG&A amounts in table 6-3 consist of the cost of production multiplied by certain coefficients. These coefficients are the planned internal rates used by SMST in preparing price/cost allocations for orders.[128]

7.66.  We note that it appears that there was a disagreement between MOFCOM and SMST with respect to the source of data to determine the SG&A amount. While the European Union submits that SMST understood that MOFCOM should have been using the SG&A amount based on actual data from table 6-5[129], China submits that MOFCOM understood that it made clear in its disclosures that it was using the data contained in table 6-3.[130] Irrespective of these understandings, we observe that it is undisputed that SMST requested MOFCOM, and MOFCOM accepted, not to use in the constructed normal value calculations the cost of production in table 6-3 for Grade B sales in the European Union, because such cost of production was distorted due to the inclusion of the two free sample transactions.[131] Despite MOFCOM's decision to disregard the cost of production data in table 6-3 for Grade B sales in the European Union, MOFCOM nevertheless used the SGA amounts in table 6-3, even though they had been derived by applying certain coefficients to that disregarded cost of production data. We note China's argument that the "SG&A data affected by the disregarded cost of production could have been corrected by [the relevant] coefficients" used in the calculation of the SG&A amounts.[132] Although China has submitted that (i) MOFCOM requested SMST to explain its SG&A methodology and the sources of the coefficients at issue, and (ii) SMST failed to do so[133], we do not consider that an unbiased and objective investigating authority could have assumed the corrective potential of the relevant coefficients without any supporting analysis or evidence.[134] We agree with the European Union that any such assumption would have been "speculative".[135] In our view, by using SGA data based on the application of coefficients to data that had already been excluded for the purpose of constructing normal value, MOFCOM failed to fulfil the requirements of Article 2.2.2[136], namely that the SG&A amounts "be based on actual data pertaining to production and sales in the ordinary course of trade of the like product".[137] In light of the foregoing, we uphold the European Union's claim that China acted inconsistently with Article 2.2.2 of the Anti-Dumping Agreement by failing to determine an SG&A amount for SMST on the basis of actual data pertaining to production and sales in the ordinary course of trade of the like product.

7.67.  Having upheld the European Union's claim under Article 2.2.2, we exercise judicial economy with respect to the European Union's claims under Articles 2.2.1 and 2.2.1.1 of the Anti-Dumping Agreement.[138]

7.4.2  Fair comparison: SMST's sales of Grade C

7.68.  The European Union claims that China acted inconsistently with Article 2.4 of the Anti-Dumping Agreement because China did not establish the existence of a margin of dumping for SMST on the basis of a fair comparison between the export price and the normal value for Grade C.[139] China asks the Panel to reject the European Union's claim.

7.4.2.1  Relevant WTO provision

7.69.  Article 2.4 of the Anti-Dumping Agreement provides in relevant part:

A fair comparison shall be made between the export price and the normal value. This comparison shall be made at the same level of trade, normally at the ex‑factory level, and in respect of sales made at as nearly as possible the same time. Due allowance shall be made in each case, on its merits, for differences which affect price comparability, including differences in conditions and terms of sale, taxation, levels of trade, quantities, physical characteristics, and any other differences which are also demonstrated to affect price comparability. … The authorities shall indicate to the parties in question what information is necessary to ensure a fair comparison and shall not impose an unreasonable burden of proof on those parties. (footnote omitted)

7.4.2.2  Main arguments of the parties

7.4.2.2.1  European Union

7.70.  The European Union contends that, when calculating the normal value for Grade C, MOFCOM failed to account for differences in physical characteristics between certain goods sold in the European Union and goods exported to China. The European Union submits that, as explained by SMST, "[l]arge differences in tube outer diameter … affected price comparability" because "[t]hin diameter tube requires more extensive rolling/drawing, resulting in higher costs of production and prices", and "[t]hin diameter tubes also cannot be used in a primary boiler system but rather are used in secondary systems such as measuring temperatures or controlling valves".[140] The European Union argues that it was not appropriate for China to include certain sales of thinner tubes, which were designed and produced for secondary systems, in calculating the normal value for Grade C, because such sales are not comparable, without adjustment, to the Grade C primary boiler tube exported to China.[141] By doing so, the European Union submits that China's comparison of export prices and domestic prices included different product mixes. The European Union contends that China failed to take any steps to control for differences in physical characteristic affecting price comparability, or make the necessary adjustments in order to ensure a fair comparison.[142]

7.4.2.2.2  China

7.71.  China submits that, in order to minimize the need for adjustments, "MOFCOM requested [SMST] … to list its own product types … [and] used these product types to carry out the comparison under Article 2.4 [of the Anti-Dumping Agreement]".[143] China contends that SMST initially stated, through its questionnaire responses and supporting documents, that there were no physical differences affecting price comparability between Grade C exported to China and Grade C sold domestically by SMST.[144] China submits that subsequently, when SMST referred to physical differences, it did not attempt to "quantify the price difference or to provide any evidence in support of its claim", and "provided no explanation concerning the manifest contradiction between the newly introduced claim based on physical differences and the very clear and detailed answers in its questionnaire response, in which it stated, and repeated several times, exactly the opposite".[145] China submits that, while SMST made several contradictory and incoherent statements, SMST never lodged any substantiated request in relation to a fair comparison concerning the relevant sales.[146]

7.4.2.3  Main arguments of third parties

7.4.2.3.1  Korea

7.72.  Korea contends that the burden under Article 2.4 of the Anti-Dumping Agreement to ensure a fair comparison does not shift to an exporter only because such exporter failed to claim that there is a price difference between the products being compared under this provision.[147] Korea notes that the parties in this dispute agree that SMST claimed that there were differences in physical characteristics between certain products sold in the European Union and products exported to China. Korea considers that "[i]f such a factual claim was raised at the time of the investigation, through which an investigating authority could have thrown suspicion on the issue of fair comparison, the investigating authority should have evaluated further to determine whether the product it ha[d] chosen for the comparison was appropriate, and if it did not, the investigating authority's obligation … under Article 2.4 … could not be deemed to have been released".[148]

