EUROPEAN UNION – ANTI‑DUMPING MEASURES ON BIODIESEL
FROM ARGENTINA

 

Report of the Panel

Addendum

This addendum contains Annexes A to D to the Report of the Panel to be found in document WT/DS473/R.

 

 

_______________

 

 

LIST OF ANNEXES

ANNEX A

Working Procedures of The Panel

Contents		Page
Annex A-1	Working Procedures of the Panel	A-2
Annex A-2	Additional Working Procedures of the Panel Concerning Business Confidential Information	A-7

ANNEX B

Arguments Of argentina

Contents		Page
Annex B-1	Executive Summary of the First Written Submission of Argentina	B-2
Annex B-2	Executive Summary of the Second Written Submission of Argentina	B-12
Annex B-3	Executive Summary of the Statement of Argentina at the First Meeting of the Panel	B-23
Annex B-4	Executive Summary of the Statement of Argentina at the Second Meeting of the Panel	B-29
Annex B-5	Executive Summary of the Response of Argentina to the European Union's Request for a Preliminary Ruling	B-34

ANNEX C

Arguments of the european union

Contents		Page
Annex C-1	Executive Summary of the First Written Submission of the European Union	C-2
Annex C-2	Executive Summary of the Second Written Submission of the European Union	C-11
Annex C-3	Executive Summary of the Statement of the European Union at the First Meeting of the Panel	C-21
Annex C-4	Executive Summary of the Statement of the European Union at the Second Meeting of the Panel	C-26
Annex C-5	Executive Summary of the European Union's Request for a Preliminary Ruling	C-33

ANNEX D

arguments of third parties

Contents		Page
Annex D-1	Executive Summary of Third-Party Arguments of Australia	D-2
Annex D-2	Executive Summary of Third-Party Arguments of China	D-5
Annex D-3	Executive Summary of Third-Party Arguments of Colombia	D-10
Annex D-4	Executive Summary of Third-Party Arguments of Indonesia	D-13
Annex D-5	Executive Summary of Third-Party Arguments of Mexico	D-17
Annex D-6	Executive Summary of Third-Party Arguments of Norway	D-21
Annex D-7	Executive Summary of Third-Party Arguments of the Russian Federation	D-23
Annex D-8	Executive Summary of Third-Party Arguments of the Kingdom of Saudi Arabia	D-26
Annex D-9	Executive Summary of Third-Party Arguments of Turkey	D-30
Annex D-10	Executive Summary of Third-Party Arguments of the United States	D-32

 

 

 

ANNEX A

Working Procedures of the Panel

Contents		Page
Annex A-1	Working Procedures of the Panel	A-2
Annex A-2	Additional Working Procedures of the Panel Concerning Business Confidential Information	A-7

 

ANNEX A-1

working procedures of THE PANEL

Revised on 27 January 2015

 

1. In its proceedings, the Panel shall follow the relevant provisions of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). In addition, the following Working Procedures shall apply.

General

 

2. The deliberations of the Panel and the documents submitted to it shall be kept confidential. Nothing in the DSU or in these Working Procedures shall preclude a party to the dispute (hereafter "party") from disclosing statements of its own positions to the public. Members shall treat as confidential information submitted to the Panel by another Member which the submitting Member has designated as confidential. Where a party submits a confidential version of its written submissions to the Panel, it shall also, upon request of a Member, provide a non-confidential summary of the information contained in its submissions that could be disclosed to the public.

3. The parties and third parties shall treat business confidential information in accordance with the procedures set forth in the Additional Working Procedures of the Panel Concerning Business Confidential Information adopted by the Panel on 25 November 2014.

4. The Panel shall meet in closed session. The parties, and Members who have notified their interest in the dispute to the Dispute Settlement Body in accordance with Article 10 of the DSU (hereafter "third parties"), shall be present at the meetings only when invited by the Panel to appear before it.

5. Each party and third party has the right to determine the composition of its own delegation when meeting with the Panel. Each party and third party shall have the responsibility for all the members of its own delegation and shall ensure that each member of its own delegation acts in accordance with the DSU and these Working Procedures, particularly with regard to the confidentiality of the proceedings and the submissions of the parties.

Submissions

 

6. Before the first substantive meeting of the Panel with the parties, each party shall submit a written submission in which it presents the facts of the case and its arguments, in accordance with the timetable adopted by the Panel. Each party shall also submit to the Panel, prior to the second substantive meeting of the Panel, a written rebuttal, in accordance with the timetable adopted by the Panel.

7. A party shall submit any request for a preliminary ruling at the earliest possible opportunity and in any event, no later than in its first written submission to the Panel. If Argentina requests such a ruling, the European Union shall submit its response to the request in its first written submission. If the European Union requests such a ruling, Argentina shall submit its response to the request prior to the first substantive meeting of the Panel, at a time to be determined by the Panel in light of the request. Exceptions to this procedure shall be granted upon a showing of good cause.

8. Each party shall submit all factual evidence to the Panel no later than during the first substantive meeting, except with respect to evidence necessary for purposes of rebuttal and answers to questions or comments on answers provided by the other party. Exceptions to this procedure shall be granted upon a showing of good cause. Where such exception has been granted, the Panel shall accord the other party a period of time for comments, as appropriate, on any new factual evidence submitted after the first substantive meeting.

9. Where the original language of an exhibit is not a WTO working language, the submitting party or third party shall simultaneously submit a translation of it into a WTO working language. The Panel may grant reasonable extensions of time for the translation of such exhibit upon a showing of good cause. Any objection as to the accuracy of a translation should be raised promptly in writing, preferably no later than the next filing or meeting (whichever occurs earlier) following the submission which contains the translation in question. Any objection shall be accompanied by a detailed explanation of the grounds of objection and an alternative translation.

10. To facilitate the maintenance of the record of the dispute and maximize the clarity of submissions, each party and third party shall sequentially number its exhibits throughout the course of the dispute. For example, exhibits submitted by Argentina could be numbered ARG‑1, ARG‑2, etc. If the last exhibit in connection with the first submission was numbered ARG‑5, the first exhibit of the next submission thus would be numbered ARG-6.

Questions

 

11. The Panel may at any time pose questions to the parties and third parties, orally or in writing, including in writing prior to each substantive meeting.

Substantive meetings

 

12. Each party shall provide to the Panel the list of members of its delegation in advance of each meeting with the Panel and no later than 5.00 p.m. the previous working day.

13. The first substantive meeting of the Panel with the parties shall be conducted as follows:

a.   The Panel shall invite Argentina to make an opening statement to present its case first. Subsequently, the Panel shall invite the European Union to present its point of view. Before each party takes the floor, it shall provide the Panel and other participants at the meeting with a provisional written version of its statement. In the event that interpretation is needed, each party shall provide additional copies for the interpreters, through the Panel Secretary. Each party shall make available to the Panel and the other party the final version of its opening statement as well as its closing statement, if any, preferably at the end of the meeting, and in any event no later than 5.00 p.m. on the first working day following the meeting.

b.   After the conclusion of the statements, the Panel shall give each party the opportunity to ask each other questions or make comments, through the Panel. Each party shall then have an opportunity to answer these questions orally. Each party shall send in writing, within a timeframe to be determined by the Panel, any questions to the other party to which it wishes to receive a response in writing. Each party shall be invited to respond in writing to the other party's written questions within a deadline to be determined by the Panel.

c.   The Panel may subsequently pose questions to the parties. Each party shall then have an opportunity to answer these questions orally. The Panel shall send in writing, within a timeframe to be determined by it, any questions to the parties to which it wishes to receive a response in writing. Each party shall be invited to respond in writing to such questions within a deadline to be determined by the Panel.

d.   Once the questioning has concluded, the Panel shall afford each party an opportunity to present a brief closing statement, with Argentina presenting its statement first.

14. The second substantive meeting of the Panel with the parties shall be conducted as follows:

a.   The Panel shall ask the European Union if it wishes to avail itself of the right to present its case first. If so, the Panel shall invite the European Union to present its opening statement, followed by Argentina. If the European Union chooses not to avail itself of that right, the Panel shall invite Argentina to present its opening statement first. Before each party takes the floor, it shall provide the Panel and other participants at the meeting with a provisional written version of its statement. In the event that interpretation is needed, each party shall provide additional copies for the interpreters, through the Panel Secretary. Each party shall make available to the Panel and the other party the final version of its opening statement as well as its closing statement, if any, preferably at the end of the meeting, and in any event no later than 5.00 p.m. of the first working day following the meeting.

b.   After the conclusion of the statements, the Panel shall give each party the opportunity to ask each other questions or make comments, through the Panel. Each party shall then have an opportunity to answer these questions orally. Each party shall send in writing, within a timeframe to be determined by the Panel, any questions to the other party to which it wishes to receive a response in writing. Each party shall be invited to respond in writing to the other party's written questions within a deadline to be determined by the Panel.

c.   The Panel may subsequently pose questions to the parties. Each party shall then have an opportunity to answer these questions orally. The Panel shall send in writing, within a timeframe to be determined by it, any questions to the parties to which it wishes to receive a response in writing. Each party shall be invited to respond in writing to such questions within a deadline to be determined by the Panel.

d.   Once the questioning has concluded, the Panel shall afford each party an opportunity to present a brief closing statement, with the party that presented its opening statement first, presenting its closing statement first.

Third parties

 

15. The Panel shall invite each third party to transmit to the Panel a written submission prior to the first substantive meeting of the Panel with the parties, in accordance with the timetable adopted by the Panel.

16. Each third party shall also be invited to present its views orally during a session of this first substantive meeting set aside for that purpose. Each third party shall provide to the Panel the list of members of its delegation in advance of this session and no later than 5.00 p.m. the previous working day.

17. The third‑party session shall be conducted as follows:

a.   All third parties may be present during the entirety of this session.

b.   The Panel shall first hear the arguments of the third parties in alphabetical order. Third parties present at the third-party session and intending to present their views orally at that session, shall provide the Panel, the parties and other third-parties with provisional written versions of their statements before they take the floor. Third parties shall make available to the Panel, the parties and other third parties the final versions of their statements, preferably at the end of the session, and in any event no later than 5.00 p.m. of the first working day following the session.

c.   After the third parties have made their statements, the parties may be given the opportunity, through the Panel, to ask the third parties questions for clarification on any matter raised in the third parties' submissions or statements. Each party shall send in writing, within a timeframe to be determined by the Panel, any questions to a third party to which it wishes to receive a response in writing.

d.   The Panel may subsequently pose questions to the third parties. Each third party shall then have an opportunity to answer these questions orally. The Panel shall send in writing, within a timeframe to be determined by it, any questions to the third parties to which it wishes to receive a response in writing. Each third party shall be invited to respond in writing to such questions within a deadline to be determined by the Panel.

Descriptive part

 

18. The description of the arguments of the parties and third parties in the descriptive part of the Panel report shall consist of executive summaries provided by the parties and third parties, which shall be annexed as addenda to the report. These executive summaries shall not in any way serve as a substitute for the submissions of the parties and third parties in the Panel's examination of the case.

19. Each party shall submit executive summaries of the facts and arguments as presented to the Panel in its written submissions, other than in responses to questions, and its oral statements, in accordance with the timetable adopted by the Panel. Each executive summary of a written submission shall be limited to no more than 10 pages, and each executive summary submitted by each party of opening and closing statements presented at a substantive meeting shall be limited to no more than 5 pages each. The Panel will not summarize in the descriptive part of its report, or annex to its report, the parties' responses to questions.

20. Each third party shall submit an executive summary of its arguments as presented in its written submission and statement in accordance with the timetable adopted by the Panel. This summary may also include a summary of responses to questions, where relevant. The executive summary to be provided by each third party shall not exceed 6 pages.

21. The Panel reserves the right to request the parties and third parties to provide executive summaries of facts and arguments presented by a party or a third party in any other submissions to the Panel for which a deadline may not be specified in the timetable.

Interim review

 

22. Following issuance of the interim report, each party may submit a written request to review precise aspects of the interim report and request a further meeting with the Panel, in accordance with the timetable adopted by the Panel. The right to request such a meeting shall be exercised no later than at the time the written request for review is submitted.

23. In the event that no further meeting with the Panel is requested, each party may submit written comments on the other party's written request for review, in accordance with the timetable adopted by the Panel. Such comments shall be limited to commenting on the other party's written request for review.

24. The interim report, as well as the final report prior to its official circulation, shall be kept strictly confidential and shall not be disclosed.

Service of documents

 

25. The following procedures regarding service of documents shall apply:

a.   Each party and third party shall submit all documents to the Panel by filing them with the DS Registry (office No. 2047).

b.   Each party and third party shall file 4 paper copies of all documents it submits to the Panel. However, when exhibits are provided on CD-ROMS/DVDs, 2 CD-ROMS/DVDs and 2 paper copies of those exhibits shall be filed. The DS Registrar shall stamp the documents with the date and time of the filing. The paper version shall constitute the official version for the purposes of the record of the dispute.

c.   Each party and third party shall also provide an electronic copy of all documents it submits to the Panel at the same time as the paper versions, preferably in Microsoft Word format, either on a CD-ROM, a DVD or as an e-mail attachment. If the electronic copy is provided by e-mail, it should be addressed to DSRegistry@wto.org, with a copy to XXXX@wto.org, XXXX@wto.org and XXXX@wto.org. If a CD-ROM or DVD is provided, it shall be filed with the DS Registry.

d.   Each party shall serve any document submitted to the Panel directly on the other party. Each party shall, in addition, serve on all third parties its written submissions in advance of the first substantive meeting with the Panel. Each third party shall serve any document submitted to the Panel directly on the parties and all other third parties. Each party and third party shall confirm, in writing, that copies have been served as required at the time it provides each document to the Panel.

e.   Each party and third party shall file its documents with the DS Registry and serve copies on the other party (and third parties where appropriate) by 5.00 p.m. (Geneva time) on the due dates established by the Panel. A party or third party may submit its documents to another party or third party in electronic format only, subject to the recipient party or third party's prior written approval and provided that the Panel Secretary is notified.

f.    The Panel shall provide the parties with an electronic version of the descriptive part, the interim report and the final report, as well as of other documents as appropriate. When the Panel transmits to the parties or third parties both paper and electronic versions of a document, the paper version shall constitute the official version for the purposes of the record of the dispute.

26. The Panel reserves the right to modify these procedures as necessary, after consultation with the parties.

 

 

Annex A-2

Additional Working Procedures of the Panel Concerning

Business Confidential Information

Adopted 25 November 2014

 

The following procedures apply to any business confidential information (BCI) submitted in the course of the Panel proceedings in DS473.

 

1.   For the purposes of these Panel proceedings, BCI is any information that has been designated as such by the party submitting the information and that was previously treated as BCI by the Commission of the European Union in the anti-dumping investigation at issue in this dispute. However, these procedures do not apply to any 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.   As required by Article 18.2 of the DSU, a party or third party having access to BCI submitted in these Panel proceedings shall treat it as confidential and shall not disclose that information other than to those persons authorized to receive it pursuant to these procedures. Any information submitted as BCI under these procedures shall only be used for the purposes of this dispute and for no other purpose. Each party and third party is responsible for ensuring that its employees and/or outside advisors comply with these working procedures to protect BCI. An outside advisor is not permitted access to BCI if that advisor is an officer or employee of an enterprise engaged in the production, export, or import of the products that were the subject of the investigation at issue in this dispute. All third party access to BCI shall be subject to the terms of these working procedures.

 

3.   No person may have access to BCI except a member of the Secretariat or the Panel, an employee of a party or third party under the terms specified in these procedures, or an outside advisor to a party or third party for the purposes of this dispute.

 

4.   The party submitting BCI shall mark the cover and/or first page of the document containing BCI, and each page of the document, to indicate the presence of such information. The specific information in question shall be placed between double brackets, as follows: [[xx,xxx.xx]]. The first page or cover of the document shall state "Contains business confidential information on pages xxxxxx", and each page of the document shall contain the notice "Contains Business Confidential Information" at the top of the page.

 

5.   Any BCI that is submitted in binary-encoded form shall be clearly marked with the statement "Business Confidential Information" on a label of the storage medium, and clearly marked with the statement "Business Confidential Information" in the binary-encoded files.

 

6.   In the case of an oral statement containing BCI, the party or third party making such a statement shall inform the Panel before making it that the statement will contain BCI, and the Panel will ensure that only persons authorized to have access to BCI pursuant to these procedures are in the room to hear that statement. The written versions of such oral statements submitted to the Panel shall be marked as provided for in paragraph 4.

 

7.   If a party or third party considers that information submitted by the other party or a third party contains information which should have been designated as BCI and objects to such submission without BCI designation, it shall forthwith bring this objection to the attention of the Panel, the other party, and, where relevant, the third parties. The Panel shall deal with the objection as appropriate. Similarly, if a party or third party considers that the other party or a third party submitted information designated as BCI which should not be so designated, it shall forthwith bring this objection to the attention of the Panel, the other party, and, where relevant, the third parties, and the Panel shall deal with the objection as appropriate.

 

8.   Any person authorized to have access to BCI under the terms of these procedures shall store all documents containing BCI in such a manner as to prevent unauthorized access to such information.

 

9.   The Panel will not disclose BCI, in its report or in any other way, to persons not authorized under these procedures to have access to BCI. The Panel may, however, make statements of conclusion drawn from such information. Before the Panel circulates its final report to the Members, the Panel will give each party an opportunity to review the report to ensure that it does not contain any information that the party has designated as BCI.

 

10. Submissions containing BCI will be included in the record forwarded to the Appellate Body in the event of an appeal of the Panel's Report.