7.4.2.3.2  Kingdom of Saudi Arabia

7.73.  Saudi Arabia submits that the adjusted values that form the basis for a determination of dumping should depart as little as possible from actual prices in the markets at issue.[149] In addition, Saudi Arabia contends that "normal value" must be specific to the exported product and its unique product and pricing characteristics.[150] Saudi Arabia also submits that the comparison in Article 2.4 refers to two interrelated values, and does not permit an investigating authority to ignore any similarity or difference that might affect "comparability".[151]

7.4.2.3.3  United States

7.74.  The United States submits that a fair comparison, under Article 2.4 of the Anti-Dumping Agreement, requires an investigating authority to strive to compare similar products as well as transactions. Where the product under consideration consists of two or more significantly diverse product models, the United States contends that an investigating authority "must conduct an exercise such as a model matching", whereby certain imported and domestic like products are matched "to assure accurate price comparisons within but not across relevant product categories".[152] The United States submits that "because model matching ensures that only sales of products with similar physical characteristics are compared to each other or necessary adjustments for the differences are made, some sort of model matching exercise is an essential component of establishing a fair comparison between the export price and normal value".[153]

7.75.  The United States also submits that a failure to make due allowance for differences in physical characteristics that affect price comparability would be a breach of the obligation contained in Article 2.4 of the Anti-Dumping Agreement.[154] The United States contends that "[i]f an investigating authority sought … information [on differences in physical characteristics that may affect price comparability], but an exporter or producer merely identified differences in physical characteristics … without claiming that those differences affected price, then the investigating authority need not independently undertake an analysis of the differences in physical characteristics to determine whether they affected price comparability".[155]

7.4.2.4  Evaluation by the Panel

7.76.  The main issue before the Panel is whether or not SMST actually made a request for due allowance concerning physical differences affecting price comparability within the meaning of Article 2.4 of the Anti-Dumping Agreement.

7.77.  Article 2.4 provides that "[d]ue allowance shall be made in each case, on its merits, for differences which affect price comparability, including differences in … physical characteristics". The Appellate Body in EC – Fasteners stated that "[d]ifferences between products … would not always affect price comparability and require adjustments by the authorities".[156] The Appellate Body considered that the investigating authority may be unduly burdened if it were required "to assess each difference in order to determine whether adjustment is needed in every case, even without a request by the interested party".[157] Yet, the Appellate Body concluded that "it is the investigating authority's duty to review the requested adjustments in order to determine whether any physical differences identified before it are differences that affect price comparability within the meaning of Article 2.4".[158]

7.78.  Concerning the methodology in Article 2.4, there is no guidance in this provision as to how due allowance for differences affecting price comparability is to be made.[159] The Panel in EC – Fasteners explained that "most investigating authorities either make comparisons of transaction prices for groups of goods within the like product that share common characteristics, or by making an adjustments for each difference affecting price comparability to either the normal value or the export price of each transaction to be compared".[160] In that same case, the Appellate Body later considered that:

For example, the authority may choose to make comparisons of transaction prices for a number of groups of goods within the like product that share common characteristics, thus minimizing the need for adjustments, or it may choose to make adjustments for each difference affecting price comparability to either the normal value or the export price of each transaction to be compared.[161]

7.79.  Turning to the facts before the Panel, we note that SMST's Questionnaire Response did not request any adjustments for differences in physical characteristics.[162] Nevertheless, it is undisputed that, in its comments on MOFCOM's preliminary dumping disclosure, SMST stated that MOFCOM should not have included certain sales because they involved very thin tubes that are not used in primary boiler systems.[163] SMST submitted that:

These thin tubes cannot be used in the primary boiler system designed to transport steam. Rather, they are used in secondary system such as measuring temperatures or controlling [valves]. Also, because of their very thin dimensions, they require more extensive rolling/drawing resulting in higher costs of production. The price of these thin tubes can therefore not be properly compared to the price of the DMV 310N [i.e. Grade C] tubes exported to China.[164]

7.80.  It is also undisputed that, during verification, (i) SMST provided a diagram showing that tubes in certain European Union sales were thinner than those sold in China and that there were certain differences in the production process between comparatively thinner and thicker tubes;[165] and (ii) MOFCOM's officials marked such document, at the verification site, with hand-written text that translates as: "Why SMST-I's [certain] domestic transactions … cannot be included in the domestic sales and compared with the export sales? Because the small tube of H310N is used for the connection of boiler's control system".[166]

7.81.  With respect to Grade C, MOFCOM stated in the SMST final dumping disclosure that:

[SMST] presented evidence in the course of the verification in order to prove that the product [in certain sales] that should be allegedly excluded has a difference with [SMST]'s products exported to China in terms of processing technology, etc. However, since no evidence proves that aforementioned products do not meet the specific description of the investigated products provided for in the initiation notice, the investigating authority decides to maintain, in the final determination, its decision in the preliminary determination not to exclude the aforementioned … relatively small amount transactions when determining the normal value of this grade.[167]

7.82.  In its comments on the final dumping disclosure, SMST stated that:

In calculating normal value for [Grade C], BOFT included [certain] EU sales of merchandise that were not comparable to the merchandise sold for export to China. … Large differences in tube outer diameter affected price comparability. Thin diameter tube requires more extensive rolling/drawing, resulting in higher costs of production and prices. Thin diameter tubes also cannot be used in the primary boiler system but rather are used in secondary systems such as measuring temperatures or controlling valves and therefore are sold in much smaller quantities than normal boiler tube. This also affects price comparability.

It is therefore not appropriate for BOFT to continue to include [certain sales] in calculating normal value for DMV 310N [i.e. Grade C] …

This issue was thoroughly reviewed at verification. At verification, the BOFT officials reviewed technical information concerning boiler construction, as well as technical specifications and invoices for [certain] transactions. … The information confirmed the difference between primary and secondary boiler systems and showed that the secondary system tube sold … had a price per metric ton that was [higher than] the thicker DMV 310N primary boiler tube sold in the EU and Chinese markets.

The only reason given by BOFT in its disclosure before the final determination for continuing to include the secondary system tube in its normal value calculation was that SMST 'did not prove that these products do not meet the scope description of the subject merchandise in the initiation notice.' It is however not an issue of whether secondary system tube is included within the scope of subject merchandise but rather whether secondary system tube can properly be compared to primary boiler tube under Article 2.4 of the WTO Antidumping Agreement.

Article 2.4 … requires that a 'fair comparison shall be made between the export price and the normal value' and that 'due allowance' shall be made for any 'differences which affect price comparability,' including differences in 'physical characteristics.' As discussed above the verified record evidence in this case demonstrates that major differences in outer dimensions affect the price comparability of secondary system tube and primary boiler tube, with the unit prices of secondary system tube being [higher than] primary boiler tube. Given the fact that there were sufficient home market sales of DMV 310N primary boiler tube for comparison with the DMV 310N primary boiler tube exported to China, BOFT should have excluded the secondary system tube sold [in the EU market] in its calculation of normal value for DMV 310N.[168]

7.83.  In light of the foregoing, we consider that SMST did request an adjustment, under Article 2.4[169], to reflect physical differences affecting price comparability.[170] Although SMST had initially reported in its questionnaire response that there were no differences affecting price comparability, it should have been clear to MOFCOM that SMST changed its position in this regard during the course of the investigation. In its comments on MOFCOM's final dumping disclosure, SMST clearly referred to differences affecting price comparability, and the obligation on MOFCOM to ensure a fair price comparison pursuant to Article 2.4. In these circumstances, we consider that an objective and impartial investigating authority would not have "assessed the physical differences and the information provided by SMST in this respect in the framework of exclusion from the scope of products under consideration", as MOFCOM did.[171] At a minimum, an objective and impartial investigating authority would have acknowledged the fact that an adjustment was being sought, and considered whether that adjustment was warranted, and if the necessary information had been provided.

7.84.  China contends that MOFCOM should not have understood SMST to have requested any adjustment to differences in physical characteristics because SMST did not present a substantiated request to that effect. China submits that SMST did not attempt to quantify or explain the price difference or provide any evidence suggesting that such differences had an impact on prices or costs.[172]

7.85.  We note that China accepts that, during verification, MOFCOM received a diagram from SMST showing that certain tubes sold in the European Union were thinner than those sold in China, and that there were certain differences in the production process between comparatively thinner and thicker tubes.[173] China has not shown that MOFCOM rejected SMST's request for want of it being "substantiated". We recall that it is well established that a Member may not offer, during WTO dispute settlement, a new rationale for its investigating authority's determinations.[174] MOFCOM's determinations must be evaluated in light of the rationale provided by MOFCOM during the underlying anti-dumping proceedings. Thus, we find that China's arguments relating to such lack of a "substantiated" request constitute ex post rationalization, which we are bound not to consider when examining the European Union's claim at issue.

7.86.  In light of the foregoing, we uphold the European Union's claim that China acted inconsistently with Article 2.4 of the Anti-Dumping Agreement by failing to address SMST's adjustment request under this provision with a view to determining the existence of a margin of dumping for SMST on the basis of a fair comparison between the export price and the normal value for Grade C.

7.4.3  Alleged failure to take into account certain information provided during verification

7.87.  The European Union claims that China acted inconsistently with Article 6.7 and Paragraph 7 of Annex I to the Anti-Dumping Agreement because MOFCOM refused to take into account certain information provided by SMST during the verification "[o]n the ground that the company did not raise this point before the onsite verification started, the Investigation Authority decided to deny the above request".[175] The European Union further claims that China acted inconsistently with Article 6.8 and Paragraphs 3 and 6 of Annex II to the Anti-Dumping Agreement by failing to comply with the requirements to apply "facts available".[176] China asks the Panel to reject the European Union's claims.

7.4.3.1  Relevant WTO provisions

7.88.  Article 6.7 of the Anti-Dumping Agreement provides:

In order to verify information provided or to obtain further details, the authorities may carry out investigations in the territory of other Members as required, provided they obtain the agreement of the firms concerned and notify the representatives of the government of the Member in question, and unless that Member objects to the investigation. The procedures described in Annex I shall apply to investigations carried out in the territory of other Members. Subject to the requirement to protect confidential information, the authorities shall make the results of any such investigations available, or shall provide disclosure thereof pursuant to paragraph 9, to the firms to which they pertain and may make such results available to the applicants.

7.89.  Paragraph 7 of Annex I to the Anti-Dumping Agreement provides:

As the main purpose of the on‑the‑spot investigation is to verify information provided or to obtain further details, it should be carried out after the response to the questionnaire has been received unless the firm agrees to the contrary and the government of the exporting Member is informed by the investigating authorities of the anticipated visit and does not object to it; further, it should be standard practice prior to the visit to advise the firms concerned of the general nature of the information to be verified and of any further information which needs to be provided, though this should not preclude requests to be made on the spot for further details to be provided in the light of information obtained.

7.90.  Article 6.8 of the Anti-Dumping Agreement provides:

In cases in which any interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available. The provisions of Annex II shall be observed in the application of this paragraph.

7.91.  Paragraph 3 of Annex II to the Anti-Dumping Agreement provides:

All information which is verifiable, which is appropriately submitted so that it can be used in the investigation without undue difficulties, which is supplied in a timely fashion, and, where applicable, which is supplied in a medium or computer language requested by the authorities, should be taken into account when determinations are made. If a party does not respond in the preferred medium or computer language but the authorities find that the circumstances set out in paragraph 2 have been satisfied, the failure to respond in the preferred medium or computer language should not be considered to significantly impede the investigation.