 

 

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ANNEX B

Arguments of argentina

Contents		Page
Annex B-1	Executive Summary of the First Written Submission of Argentina	B-2
Annex B-2	Executive Summary of the Second Written Submission of Argentina	B-12
Annex B-3	Executive Summary of the Statement of Argentina at the First Meeting of the Panel	B-23
Annex B-4	Executive Summary of the Statement of Argentina at the Second Meeting of the Panel	B-29
Annex B-5	Executive Summary of the Response of Argentina to the European Union's Request for a Preliminary Ruling	B-34

 

ANNEX B-1

Executive Summary of the first written
submission of Argentina

I.     introduction

 

1.    Argentina has initiated this dispute with regard to two different measures: first, Article 2(5) of Council Regulation (EC) No 1225/2009 (hereinafter, the Basic Regulation), that Argentina challenges as being inconsistent "as such" with several provisions of the Anti-Dumping Agreement (hereinafter, ADA), and the General Agreement on Tariffs and Trade 1994 (hereinafter, GATT 1994), and second, the anti-dumping measures imposed by the European Union (hereinafter, EU) on imports of biodiesel originating in Argentina^[1], that Argentina submits that are inconsistent with several obligations under the ADA and the GATT 1994.

 

II.        "AS SUCH" CLAIMS IN RELATION TO ARTICLE 2(5) OF COUNCIL REGULATION (EC) NO 1225/2009 OF 30 NOVEMBER 2009 ON PROTECTION AGAINST DUMPED IMPORTS FROM COUNTRIES NOT MEMBERS OF THE EUROPEAN COMMUNITY

 

A.     Background, scope and content of Article 2(5) of the Basic Regulation

 

2.     The original version of Article 2(5) of the Basic Regulation as adopted in 1994 to implement the ADA did not contain the provision currently set out in its second paragraph, which Argentina challenges in the present dispute. This paragraph has been added by Council Regulation (EC) No 1972/2002 of 5 November 2002. The historical overview of this provision shows that the second paragraph of Article 2(5) has actually been introduced to keep the possibility in the calculation of normal value to disregard the "costs" of the producers when the authorities consider that these costs are "abnormally or artificially low", because they do not reflect "market values" or are "distorted".

 

3.     According to Council Regulation (EC) 1972/2002 and the consistent practice of the EU authorities Article 2(5), second paragraph, of the Basic Regulation refers to situations where the prices of an input are "abnormally or artificially low" because they are set in a "regulated market" or because of the existence of some alleged "distortion" on the domestic market. This interpretation has been confirmed by the General Court of the EU. Article 2(5), second paragraph, requires, in such a situation, that these costs "be adjusted or established on the basis of the costs of other producers or exporters in the same country or, where such information is not available or cannot be used, on any other reasonable basis, including information from other representative markets." Such a rule is inconsistent with various provisions of the ADA and of the GATT 1994.

 

B.         Article 2(5) of the Basic Regulation violates Article 2.2.1.1 of the ADA and, as a result, Article 2.2 of the ADA and Article VI: 1(b)(ii) of the GATT 1994

 

4.     Article 2.2.1.1 of the ADA, correctly interpreted in accordance with the principles of treaty interpretation does not allow investigating authorities to reject or adjust costs of certain inputs used in the production of the product under consideration because the prices of these inputs in their domestic market are found to be "abnormally or artificially low", because they do not reflect market values or because they are allegedly distorted.

 

·     The ordinary meaning of Article 2.2.1.1 of the ADA

 

5.     Article 2.2.1.1 establishes an obligation on the investigating authorities to calculate the costs "on the basis of records kept by the exporter" when constructing normal value, provided that two conditions are fulfilled: (i) such records are in accordance with the generally accepted accounting principles (GAAP) of the exporting country and (ii) such records reasonably reflect the costs associated with the production and sale of the product under consideration.

 

6.     There are only two exceptions to the above obligation to calculate costs on the basis of the records kept by the exporters. It is only where the records are inconsistent with GAAP or that they do not reasonably reflect the costs associated with the production and sale of the product under consideration that the authorities have the right not to use the data in the records. Whenever the records are consistent with GAAP of the exporting country and they reasonably reflect the costs associated with the production and sale of the product, the investigating authorities must calculate the costs on the basis of the records kept by the exporter or producer.

 

7.     The second condition included in Article 2.2.1.1, first sentence, does not authorize the authorities to reject or adjust the data in the records because the prices are "abnormally or artificially low", because they do not reflect "market values" or are "distorted". This interpretation flows from the ordinary meaning of the words of Article 2.2.1.1, first sentence and from the structure of that sentence. In providing that the records must reasonably reflect "the costs" associated with the production and sale of the product under consideration, Article 2.2.1.1 of the ADA expressly refers to the charges or expenses which have actually been incurred by the producer concerned for the production and sale of the product under consideration, regardless of whether such costs are lower than international prices or of whether they are, in the authorities' view, market-based.

 

8.     Moreover, the word "reasonably" in Article 2.2.1.1 is attached to the verb "reflect" and not to the word "costs". This sentence does not provide that the records must reflect "reasonable costs" or "costs which are reasonable in light of prices on other markets". This analysis excludes an interpretation that refers to whether the costs included in the records are in line with international prices or prices on other markets. In other words, the sentence does not provide that the records must reflect costs which are reasonable, but that they must reflect "costs associated with the production and sale of the product under consideration" and in a reasonable way.

 

·     The context of Article 2.2.1.1, first sentence, of the ADA

 

9.     The second and third sentences of Article 2.2.1.1 provide relevant context in construing the obligation set out in the first sentence. The second sentence provides what the authorities have to do if they use an alternative cost allocation methodology. This confirms that the second condition in the first sentence refers to a cost allocation issue.

 

10.   Article 2.2.2 of the ADA deals with "the amounts for administrative, selling and general costs and for profits" which are also central elements for constructing normal value. It flows from this rule that if the drafters of the ADA had intended to authorize the authorities to use, for the purposes of the calculation of the cost of production, data other than those of the producers, they would have explicitly provided so. Furthermore, the different ways set out in Article 2.2.2 to determine SG&A and profit all relate to data in the country of origin. This supports the view that a "reasonability" test under Article 2.2.1.1, first sentence, by reference to data outside the country of origin is not relevant and contrary to the principles found in the context of the dumping determination.

 

11.   Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994 expressly refer to "the cost of production in the country of origin". Since Article 2.2.1.1 of the ADA seeks to provide further details "for the purposes of paragraph 2", it is clear that the interpretation of Article 2.2.1.1 must be consistent with Article 2.2, to which Article 2.2.1.1 directly refers. The express indication in Article 2.2 of the ADA (and Article VI:1 of the GATT 1994) that the cost of production is the one "in the country of origin" does not allow to conclude that the "costs" referred to in Article 2.2.1.1 could be found to be "unreasonable" in view of benchmarks outside of the country of origin, such as prices in other markets. Since the construction of the normal value must be based on the "cost of production in the country of origin", it does not make any sense to reject costs on the ground that they would not reflect international prices or prices in other markets.

 

12.   An interpretation of the first sentence of Article 2.2.1.1 whereby the cost data could be rejected because they are lower than prices in other markets is inconsistent with the requirement under Article 2.2 of the ADA that the constructed normal value be based on the "cost of production in the country of origin".

 

·     The object and purpose of the ADA

 

13.   By providing that the records are not reasonable if the cost data reflect prices which are lower than the prices on other markets, Article 2(5), second paragraph, undermines the fundamental logic of "dumping" which is based on a comparison between the export price of the product concerned and the price of the like product on the domestic market, as defined in Article VI:1 of the GATT 1994 and 2.1 of the ADA.

 

·     Case law

 

14.   The interpretation according to which the first sentence of Article 2.2.1.1 of the ADA does not allow investigating authorities to reject or adjust costs of certain inputs used in the production of the product under consideration when the prices of these inputs in their domestic market are found to be "abnormally or artificially low", because they do not reflect market values or because they allegedly are distorted is confirmed by the Panel Reports in US – Softwood Lumber V^[2], EC – Salmon^[3], and Egypt – Steel Rebar.^[4]

 

C.         Article 2(5) of the Basic Regulation is inconsistent with Article 2.2 of the ADA and Article VI: 1(b)(ii) of the GATT 1994

 

15.   Article 2(5) of the Basic Regulation violates Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994 since those provisions expressly require that the margin of dumping must be determined by comparison with the cost of production in the country of origin.

 

16.   Article 2.2 expressly provides that when the margin of dumping is established by comparison with a constructed normal value, the comparison shall be made with "the cost of production in the country of origin". Article VI:1(b)(ii) of the GATT 1994 similarly refers to "the cost of production of the product in the country of origin." Since Article 2(5), second paragraph, of the Basic Regulation provides that the costs shall be adjusted or established "on the basis of the costs of other producers or exporters in the same country, or, where such information is not available or cannot be used, on any other reasonable basis, including information from other representative markets", it is inconsistent with Article 2.2 and Article VI:1(b)(ii) of the GATT 1994 which require to use the cost of production "in the country of origin".

 

D.         The EU violates Article XVI:4 of the Marrakesh Agreement Establishing the WTO and Article 18.4 of the ADA

 

17.   Since Article 2(5), second paragraph, of the Basic Regulation violates Articles 2.2.1.1 and 2.2 of the ADA and Article VI:1 of the GATT 1994, it follows that the EU has not ensured the conformity of its laws, regulations and administrative procedures with the provisions of the ADA and of the GATT 1994 and, therefore, has also violated Article XVI:4 of the Marrakesh Agreement Establishing the WTO and Article 18.4 of the ADA.

 

III.      Claims concerning the Anti-Dumping Measures Imposed by the EUROPEAN UNION on Imports of Biodiesel Originating in Argentina

 

A.         The EU acted inconsistently with Articles 2.2.1.1 and 2.2 of the ADA and with Article VI:1(b)(ii) of the GATT 1994 in failing to calculate the cost of production on the basis of the records kept by the producers under investigation

 

18.   Argentina submits that the EU acted inconsistently with the obligation laid down in the first sentence of Article 2.2.1.1 of the ADA since it calculated the exporting producers' cost of soybean on the basis of an average of the FOB reference price and not on the basis of cost of soybean included in the accounting records of those producers.^[5] If this Panel finds that Article 2(5) of the Basic Regulation is as such inconsistent with Article 2.2.1.1 of the ADA, it follows that its application in the anti-dumping investigation concerning imports of biodiesel originating in Argentina necessarily produced a result that is also inconsistent with Article 2.2.1.1 of the ADA. In any case, Argentina submits that the violation of these provisions is supported by five arguments.

 

19.   First, Argentina submits that the finding that the records of the Argentinean producers did not reasonably reflect the costs of "the main raw material" is based on an improper establishment of the facts. This finding ignores the fact that prices in Argentina are freely set and based on offer and demand, as recognized by the EU itself in both the Definitive Regulation and in the parallel anti-subsidy investigation.

 

20.   Second, in finding that the costs of the main raw material were not reasonably reflected in the records of the exporting producers, the EU ignored the ordinary meaning of the terms of the first sentence of Article 2.2.1.1 of the ADA. By referring to the term "costs", Article 2.2.1.1 refers to the expenses actually incurred by the producer. Therefore, the fact that the cost of soybean incurred and reported by the exporters was lower than the international price did not allow the EU to conclude that the records of the exporters do not reasonably reflect the costs of soybean associated with the production and sale of biodiesel.

 

21.   Third, the interpretation of the first sentence of Article 2.2.1.1 of the ADA at the basis of the EU's refusal to base the cost of soybean on the records of the exporting producers cannot be reconciled with the structure of that provision. In this sentence, "records" is the subject, "costs" the object, "reflect" the verb and "reasonably" the adverb which qualifies the term "reflect". The misplaced reading of "international prices" into the second condition of Article 2.2.1.1 of the ADA leads to the result that for "records" to reflect "costs" according to the interpretation of the EU, such records should have reflected costs that a producer actually never incurred, namely, in this case, the FOB reference price of soybean.

 

22.   Fourth, the refusal of the EU to base the cost of soybean on the records of the producers under investigation is based on a reading of Article 2.2.1.1 of the ADA that is not supported by the context of this provision. The second and third sentences of Article 2.2.1.1, dealing with cost allocation issue, show that the "reasonably reflect" condition in the first sentence of Article 2.2.1.1 refers to the actual costs incurred by the producers instead of international prices. Furthermore, Articles 2.2 of the ADA and VI:1(b)(ii) of the GATT 1994 expressly refer to the cost of production in the country of origin. Given that Article 2.2.1.1 of the ADA is aimed at further specifying that clause, Article 2.2.1.1 must be read in a manner that is consistent therewith. Therefore, it does not make any sense to reject costs on the grounds that they would not reflect "international prices", since it implies a comparison with prices outside of the country of origin. Argentina also reiterates the reference to Article 2.2.2 of the ADA in this respect.

 

23.   Fifth, Argentina submits that, in finding that the records of exporting producers "do not reasonably reflect costs" because they do not reflect international prices despite the fact that they reflect the costs actually paid by the exporting producer, and in replacing the costs reflected in those records by international prices, the EU undermines the object and purpose of the ADA which is to counteract dumping that occurs when the export price is less than the comparable price, in the domestic market and not on any other markets. The EU subverted the fundamental purpose of the ADA and used the Agreement to address differences in price between the export price of the product concerned and international prices, instead of comparable prices on the domestic market.

 

B.         The EU acted inconsistently with Article 2.2 of the ADA and Article VI: 1(b)(ii) of the GATT 1994 in failing to construct normal value of biodiesel on the basis of the cost of production in Argentina

 

24.   In replacing the cost of soybean reported in the records of the exporting producers by an average of the FOB reference price, the EU failed to construct normal value on the basis of the cost of production in the country of origin. Consequently, the EU acted inconsistently with Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994.

 

C.         The EU acted inconsistently with Article 2.2.1.1 of the ADA by including costs not associated with the production and sale of biodiesel in the calculation of the cost of production

 

25.   By using the average of the reference FOB price minus fobbing costs during the investigation period (IP), the EU included in its calculation of the cost of production of biodiesel a cost which is not associated with the cost of production and sale of biodiesel within the meaning of Article 2.2.1.1 of the ADA. Since the producers under investigation did not pay the reference FOB price minus fobbing costs for soybeans but, instead an amount representing the actual cost of soybean included in their records, Argentina submits that, the price of soybean used by the EU to calculate the cost of production is not a price that is associated with the production and sale of the like product. Therefore, the EU acted inconsistently with Article 2.2.1.1 of the ADA.

 

26.   As a result of the inconsistencies mentioned in (A) to (C) above, the dumping margin determinations are inconsistent with Article 2.1 of the ADA and with Article VI:1 of the GATT 1994.

 

D.         The EU acted inconsistently with Articles 2.2 and 2.2.2(iii) of the ADA because the amounts for profits established by the EU were not determined on the basis of a reasonable method

 

27.   When determining the reasonable amount for profits, the EU did not calculate the reasonable amount for profits on the basis of the chapeau of Article 2.2.2 of the ADA or on subparagraphs (i) or (ii) of that provision, choosing instead to base it on "any other reasonable method" pursuant to Article 2.2.2(iii) of the ADA. Argentina submits that the amount for profits established by the EU of 15% is not based on a reasonable method within the meaning of Article 2.2.2(iii) of the ADA and cannot be considered to be "reasonable" within the meaning of Article 2.2 in fine of the ADA.

 

28.   In both the Provisional and Definitive Regulations, the EU failed to provide any explanation of how it determined a profit margin of 15%. The 15% figure does not result from any "method" within the meaning of Article 2.2.2(iii) of the ADA, let alone a reasonable one. Argentina fails to see how a World Bank figure concerning the short to medium term lending rate can be understood to be a relevant justification of the 15% profit margin determination. Moreover, Argentina explained that it was unreasonable to consider that the Argentinean biodiesel industry is "young and innovative", at a time when production had peaked and the market had matured significantly.

 

E.         The EU acted inconsistently with Article 2.4 of the ADA in failing to make due allowance for differences affecting price comparability, including differences in taxation, and in precluding a fair comparison between export price and normal value

 

29.   Argentina submits that the EU acted inconsistently with Article 2.4 of the ADA in failing to make a fair comparison between normal value and export prices within the meaning of that provision, as a fair comparison would have required that due allowance be made for differences affecting price comparability. This inconsistency arose as a result of a comparison of, on the one hand, a constructed normal value that included an average of the reference FOB price of soybeans (minus fobbing costs) with, on the other hand, an export price that incorporated the domestic price of soybeans.

 

30.   In the Definitive Regulation, the EU deducted the expenses incurred for exporting the soybean from the reference FOB price. Therefore, the difference between the price of soybean included in the constructed normal value and the domestic price of soybean reflected in the export price is approximately equal to the export tax on soybean. The EU itself acknowledged that its methodology yielded a result which, from a numerical point of view, was similar to simply adding the export tax to the cost of the raw material.

F.         The EU acted inconsistently with Article 9.3 of the ADA and Article VI: 2 of the GATT 1994 in imposing and levying anti-dumping duties in excess of the margin of dumping that should have been established in accordance with Article 2 of the ADA

 

31.   In order to have the dumping margin determination made in conformity with Article 2 of the ADA, the EU should have based the cost of production on the records of the producers under investigation and it should have ensured that the profit margin determination was based on a reasonable method pursuant to Article 2.2.2(iii) of the ADA. Therefore, the EU has imposed and levied anti-dumping duties in excess of the margin of dumping that it should have calculated in conformity with Article 2 of the ADA. As a result, it acted inconsistently with Article 9.3 of the ADA and VI:2 of the GATT 1994.

 

G.         The EU acted inconsistently with Articles 3.1, 3.4 and 3.5 of the ADA in its evaluation of the production capacity, the utilization of capacity and the return on investment of the EU industry

 

32.   Argentina submits that the utilization of capacity was overstated and that a proper evaluation would have revealed that capacity utilization was in fact significantly lower than the figures reflected in the Definitive Regulation. Argentina claims that the EU failed to ensure that injury arising out of the overcapacity of the domestic industry was not attributed to the dumped imports. This is the result of, among others, the EU's failure to properly evaluate the utilization of capacity of its domestic industry.

 

33.   Throughout the investigation, overcapacity was identified as a factor having an impact on the state of the industry by the investigated companies as well as by the Government of Argentina. In the course of the injury analysis conducted by the EU, the European Biodiesel Board (hereinafter, EBB) submitted information that showed that capacity of the domestic industry grew throughout the investigation period. In a submission dated 17 September 2013, the EBB suddenly asserted that the figures concerning production capacity of the EU industry needed to be adjusted to exclude the "idle" capacity. On 1 October 2013, the EU issued the Definitive Disclosure where it accepted the resubmitted data and altered the findings on capacity and capacity utilization that it had made in the Provisional Regulation. However, the Definitive Disclosure did not contain further information on the methodology used by the EU to assess this information or further elaboration of what was meant by "close scrutiny of this resubmitted data".