7.92.  Paragraph 6 of Annex II to the Anti-Dumping Agreement provides:

If evidence or information is not accepted, the supplying party should be informed forthwith of the reasons therefor, and should have an opportunity to provide further explanations within a reasonable period, due account being taken of the time‑limits of the investigation. If the explanations are considered by the authorities as not being satisfactory, the reasons for the rejection of such evidence or information should be given in any published determinations.

7.4.3.2  Main arguments of the parties

7.4.3.2.1  European Union

7.93.  The European Union contends that, in the context of calculating SMST's margin of dumping for Grade B, (i) SMST submitted to the investigating authorities that certain financial expenses had been inadvertently double-counted in the SMST dumping questionnaire response, and (ii) SMST adduced corrected information that was duly verified. The European Union claims that China acted inconsistently with Article 6.7 and Paragraph 7 of Annex I to the Anti-Dumping Agreement by refusing to take into account the corrected information provided during the verification.[177] The European Union takes issue with the fact that "[t]he only reason provided by China in the SMST Final Disclosure and in the Final Determination for refusing to take the corrected information into account was that SMST did not raise this point before the verification started".[178]

7.94.  In addition, the European Union claims that China acted inconsistently with Article 6.8 and Paragraphs 3 and 6 of Annex II to the Anti-Dumping Agreement because China failed to take into account all information pertaining to the determination of SMST's margin of dumping which was (i) verifiable; (ii) appropriately submitted so that it could have been used in the investigation without undue difficulties, and (iii) supplied in a timely fashion.[179] The European Union contends that "the question of what information an investigating authority must rely on is closely linked to the related question of the circumstances in which an investigating authority may rely on other information, which is essentially what China did in this case when it relied on the erroneous and uncorrected data relating to financial expenses".[180] The European Union submits that it "makes the same claim with respect to the information contained in" certain of SMST's questionnaire responses and verification exhibits.[181]

7.4.3.2.2  China

7.95.  China contends that there was no double-counting in the dumping margin determination and that, accordingly, the claims lack any factual basis and that the alleged procedural violation did not and could not have had any adverse impact on the European Union, as there is no case of nullification or impairment of the European Union's rights.[182] In addition, China argues that Article 6.7 and Paragraph 7 of Annex I to the Anti-Dumping Agreement do not mandate investigating authorities to accept all information presented during a verification visit.[183] China submits that these provisions grant an investigating authority the right to conduct an on-the-spot verification in the territory of the exporting Member under certain circumstances. China contends that such provisions do not, by contrast, impose any obligation to conduct any verification or accept all information. According to China, the fact that the purpose of a verification visit is to "verify information provided or to obtain further details" does not imply that an investigating authority is compelled to verify information provided or to obtain further details.[184] Moreover, China submits that Article 6.8 and Annex II of the Anti-Dumping Agreement are irrelevant to the matter at issue because MOFCOM did not make any determinations on the basis of "facts available".[185] Finally, China submits that European Union's claims concerning the SMST's questionnaire responses and verification exhibits are difficult to understand and fall short of making a prima facie case.[186]

7.4.3.3  Main arguments of third parties

7.4.3.3.1  Turkey

7.96.  Turkey submits that "there should be no legal responsibility on side of the authority to accept or consider any newly prepared information [submitted at verification] which profoundly alters the basis of dumping calculation, namely normal value, export price and cost of production, or explanations that extensively modify the answers in the questionnaire".[187]

7.4.3.3.2  United States

7.97.  The United States agrees with the European Union that an investigating authority is "not entitled to reject information on the sole ground that such information was proffered at verification".[188] Nevertheless, the United States submits that on-the-spot investigations are not opportunities for interested parties to submit a significant amount of new information.[189] According to the United States, "if a firm always could provide substantial corrections once it realized what specific information an investigating authority was verifying during an on-the-spot investigation, the effectiveness of the on-the-spot investigation would be undermined … [T]he flexibility to accept clerical corrections should not be construed such that the firm could be less motivated to prepare carefully its data submissions".[190] Finally, the United States submits that Article 6.8 and Annex II of the Anti-Dumping Agreement provide relevant context to the consideration of what information must be accepted by the investigating authority.[191]

7.4.3.4  Evaluation by the Panel

7.98.  Although the European Union refers to an actual occurrence of double-counting, we understand that the European Union is rather concerned with the potential for double-counting that results from the fact that financial expenses of the headquarters were included in both table 6-6 and table 6-8.[192] We note that table 6-8 was not used by MOFCOM in its SG&A determination for Grade B in the initial investigation, because MOFCOM relied instead on table 6-3.[193] However, we understand that the European Union is concerned that, when implementing the Panel's possible findings regarding its Article 2 claims against the SGA determined by MOFCOM for Grade B, MOFCOM will rely on table 6-8, which could then result in double-counting of the relevant financial expenses, since they could be imported into the SGA amount from both table 6-6 and table 6-8. For this reason, the European Union seeks a finding by the Panel that MOFCOM committed a procedural error in failing to allow SMST to rectify certain information only on the basis that SMST did not raise this matter before the verification started.[194] Thus, with respect to the European Union's first set of claims, the issue before the Panel is whether MOFCOM acted inconsistently with Article 6.7 and Paragraph 7 of Annex I to the Anti-Dumping Agreement by rejecting SMST's rectification only on the basis that SMST did not raise this matter before the verification started.[195]

7.99.  We note that SMST's rectification request relates to tables 6-6 and 6-8.[196] It is undisputed that the detailed information concerning SG&A in tables 6-6 and 6-8 is summarized in table 6-5.[197] In our view, there is therefore a clear and direct connection between the information in tables 6-6 and 6-8, on the one hand, and the information in table 6-5, on the other hand. We also note that in MOFCOM's notification to SMST prior to verification, MOFCOM requested SMST to prepare documents relating inter alia to table 6-5.[198] Thus, in our view, SMST's rectification request (concerning tables 6-6 and 6-8) has a clear and direct connection to the information (concerning table 6-5) expressly requested by MOFCOM to be verified during the on-the-spot investigation. Recalling that Paragraph 7 of Annex I of the Anti-Dumping Agreement provides that "the main purpose of the on-the-spot investigation is to verify information", we consider that an investigating authority would normally welcome the rectification of information in these circumstances. On this basis, we consider that MOFCOM acted contrary to the main purpose of the on-the-spot investigation when it expressly requested SMST to prepare documents relating to table 6-5, but later rejected information which was potentially relevant to such table on the sole ground that SMST did not raise this matter before the verification started.

7.100.  We agree with China that Article 6.7 and Paragraph 7 of Annex I to the Anti-Dumping Agreement "contain no obligation for an investigating authority to accept all information presented to it during the verification visit".[199] As indicated by the United States, an authority does not necessarily have to accept new information during verification.[200] Nor does it have to accept voluminous amounts of corrected information. Late in the investigation, such information probably could not be used without undue difficulties by the authority. However, we understand that the present case simply concerns the rectification of one piece of information: the financial expenses of the headquarters. There seems to be no valid reason why MOFCOM did not accept the rectified information from SMST, particularly since MOFCOM appears to have understood the matter explained by SMST concerning the financial expenses at issue (as evidenced by the verification disclosure[201]).

7.101.  In light of the foregoing, we uphold the European Union's procedural claim that China acted inconsistently with Article 6.7 and Paragraph 7 of Annex I to the Anti-Dumping Agreement by rejecting SMST's rectification at issue only on the basis that it was not provided prior to verification.

7.102.  Turning to the European Union's claims under Article 6.8 and Paragraphs 3 and 6 of Annex II to the Anti-Dumping Agreement, the European Union suggests that MOFCOM applied "facts available" when MOFCOM "relied on the erroneous and uncorrected data relating to financial expenses".[202] However, China submits that "MOFCOM did not make any determinations on the basis of 'facts available'" and that "the situation at hand simply does not fall within the scope of the Article 6.8 and Annex II of the Anti-Dumping Agreement".[203] The European Union has pointed to no evidence on the Panel record to demonstrate otherwise. In addition, we note that China submits that "MOFCOM did not rely on the SG&A reported in table 6-5 [rather] MOFCOM used the … SG&A data provided by SMST in table 6-3".[204] We recall our conclusion above that it appears there was a disagreement between MOFCOM and SMST concerning the use of tables 6-3 and 6-5 with regard to the proper SG&A amount for MOFCOM's constructed normal value.[205] Thus, we fail to see how this may be considered as a determination on the basis of "facts available". In our view, MOFCOM based its determination on evidence contained in the records, which at that time MOFCOM considered were the correct facts submitted by SMST.[206] As MOFCOM did not apply "facts available" in making the determination at issue, we see no factual basis for the European Union's claims under Article 6.8 and Paragraphs 3 and 6 of Annex II. Thus, we reject these claims accordingly.[207]


7.5  MOFCOM's determination that subject imports caused material injury to the domestic industry

7.103.  The complainants, Japan and the European Union, make a number of claims concerning MOFCOM's determination that dumped imports from Japan and the European Union caused material injury to the domestic industry. First, they claim that MOFCOM's consideration of the price effects of subject imports is inconsistent with Articles 3.1 and 3.2 of the Anti-Dumping Agreement. Second, they claim that MOFCOM's assessment of the impact of the dumped imports on the state of the domestic industry is inconsistent with Articles 3.1 and 3.4 of the Anti-Dumping Agreement. Third, they claim that MOFCOM's determination that there is a causal link between dumped imports and material injury to the domestic industry is inconsistent with Articles 3.1 and 3.5 of the Anti-Dumping Agreement.[208]

7.104.  China asks the Panel to reject each of the complainants' claims.

7.5.1  Whether MOFCOM's consideration of the price effects of subject imports is inconsistent with Articles 3.1 and 3.2 of the Anti-Dumping Agreement

7.5.1.1  Introduction

7.105.  The complainants submit that MOFCOM's consideration of price undercutting in respect of subject imports is inconsistent with Articles 3.1 and 3.2 of the Anti-Dumping Agreement. First, the complainants contend that MOFCOM's analysis of the price effects of Grade C subject imports is analytically and factually flawed. The complainants contend in this regard that MOFCOM improperly compared the price of Grade C subject imports with the price of Grade C domestic products, despite significant differences between the quantities of imported and domestic product sold. The complainants also assert that MOFCOM improperly found price undercutting simply on the basis that the price of Grade C subject imports was less than the price of domestic Grade C products, without any consideration of evidence suggesting that Grade C subject imports did not have any price undercutting effect on Grade C domestic products. Second, the complainants submit that MOFCOM improperly extended its finding of price undercutting in respect of Grades B and C to the like domestic product as a whole, including Grade A.

7.5.1.2  Relevant provisions

7.106.  Article 3.1 of the Anti-Dumping Agreement provides:

A determination of injury for purposes of Article VI of GATT 1994 shall be based on positive evidence and involve an objective examination of both (a) the volume of the dumped imports and the effect of the dumped imports on prices in the domestic market for like products, and (b) the consequent impact of these imports on domestic producers of such products.

7.107.  Article 3.2 of the Anti-Dumping Agreement provides:

With regard to the volume of the dumped imports, the investigating authorities shall consider whether there has been a significant increase in dumped imports, either in absolute terms or relative to production or consumption in the importing Member.  With regard to the effect of the dumped imports on prices, the investigating authorities shall consider whether there has been a significant price undercutting by the dumped imports as compared with the price of a like product of the importing Member, or whether the effect of such imports is otherwise to depress prices to a significant degree  or prevent price increases, which otherwise would have occurred, to a significant degree.  No one or several of these factors can necessarily give decisive guidance.