 

34.   Argentina claims that the EU acted inconsistently with Articles 3.1 and 3.4 of the ADA first, because the EU's definition of "utilization of capacity" is inconsistent with Article 3.4 of the ADA, second, because its analysis of the production capacity and the utilization of capacity of the EU industry was not based on positive evidence; third, because the injury determination did not involve an objective examination; fourth, because the evaluation of the production capacity and of the utilization of capacity is not adequate and that the EU therefore acted inconsistently with Article 3.4 of the ADA and fifth, because the indicators "utilization of capacity" and "return on investment" were not evaluated in a consistent manner.

 

·          The EU's definition of utilization of capacity is inconsistent with Article 3.4 of the ADA

 

35.   Argentina notes that the terms "utilization of capacity" in Article 3.4 of the ADA contain no reference to a concept such as "availability for use" or "idleness". Consequently, in the framework of Article 3 of the ADA, the entirety of production capacity must be taken into account regardless of whether it is allegedly "available for use" or not. It is undeniable that all of an industry's production capacity, whether it is available for immediate use or not, generates costs. Failure to take production capacity that is not ready for use or that is "idle" yields an inaccurate picture of the state of the domestic industry. In adopting a definition whereby the evaluation of "utilization of capacity" excludes so-called "idle" capacity, the EU acted inconsistently with Article 3.4 of the ADA.

 

·          The EU acted inconsistently with Article 3.1 and 3.4 of the ADA in failing to base its analysis of the production capacity and the utilization of capacity on positive evidence

 

36.   At a late stage in the proceedings, the EBB submitted a document requesting the exclusion of supposedly idle capacity, a change in production capacity figures by EBB that amounted to 26.53% of total production capacity in the EU or 5,898,000 tons during the IP.^[6] This amounts to almost three times the combined amounts of imports originating in Argentina and Indonesia during the IP. Argentina submits that the evidence on which the evaluation of the utilization of capacity is based is implausible first because the alleged "mistake" in EBB's submissions would have been impossible to overlook, and second, because if the "mistake" had existed, major inconsistencies in the data submitted by EBB concerning production capacity of non-EBB Members would have been evident, especially in view of the fact that the entirety of the alleged "idle capacity" of the EU industry was allocated to non-EBB Members, which are a minority sector of the EU industry.

 

37.   In stark contrast to the multiplicity of publicly available sources confirming the accuracy of the data in the Complaint and the Provisional Regulation, the data provided by EBB in its submission of 17 September 2013 appear to consist of mere assertions by EBB. The EU stated in the Definitive Regulation that it cross-referenced EBB's submission to "publicly available data concerning in particular idle capacity as well as capacity of producers that ceased operations due to financial difficulties" but it does not state what these publicly available data are. The reliance on undisclosed yet supposedly public sources further calls into question the reliability and creditworthiness of the evidence on which evaluation of the capacity of the Union industry was based.

 

38.   Argentina notes that (1) this "publicly available data" was not placed on the public file of the investigation, (2) it is contradicted by all other publicly available sources that do appear on the public file of the investigation and (3) the EU did not clarify what the "cross-referencing" exercise entailed. As a result, Argentina submits that the data on which the evaluation of production capacity and capacity utilization is based, is not reliable.

 

39.   Moreover, Article 3.4 of the ADA does not allow for an exclusion of production capacity that is "idle" from the evaluation of the utilization of capacity. As a result, the "idleness" of production capacity is a fact that is neither relevant nor pertinent to the question of what constitutes production capacity within the meaning of Article 3.4 of the ADA; it is production capacity regardless of whether it is "idle" or "available for use." As a result, to the extent that the assessment of production capacity and utilization of capacity is based on evidence concerning the fact that part of the capacity is allegedly "not available for use", it is based on evidence that is irrelevant and impertinent.

 

40.   Therefore, the EU failed to base its injury determination on positive evidence and acted inconsistently with Articles 3.1 and 3.4 of the ADA.

 

·          The EU acted inconsistently with Articles 3.1 and 3.4 of the ADA in failing to conduct an objective examination of the production capacity and the utilization of capacity of its domestic industry

 

41.   The unusual exclusion of production capacity that was "idle" had the effect of understating the production capacity of the EU biodiesel industry by 5,898,000 tons during the IP or 26.53% of total capacity. This understatement, in turn, overstates the utilization of capacity and thus negates the significance of the overcapacity of the EU industry as a cause of injury that is different from that of the allegedly dumped imports. Argentina submits that in weighing and balancing the evidence before it, the EU did not act in an even-handed manner. Indeed, the exclusion of production capacity that was "not available for use" was based on evidence that is not credible and which at the same time favoured the interests of EBB in the investigation. As a result, the examination was not "objective" within the meaning of Article 3.1 of the ADA. The EU has therefore acted inconsistently with Articles 3.1 and 3.4 of the ADA.

·          The EU acted inconsistently with Article 3.4 of the ADA in failing to adequately evaluate the production capacity and utilization of capacity of the domestic industry of the EU

 

42.   When stating that production capacity remained "relatively stable" the EU failed to properly evaluate production capacity at the provisional stage as it failed to properly analyze this factor by "placing it in context in terms of the particular evolution of the data".^[7] Argentina submits that the EU equally failed to adequately evaluate the production capacity and utilization capacity of the EU industry at the definitive stage. Consequently, the EU acted inconsistently with Article 3.4 of the ADA.

 

·          The EU acted inconsistently with Article 3.4 of the ADA in failing to evaluate utilization of capacity and return on investment in a consistent manner

 

43.   To the extent that the EU eliminated so-called "idle capacity" from the production capacity of the EU industry, while basing the evaluation of the return on investment on the basis of all assets employed in the production of biodiesel, it would appear that both factors were based on data which lack consistency. Indeed, while the "return on investment" appears not to exclude "idle" assets, the EU's evaluation of the utilization of capacity did. Thus, Argentina submits that the EU failed to evaluate the return on investments and the utilization of capacity in a consistent manner. Consequently, the EU acted inconsistently with Article 3.4 of the ADA.

 

H.         The EU acted inconsistently with Articles 3.1 and 3.5 of the ADA in failing to ensure that the injury caused by the overcapacity of the EU industry was not attributed to the allegedly dumped imports

 

·      Figures concerning production capacity and utilization of capacity are incorrect

 

44.   The EU made a determination concerning production capacity and utilization of capacity based on a definition of utilization of capacity which is inconsistent with Article 3.4 of the ADA, which was not based on positive evidence, which did not involve an objective examination and which was not based on an adequate evaluation. The correct figures would have shown a much higher production capacity of the EU industry and, consequently, a much lower utilization of capacity.

 

·      Errors in the assessment of the overcapacity in the Provisional Regulation

 

45.   The EU appeared to assume, incorrectly, that the arguments of the interested parties concerned only the low capacity utilization, instead of referring to overcapacity. The EU industry had expanded production capacity by 38% during the period 2008-2011, i.e. far beyond what the market could absorb and despite the already extremely low rates of utilization of capacity in 2008. Even a superficial consideration of these arguments on overcapacity would have shown that based on the figures of the Provisional Regulation, unused capacity increased from 11,613,000 tons in 2009 to 13,174,629 tons during the IP, an increase of 1,561,322 tons.

 

·      The findings relating to fixed costs are incorrect

 

46.   Argentina refers to the statement that fixed costs do not bear any relation to capacity utilization rates, which is one of the reasons why the EU rejected the allegation that there was a causal relationship between the overcapacity of the EU industry and the injury it suffered. This statement appears to be based on a misunderstanding. Indeed, the fact that fixed costs remain constant at different capacity utilization rates is precisely the reason why the low capacity utilization rates result in fixed costs being disproportionately high on a per unit basis.

 

47.   In addition to the fact that, contrary to the statements of the EU, the weight of the fixed costs in the total cost of production is impacted by the rate of capacity utilization, Argentina disputes the notion that fixed costs were low and that, therefore, the low rates of capacity utilization were not a "decisive" factor of injury, as stated in Recitals 164 and 166 of the Definitive Regulation.

 

·          The findings that low capacity utilization rates are not a decisive factor cannot be reconciled with the EU's statements that the biodiesel industry is capital intensive

 

48.   The EU mentions repeatedly that the biodiesel industry is capital intensive. Capital-intensive industries require large financial commitments to produce the first unit of any good and thus require high capacity utilization to achieve economies of scale and achieve a return on investment. Argentina submits that the finding that the very significant overcapacity of the EU industry was not a decisive factor of injury cannot be reconciled with the statements throughout the Provisional and Definitive Regulations that the biodiesel industry is capital-intensive.

 

I.         The EU acted inconsistently with Articles 3.1 and 3.5 of the ADA in failing to ensure that the alleged injury caused by the EU industry's long term commercial strategy of importing the product under consideration was not attributed to the allegedly dumped imports

 

49.   The EU failed to properly assess the injury arising from the EU industry's strategy of importing the product under consideration, thereby failing to separate and distinguish the injurious effects of this commercial strategy from those of the allegedly dumped imports.

 

50.   The EU itself recognized that imports made by the EU industry were one of the reasons for the low capacity utilization rate. Therefore, the commercial strategy pursued by the EU industry, which consisted of sourcing the product under consideration in Argentina through related entities, was a cause of injury. The statement that the imports were temporarily made in self-defense is contradicted by their sheer volume: over 60% of total imports by the EU's own recognition.

 

J.         The EU acted inconsistently with Articles 3.1 and 3.5 of the ADA in failing to ensure that the injury caused by the double-counting regimes was not attributed to the allegedly dumped imports

 

51.   The EU acted inconsistently with Articles 3.1 and 3.5 of the ADA as a result of the failure to recognize that the double-counting regimes injured the EU industry at the same time as the allegedly dumped imports and/or of the failure to appropriately assess the injurious effects of those regimes. In failing to examine the effects of the double-counting regimes in force in other EU Member States besides France, the EU failed to appreciate the full extent of the injurious effects of those regimes. The EU misplacedly insisted that double-counting only shifts demand, although it also reduces demand. Finally, Argentina disputes the relevance of the contention that the double-counting regime was in force only during a part of the IP in France.

 

K.         The EU acted inconsistently with Articles 3.1 and 3.5 of the ADA in failing to ensure that the injury caused by the lack of vertical integration and the access to raw material of the EU industry was not attributed to the allegedly dumped imports

 

52.   Argentina contends that the EU failed to comply with the non-attribution obligation in relation to the lack of vertical integration and the lack of access to raw materials of the EU industry. The EU did not undertake any steps to separate and distinguish the injurious effects arising out of these factors from the injurious effects of the allegedly dumped imports. Therefore, the EU acted inconsistently with Articles 3.1 and 3.5 of the ADA.

 

IV.       conclusion

 

53.   Argentina respectfully requests that this Panel find that:

 

I.- Article 2(5) of the Basic Regulation is inconsistent as such, with the following provisions of the ADA and the GATT 1994: (A) Articles 2.2.1.1 and 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994 by providing that the authorities shall reject or adjust the cost data of the exporters as included in its records when those costs reflect prices which are "abnormally or artificially low", because the costs do not reflect market prices or because they are allegedly affected by a distortion; (B) Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994 by providing that the costs shall be adjusted or established in certain cases "on any other reasonable basis, including information from other representative markets", even though neither provision allows for an establishment of the costs on this basis. As a result, the EU acted inconsistently with Article XVI:4 of the Marrakesh Agreement Establishing the WTO and Article 18.4 of the ADA, and

II.- The anti-dumping measures imposed by the EU on imports of biodiesel originating in Argentina are inconsistent with the following provisions of the ADA and the GATT 1994: (A) Articles 2.2.1.1 and 2.2 of the ADA and with Article VI:1(b)(ii) of the GATT 1994 because the EU failed to calculate the cost of production on the basis of the records kept by the producers under investigation; (B) Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994 because the EU failed to construct the normal value of the exports of biodiesel on the basis of the cost of production in the country of origin; (C) Article 2.2.1.1 of the ADA because the EU included costs not associated with the production and sale of biodiesel in the calculation of the cost of production; (D) As a result of the inconsistencies mentioned in points (A) to (C) above, the dumping margin determinations are inconsistent with Article 2.1 of the ADA and with Article VI:1 of the GATT 1994; (E) Articles 2.2 and 2.2.2(iii) of the ADA because the EU failed to base the profit margin as a component of the constructed normal value on a reasonable method within the meaning of Article 2.2.2(iii) of the ADA; (F) Article 2.4 of the ADA because the EU failed to make due allowance for differences affecting price comparability, including differences in taxation, thereby precluding a fair comparison between the export price and normal value; (G) Article 9.3 of the ADA and VI:2 of the GATT 1994 because the EU imposed and levied anti-dumping duties in excess of the margin of dumping that should have been established in accordance with Article 2 of the ADA; (H) Articles 3.1 and 3.4 of the ADA because the EU's injury determination is not based on positive evidence and does not involve an objective examination of the consequent impact of the allegedly dumped imports on domestic producers of the like product in relation to capacity, utilization of production capacity and return on investment of the EU industry; (I) Articles 3.1 and 3.5 of the ADA since the EU failed to conduct an objective examination, based on positive evidence, of known factors other than the allegedly dumped imports in its non-attribution analysis; hence, the EU failed to ensure that the injury suffered by the domestic industry of the EU resulting from other factors was not attributed to the allegedly dumped imports. Argentina considers that the measures at issue should be withdrawn.

54.   Argentina respectfully requests the Panel to make use of its discretion under the second sentence of Article 19.1 of the DSU by suggesting ways in which the European Union should implement the recommendations and rulings of the DSB to bring its measures into conformity with the Anti-dumping Agreement and the GATT 1994.

 

 

ANNEX B-2

Executive Summary of the Second written
submission of Argentina

A.     Introduction

 

1.     Argentina has demonstrated, and the European Union (hereinafter the "EU") has failed to rebut, that, under Article 2(5) second subparagraph of the Basic Regulation, as reflected in the consistent practice of the EU authorities and the judgments of the General Court of the EU, when the prices of inputs are found to be "abnormally low" or "artificially low" in comparison to prices in other markets, as a result of an alleged "distortion", it is concluded that the costs are not reasonably reflected in the records of the producer concerned and are thus adjusted or replaced by data on any other reasonable basis, including information from other representative markets. This measure is clearly inconsistent with Articles 2.2.1.1 and 2.2 of the Anti-Dumping Agreement (hereinafter the "ADA").

 

2.     Argentina has also demonstrated that several aspects of the anti-dumping measures imposed by the EU on imports of biodiesel originating in Argentina are inconsistent with the provisions of the ADA, including the dumping margin determinations and the injury and causality determinations.

 

B.         Argentina's claims against Article 2(5), second subparagraph, of the Basic Regulation

 

The measure at issue

 

3.     Under its "as such" claims, Argentina is challenging one measure, namely Article 2(5), second subparagraph, of the Basic Regulation and not "two separate measures"^[8] as the EU is claiming.

 

4.     Regarding the scope of the measure, the EU errs when claiming that "the second subparagraph of Article 2(5) of the Basic Regulation [only] describes what the authorities can do after it has been determined that the records do not "reasonably reflect" costs, pursuant to the first subparagraph of Article 2(5) of the Basic Regulation".

 

5.     This is, first of all, contrary to the text of Article 2(5), second subparagraph. Indeed, Article 2(5), second subparagraph, does not only provide to the authorities the legal basis to use information from other representative markets when information on the domestic market is not available or cannot be used but, at the very same time, it also provides the legal basis for disregarding the records of the producers in those situations.

 

6.     The background, the consistent practice of the EU authorities and the judgements of the General Court of the EU, confirm that Article 2(5), second subparagraph, provides the legal basis for rejecting the records of the producers/exporters where prices are "artificially low" or "abnormally low" as a result of an alleged "distortion".

 

7.     Regarding the background, it must be noted that the first subparagraph of Article 2(5) was introduced through Council Regulation No 3283/94 of 22 December 1994 which sought to implement the EU's international obligations arising from the ADA adopted during the Uruguay Round. In particular, by means of Article 2(5) of that regulation, it intended to implement the particular obligations laid down by Article 2.2.1.1 of the ADA. The second subparagraph of Article 2(5) was introduced by Regulation No 1972/2002 at the same time that Russia was granted full Market Economy Status, to provide a legal basis for the authorities to reject the cost data included in the records of the investigated party in case those costs reflect a price which is "abnormally low" or "artificially low", in comparison to prices in other markets, because of a "distortion" and to adjust or replace such costs by data which are not affected by such "distortion", as clearly stated in Recital 4 of Regulation No 1972/2002.

 

8.     The scope of Article 2(5), second subparagraph, as described by Argentina has been expressly confirmed by the General Court in the judgments referred to by Argentina.

 

In particular, in the second Acron case (Case T-118/10), the General Court expressly noted that the assessment "whether the records reasonably reflect the costs" is made pursuant to the second subparagraph of Article 2(5):^[9]

 

The institutions were therefore fully entitled to conclude that one of the items in the applicants' records could not be regarded as reasonable and that, consequently, that item had to be adjusted by having recourse to other sources from markets which the institutions regarded as more representative and, consequently, the price of gas had to be adjusted.^[10]

9.     Finally, the consistent practice of the EU authorities which has developed after the introduction into the Basic Regulation of Article 2(5), second subparagraph, confirms the foregoing. The Aluminium Foil case to which the EU refers is irrelevant since the determination was based in that case on Article 18 of the Basic Regulation.

 

10.   It is clear from the foregoing that Argentina does not confuse the scope of the second subparagraph of Article 2(5) with the scope of the first subparagraph of Article 2(5), as asserted by the EU.^[11] Instead, it is the defendant that artificially creates a non-existent two-steps approach between Article 2(5) first and second subparagraphs, on the basis of the allegation that the second subparagraph only describes "what the authorities are authorized to do in order to calculate the costs, when the company records cannot be used".^[12] The EU's position should not prevail. That position is based on a simplistic reading of Article 2(5), first and second subparagraphs, taken in isolation, and without consideration of their context. As demonstrated above, the text of Article 2(5), second subparagraph, together with its background makes evident that it is pursuant to that particular provision that the authorities determine that records do not reasonably reflect the costs where the prices are "abnormally low" or "artificially low", in comparison to prices in other markets, because of an alleged "distortion". This has been expressly confirmed by the General Court, and is supported by the consistent practice of the EU authorities which has developed after the introduction into the Basic Regulation of Article 2(5), second subparagraph.

 

11.   As to the precise meaning and content of the measure challenged, Argentina notes that the "measure on its face" is only "the starting point" for an "as such" analysis.^[13] As the Appellate Body underlined, if "the meaning or content of the measure is not evident on its face, further examination is required"^[14], as Argentina claims, so it is needed that the Panel "undertake a holistic assessment of all relevant elements (…)"^[15] "(…) submitted by a party that the alleged inconsistency with the covered agreements arises from a particular manner in which a measure is applied".^[16]

 

12.   After reading the plain text of Article 2(5), second subparagraph, of the Basic Regulation, it is clear that this provision imposes an obligation on the authorities. Indeed, where information of the costs of other producers or exporters in the same country "is not available or cannot be used", then the costs must be adjusted or established on "any other reasonable basis, including information from other representative markets". The second part of that provision also directs the authorities to reject the exporters' records for the same reason that they have to use information from other representative markets.

 

13.   Furthermore, Recital 4 of Regulation No 1972/2002 explains the meaning and content of Article 2(5), second subparagraph. Recital 4 explicitly acknowledges that, in situations where, because of a particular market situation, sales do not permit a proper comparison, the records do not reasonably reflect the costs associated with the production and sale of the product under consideration. The use of the words "in particular" demonstrates that the finding that the records do not reasonably reflect the costs is not limited to situations in which a particular market situation has been found to exist. The next sentence in Recital 4 establishes that this is to be the case whenever the costs are "affected by a distortion". The EU itself has noted that Article 2(5), second subparagraph, is used by the authorities in cases where, like in the case at hand, normal value is constructed because of lack of sales in the ordinary course of trade. It cannot just argue thereafter that Recital 4, which precisely seeks to explain the meaning and content of Article 2(5), second subparagraph, is not relevant for the interpretation of that provision.

 

14.   The fact that Recital 4 is relevant for the interpretation of Article 2(5), second subparagraph in all circumstances is further supported by the fact that the General Court referred to Recital 4 even with regard to situations in which the normal value was constructed pursuant to a finding that there was no or insufficient sales in the ordinary course of trade.^[17]

 

15.   In conclusion, Regulation No 1972/2002, and in particular its Recital 4, are highly relevant for the understanding of the content and meaning of Article 2(5), second subparagraph. They demonstrate that Article 2(5), second subparagraph, provides the legal basis for (a) rejecting the cost data included in the records when they are affected by a "distortion", in particular, when they reflect prices that are "artificially low" and (b) for adjusting or establishing the costs in such a case on the basis of data from sources which are not affected by such distortions.

 

16.   Argentina has also referred to the consistent practice of the EU authorities pursuant to Article 2(5), second subparagraph, of the Basic Regulation as a relevant element for the understanding of the meaning and content of Article 2(5), second subparagraph.^[18] In all the cases referred to by Argentina, the EU authorities have described the prices of the input concerned as being "significantly lower" or "much lower" in comparison with prices in other markets, such as prices in the EU. The prices have been described as being "abnormally low" and/or "artificially low" prices. What is relevant is the consistency in the determinations made by the EU authorities, that is, where the prices of the inputs have been found to be "artificially low" or "abnormally low" because of an alleged distortion, the authorities have consistently concluded that the records did not reasonably reflect the costs associated with the production and sale of the product under consideration.

 

17.   Finally, the judgements of the General Court are relevant for the understanding of the meaning and content of Article 2(5), second subparagraph, since the General Court has confirmed on the basis of Recital 4 of Council Regulation No 1972/2002 that the key element in the determination that the data were not "reasonable" is the existence of a "distortion".

 

18.   In conclusion, when assessed in conjunction, these elements establish altogether that where the prices of the inputs are found to be "artificially low" or "abnormally low" in comparison to prices on other markets as a result of a "distortion", the records do not reasonably reflect the costs associated with the production and sale of the product under consideration and the costs included in the records are adjusted or replaced by information from other representative markets.

 

The Mandatory / Discretionary distinction

 

19.   Argentina first notes that there is no provision in the ADA or any other Agreements which establishes a mandatory/discretionary standard that the Panel would have to apply. In other words, the Panel is required to examine whether the measure is consistent with the relevant WTO obligations, not whether the measure is discretionary or mandatory. Thus, the mandatory/discretionary distinction is not a test that panels are required to apply. At best, it could in certain cases be an "analytical tool", which, as established by the Appellate Body, should not be applied "mechanistically", and the significance of which would vary from case to case.^[19]

 

20.   Argentina submits that the starting point of the analysis in an "as such" claim is the provision with which the measure is claimed not to be consistent. Therefore, if the relevant WTO provision prohibits a certain conduct, the mere fact that the measure being challenged provides for such a conduct should lead to the conclusion that there is a violation. Thus, even if Article 2(5), second subparagraph, only provided for the possibility - and did not require – that the authorities reject the records in such situations, the mere possibility would render it inconsistent with Article 2.2.1.1 of the ADA. The same reasoning applies to Argentina's claim under Article 2.2 of the ADA.

 

21.   Second, and in any case, Argentina submits that Article 2(5), second subparagraph, is not discretionary as alleged by the EU. The text of Article 2(5), second subparagraph, Regulation No 1972/2002, the consistent practice of the EU authorities as well as the judgments of the General Court show that the authorities do not have discretion with respect to situations in which the prices are found to be "abnormally low" or "artificially low" because of an alleged "distortion". In such cases, the authorities necessarily conclude that the records do not reasonably reflect the costs and replace or adjust the costs on the basis of information from other representative markets.

 

Article 2(5), second subparagraph, of the Basic Regulation violates Article 2.2.1.1 of the ADA and, as a result, Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994

 

22.  Regarding the interpretation of Article 2.2.1.1 of the ADA, Argentina notes in relation to the text of that provision, that the structure of the first sentence of Article 2.2.1.1 clearly excludes any reasonableness test of the cost elements themselves.^[20] This is supported by the fact that the sentence uses the adverb "reasonably" which relates to the verb "reflect" and not the adjective "reasonable" that would be used to describe the "costs". Thus, the test is not to determine whether the cost elements are "reasonable" in relation to any type of outside benchmarks, but whether the records of the producer/exporter investigated provide reasonable information of the costs that are associated with the production and sale of the product under consideration for that producer/exporter in the framework of that investigation.

 

The definition of the term "costs" as "charges or expenses" refers to a concrete amount by opposition to a hypothetical value, such as an international price, while the term "associated" does not in any away imply "a broad range of relations between the "costs" and the "production""^[21] such that it could "capture the costs that would normally be associated with the production and sale of the goods".^[22] The word "associated" simply means that the costs must "pertain"^[23] to the production and sale of the product under consideration.

 

23.   Regarding the context, Argentina notes that the second and third sentences of Article 2.2.1.1 confirm that the test under the first sentence is not about the reasonableness of the costs in relation to outside benchmarks but about the relationship between the costs and the production and sale of the product under investigation for each producer/exporter examined in the anti-dumping investigation at issue. Article 2.2 which refers to the "cost of production in the country of origin" means that Article 2.2.1.1 cannot imply a test whereby it is examined whether the "costs" are reasonable in light of benchmarks outside of the country of origin. As to Article 2.2.2 of the ADA, this provision which deals exclusively with the determination of the "amounts for administrative, selling and general costs and for profits" confirms that if the drafters had intended to authorize the authorities to use data other than those of the producers/exporters for the calculation of the "cost of production", they would have explicitly provided for that possibility in Article 2.2.1.1.

 

24.   Finally, Argentina submits that "dumping" is about the "pricing behaviour" of the exporters/producers concerned and that this applies to both the "export price" and the "normal value" as the Appellate Body itself noted is US – Zeroing (Japan). The European Union's view that the normal value is "the value that the products should have in normal circumstances" is inconsistent with the proposition that the normal value relates to the pricing behaviour of the exporter/producer investigated. Indeed, the dumping found in such circumstances would not result from the pricing behaviour of the exporter/producer concerned but from the difference between the export price of the exporter/producer concerned and a hypothetical value, namely the one that products should have in normal circumstances. This view departs from the definition of "dumping" which is said to relate to the pricing behaviour of the specific exporter/producer investigated.

 

25.   Regarding the object and purpose, Argentina notes that, by claiming that the authorities should be authorized to address costs of inputs which are not "normal", the EU appears to seek to address so-called "input dumping" which has been described as "situation where materials or components that are used in manufacturing an exported product are purchased internationally or domestically at dumped or below cost prices, whether or not the product itself is exported at dumped prices".^[24]

 

26.   This issue was discussed by the Ad-Hoc Group on the Implementation of the Anti-Dumping Code of the Committee on Anti-Dumping Practices just before the Uruguay Round. There was, however, no consensus on this issue. Furthermore, the Draft Recommendation prepared by the Ad-Hoc Group confirms that no provision in the GATT or in the Anti-Dumping code authorized the use of anti-dumping duties to address "input dumping". As Argentina explained in its response to Panel's question No. 18, the negotiating history of Article 2.2.1.1 shows that there was no intention amongst the Parties to introduce "the requirements that the costs reflected in the records should be reasonable", as claimed by the defendant.^[25] Furthermore, the issue of "input dumping" was raised during the Uruguay Round negotiations but was not addressed in the ADA.

 

27.   In conclusion, the analysis of the text and context of Article 2.2.1.1 as well as of the object and purpose unambiguously demonstrates that this provision does not permit investigating authorities to reject data included in the exporter/producer's records because such data reflect "abnormally low" or "artificially low" prices because of a "distortion".

 

28.   As to the claims, Argentina first submits that to the extent that the Panel confirms that Article 2.2.1.1 prohibits the rejection of data in the records merely because those data are found to be "abnormally low" or "artificially low" because of an alleged distortion, Article 2(5), second subparagraph, must be found to be inconsistent with Article 2.2.1.1 because that rejection falls within the category of what is prohibited by Article 2.2.1.1. Second, and in any case, Argentina submits that pursuant to Article 2(5), second subparagraph, the authorities are required to conclude that the records do not reasonably reflect costs when prices are found to be "abnormally low" or "artificially low" because of an alleged distortion, thereby violating Article 2.2.1.1 of the ADA.

 

Article 2(5), second subparagraph, of the Basic Regulation violates Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994

 

29.   Regarding the interpretation of Article 2.2 of the ADA, Argentina notes that the text of the provision is clear and necessarily requires that the data/evidence used must be data/evidence in the country of origin. Furthermore, even if evidence outside the country or origin could be used, it would have to be demonstrated that the cost of production which is based on such data/evidence constitutes the "cost of production in the country of origin".

 

30.   As to the claims, Argentina submits that Article 2(5), second subparagraph, violates Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994 because it provides that, where the costs of other producers or exporters in the same country are not available or cannot be used, the costs shall be adjusted or established on any other reasonable basis, including information from other representative markets while Article 2.2 prohibits the construction of normal value on a basis other than "the cost of production in the country of origin". Furthermore, Argentina notes that the authorities do not have the "broad discretion" as claimed by the EU. The text of Article 2(5), second subparagraph, as confirmed by the practice, shows that where information from the domestic market is not available or cannot be used, the costs must be adjusted or replaced on any other reasonable basis including information from other representative markets.

 

C.         Claims against the Anti-Dumping Measures on Imports of Biodiesel originating in Argentina

 

As a preliminary matter, Argentina noted several factual inconsistencies in the EU's defense.

 

Claims pursuant to Articles 2.2 and 2.2.1.1 of the ADA and Article VI:1(b)(ii) of the GATT 1994 and consequential claim pursuant to Article 2.1 of the ADA and Article VI:1 of the GATT 1994

 

31.   In the biodiesel investigation, the EU first rejected the cost of soybean that was reported by the producers under investigation and that was used to determine the cost of soybean oil, on the basis that they were found to be artificially lower that the international prices due to the distortion created by the Argentine export tax system. After the rejection of the reported costs of soybean, the EU went on to replace those costs with the reference FOB prices of soybean.

 

32.   Argentina has claimed that the EU authorities were not entitled to examine whether the costs of soybeans "would pertain to the production and sale of biodiesel in normal circumstances, i.e. in the absence of the distortion caused by Argentina's export tax on the raw materials".^[26] Therefore, by rejecting the cost data of soybeans as included in the records of the producers because they were "artificially lower than the international prices due to the distortion created by the Argentine export tax system"^[27], the EU violated Article 2.2.1.1 of the ADA.

 

33.   It is important to emphasise that the EU authorities not only wrongfully tested whether the costs reflected costs of soybeans that would normally be associated with the production and sale of biodiesel in normal circumstances, but they also wrongfully carried out this test in comparison with "international prices". As Argentina has underlined previously, comparison with benchmarks outside the country of origin is clearly incompatible with the express requirement in Article 2.2 that refers to the "cost of production in the country of origin".

 

34.   The EU has explained that the international price of soybean - which has been used as benchmark - is the price that would have pertained to the production and sale of biodiesel in the absence of the export tax on soybean.^[28] It has also stated that the difference between the international price and the domestic price of soybean (which is the price that was reported by the producers under investigation) is the export tax and other expenses incurred for exporting it.^[29]

 

35.   Argentina submits that implicit in these statements is the consideration that, in fact, the international price of soybean did not pertain to the production and sale of the biodiesel under investigation in that investigation and in that case. Therefore, according to the EU's own findings in the biodiesel investigation, the international price of soybean that was used as benchmark to determine that the costs of soybeans were not reasonably reflected in the records^[30] is not associated with the production and sale of biodiesel within the meaning of the second proviso of the first sentence of Article 2.2.1.1 of the ADA.

 

36.   Given that the international price of soybean is not a cost of the Argentinean producers that is associated with the production and sale of biodiesel in that investigation, the EU was not allowed, under the second proviso of the first sentence of Article 2.2.1.1, to test the records of the Argentinean producers against those costs.

 

37.   Therefore, in rejecting the cost of soybean reported by the exporting producers when constructing normal value on grounds that those costs "were found to be artificially lower than the international prices", the EU acted inconsistently with Articles 2.2.1.1 and 2.2 of the ADA and with Article VI:1(b)(ii) of the GATT 1994.

 

38.   With regard to Article 2.2, Argentina submits that the ADA provides that the costs of production must be "the cost of production in the country of origin". According to this, Argentina has demonstrated that the EU violated this obligation since in calculating the cost of production of the Argentinean exporters/producers, it did not use domestic prices of soybeans, but the reference FOB prices of soybeans, net of fobbing costs.^[31]

 

39.   The reference FOB price of soybean minus fobbing costs, on the basis of which the EU calculated the cost of production, is not a "price to be paid for the act of producing" (i.e. cost of production) in Argentina (the country of origin), as it comprises the export tax on soybeans and because the domestic price of soybean is equivalent to the reference price minus fobbing costs and minus export taxes. The reference FOB price is, at best, a proxy of the export price of soybean but not a cost at which soybean is acquired domestically. It thus acted inconsistently with Article 2.2 of the ADA and with Article VI:1(b)(ii) of the GATT 1994.

 

40.   Finally, for the reasons expressed in its opening statement^[32] and in its response to Panel question No. 55, Argentina maintains its claims under Article 2.1 of the ADA and Article VI:1 of the GATT 1994.

 

The EU acted inconsistently with Articles 2.2 and 2.2.2(iii) of the ADA because the amounts for profits established by the EU were not determined on the basis of a reasonable method

 

41.   Argentina asserts that, contrary to what the EU pretends, the mere fact of establishing an amount and then testing its reasonableness is insufficient to comply with the terms of Article 2.2.2(iii) of the ADA. In order to fulfil the requirements of that provision, the selected amount needs to be arrived at following a reasonable method. Given that the EU did not establish the amount for profits pursuant to any method, let alone a reasonable one, it has violated Articles 2.2.2(iii) and 2.2 of the ADA.

 

The EU acted inconsistently with Article 2.4 of the ADA in failing to make due allowance for differences affecting price comparability, including differences in taxation, and in precluding a fair comparison between export price and normal value

 

42.   Argentina has shown that the manner in which the EU constructed normal value whereby it disregarded the domestic price of soybean as a basis to calculate the "oil share" (i.e. the value of the bean corresponding to the oil) and substituting it with the "FOB reference price" of soybean as a basis from which to calculate the "oil share" is inconsistent with Articles 2.2 and 2.2.1.1 of the ADA. This WTO-inconsistent manner of substituting the cost of soybean resulted in a normal value applied to the exporting producers that reflected the international price of soybean oil, as if the exporting producers were located outside of the territory of Argentina.

 

43.   In subsequently calculating the dumping margin, the EU compared this "non-domestic" or "international" normal value of biodiesel with an export price that was fully "domestic", i.e. without the substitution or the adjustment of the cost of soybean out of which the "oil share" was calculated. By proceeding in that way, the EU acted as if it were calculating dumping margins of the finished product based on differences between the domestic price and the export price not of the product under consideration, but of its primary input. Therefore, the EU generated an artificial imbalance between the export price and the normal value.

 

44.   As a consequence, Argentina has claimed that a difference exists between normal value and export price^[33] and that this difference affects price comparability.^[34] It consequently claims that the comparison between normal value and export price, absent an adjustment to account for this difference, is not a fair comparison and consequently it is inconsistent with Article 2.4 of the ADA.