7.5.1.3  Alleged flaws in MOFCOM's consideration of price undercutting in respect of Grade C

7.5.1.3.1  The difference between the volume of Grade C subject imports and the volume of domestic Grade C products
7.5.1.3.1.1  Main arguments of the parties

Japan and the European Union[209]

7.108.  The complainants submit that MOFCOM improperly compared the price of imported Grade C with the price of domestic Grade C for 2009 and 2010, despite its finding that there was a "huge difference in quantity" between the volumes of imported and domestic products during these years. The complainants contend that the significant difference meant that the relevant import and domestic prices were not comparable. They assert that the price comparison undertaken by MOFCOM therefore lacked objectivity and provided no basis for establishing the existence of price undercutting, contrary to Articles 3.1 and 3.2 of the Anti-Dumping Agreement.

7.109.  The complainants observe that the Appellate Body in China – GOES stated that "an investigating authority's consideration under Article[] 3.2 … must be reflected in relevant documentation, such as an authority's final determination, so as to allow an interested party to verify whether the authority indeed considered such factors".[210] The complainants submit that MOFCOM failed to explain how it considered that these import and domestic prices could properly be considered comparable, despite the significant difference in quantity. The complainants contend that it was therefore impossible to verify how MOFCOM considered the existence of price undercutting in respect of Grade C, with the result that its consideration of that matter is inconsistent with Article 3.2 of the Anti-Dumping Agreement.

China

7.110.  China contends that the methodology adopted by MOFCOM to take into account the quantity differences in respect of Grade C was clearly set out in the Final Determination and other documents. China submits that the complainants' claims thus lack any factual basis.[211] China further asserts that there is no legal basis in Articles 3.1 or 3.2 for any claim that MOFCOM failed to explain how it accounted for the relevant differences. China contends that there is no obligation to explain in Articles 3.1 or 3.2. China contends that the obligation to explain is rather found in procedural provisions of the Anti-Dumping Agreement, such as Article 12.2.2. China contends that the complainants' reliance on the finding of the Appellate Body in China – GOES is inapposite, since that finding only means that the fact that the authority has considered price effects needs to be reflected in the relevant documentation.[212] China explains that the complainants limit themselves to alleging that MOFCOM provided no explanation of the methodology followed, but notes that, in any event, MOFCOM had discretion regarding the methodology to follow in taking into account the quantitative difference, and asserts that MOFCOM applied its methodology in an objective way.[213] In addition, China maintains that MOFCOM ensured that Grade C subject import prices could properly be compared with Grade C domestic prices, without any risk of price distortions resulting from the relevant quantitative difference.[214] China contends that, under Article 3.2, the relevant element of a price effects consideration is the perception by the market[215], and that quantitative differences between the total import volume and the total domestic sales do not "have a perceived importance to customers" (while a quantitative difference may impact costs, which could mandate an adjustment in a dumping determination).[216]

7.5.1.3.1.2  Evaluation by the Panel

7.111.  We begin by addressing China's argument that the complainants' claims lack any basis in law.[217] According to China, the complainants' claims concern the alleged failure by MOFCOM to explain its treatment of the difference in quantities, rather than the substance of how MOFCOM actually addressed that difference with a view to ensuring price comparability. China submits that there is no obligation to explain in Articles 3.1 or 3.2 of the Anti-Dumping Agreement.

7.112.  We are not persuaded by China's understanding of the scope of the complainants' claims. We acknowledge that the complainants did refer in their first written submissions[218] to the Appellate Body's finding in China – GOES that "an investigating authority's consideration under Article[] 3.2 … must be reflected in relevant documentation …".[219] However, we do not understand the complainants' claim to principally concern merely whether or not MOFCOM adequately explained its treatment of the difference in quantity between imports and domestic sales of Grade C. Rather, we understand their claim to concern whether MOFCOM's determination in this regard was, as explained, consistent with the requirements of Article 3.2. We note that the heading of the relevant sub-section in the European Union's first written submission reads "China's analysis of price-undercutting with respect to Grade C is flawed".[220] The relevant heading in Japan's first written submission reads "MOFCOM's analysis of the price effects of imported Grade C is analytically and factually flawed".[221] At paragraph 85 of its oral statement at the Panel's first substantive meeting with the parties, the European Union asserted that the limited number of domestic Grade C transactions provided "an unreliable basis for any price undercutting conclusions". For its part, Japan asserted that "[w]ithout a meaningful quantity of both import and domestic sales for a given product, it is difficult to see how any objective price undercutting conclusion could be reached with respect to that product".[222] In its oral statement at the first substantive meeting, Japan stated that "the trivial quantity of domestic sales of [Grade] C in both 2009 and 2010 should indicate that those domestic sales may have been one-off outlier transactions made for any variety of reasons, and therefore not comparable with such a large quantity of imports sales of [Grade] C …".[223] In light of these considerations, we understand the complainants' claim to concern the substantive issue of comparability, to which we now turn.