 

The EU acted inconsistently with Article 9.3 of the ADA and Article VI:2 of the GATT 1994 in imposing and levying anti-dumping duties in excess of the margin of dumping that should have been established in accordance with Article 2 of the ADA

 

45.   Argentina's claim is that the EU has imposed and levied anti-dumping duties in excess of the margin of dumping that it should have calculated in conformity with Article 2 of the ADA and that, consequently, it acted inconsistently with Article 9.3 of the ADA and Article VI:2 of the GATT 1994.^[35]

 

46.   The defense of the EU appears to suggest that the terms "margin of dumping" have a meaning under Article 9.3 that is different from the meaning assigned to those terms under Article 2 and that, therefore, the level of the duties imposed or levied on the dumped imports may be tested against a margin of dumping which is not the margin of dumping established in conformity with Article 2 of the ADA. In line with the EU's contention, under Article 9.3, the "margins of dumping" against which the duties are to be tested would be those that are found by the investigating authority, regardless of their consistency with Article 2. This line of thought runs counter to Article 2.1 of the ADA, which defines dumping "for the purpose of this agreement" and thus shows that the meaning is uniform throughout the agreement.^[36] It is also inconsistent with the text of Article 9.3, which explicitly states "as established under Article 2" and not "as determined by the investigating authority".

 

The EU acted inconsistently with Articles 3.1 and 3.4 of the ADA in its evaluation of the production capacity, the utilization of capacity and the return on investment of the EU industry

 

47.   Argentina first submits that the EU's definition of capacity and capacity utilization is inconsistent with Article 3.4. Article 3.4 contains no basis for excluding capacity that is "idle" or "not available for use" from the assessment of capacity utilization.^[37] Moreover, the EU not only has not pointed to any textual or contextual basis that would support the exclusion of part of the production capacity from the analysis of the utilization of capacity, but has not offered any explanation of what this exactly means. Therefore, the EU acted inconsistently with Article 3.4 of the ADA in excluding part of the production capacity, namely the "idle" capacity, from the assessment of the utilization of capacity.

 

48.   Second, Argentina submits that the EU's assessment of production capacity and capacity utilization is not based on positive evidence. Argentina notes that the domestic industry intended to exclude "idle" capacity from its production capacity from the beginning of the investigation, as indicated by the statement that idle capacity had already been excluded from the capacity figures of EBB members.^[38] Against this background, the fact that the production capacity figures for non-EBB members included both their idle capacity and that of EBB members appears to have been a mistake.^[39] The data, on which the evaluation of capacity utilization is based, appear not to be reliable because they are contradicted by a multiplicity of available public sources, including EBB itself.^[40] In view of the foregoing, it must be concluded that the EU's evaluation of production capacity and capacity utilization was not based on positive evidence and was therefore inconsistent with Articles 3.1 and 3.4 of the ADA.

 

49.   Third, the EU did not conduct an objective examination of the domestic industry's production capacity and utilization of capacity. The EU attempts to contradict Argentina's claims by stating that it selected a sample of EU companies and subjected their data to detailed examination and verification.^[41] However, all the sampled producers were EBB members, whose production capacity figures excluded "idle capacity" from the beginning. Therefore, the verification of those EBB companies does not guarantee the accuracy of the figures relating to non-EBB members and to the industry as a whole, which concerns the figures that were adjusted.

 

50.   Fourth, the EU did not consistently evaluate the utilization of capacity and return on investment. In its answer to Panel question No. 63(b) and in its opening statement^[42], Argentina has addressed the EU's argument that there were no sampled companies with so-called "idle" capacity.^[43] As explained by Argentina, at least one of the sampled companies, Diester, appeared to have what would fall within the EU's vague definition of "idle" capacity, that is, capacity that was installed but which was not available for use. Therefore, Argentina maintains its claim that the EU acted inconsistently with Article 3.4 of the ADA in failing to evaluate the return on investments and the utilization of capacity in a consistent manner.

 

The EU acted inconsistently with Articles 3.1 and 3.5 of the ADA in failing to ensure that the injury caused by certain factors was not attributed to the allegedly dumped imports

 

51.   Regarding overcapacity, Argentina has demonstrated that the EU failed to make an appropriate assessment of the injury caused to the EU industry by its overcapacity. The EU's defense is entirely unconvincing for a number of reasons.

 

52.   First of all, the EU confuses utilization of capacity as an injury indicator (under Article 3.4 of the ADA) and the overcapacity of its domestic industry as a cause of injury (under Article 3.5 of the ADA). Second, the confusion prevented the EU from ascertaining the impact of this cause of injury on capacity utilization as an injury indicator, thus understating the controlling importance of overcapacity as a source of injury. Third, there is a correlation between the increase in overcapacity and the decrease in profitability which, together with the decline in market share are the main injury indicators on which the EU has relied to come to the conclusion that the domestic industry was materially injured.^[44] Therefore, contrary to the EU's assertions, the overcapacity is the cause of the declining profit and consequently, of the injury suffered by the domestic industry. Fourth, the profit of 3.5% of the domestic industry in 2009 to which the EU refers was, in fact, extremely low by the EU's own standards, namely a 15% injury elimination level set by the EU for the period April 2007 to March 2008.^[45] This level which is well below the injury elimination level set by the EU itself disproves the EU's contention that the industry could be healthy with high overcapacity. In any case, Argentina recalls that between 2009 and the IP overcapacity did not remain constant but instead increased by 1,561,322MT. Fifth, even if no increase in imports would have taken place at all during the IP, the overcapacity would still be enormous.

 

53.   To summarize, the continued overcapacity and its significant increase between 2009 and the IP was the main factor injuring the domestic industry and not the imports originating in Argentina and Indonesia. The above shows that the EU's decision to attribute controlling importance to the allegedly dumped imports as a source of injury instead of to the overcapacity of the domestic industry amounts to a failure to appropriately separate and distinguish the injurious effects of the overcapacity from those of the allegedly dumped imports. Therefore, the EU acted inconsistently with Articles 3.1 and 3.5 of the ADA.

 

54.   Turning to the long-term commercial strategy of the EU industry, Argentina noted that the EU's arguments are unconvincing for various reasons. First, the EU's statement that the domestic industry was compelled to buy biodiesel from Argentina is not believable given that the imports from Argentina and Indonesia were not a marginal phenomenon in comparison to total imports. This argument also overlooks the fact that biodiesel production facilities in Argentina are either directly affiliated to the domestic industry or related through common ownership.

 

55.   Second, the EU has not provided evidence that had the domestic industry not made those imports, traders would have made those imports. Finally, the argument about the maintenance of a customer base is unconvincing and contradicted by the fact that the EU itself added the imports made by the Union industry to the market share of the allegedly dumped imports, instead of adding it to the market share of the domestic industry.^[46]

 

56.   In view of the above, Argentina submits that the EU acted inconsistently with Articles 3.1 and 3.5 of the ADA in failing to separate and distinguish the injurious effects of the domestic industry's own commercial strategy, in qualifying it as "self-defense" and in incorrectly attributing its effects to the allegedly dumped imports.

 

57.   With regard to double-counting, Argentina has claimed that the EU failed to appropriately assess the injurious effects of the double-counting regimes and that it failed to separate and distinguish its effects from those of the allegedly dumped imports. In responding to this claim, the EU has stated that, double-counting shifts demand within the Union industry and does not generate demand for imports and that Union producers of double-counting biodiesel experienced negative performance, suggesting that the decline of non-double counting producers cannot be attributed to the performance of the double-counting producers.^[47]

 

58.   Argentina disagrees with these arguments for the following reasons. First of all, the fact that the financial situation of the producers declined only after double-counting had been repealed in France is irrelevant, as the effects of double-counting materialized during the IP. Consequently, the injurious effects of that scheme should have, but were not distinguished and separated from the injury caused by the allegedly dumped imports as mandated by Article 3.5 of the ADA. Second, Argentina notes that the EU failed to examine double-counting regimes other than the French regime^[48], despite the fact that their existence was brought to the attention of the investigating authority.

 

59.   In view of the above, Argentina submits that the EU violated Articles 3.1 and 3.5 of the ADA in failing to examine double-counting and to distinguish and separate the injurious effects of double-counting from those of the allegedly dumped imports.

 

60.   Finally, Argentina has claimed that the EU's industry is at a disadvantage because of a lack of vertical integration and lack of access to raw materials. The disadvantage results from the introduction of additional phase of transport into the production chain, which does not exist when the raw materials are processed on site. The significance of this disadvantage cannot be understated, especially in view of the fact that transport of the raw material is not only an additional phase, but occupies a much larger volume of cargo space.

 

61.   In consequence, in failing to separate and distinguish the effects of the lack of vertical integration and the lack of access to raw materials from the injury caused by the allegedly dumped imports, the EU acted inconsistently with Articles 3.1 and 3.5 of the ADA.

 

62.   For the reasons set out in this submission and in previous submissions, Argentina respectfully requests that this Panel find that:

 

I.- Article 2(5) of the Basic Regulation is inconsistent as such, with the following provisions of the ADA and the GATT 1994: (A) Articles 2.2.1.1 and 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994 by providing that the authorities shall reject or adjust the cost data of the exporters as included in its records when those costs reflect prices which are "abnormally or artificially low", because the costs do not reflect market prices or because they are allegedly affected by a distortion; (B) Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994 by providing that the costs shall be adjusted or established in certain cases "on any other reasonable basis, including information from other representative markets", even though neither provision allows for an establishment of the costs on this basis. As a result, the EU acted inconsistently with Article XVI:4 of the Marrakesh Agreement Establishing the WTO and Article 18.4 of the ADA, and

 

II.- The anti-dumping measures imposed by the EU on imports of biodiesel originating in Argentina are inconsistent with the following provisions of the ADA and the GATT 1994: (A) Articles 2.2.1.1 and 2.2 of the ADA and with Article VI:1(b)(ii) of the GATT 1994 because the EU failed to calculate the cost of production on the basis of the records kept by the producers under investigation; (B) Article 2.2 of the ADA and Article VI:1(b)(ii) of the GATT 1994 because the EU failed to construct the normal value of the exports of biodiesel on the basis of the cost of production in the country of origin; (C) Article 2.2.1.1 of the ADA because the EU included costs not associated with the production and sale of biodiesel in the calculation of the cost of production; (D) As a result of the inconsistencies mentioned in points (A) to (C) above, the dumping margin determinations are inconsistent with Article 2.1 of the ADA and with Article VI:1 of the GATT 1994; (E) Articles 2.2 and 2.2.2(iii) of the ADA because the EU failed to base the profit margin as a component of the constructed normal value on a reasonable method within the meaning of Article 2.2.2(iii) of the ADA; (F) Article 2.4 of the ADA because the EU failed to make due allowance for differences affecting price comparability, including differences in taxation, thereby precluding a fair comparison between the export price and normal value; (G) Article 9.3 of the ADA and VI:2 of the GATT 1994 because the EU imposed and levied anti-dumping duties in excess of the margin of dumping that should have been established in accordance with Article 2 of the ADA; (H) Articles 3.1 and 3.4 of the ADA because the EU's injury determination is not based on positive evidence and does not involve an objective examination of the consequent impact of the allegedly dumped imports on domestic producers of the like product in relation to capacity, utilization of production capacity and return on investment of the EU industry; (I) Articles 3.1 and 3.5 of the ADA since the EU failed to conduct an objective examination, based on positive evidence, of known factors other than the allegedly dumped imports in its non-attribution analysis; hence, the EU failed to ensure that the injury suffered by the domestic industry of the EU resulting from other factors was not attributed to the allegedly dumped imports. Argentina considers that the measures at issue should be withdrawn.

 

63.   Argentina respectfully requests the Panel to make use of its discretion under the second sentence of Article 19.1 of the DSU by suggesting ways in which the European Union should implement the recommendations and rulings of the DSB to bring its measures into conformity with the Anti-dumping Agreement and the GATT 1994.

ANNEX B-3

Executive Summary of the Statement of Argentina

at the First Meeting of the Panel

1.         Opening Remarks

 

1.         Argentina asserts that we are not here because export taxes are the source of unfair advantages for producers in countries where exports are taxed, as the narrative of the EU suggests. We are here because of structural problems and lack of competitiveness in the EU industry of biodiesel. These structural problems are unfortunate in light of the huge subsidies granted to the biodiesel industry in Europe.

 

2.         Argentina believes that the investigating authorities in the EU have a mandate to challenge export taxes at any cost. And it is what they did, even knowing that Argentina and Indonesia would bring a case before the WTO. However, export taxes are not only legal (there are no disciplines for export taxes under WTO law) but also legitimate instruments broadly used by developing countries and mainly for fiscal purposes.

 

2.         Introduction

 

3.         Despite being based on an intensely litigated agreement – the Anti-Dumping Agreement - this dispute is still unique on at least two counts: a) The first aspect is the fact that while dumping reflects the conduct of individual companies that export at prices below those in their own domestic market, in the case at hand, the European Union has targeted a series of practices that are very different from such price discrimination and are completely beyond the control of the exporting producers b) the second distinctive feature of this case which is derived from the first one, is the overt attempt by the European Union to expand the scope of application of the Anti-Dumping Agreement. According to the European Union, dumping would no longer be confined to the well-known practice of pricing the same product differently for different markets. Instead, it would also encompass differences in costs at which producers in different countries obtain inputs. Hence, as of the moment there is a difference in the price at which a producer can have access to a given input, and provided that such difference is reflected in the price of the final product, then, according to the European Union, that product is being dumped.

 

4.         According to the above said, Argentina first challenges "as such" Article 2(5), second subparagraph, of the Basic Regulation, which provides that where the costs of the inputs in the records reflect prices that are found to be artificially or abnormally low in comparison with the prices on other markets, the costs have to be adjusted or established on another basis, including on the basis of information from other representative markets. This measure is manifestly inconsistent with the provisions of the Anti-Dumping Agreement and, in particular, with its Article 2 which precisely lays down the rules that must be followed for the determination of the normal value. This measure is of significant concern to Argentina given that the investigating authority endows itself with a margin of discretion that goes well beyond what is allowed under the Anti-Dumping Agreement. The European Union is, in fact, trying to create a new category of "dumping" which does not exist under the Anti-Dumping Agreement.

 

5.         Argentina also challenges the anti-dumping measures imposed by the European Union on imports of biodiesel from, Argentina. These measures are based on manifestly flawed determinations of dumping since the European Union erroneously rejected the Argentinean producers' cost data for soybean and replaced them by the average of the FOB reference price, thereby finding dumping or artificially inflating the margins of dumping of the Argentinean producers. Furthermore, these measures are also based on manifestly flawed determinations relating to both injury and causality.

 

3.         Request for a Preliminary Ruling and Preliminary Issues raised by the European Union

 

6.         In Argentina's view, to the extent that the European Union cannot demonstrate that resolving these Article 6.2 claims would make any practical differences, these issues appear to be moot and, in Argentina's view, the Panel therefore does not need to examine them any further.^[49]

 

7.         The same comment applies to the European Union's claim about Argentina's alleged failure to identify the "specific measures at issue" in which it argued that the references to the terms "implementing measures and related instruments or practices" and to "related measures and implementing measures" in Argentina's Panel Request were too vague.^[50] Argentina noted that these words were not on their face inconsistent with the requirement to identify the specific measures at issue and that, in any case, this objection appeared to be premature and unnecessary.

 

8.         The European Union first asserts that the Panel must reject Argentina's claims pursuant to Article 2.1 of the Anti-Dumping Agreement and VI:1 of the GATT 1994 because they are definitional provisions that do not impose independent obligations^[51] and is not applicable to situations where there are no sales in the ordinary course of trade.^[52] However, Argentina remembers that in subparagraph 470 of its first written submission has explained that the European Union's violations of Article 2.1 of the Anti-Dumping Agreement and Article VI:1 of the GATT 1994 result from the numerous violations of Articles 2.2 and 2.2.1.1 of the Anti-Dumping Agreement.

 

9.         The European Union erroneously argues that Argentina claims that a violation of Article 2.2 automatically constitutes a failure to comply with Article 9.3.^[53] This is not correct. Argentina is not taking issue with the calculation of the normal value under its Article 9.3 claim. What Argentina has submitted is that the European Union has imposed definitive anti-dumping duties which exceed the margins of dumping as established under Article 2 of the Anti-Dumping Agreement.

 

4.         Claims against Article 2(5), second subparagraph, of the Basic Regulation

 

10.       Argentina is not challenging "two separate "measures""^[54], as claimed by the European Union, but only one measure, namely Article 2(5), second subparagraph.

 

4.1   Claim under Article 2.2.1.1 of the Anti-Dumping Agreement

 

11.       Argentina claims first that Article 2(5), second subparagraph, violates Article 2.2.1.1. In this sense, Argentina asserts that the introduction of the second subparagraph in Article 2(5) by Regulation No 1972/2002 gave a specific meaning and content to the condition that the "costs associated with the production and sale of the product under investigation are not reasonably reflected in the records of the party concerned". Under and pursuant to the new second subparagraph of Article 2(5), the authorities have to conclude that the records do not reasonably reflect costs associated with the production and sale of the product under consideration where they find that the costs of the inputs reflect prices that are "abnormally or artificially low" in comparison to prices on other markets.

 

12.       Thus, it clearly flows from Regulation No 1972/2002 that, with the introduction of the second subparagraph of Article 2(5), a condition has been imposed on the authorities which must examine whether the costs of the inputs are not "abnormally or artificially low" in comparison to prices on other markets. This is actually supported by the wording of the second part of Article 2(5), second subparagraph, which refers to the adjustment or establishment of costs on any other reasonable basis including from other representative markets. The requirement to use information from other representative markets is rendered necessary precisely because the data on the domestic market are to be considered non-usable when they are found to be "artificially or abnormally low" in comparison with prices on other markets.

13.       This is further supported by the consistent practice of the authorities, because it has been found that there is an automatic link between, on the one hand, prices that are found to be "abnormally or artificially low" in comparison to prices on other markets and, on the other hand, the finding that the costs are not reasonably reflected in the records. There is no discretion, and the practice confirms that.

 

14.       Contrary to what European Union affirms, Argentina is not required to demonstrate that the "abnormally or artificially low" prices of the inputs is the only reason justifying the conclusion that the company records do not reasonably reflect the costs. Argentina is only required to demonstrate that the measure at issue necessarily requires the authorities to conclude that the records do not reasonably reflect the costs when the costs reflect prices that are found to be abnormally or artificially low.

 

15.       The European Union claims that under the second condition of Article 2.2.1.1, the authorities can examine whether the records reflect costs that would normally be associated with the production and sale of the goods in normal circumstances.^[55]

 

16.       To defend its position, the European Union is thus obliged to distort the ordinary meaning of the terms of Article 2.2.1.1, adding words that are not there, such as "would normally be" and "in normal circumstances". As emphasized in Argentina's first written submission, such an interpretation is not only contrary to the ordinary meaning of the words, but also to the structure of the sentence and the context of this provision.

 

17.       There is nothing in Article 2.2.1.1 or other provisions of the Anti-Dumping Agreement suggesting that the cost data of producers can be disregarded because they are lower than what they would be in other markets. Argentina underlined earlier, rejecting the costs of a producer on the ground that there are not "normal" in comparison to the prices in another country is fundamentally contrary to the concept of "dumping" in the Anti-Dumping Agreement.

 

4.2   Claim under Article 2.2 of the Anti-Dumping Agreement

 

18.       Argentina asserts that the wording of Article 2(5) second subparagraph is clearly WTO inconsistent: it "mandates" the authorities to adjust or establish the costs "where such information is not available or cannot be used", "on any other reasonable basis, including information from other representative markets".

 

19.       Furthermore, the European Union errs when it argues that it would be necessary to demonstrate that this provision requires "the investigating authority to use such information "in all cases"."^[56] However, as the Appellate Body noted in an earlier case, in order to succeed with an "as such" claim,^[57] Argentina is not required to demonstrate that in each and every case where Article 2(5) second subparagraph will be used, it will end in a result which is inconsistent with WTO rules. It is sufficient for Argentina to demonstrate that this rule will necessarily lead to violations of WTO rules in certain specified circumstances.

 

20.       The European Union's interpretation that "[t]he possibility of using "any other reasonable method" in Article 2.2.2(iii) implies that Article 2.2, as a whole, does not impose an absolute prohibition on the use of data on the cost of production from countries other the country of origin, where the conditions of production and sale are not in the ordinary course of trade"^[58] is untenable.

 

5.         Claims regarding the Anti-Dumping Measures on imports of biodiesel originating in Argentina

 

5.1       Claims under Articles 2.2 and 2.2.1.1 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994

 

5.1.1    The European Union misinterprets Article 2.2.1.1 of the Anti-Dumping Agreement

 

21.       Argentina does not dispute that the costs against which the records must be tested are those that are "associated with the production and sale of the product under consideration". However, as Argentina has emphasized, the fact that the test refers to the "costs associated with the production and sale of the product under consideration" means that the determination must establish whether the costs in question effectively "pertain to the production and sale of the product in question", irrespective of whether the costs are lower than international prices or prices in other markets. In stating that it is entitled to consider "which costs would pertain to the production and sale of biodiesel in normal circumstances", the European Union is adding words which are not there, namely "would" and "in normal circumstances", and is thereby modifying the scope and meaning of this provision.

 

22.       In the biodiesel anti-dumping investigation, the European Union did not examine whether the costs of soybeans in the producers' records reasonably related to the cost of producing and selling biodiesel in Argentina. Rather, it examined those costs against a hypothetical benchmark price and concluded that "the domestic prices of the main raw material used by the biodiesel producers in Argentina were […] artificially lower than the international prices due to the distortion created by the Argentine export tax system".^[59]

 

23.       Furthermore, the panel report in EC – Salmon confirmed that "the test for determining whether a cost can be used in the calculation of "cost of production" is whether it is "associated with the production and sale" of the like product", the costs being those of the "investigated party." The fact that the Panel in EC – Salmon defines the expression "cost of production" as "the price to be paid for the act of producing" does not in any way mean that the word "costs" could be understood as hypothetical prices.

 

5.1.2    The European Union acted inconsistently with Article 2.2.1.1 in using costs that are not associated with the production and sale of biodiesel for the construction of normal value

 

24.       Argentina has shown that for the exporting producers, the FOB reference price is not a price that is associated with the production and sale of biodiesel. In fact, the reference FOB price is a statistical tool which is calculated by averaging FOB prices of the previous day.

 

5.1.3    The European Union acted inconsistently with Article 2.2 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994 in failing to construct normal value on the basis of the cost of production in the country of origin

 

25.       In calculating the cost of production, the European Union did not use the domestic price of soybeans, but the reference FOB price of soybeans, net of fobbing costs. By using the reference FOB price of soybeans, the European Union failed to construct normal value on the basis of the cost of production in the country of origin, thereby, acting inconsistently with Article 2.2 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994.

 

5.2   Claim under Article 2.4 of the Anti-Dumping Agreement: failure to make a fair comparison

 

26.       Argentina argues that the difference between normal value and export price results from the use of the reference FOB price of soybean, which includes the export tax on soybeans in the construction of the normal value while the export price does not include any export tax at all. Consequently, it affects price comparability and also has a huge impact on the dumping margins.

 

5.3       Claims under Articles 3.1, 3.4 and 3.5 of the Anti-Dumping Agreement in relation to production capacity and utilization of capacity

 

5.3.1    The European Union's definition of production capacity and utilization of capacity is inconsistent with Article 3.4 of the Anti-Dumping Agreement

 

27.       At the outset, and as also noted by China^[60], since Article 3.4 of the Anti-Dumping Agreement contains no reference to availability for use or idleness when providing that the injury assessment includes an evaluation of the utilization of capacity, the European Union's failure to include idle capacity in its evaluation of the utilization of capacity is therefore inconsistent with Article 3.4 of the Anti-Dumping Agreement. Argentina specifically notes that Article 3.4 of the Anti-Dumping Agreement mandates that all relevant economic factors and indices having a bearing on the state of the industry must be evaluated in the context of an injury assessment. The exclusion of capacity, which is a relevant economic factor, from the calculation of the utilization of capacity is thus inconsistent with this provision.^[61]

 

5.3.2    The evaluation of production capacity and utilization of capacity is not based on positive evidence

 

28.       Argentina maintains that the analysis of production capacity and utilization of capacity is not based on positive evidence, contrary to the requirements of Article 3.1 of the Anti-Dumping Agreement, for two reasons: a) the attribution of the "idle" capacity of EBB members and non-EBB members to the capacity of non-EBB Members is implausible due to the magnitude of the mistake, which amounts to almost six million tons and b) the new evidence submitted by the European Union in Exhibit EU-10 does not appear to directly relate to production capacity. Indeed, it only points to the fact that plants have stopped producing or have commenced insolvency proceedings. It does not demonstrate, however, that production capacity has ceased to exist.

 

5.3.3    The European Union's evaluation of production capacity and utilization of capacity does not involve an objective assessment

 

29.       Contrary to the general obligation assumed under WTO, the European Union favoured evidence produced by one party but which is contradicted by publicly available and reliable information over the evidence on the record until that point.

 

5.3.4    The inconsistent evaluation of utilization of capacity and return on investment

 

30.       Argentina objects to the inconsistent evaluation of both factors, since the so-called "idle" capacity was excluded from the evaluation of capacity utilization while it was included in the calculation of return on investment.^[62]

 

5.3.5        Causation: overcapacity was a source of injury

 

31.       Argentina maintains that the improper evaluation of the production capacity of the European Union industry under Article 3.4 of the Anti-Dumping Agreement prevented it from properly assessing overcapacity as a source of injury pursuant to Article 3.5. Indeed, an objective evaluation of production capacity and capacity utilization based on positive evidence would not have allowed the European Union to find that capacity utilization was increasing.

 

32.       Furthermore, it is illogical to assert that because the utilization rate was consistently low, it could not be the cause of the decline in profitability or of the poor performance of the European Union industry, considering, especially in this case the gross level of the overcapacity.

 

33.       To sum up, overcapacity was a factor known to the authorities, different from the dumped imports and also a source of injury, the effects of which the European Union was obliged to distinguish and separate from those caused by the allegedly dumped imports.

 

5.3.6    Causation: long-term commercial strategy of importing biodiesel originating in Argentina as a source of injury

 

34.       The facts show that rather than being forced to import biodiesel originating in Argentina, imports by the EU producers appear to have been a deliberate commercial strategy on their side. First of all, there is ample evidence on the record showing close relations, or even affiliation, to the same corporate groups of European and Argentinean producers, and secondly, the facts on the record show that 60% of total imports from Indonesia and Argentina during the IP were made by the EU industry itself.^[63]

 

35.       In conclusion, Argentina submits that the European Union was under the obligation to ensure that the injury resulting from the industry's long term commercial policy was not attributed to the domestic industry. Its failure to do so is inconsistent with Articles 3.1 and 3.5 of the Anti‑Dumping Agreement.

ANNEX B-4

Executive Summary of the Statement of Argentina

at the second Meeting of the Panel

1.     Preliminary Issues

 

1.     Regarding Argentina's claim under Article 2.4, Argentina has demonstrated that a difference exists between normal value and export price^[64],that this difference affects price comparability^[65] and therefore that, absent an adjustment to account for this difference, the comparison is not fair. In this regard, the EC – Tube or Pipe Fittings an the EU – Footwear (China) cases referred to by the European Union^[66] are not relevant and must be rejected. Therefore, the European Union errs when arguing that Argentina's claim is outside the scope of Article 2.4.

 

2.         Argentina's Claims against Article 2(5), second subparagraph, of the Basic Regulation

 

2.1       The scope, meaning and content of Article 2(5), second subparagraph, of the Basic Regulation

 

2.     Argentina argues that the European Union makes an effort to purport an over-simplistic reading of Article 2(5), second subparagraph, in complete isolation from its context when stating that it only "describes what the authorities are authorized to do in order to calculate the costs, when the company records cannot be used".^[67] The fact that the determination that the records do not reasonably reflect the costs when they reflect prices that are "abnormally or artificially low" in comparison to prices on other markets because of an alleged distortion is made pursuant to Article 2(5), second subparagraph, of the Basic Regulation, does not only flow from the text of the provision and its background.^[68] It has been also expressly confirmed by the practice and the General Court in the second Acron case.^[69]

 

3.     With regard to the meaning and content of Article 2(5), second subparagraph, the European Union had argued that the text of Article 2(5), second subparagraph, did not include the terms used by Argentina to describe the content and meaning of that measure.^[70] Argentina has emphasized that, pursuant to Article 11 of the DSU the Panel should undertake a holistic assessment of all relevant elements, not only the text of the law, but also the consistent practice and the judgments of the General Court.

 

4.     The European Union has also raised a new argument, namely that Argentina did not "establish the "scope, meaning and content" of the second subparagraph of Article 2(5) in general".^[71] According Argentina – Import Measures in which the Appellate Body found that "in every WTO dispute, a complainant must establish that the measure it challenges is attributable to the respondent, as well as the precise content of that challenged measure, to the extent that such content is the object of the claims raised"^[72] this argument must be rejected.

 

5.     On the other hand, the US – Carbon Steel (India) case^[73] does not support the European Union's position. Indeed, the statement quoted by the European Union that "it is not clear why a number of instances of the application of the measure should in this case conclusively establish the meaning of the measure at issue in general, which in this case is confined to [the defending party's legislation]"^[74], must be read in its context, since this statement^[75] does not have the meaning that the European Union pretends to read in it.

 

2.2       Argentina has made a prima facie case on its claims against Article 2(5), second subparagraph, of the Basic Regulation

 

6.     Argentina would like to emphasize that, in order to succeed with its "as such" claims, it is not necessary to demonstrate that the challenged measures requires the authorities to apply it in a manner inconsistent with the covered agreements "in all cases" as claimed by the European Union.^[76]

 

7.     Argentina has explained why, in its view, the discretionary/mandatory distinction is not relevant for the purposes of its claims and noted that, in any case, the measure at issue does not afford to the authorities the alleged "broad discretion" claimed by the European Union.

 

8.     Firstly, and regarding as the discretionary/mandatory as an irrelevant distinction Argentina has noted that, if the relevant WTO provision prohibits a certain conduct, the fact that the measure being challenged provides for the possibility to adopt such a conduct, should lead to the conclusion that there is a violation of the said WTO provision.^[77] Since Article 2.2.1.1 does not permit determinations that the records do not reasonably reflect costs in case of "artificially low" or "abnormally low" prices in comparison to prices on other markets because of an alleged distortion, and Article 2.2 does not permit the use of information other than information in the country of origin, Article 2(5), second subparagraph, must be found to be inconsistent with this specific provision as Argentina has argued.

 

9.     Secondly, in order to make a prima facie case, Argentina has demonstrated that the assertion that Article 2(5), second subparagraph, affords broad discretion to the authorities is simply not true. It flows from the various elements presented by Argentina that the authorities do not have the discretion alleged by the European Union. The use of the term "shall" indicates the clear mandatory nature of the rule, and flies on the face of the assertion that second subparagraph of Article 2(5) of the Basic Regulation is framed in "permissive terms".^[78] Moreover, the absence of discretion is supported by the consistent practice referred to by Argentina contrary to that of US – Carbon Steel (India)^[79], and confirmed by the General Court.

 

10.   In relation to Argentina's claims under Article 2.2, the cases referred to by the European Union showing that the EU authorities sometimes make adjustments based on domestic sources are totally irrelevant as well since Argentina is not taking issue with that type of adjustment.

 

3.     Argentina's claims under Article 2.2.1.1 of the Anti-Dumping Agreement

 

3.1   Legal Interpretation of Article 2.2.1.1 of the Anti-Dumping Agreement

 

11.   Argentina in the first place address an important preliminary issue, that is, the European Union claims that what the Panel has to do is to examine Argentina's interpretation and determine whether "this is indeed the proper interpretation of Article 2.2.1.1".^[80] This is, however, an erroneous description of the Panel's task. The Panel has to determine whether Argentina has established that Article 2(5), second subparagraph, is inconsistent with Article 2.2.1.1. It is on the basis of all evidence and legal argumentation that the Panel has to determine whether Argentina has indeed demonstrated that Article 2(5), second subparagraph, is inconsistent with Article 2.2.1.1 of the Anti-Dumping Agreement.

 

12.   Argentina notes that, regarding the interpretation of Article 2.2.1.1, the European Union, in its second written submission, has focused on certain specific aspects such as the negotiating history, the findings of the panel in US – Softwood Lumber V, among others, which do not appear to be central to the interpretative exercise which must focus on the ordinary meaning of the terms, their context and the object and purpose of the Agreement.

 

13.   First, the findings in US – Softwood Lumber V. The European Union attempts, by selectively quoting the Panel Report in that case, to create parallelisms between the situations in that case and the measure we are discussing in the present case. The situations at issue in US – Softwood Lumber V were, however, different from what we are discussing in this case.

 

14.   Second, the reference to Note 2 Ad Article VI paragraphs 2 and 3 concerning the "multiple currency practices." The European Union´s reference to this Note has simply nothing to do with what we are discussing here. Therefore, this argument should be rejected. The definition of "dumping" in Article VI is contained in paragraph 1. The Ad Note, however, specifically refers to paragraphs 2 and 3. In fact, this Ad Note does not seek to change or have any influence on the definition of "dumping" which is included in Article VI:1, but only to authorize the levy of anti‑dumping duties in the very specific circumstances identified therein. Lastly, Argentina's interpretation is confirmed by the negotiating history. The negotiating history makes clear that the drafters agreed that "only price dumping" as defined in Article VI would be allowed to justify the defensive duties which were an exception to GATT rules. For all the aforesaid, the attempt of the European Union to draw parallelisms between "multiple currency practices" and the characteristics of Argentina's export tax on soya beans^[81] is manifestly inappropriate and unsupported by the proper interpretation of that provision.

 

15.   Third, the definition of "cost" as provided by the Panel in EC – Salmon (Norway), Argentina does not see much difference between a price that is "paid" and a price that is "incurred", since the word "cost" refers to a concrete amount and not to a hypothetical value.

 

3.2       Argentina's claim under Article 2.2.1.1 concerning anti-dumping measures on imports of biodiesel from Argentina

 

16.   In its second written submission, the European Union fails to rebut the claims raised by Argentina. Instead, the European Union has focused on some factual issues which are manifestly incorrect.

 

17.   First, the European Union argues that the export tax on soybeans "constitutes a mechanism for distorting the price of soya beans".^[82] This is not so. Argentina has already explained.^[83] Second, the European Union continues to wrongly argue that the FOB reference price is the "price to be paid" by the Argentinean producers for domestic purchases of soybeans in Argentina.^[84] As emphasized several times, the FOB reference price is not a price that is payable on domestic transactions. Rather, it is a taxable basis for levying the corresponding export tax.

 

4.     Claims under Article 2.2 of the Anti-Dumping Agreement

 

18.   On the basis of the definition provided by the Panel in EC – Salmon (Norway), the "cost of production" means "the price to be paid for the act of producing". Therefore, the "cost of production in the country of origin" refers to the price to be paid for the act of producing biodiesel in the country of origin, that is, in Argentina.

 

19.   The EU authorities have used - and this is not disputed - an average of the FOB reference prices minus fobbing costs as the cost for soybeans when constructing normal value. The European Union in fact acknowledges that it is not the price at which soybean is purchased domestically, since it keeps on stating that the FOB reference prices reflect "the cost of soya beans that Argentine producers of biodiesel would have to incur, in the absence of the export tax".^[85]

 

20.   By not using the "cost of production in the country of origin" the European Union violated Article 2.2 of the Anti-Dumping Agreement.

 

5.     Background and Economic Context of the Antidumping Investigation Concerning Imports of Biodiesel.

 

21.  The background to this dispute shows that the first full year of production of biodiesel in the European Union is 2005. By the end of 2007 EU's total consumption had slightly more than doubled. Interestingly the capacity utilization figures determined by the Commission for the sampled EU producers was 84%. There were imports from some countries but not from Argentina which, at that time, had no biodiesel industry.