7.113.  Although investigating authorities have discretion in how they consider price effects in the context of Article 3.2, this discretion is not unlimited. Given the overarching requirements of Article 3.1, an investigating authority's price effects analysis must involve an "objective examination", and must be based on "positive evidence". This means inter alia that, whenever an investigating authority's consideration of the price effects of imports involves a comparison between imported and domestic prices, the authority must ensure that such prices are comparable.[224] In the words of the China – GOES panel, "[a]s soon as price comparisons are made, price comparability necessarily arises as an issue".[225] China has not expressly denied this. China acknowledges that MOFCOM verified whether such quantitative difference might "preclude[] a meaningful price effect consideration".[226] In addition, MOFCOM referred to "the huge difference in quantity", and stated that such difference "should be taken into consideration when making [the] price comparison".[227] We similarly consider that significant differences in quantities are likely to have an impact on comparability, and thus, if there are such differences, they must be looked into in considering price effects.[228]

7.114.  China submits that MOFCOM properly ensured price comparability, notwithstanding the volume difference at issue, by ascertaining that "the difference was similar" in both 2009 and 2010".[229] According to China, this provided the basis for MOFCOM to proceed with its price comparison "without risking the distortion of any considerations by the quantitative differences".[230] In this regard, we note that MOFCOM did find that "there was a similar quantitative difference" between the volume of Grade C imports and the volume of Grade C domestic sales for both 2009 and 2010.[231] However, there is no explanation by MOFCOM of how this fact is relevant to ensuring price comparability in light of the differences in quantities. Nor is there any explanation of how this fact eliminates the risk of distortion, as suggested by China. The risk of a distorted price comparison results from the fact that there is a significant difference between the volumes of the products whose prices are being compared, which may have an effect on their prices. The fact that such a difference remains constant over a period of time does not address the possible distortion of the comparison. It simply means that if there is any distortion, it continues for that period. Accordingly, in the absence of additional explanation or clarification by MOFCOM, we are not persuaded that MOFCOM properly established that, notwithstanding the significant difference between the quantities of Grade C imports and the quantity of Grade C domestic sales, the prices of imports and domestic product were comparable for the purpose of considering price undercutting by imports of Grade C.

7.115.  For the above reasons, we uphold the complainants' claims that MOFCOM's failure to properly account for differences in quantities when comparing the price of Grade C subject imports with the domestic Grade C price is inconsistent with Articles 3.1 and 3.2 of the Anti-Dumping Agreement.

7.5.1.3.2  Whether Grade C subject imports had any price undercutting effect on domestic Grade C products
7.5.1.3.2.1  Main arguments of the parties

Japan and the European Union

7.116.  The complainants submit that a determination that price "undercutting" exists cannot be based solely on the existence of a mathematical difference between import and domestic prices. They submit that, pursuant to Article 3.2, an investigating authority must also consider whether any price difference enabled subject imports to have a price undercutting effect on domestic prices.

7.117.  The complainants contend that their position is based on: the text of Article 3.2, including the phrase "the effect of the dumped imports on prices" and relevant definitions of the term "undercutting"; its context, including Articles 3.1 ("the effect of the dumped imports on prices in the domestic market for like products") and 3.5 ("the effects of dumping, as set forth in paragraphs 2 and 4"); the purpose of Article 3 (to ensure that anti-dumping measures are imposed only where dumped imports are found to be causing injury through a "logical progression" of inquiry); and previous panel and Appellate Body reports.[232] Concerning dictionary definitions of the term "undercut", the complainants suggest that the relevant definitions of "undercut" are: "[t]o supplant … by selling at lower prices" or "[t]o render unstable; to render less firm, to undermine".[233] According to the complainants, these definitions indicate that, for a proper price "undercutting" finding to be made, the mere fact that the import price is lower than the domestic price does not suffice. They submit that an investigating authority must also show that dumped imports replaced domestic like products and thereby resulted in a loss of domestic sales volumes, or at least placed downward pressure on domestic prices. Concerning precedent, the complainants refer in particular to the finding by the Appellate Body in China – GOES that Article 3.2 requires the investigating authority to consider "domestic prices in conjunction with subject imports", or "the relationship between subject imports and prices of like domestic products", to determine whether dumped imports provide "explanatory force" for the occurrence of effects on the prices of the domestic like product.[234] The European Union relies on the Appellate Body's findings to argue that an investigating authority is required to consider whether a first variable – that is, a price differential per se – has explanatory force for the occurrence of a second variable – that is, price undercutting.

7.118.  The complainants contend that there was no basis for MOFCOM to conclude that Grade C subject imports had a price undercutting effect on domestic Grade C products, because subject import prices remained higher than domestic prices until the latter increased by 112.80%. The complainants observe in this regard that, according to MOFCOM's own analysis, in 2010 the price of the domestic Grade C increased by 112.80% from 2009, while the price of the subject imports of the same grade decreased by 36.32%. The complainants assert that the dynamic relationship of the prices of both imported and domestic products shows that subject imports of Product C did not have a significant undercutting effect on the prices of the corresponding like domestic products. The complainants assert that MOFCOM failed to take account of the increase in domestic price of Grade C in its price undercutting consideration. The complainants also assert that the vast difference in import and domestic price levels and the inverse price movements suggest that the domestic sales of Grade C were not in competition with imports of Product C during the POI in the Chinese market. They refer to record evidence showing that domestic importers unanimously considered the subject imports and domestic like products not to be substitutable.[235] The complainants assert that, in these circumstances, there was no basis for MOFCOM to conclude that subject imports of Grade C drove down domestic Grade C prices, or otherwise caused any tangible decrease, or prevented any increase, in domestic Grade C prices.[236]

China

7.119.  China considers that Article 3.2 allows an investigating authority to "presume conclusively" that there is price undercutting within the meaning of Article 3.2 whenever dumped import prices are below comparable domestic prices.[237] According to China, no additional "effect" consideration is required since price undercutting is in itself an effect. China asserts that the complainants only refer to one of the definitions of the term "undercut" given in the Oxford English Dictionary. China notes that the dictionary also defines the term "undercut" as meaning to "sell at lower prices than".[238] Further, China contends that if an investigating authority were required by Article 3.2 to show that a price differential had the effect of depressing or suppressing domestic prices, the Article 3.2 distinction between price undercutting on the one hand, and price depression and price suppression on the other, would be undermined.