 

22.   Between 2007 and 2009, Community consumption literally exploded according to the Commission's own figures^[86], but not as overwhelmingly as production capacity, which sky-rocketed in the same period and thereby creating huge overcapacity.^[87]

 

23.   The European Union has argued that this did not prevent the EU industry from still being profitable in 2009, suggesting that excess capacity is not a cause of injury such as to break the causal link. Interestingly enough however, the figures of profitability in the investigation concerning imports from the United States, show that in 2005 when overcapacity was not excessive yet, the profitability rate of the sampled producers was at 18.3% while by 2009, coinciding with an overcapacity of the Union industry of more than 11 million tons, profitability had dropped further by more than a third, to only 3.5%.

 

6.     Claims under Article 3 of the Anti-Dumping Agreement

 

24.   The European Union acted inconsistently with Articles 3.1 and 3.4 because its definition of capacity and capacity utilization is inconsistent with Article 3.4 and its assessment of these factors is neither based on positive evidence nor include an objective examination. Additionally to these inconsistencies, the EU also failed to properly evaluate the effects of the enormous overcapacity on the EU industry, thereby violating Articles 3.1 and 3.5 of the Anti-Dumping Agreement.

 

25.   Article 3.4 does not contain any rule allowing the exclusion of capacity that would be "idle" or "not immediately available for use". Argentina prefers to draw the Panel's attention to the fact that in the proceeding on photovoltaic modules from China as well as in the US biodiesel case the so-called "idle capacity" was not excluded from production capacity.^[88]

 

26.   In relation to this point Argentina explained in previous submissions that the European Union could simply not exclude part of the capacity from the assessment of the production capacity and utilization of capacity on the grounds that it was "idle" without violating Article 3.4 of the Anti-dumping Agreement.

 

27.   The European Union's assessment of production capacity and the utilization of capacity is not based on positive evidence and does involve an objective examination as Argentina has shown. With respect to the "desk analysis and checking against publicly available sources", the European Union has not yet been able to produce the alleged "publicly available data" that would support these new figures and that they are contradicted by all publicly available data on record that appeared in the public file of the investigation. With respect to the verification of the data Argentina would like to highlight that, although the European Union did select a sample of Union producers and carried out a detailed examination of their data including on-the-spot verifications, this was done before the imposition of provisional duties. In any event, that early examination and verification actually confirmed the accuracy of the production capacity figures that were reported in the Provisional Regulation.

 

28.   Finally, Argentina has demonstrated that the conclusions reached by the Commission as to why the effects of overcapacity did not break the causal link between dumped imports and injury, are not conclusions which could be reached by an unbiased and objective decision maker taking into account the facts that were before the investigating authority, and in light of the explanations given^[89] as explained in detail in Argentina's previous submissions.

 

29.   The European Union thus failed to appropriately assess overcapacity and its effects on the situation of the domestic industry, leading to an erroneous conclusion about the causality between alleged dumped imports and the injury suffered by the EU industry.

 

30.   Regarding the long-term commercial strategy of the European Union industry, the figures are undisputed and are self-explanatory. As a matter of fact, if the three producers whose imports reached 63%, 85% and 71% of their own production had not been excluded from the definition of the "Union industry", the proportion of imports made by the European Union producers would have exceeded the overall 60% ratio determined for the Union industry.

 

31.   The sole justification given by the European Union to the massive imports from the countries concerned was that if the domestic industry had not imported biodiesel from Argentina, "that role would have been filled by independent traders". However, the European Union fails to offer a logical explanation as to why there was no increase in imports by such independent traders during the IP. Surely if the European Union producers found an advantage in importing from Argentina – so much so that they actually managed to increase their market share in the Union if their own production is added to their imports, then one would also have expected independent traders to equally find it attractive to import into the European Union. The European Union does not offer a logical explanation that would explain in which way the European Union producers were hoping to prevent independent traders from importing to the EU by doing it themselves.

 

 

 

ANNEX B-5

Executive Summary of the Response of Argentina to the

European Union's Request for a Preliminary Ruling

1.     Introduction

 

1.     The request for a preliminary ruling filed by the European Union is based on arguments that are formalistic in nature, that are based on a selective reading of fragments of Argentina's panel and consultations requests out of context, or on arguments that are obscure or inaccurate. Therefore, preliminary objections by the European Union should all be rejected by the Panel. Argentina considers that (i) it has identified the specific measures at issue in its panel request, (ii) that it has presented the problem clearly in its panel request and (iii) that its panel request does not expand the scope of the dispute. Argentina will address each issue in turn.

 

2.     Argentina has identified the specific measures at issue

 

2.     The European Union takes issue with an alleged lack of clarity in the identification of the "specific measures at issue." In particular, the European Union takes issue with the references to "implementing measures and related instruments or practices" and to "related measures and implementing measures" in Section 1 of Argentina's panel request.^[90]

 

2.1   The European Union's objection is unclear and inaccurate

 

3.     The objection raised by the European Union falls short of accuracy and clarity.

 

4.     Indeed, first, in relation to paragraph 1(A) of Argentina's panel request, the European Union notes that this paragraph refers to "any subsequent amendments, replacements, implementing measures and related instruments or practices". At paragraph 8 of its request for preliminary ruling, the European Union argues that the reference to "implementing measures and related instrument or practices" is too vague. However, in paragraph 9, the European Union argues that "Argentina's claims against "implementing measures and other related measures" in paragraph 1(A) and footnote 7 of its Panel Request fall outside the Panel's terms of reference; that reference to "other related measures" is unclear since the panel request refers to "implementing measures and related instruments or practices".

 

5.     Second, in relation to paragraph 1(B), the European Union states that "[f]ootnote 3 mentions Commission Regulation 490/2013, while footnote 2 mentions Council Implementing Regulation 1194/2013."^[91] However, this is manifestly incorrect. In fact, footnote 3 refers to both Commission Regulation (EU) No 490/2013 and Council Implementing Regulation (EU) No 1194/2013, while footnote 5 refers to Council Regulation (EU) No 490/2013 and footnote 6 refers to Council Implementing Regulation (EU) No 1194/2013.

 

2.2   The European Union's objection should be rejected entirely

 

6.     The European Union contends that, by referring to "implementing measures and related instrument or practices" and "related measures and implementing measures" when describing the measures at issue, Argentina's panel request fails to comply with the provisions of Article 6.2, because it fails to "identify the specific measures at issue."^[92] The requirements under Article 6.2 of the DSU to identify the specific measures at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly are central to the establishment of the jurisdiction of the Panel.^[93]

 

7.     As emphasized by the Appellate Body "compliance with the requirements of Article 6.2 must be determined on the merits of each case, having considered the panel request as a whole, and in the light of attendant circumstances."^[94] The panel must therefore "scrutinize carefully the panel request, read as a whole, and on the basis of the language used, in order to determine whether it is "sufficiently precise" to comply with Article 6.2 of the DSU."^[95]

 

8.     The European Union's suggestion that there is something vague in the references to "implementing measures and related instruments or practices" and to "related measures and implementing measures" lacks merits.

 

9.     First of all, Argentina notes that these types of references are not uncommon in panel requests. As the Panel noted in Australia – Tobacco Plain Packaging (Indonesia), the rulings in previous disputes in which this type of references has been challenged "suggest to us that a reference to unnamed measures such as those discussed above is not per se inconsistent with the specificity requirement in Article 6.2."^[96] Argentina notes that the European Union fails to substantiate why, in the present case, the references concerned would be inconsistent with the specificity requirement in Article 6.2 of the DSU.

 

10.   Argentina notes that "the obligation to identify the specific measure at issue does not oblige the complainant to set forth the "precise content" of the measure in its panel request."^[97] As the Appellate Body emphasized, "although a measure cannot be identified without some indication of its contents, the identification of a measure within the meaning of Article 6.2 needs be framed only with sufficient particularity so as to indicate the nature of the measure and the gist of what is at issue."^[98]

 

11.   Section 1, point A) of Argentina's panel request, refers to "Article 2(5) of Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community as well as any subsequent amendments, replacements, implementing measures and related instruments or practices." Reading the sentence in its entirety, it is clear that the words "implementing measures and related instruments or practices" which are being challenged by the European Union necessarily refer to "Article 2(5) of Council Regulation (EC) No 1225/2009." Therefore, only measures relating to, that is having a sufficiently close nexus to, Article 2(5) of Council Regulation (EC) No 1225/2009 could fall within the scope of the "implementing measures and related instruments or practices." Therefore, this is not a "vague" reference as the European Union claims.

 

12.   This is further supported by the narrative description of the substantive content and operation of the measures at issue in Section 2, point A), the heading and first two paragraphs which provide the following description:

 

Article 2(5) of Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries of the European Community (the "Basic Regulation)⁷

Article 2(5) of the Basic Regulation inter alia provides that if costs associated with the production and sale of the product under investigation are not reasonably reflected in the records of the party concerned, they shall be adjusted or established on the basis of the costs of other producers or exporters in the same country or, where such information is not available or cannot be used, on any other reasonable basis, including information from other representative markets.

Pursuant to this provision, when the European Union considers that the costs of manufacturing the product under consideration actually incurred by the producer under investigation are artificially low or are otherwise distorted, it does not calculate the costs on the basis of the records of the producer under investigation although those records are in accordance with the generally accepted accounting principles of the exporting countries and reasonably reflect the costs associated with the production and sale of the product under consideration but adjusts those costs or establishes them on the basis of other data, including data pertaining to markets other than those of the exporting country.

⁷ As well as any subsequent amendments, replacements, implementing measures and related instruments or practices

13.   Thus, the above constitutes the description of the substantive content and operation of the challenged measures. It makes clear that the measures being challenged relate to Article 2(5) of the Basic Regulation. Thus, the only way to read "implementing measures and related instruments or practices" is in close connection to Article 2(5) of the Basic Regulation.

 

14.   As to the reference to "related measures and implementing measures" in Section 1, point B), these terms are placed at the end of point B) which identifies the primary measures being challenged as "the anti-dumping measures imposed by the European Union on imports of biodiesel originating in, inter alia, Argentina, as well as the underlying investigation.". Point B) then precisely identifies the anti-dumping measures, both in footnote 3 as well as in the next paragraphs of point B as covering (i) the provisional anti-dumping duties on imports of biodiesel originating in, inter alia, Argentina, pursuant to Commission Regulation (EU) No 490/2013 of 27 May 2013 imposing a provisional anti-dumping duty on imports of biodiesel originating in Argentina and Indonesia and (ii) the definitive measures imposed pursuant to Council Implementing Regulation (EU) No 1194/2013 of 19 November 2013 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of biodiesel originating in Argentina and Indonesia. The last paragraph then concludes that the measures at issue include the anti-dumping measures identified above "as well as any subsequent amendments, replacements, related measures and implementing measures." It is clear that only measures relating to the anti-dumping measures imposed by the European Union on imports of biodiesel originating in Argentina could fall within the scope of the terms "related measures and implementing measures.

 

15.   Argentina notes that the situation in the present case is similar to the one addressed by panels in recent cases, namely India – Agricultural Products and Australia – Tobacco Plain Packaging (Indonesia). In that case, the Panel rejected the objection that "the panel request is not sufficiently precise to meet the requirements of Article 6.2 simply by virtue of the inclusion of the terms "related measures, or implementing measures."^[99] In particular, the Panel emphasized that the "primary measures" were not broadly defined, but rather limited in view of their context.^[100]

 

16.   The references which the European Union takes issues with were necessary to protect the interests of Argentina as complaining party in order to avoid that a closely connected measure adopted after the establishment of the panel could be claimed not to be within the panel's terms of reference merely because not mentioned in the panel request. The Appellate Body has recognized that this constitutes a legitimate objective and serves the due process objective of preventing the complaining party from having to "adjust its pleading throughout dispute settlement proceedings in order to deal with a disputed measure as a "moving target"."^[101] Hence, the aim of such references is to address the potential situation arising if the European Union were to adopt measures that are closely connected to, or change the legal nature of the existing measures during the course of the Panel proceedings. This situation arose in EC – Chicken Cuts (Brazil) in which, since the complainants' panel requests were not worded sufficiently broadly, they could not be interpreted as containing the new measures.^[102]

 

17.   In EC – IT Products, the Panel also noted that:

 

While we do not consider that the mere incantation of the phrase "any amendments or extensions and any related or implementing measures" in a panel request will permit Members to bring in measures that were clearly not contemplated in the Panel request, it may be used to refer to measures not yet in force or concluded on the date of the panel request, or measures that the complainants were not yet aware of, such as government procedures not yet published that have the same essential effect as the measures that were specifically identified. This is to prevent the possibility that the procedural requirements of WTO dispute settlement result in a situation where measures could completely evade review.^[103]

18.   In conclusion, Argentina requests the Panel to reject the European Union's objection that "Argentina's claims against "implementing measures and other related measures" in Paragraph 1(A) and footnote 7 of its Panel Request, as well as Argentina's claims against "related measures and implementing measures" in Paragraph 1(B) of its Panel Request, fall outside the Panel's terms of reference".^[104] First of all, the European Union failed to substantiate its objection. Second, this claim is premature and unnecessary. Third, when interpreted in their context, the words challenged by the European Union cannot be found to be vague and therefore are not "on their face" inconsistent with the requirement under Article 6.2 of the DSU to identify the specific measures at issue.

 

3.     Argentina's panel request provides a brief summary of the legal bases of the complaint sufficient to present the problem clearly

 

19.   The European Union argues that Argentina's panel request fails to meet the requirement to "present the problem clearly" in two aspects: by failing to identify the "legal basis" of the complaint and by failing to "plainly connect the challenged measures with the provisions of the covered agreements claimed to have been infringed."^[105]

 

20.   Argentina notes that the requirement to "present the problem clearly" is not a standalone requirement. Article 6.2 of the DSU contains two requirements: (i) the obligation to identify the specific measure(s) at issue and (ii) the obligation to provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly.

 

3.1 The "inter alia" legal basis

 

21.   The European Union first takes issues with the use of the word "inter alia" in sub‑section 2(A). It argues that because of the words "inter alia", "[n]either the European Union, nor the Panel has any idea of what claims or legal bases Argentina will finally present in this case: the words "inter alia" make the list of claims in Argentina's panel request completely open-ended."^[106]

 

22.   Sub-section 2(a) of Argentina's panel request provides that:

 

A) Article 2(5) of Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community (the "Basic Regulation")

[…]

Argentina considers that Article 2(5) of the Basic Regulation is inconsistent as such with, inter alia, the following provisions of the Anti-Dumping Agreement, the GATT 1994 and the Marrakesh Agreement Establishing the World Trade Organization ("Marrakesh Agreement"):

[…]

23.   In the first place, Argentina notes that the scope of the European Union's objection is unclear. Indeed, the European Union claims that "[t]his is inconsistent with Article 6.2 of the DSU and places the relevant claims outside the Panel's terms of reference."^[107] It is, however, unclear which "relevant claims" would, according to the European Union, be placed outside the Panel's terms of reference.

 

24.   To the extent that the European Union were to argue that all the claims made by Argentina in Section 2, point A) would fall outside the Panel's terms of reference, this objection does not make any sense.

 

25.   In fact, the European Union is focusing on the words "inter alia" in the introductory paragraph in isolation, without examining the context in which these words are used and in particular the list of legal claims included thereafter. As is clear from the panel request, the introductory paragraph in which the words "inter alia" are included is nothing else but the introductory clause to a detailed description of the specific legal bases of the different "as such" claims, as indicated by the colon that is written right after the parenthesis and before the list of items 1 to 4.

 

26.   Furthermore, the claims made by Argentina and which are listed under points 1 to 4 of Section 2, point A) of Argentina's panel request, all precisely identify the provisions of the covered agreements that Argentina claims are being violated. For each claim, Argentina provides an explanation of the content of the claim so that the European Union knows the case it has to answer.

 

3.2 Paragraph 2 (B) of Argentina's Panel Request

 

27.   The European Union also takes issue with the following paragraph in Sub-section 2, B) of Argentina's panel request:

 

Argentina considers that the anti-dumping measures imposed by the European Union on imports of biodiesel originating in, inter alia, Argentina and the underlying investigation are inconsistent with the following provisions of the Anti-Dumping Agreement and of the GATT 1994:

6. Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994 because the European Union imposed and levied anti-dumping duties in excess of the margin of dumping that should have been established in accordance with Article 2 of the Anti-Dumping Agreement.

28.   The European Union claims that "[t]his paragraph fails to meet the requirements of Article 6.2 of the DSU"^[108] for four reasons which must all be rejected.

 

29.   First, the European Union claims that "Argentina's Panel Request fails to mention the specific sub-paragraph of Article 9.3, with which the challenged measures are supposed to be inconsistent."^[109] There is, however, no such kind of general requirement "to refer to the specific sub-paragraph of the WTO treaty provision that is supposed to be infringed by the challenged measure".^[110] The Appellate Body Report to which the European Union refers, found that:

 

There may be situations where the simple listing of the articles of the agreement or agreements involved may, in the light of attendant circumstances, suffice to meet the standard of clarity in the statement of the legal basis of the complaint^[111]

30.   Argentina's panel request indicates that the measures at issue are inconsistent with Article 9.3 and Article VI:2 of the GATT 1994 "because the European Union imposed and levied anti-dumping duties in excess of the margin of dumping that should have been established in accordance with Article 2 of the Anti-Dumping Agreement." While Article 9.3 indeed includes a chapeau and three sub-paragraphs, it is clear from the description of the claim (just quoted) that Argentina is taking issue with the chapeau. This interpretation is in accordance with the Report of the Appellate Body in Thailand – H-Beams which held that "a general reference to Article 3 of the Anti-Dumping Agreement without identifying the relevant paragraphs, was sufficient to fulfill the requirements of Article 6.2 of the DSU, considering that the panel request "referred explicitly to the specific language of Article 3."^[112]

 

31.   Second, the European Union argues that "Argentina fails to articulate the exact claims it advances."^[113] According to the European Union, it is not clear whether Argentina actually challenges (a) the comparison between the anti-dumping duty and the margin of dumping or (b) the method of calculation of the margin of dumping itself.^[114]

 

32.   However, there is no ambiguity about the claim of Argentina. In fact, as is clear from the structure of the panel request, Argentina first takes issue with the dumping margin determination under points 1, 2, 3, 4 and 5 of its panel request which all refer to specific obligations under Article 2 of the Anti-Dumping Agreement. Under point 6 of the panel request, as a next logical step, Argentina then claims that the European Union violated Article 9.3 by imposing and levying anti-dumping duties in excess of the margin of dumping to be established pursuant to Article 2 of the Anti-Dumping Agreement.