7.120.  China also submits that MOFCOM properly found, in the context of its like product determination, that Grade C imports and Grade C domestic products are substitutable, and do compete with one another.[239] China contends that MOFCOM properly found that domestically produced Grade C is "like" imported Grade C. In this respect, China considers that a likeness finding does not necessarily imply that all domestic products within the basket of "like products" are "like" all imported products. However, China considers that such finding does imply a "likeness" between the domestic product type that was explicitly found to be "like" the corresponding product type of the product under consideration.[240] China asserts that such determination of likeness inevitably implies that there is a competitive relationship between imported Grade C and domestically produced Grade C[241], relying on the Appellate Body's findings in previous disputes.[242] China contends that because the complainants have not challenged MOFCOM's likeness determination under Article 2.6 of the Anti-Dumping Agreement, they are precluded from challenging the existence of competition between Grade C subject imports and Grade C domestic products in the context of Articles 3.1 and 3.2.

7.5.1.3.2.2  Evaluation by the Panel

7.121.  The main issue raised by the complainants' claims is whether MOFCOM was precluded by Articles 3.1 and 3.2 of the Anti-Dumping Agreement from finding price undercutting purely on the basis that the price of imported Grade C was lower than the price of domestic Grade C, or whether MOFCOM was required by Article 3.2 to consider if Grade C subject imports had a price undercutting effect on the price of domestic Grade C, in the sense of placing downward pressure on those domestic prices by being sold at lower prices.

7.122.  Article 3.1 of the Anti-Dumping Agreement sets forth an overarching requirement that a determination of injury shall involve inter alia an objective examination of "the effect of the dumped imports on prices in the domestic market for like products". In respect of price undercutting, Article 3.2 provides that "[w]ith regard to the effect of the dumped imports on prices, the investigating authorities shall consider whether there has been a significant price undercutting by the dumped imports as compared with the price of a like product of the importing Member".

7.123.  We note that the complainants rely on the Appellate Body's discussion of Article 3.2 in China – GOES to argue that dumped imports must be shown to have "explanatory force" for the price undercutting effect on domestic like products.[243] The complainants refer in particular to paragraphs 135 and 136 of the Appellate Body's report in this regard. Since we shall refer to those Appellate Body findings to guide us in our own interpretation of Article 3.2 of the Anti-Dumping Agreement, we reproduce them here:

135.        The definition of the word "effect" is, inter alia, "something accomplished, caused, or produced;  a result, a consequence".  The definition of this word thus implies that an "effect" is "a result" of something else.  Although the word "effect" could be used independently of the factors that produced it, this is not the case in Articles 3.2 and 15.2.  Rather, these provisions postulate certain inquiries as to the "effect" of subject imports on domestic prices, and each inquiry links the subject imports with the prices of the like domestic products.

136.        First, an investigating authority must consider "whether there has been a significant price undercutting by the [dumped or subsidized] imports as compared with the price of a like product of the importing Member".  Thus, with regard to significant price undercutting, Articles 3.2 and 15.2 expressly establish a link between the price of subject imports and that of like domestic products, by requiring that a comparison be made between the two.  Second, an investigating authority is required to consider "whether the effect of such [dumped or subsidized] imports" on the prices of the like domestic products is to depress or suppress such prices to a significant degree.  By asking the question "whether the effect of" the subject imports is significant price depression or suppression, the second sentence of Articles 3.2 and 15.2 specifically instructs an investigating authority to consider whether certain price effects are the consequences of subject imports.  Moreover, the syntactic relation expressed by the terms "to depress prices" and "[to] prevent price increases" is of a subject (dumped or subsidized imports) doing something to an object (domestic prices).  The language of Articles 3.2 and 15.2 thus expressly links significant price depression and suppression with subject imports, and contemplates an inquiry into the relationship between two variables, namely, subject imports and domestic prices.  More specifically, an investigating authority is required to consider whether a first variable—that is, subject imports—has explanatory force for the occurrence of significant depression or suppression of a second variable—that is, domestic prices.[244]

7.124.  We understand the Appellate Body to have considered that, with regard to price effects generally, Article 3.2 of the Anti-Dumping Agreement is concerned with considering the relationship between subject imports and the price of like domestic products. In respect of price depression or price suppression, the Appellate Body explained that such a relationship is addressed when the investigating authority considers whether the first variable, subject imports, has "explanatory force" for the second variable, domestic prices. In respect of price undercutting, however, the Appellate Body observed that Article 3.2 establishes a "link" (i.e. relationship) between the price of subject imports and that of like domestic products by "requiring that a comparison be made between the two". The Appellate Body referred simply to a comparison between subject import prices and domestic prices. There is no suggestion by the Appellate Body that, in respect of price undercutting, one variable must be shown to have "explanatory force" for the second. Indeed, although the Appellate Body repeated the phrase "explanatory force" numerous times in its findings, at no time did it do so when addressing the requirements of Article 3.2 in respect of price undercutting. This is consistent with the Appellate Body's express statement that, because the two inquiries provided for in the second sentence of Article 3.2 are separated by the words "or" and "otherwise", "the elements relevant to the consideration of significant price undercutting may differ from those relevant to the consideration of significant price depression or suppression".[245]

7.125.  In our view, the Appellate Body's approach is entirely consistent with the text of Article 3.2. The second sentence of Article 3.2 begins "[w]ith regard to the effect of the dumped imports on prices, the investigating authorities shall consider whether there has been a significant price undercutting by the dumped imports as compared with the price of a like product of the importing Member" (emphasis supplied). The text therefore suggests that the consideration of whether there "has been" a significant price undercutting provides the requisite insight "regard[ing] … the effect of the dumped imports on prices", that is, whether as a matter of fact, "undercutting" existed during the POI. The text of Article 3.2 envisages that the existence of price undercutting (i.e. whether there "has been" price undercutting) should be established on the basis of a comparison of subject import prices and domestic prices.

7.126.  With regard to price depression and price suppression, by contrast, the text of Article 3.2 requires more than a simple comparison of the prices of two products. In this context, investigating authorities are required to consider whether one variable, namely subject imports, has "the effect of" depressing or suppressing a second variable, namely the domestic price ("whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increases, which otherw