 

33.   Argentina further notes that its first written submission confirms the meaning of the words used in the panel request.^[115] Indeed, it is clear from paragraphs 307 to 309 of Argentina's first written submission that Argentina's claim under Article 9.3 focuses on the imposition and levying of anti-dumping duties in excess of the dumping margin, had the dumping margin been determined in conformity with Article 2 of the Anti-Dumping Agreement contrary to what the European Union did in this case as demonstrated in its previous claims

 

34.   The third and fourth reasons submitted by the European Union are inapposite since they are based on the hypothetical assumption that "Argentina actually challenges the method of determining the dumping margin."^[116] As Argentina has explained above, it is clear from both the wording of the panel request and the legal provision being challenged, namely Article 9.3, that Argentina's claim focuses on the fact that the duties have been imposed and levied "in excess" of the margin of dumping established in accordance with Article 2 of the Anti-Dumping Agreement.

 

4.     The European Union's allegations concerning the expansion of the scope of the dispute

 

4.1 Arguments of the European Union

 

35.   In section 4 of its request for a preliminary ruling, European Union alleges that Argentina has expanded the scope of the dispute in its panel request either as a result of the inclusion of new measures or as the result of the inclusion of new legal bases. The European Union notes that consultations circumscribe panel requests and, that, as a result, a panel request cannot include claims that were not included in the consultations request where these new claims expand the scope of the dispute or have the effect of changing the essence of the complaint.^[117]

 

4.2 The applicable legal standard

 

36.   Although Article 6.2 requires the complainant to indicate in its panel request "whether consultations were held", it does not require the measures and claims identified in the panel request as basis for the complaint to be identical to those identified in the consultations request.^[118]

 

37.   In Brazil – Aircraft, the Appellate Body emphasized that Articles 4 and 6 of the DSU do not "require a precise and exact identity between the specific measures that were the subject of consultations and the specific measures identified in the request for the establishment of a panel"^[119]

 

38.   In relation to the "legal basis" of the complaint in particular, the Appellate Body found in Mexico – Anti-Dumping Measures on Rice that "[i]t does not follow from the use of the same term [in Articles 4.4 and 6.2] […] that the claims made at the time of the panel request must be identical to those indicated in the request for consultations."^[120]

 

39.   It is important to underline that it is the panel request, not the consultations request, which determines the panel's terms of reference pursuant to Article 7 of the DSU. Moreover, as panels and the Appellate Body have consistently emphasized in past cases, the relevant provisions of the DSU do not require a "precise and exact" identity between the measures and claims identified in the request for consultations and those identified in the panel request.

 

40.   Argentina will show why, taking into account the above legal standard, all the claims made in the panel request fall within this Panel's terms of reference and neither expand the scope of the dispute nor change the essence of the complaint.

 

4.3   The European Union's objection against the alleged inclusion of a new measure in the panel request

 

41.   The European Union claims that Argentina's panel request challenges for the first time "related practices", in addition to Article 2(5) of Council Regulation 1225/2009 since the terms "related practices" were not included in Argentina's consultations request, thus expanding the scope of the dispute and changes the essence of Argentina's complaint.^[121]

 

42.   Argentina submits that this objection of the European Union was unnecessary and is clearly moot. Argentina is not challenging the European Union's practice as a distinct measure. In other words, Argentina is not challenging ""related practices", in addition to Article 2(5) of Council Regulation 1225/2009."^[122] The measure being challenged is Article 2(5) of the Basic Regulation. Argentina refers to the practice of the European Union only to illustrate the content and scope of Article 2(5) of the Basic Regulation in view of its consistent application.^[123] Accordingly, Argentina is not challenging a "new measure" since it is not asking that this Panel rule on "related practices", as shown in paragraph 468 of its first written submission.

 

4.4   The European Union's objections against the alleged inclusion of new legal bases in the panel request

 

4.4.1 The allegedly new and unclear "as applied" claim against Article 2(5) of the Basic Regulation

 

43.   The European Union argues that Argentina brings a new and unclear claim against Article 2(5) of the Basic Regulation in a "not-numbered" paragraph. The European Union appears to refer to the unnumbered paragraph between paragraphs 3 and 4 of section B of the panel request.

 

44.   This paragraph is not a "new claim" that Argentina is bringing, as this claim is not different from the claims raised under points 1, 2 and 3. This paragraph merely emphasizes that the European Union's violations of the provisions cited in points 1, 2 and 3 occurred as a result of the application of Article 2(5) of the Basic Regulation in the imposition of the measures on imports of biodiesel of Argentina. Argentina notes in this respect that the European Union itself points out that Commission Regulation and the Council Implementing Regulation imposing the provisional and definitive duties are based on Article 2(5) of the Basic Regulation.^[124]

 

4.4.2 The allegedly new claim against Article 2(5) of the Basic Regulation based on Article 9.3 of the Anti-Dumping Agreement

 

45.   The European Union argues that Argentina's claim under Article 9.3 of the Anti-Dumping Agreement in section 2(A)(3) of the panel request falls outside of the Panel's terms of reference. It bases its argument on the fact that the request for consultations did not make any reference to Article 9.3 under section (b) and on the fact that section (b) of the consultations request did not refer to an alleged excess of the anti-dumping duty compared to the margin of dumping. The European Union thus considers that Argentina's claim under paragraph 2(A)(3) cannot be said to reasonably have evolved from the consultations.^[125] Again, this objection lacks merit.

 

46.   Argentina strongly disagrees with the European Union's contention that Argentina's as such claim under paragraph 2(A)(3) cannot reasonably be said to have evolved reasonably from the consultations request. First, as the European Union itself points out in paragraph 38 of its request for a preliminary ruling, Argentina raised a claim based on Article 9.3 in its as applied claims concerning the provisional and definitive anti-dumping measures.^[126] Therefore, the imposition of anti-dumping duties in excess of the margin of dumping as a result of the application of Article 2(5) of the Basic Regulation has been the object of consultations.

 

47.   In any case, as shown by its first written submission, Argentina is not bringing an as such claim against Article 2(5) of the Basic Regulation based on Article 9.3 of the Anti-Dumping Agreement.^[127] Indeed, Argentina considers that findings of inconsistency under Articles 2.2, 2.2.1.1 and 18.4 of the Anti-Dumping Agreement, Article VI:1(b)(ii) of the GATT 1994 and Article XVI:4 of the Marrakesh Agreement Establishing the WTO with respect to Article 2(5) of the Basic Regulation would be sufficient to secure an effective resolution of this dispute.

 

4.4.3 The allegedly new claims against Article 2(5) of the Basic Regulation based on Article VI:1 of the GATT 1994

 

48.   The European Union argues that the claims based on Article VI:1 of the GATT 1994 in sections 2(A)1 and 2(A)2 of the panel request fall outside of the terms of reference of the Panel because this provision was not mentioned in the request for consultations. At the outset, Argentina notes that the claims it bring in this section are based Article VI:1(b)(ii) only.^[128] Accordingly, Argentina limits its arguments to this specific provision. The objection raised by the European Union does not stand.

 

49.   The European Union states that it cannot be argued that "adding new claims under Article VI:1 of the GATT does not change the "essence" of the complaint."^[129] It bases this on the allegation that if Article VI:1 of the GATT 1994 is identical to the provisions of the Anti-Dumping Agreement that have already been cited, the addition of Article VI:1 would be redundant and the Panel would exercise judicial economy.^[130]

 

50.   This argument does not stand to reason. Nothing prevents Argentina from adding provisions that are identical in scope to an existing claim on which consultations were held.

 

51.   Moreover, if the European Union intends to argue that Article VI:1(b)(ii) of the GATT 1994 and Article 2.2 of the Anti-Dumping Agreement are different in scope and that the "essence" of both provisions is different, then this is directly contradicted by the text and context of both provisions. The European Union has failed to point out what the difference in scope between both provisions is.

 

52.   Article VI:1 of the GATT 1994 had been cited in the context of sections a.1 and a.2 of the consultations request in as applied claims that are similar to the as such claims at issue. Moreover, as already pointed out by Argentina, the content of Article VI:1(b)(ii) of the GATT 1994 is identical to Article 2.2 of the Anti-Dumping Agreement, which was cited in Argentina's consultations request in the section concerning the as such claims.

 

53.   Argentina submits Article VI:1 of the GATT 1994 had been cited in the context of sections a.1 and a.2 of the consultations request in as applied claims that are similar to the as such claims at issue. Moreover, as already pointed out, the content of Article VI:1(b)(ii) of the GATT 1994 is identical to Article 2.2 of the Anti-Dumping Agreement, which was cited in Argentina's consultations request in the section concerning the as such claims. Argentina therefore respectfully requests that the Panel reject the European Union's purely formalistic objection and confirm that Argentina's claims under Article VI;1 of the GATT 1994 in relation to Section 2(A) are within the Panel's terms of reference.

 

4.4.4       The allegedly new claims against Article 2(5) of the Basic Regulation based on Articles 2.2 and 2.2.1.1 of the Anti-Dumping Agreement

 

54.   The European Union argues that the paragraph of the consultations request corresponding to section 2(A)(2) of the panel request only includes a claim based on Article 2.2.1.1 of the Anti‑Dumping Agreement. It also argues that the corresponding claim in the consultations request refers only to the obligation that costs be calculated on the basis of the records kept by the exporters. The European Union thus argues that section 2(A)(2) of the panel request expands the scope of the dispute because they introduce a new legal basis (i.e., Article 2.2 of the Anti-Dumping Agreement) and because they introduce "a new type of complaint", that is, the use of costs not associated with the production and sale of the product under consideration.^[131]

 

55.   Argentina submits that the European Union carries out an unduly narrow reading when it reads section 2(A)2 of the panel request with reference to section b.2 of the consultations request only. The issue of the calculation of costs for the purpose of the construction of normal value is also addressed in section b.1 of Argentina's request for consultations, which refers to Article 2.2 of the Anti-Dumping Agreement. The assertion that Argentina added a provision in the panel request is therefore incorrect.

 

56.   Moreover, there is a clear and logical connection between Article 2.2.1.1 and Article 2.2 of the Anti-Dumping Agreement. Indeed, Article 2.2.1.1 is a specific provision governing the calculation of costs for the construction of normal value. Article 2.2 concerns, among other matters, the construction of normal value and its components, including the cost of production. Argentina submits that consultations on the calculation of costs for the construction of normal value pursuant to Article 2.2.1.1 logically also cover the construction of normal value pursuant to Article 2.2, when such costs are being included in the construction of normal value.

 

57.   Argentina also opposes the European Union's claim that it would have introduced in its panel request a "new type of complaint" when it refers to the use of costs not associated with the production and sale of the product under consideration. First of all, Argentina submits that this reference does not constitute a claim but an argument which is not required to be included in a panel request. Indeed, the Appellate Body emphasized that "Article 6.2 requires that the claims – not the arguments – be set out in a panel request in a way that is sufficient to present the problem clearly."^[132]

 

58.   Furthermore, even if it is part of the claim, the European Union's claim is premised on an incorrect reading of Argentina's request for consultations. Indeed, the request for consultations refers in relevant part to Article 2.2.1.1 of the Anti-Dumping Agreement "which requires that costs normally be calculated on the basis of records kept by the exporter or producer under investigation." The request for consultations does not limit in any way Argentina's claim to certain aspects or parts of Article 2.2.1.1, first sentence. By referring to Article 2.2.1.1 "which requires that costs normally be calculated on the basis of records kept by the exporter or producer under investigation", Argentina refers to the first sentence of Article 2.2.1.1. Therefore, the reference in the panel request to the use of costs not associated with the production and sale of the product under consideration cannot be said to be a "new claim".

 

59.   In view of the above, the European Union's objections under section 4.2.4 of its request for a preliminary ruling must fail.

 

4.4.5 The allegedly new claim against the anti-dumping measures imposed by the European Union based on Article 2.1 of the Anti-Dumping Agreement

 

60.   Finally, Argentina turns to the European Union's objection against the inclusion of Article 2.1 of the Anti-Dumping Agreement in section 2(B)4 of the panel request.

 

61.   Argentina notes that it is a well-established principle of law that the burden of proof rests upon the party asserting the affirmative of a particular claim or defense. However, Argentina fails to see any substantiation by the European Union of why the addition of Article 2.1 of the Anti‑Dumping Agreement results in an expansion of the scope of this dispute or why it cannot reasonably be said that the inclusion of this provision evolved from the consultations. In this respect, Argentina refers to paragraphs 51 to 53 of the European Union's request for a preliminary ruling, which contains only mere assertions but no substantiation. Consequently, the European Union's objection fails.

 

62.   In any case, Argentina notes that it is not basing its claim concerning the profit determination on Article 2.1 of the Anti-Dumping Agreement.^[133] As already highlighted in section 4.4.2 above, it would therefore appear not to be necessary for the panel to rule on this issue.

 

5.     Conclusion

 

63.   In light of the above, Argentina submits that the European Union's request for preliminary ruling should be rejected entirely.

 

64.   First, the objection made by the European Union about the references to "implementing measures and related instruments or practices" and "related measures and implementing measures" should be rejected: first, because the European Union failed to substantiate its objection; second, since this claim is premature and unnecessary; and third, since these references comply with the requirement under Article 6.2 of the DSU to identify the specific measures at issue.

 

65.   Second, Argentina provided a brief summary of the legal basis of the complaint sufficient to present the problem clearly in relation to the "as such" claims in section 2(A), as well as in relation to Argentina's claim under Article 9.3 of the Anti-Dumping Agreement in section 2(B)6.

 

66.   Third, Argentina did not expand the scope of the dispute. Indeed, the "related practices" do not constitute a "new measure" that cannot be said to have "evolved" from the consultations and which, in any case, are not challenged by Argentina as a distinct measure. Furthermore, all the claims listed in the panel request were either included in the consultations request or can reasonably be said to have evolved from the claims listed in consultations request.

 

67.   Accordingly, Argentina requests the Panel to find that the request for establishment of a Panel submitted by Argentina fully complies with the requirements of Article 6.2 of the DSU and that, consequently, all the measures and claims concerned fall within the Panel's terms of reference.

 

_______________

 

 

 

ANNEX C

Arguments of the european union

Contents		Page
Annex C-1	Executive Summary of the First Written Submission of the European Union	C-2
Annex C-2	Executive Summary of the Second Written Submission of the European Union	C-11
Annex C-3	Executive Summary of the Statement of the European Union at the First Meeting of the Panel	C-21
Annex C-4	Executive Summary of the Statement of the European Union at the Second Meeting of the Panel	C-26
Annex C-5	Executive Summary of the European Union's Request for a Preliminary Ruling	C-33

 

ANNEX C-1

Executive Summary of the First Written Submission

of the European Union

1.         Introduction

 

1.     The EU demonstrates that both Argentina's claims with respect to the Basic Regulation and its claims with respect to the Provisional and the Definitive Regulations should be rejected as no inconsistency with the Anti-Dumping Agreement has been proved.

 

2.         Terms of Reference

 

2.1. Claims abandoned by Argentina

 

2.     Argentina has abandoned the following claims mentioned in its Panel Request: (1) any claim against "related practices"; (2) any claim under an "inter alia" legal basis; (3) the claim against Article 2(5) of the Basic Regulation based on Article 9.3 of the Anti-dumping Agreement; (4) any distinct "as applied" claim against Article 2(5) of the Basic Regulation; (5) the claim against Article 2(5) of the Basic Regulation because the costs used are allegedly not "associated with the production and sale of the product under consideration"; and (6) the claim against the "profit determination" based on Article 2.1. The EU understands that, as Argentina has abandoned and does not pursue these claims, it cannot establish a prima facie case on them and that the Panel cannot make any findings on these claims.

 

2.2. Other Argentine Claims Challenged by the EU

 

2.2.1.   Argentina's failure to identify the "specific measure at issue"

 

3.     First, Argentina appears to have abandoned the claim. Second, Argentina's assertions must be rejected. The EU's Request for a Preliminary Ruling was timely and in full compliance with the Panel's Working Procedures. "Objections to jurisdiction" of a Panel "must be raised as early as possible". On the substance of its Request, the EU has noted the Appellate Body's consistent case law, according to which references to "implementing measures and other related measures" do not identify the specific measures at issue. Accepting that all "measures" that "implement", or are "related" to Article 2(5) of the Basic Regulation fall within the Panel's Terms of Reference would have the perverse effect of bringing within the jurisdiction of this Panel all provisional and definitive Regulations of the EU based on Article 2(5).

 

4.     The inclusion of the terms "implementing measures" and "related measures or instruments" in Argentina's Panel Request (a) creates an open-ended list of challenged "measures", (b) confuses the limits between the jurisdiction of this Panel and the jurisdiction of other panels, and (c) is not necessary in order to protect any legitimate interest of the complaining party; such legitimate interests are protected by other terms in the Panel Request, which are not challenged by the EU. Therefore, the challenged terms fail to meet the requirements of Article 6.2 of the DSU and fall outside the Panel's terms of reference.

 

2.2.2.   Argentina's other claims

 

2.2.2.1        The claim against the Provisional and the Definitive Regulations based on Article 9.3 of the Anti-Dumping Agreement

 

5.     The EU has argued that Argentina's Panel Request fails to articulate clearly the exact claim that it advances, because it is not clear whether Argentina's challenge is directed against (a) the comparison between the anti-dumping duty and the dumping margin, or (b) against the method of calculation of the dumping margin itself. The question of whether the claim under Article 9.3 is within the Panel's terms of reference is of limited value for the present dispute.

 

2.2.2.2        The claims against Article 2(5) of the Basic Regulation based on Article VI:1 of the GATT 1994

 

6.     Argentina's Panel Request includes claims against Article 2(5) of the Basic Regulation based on Article VI:1 of the GATT 1994, which were not included in Argentina's Request for Consultations. However, Argentina's first written submission does not develop these claims. The question of whether the claims against Article 2(5) based on Article VI:1 of the GATT 1994 are within the Panel's terms of reference is of very limited value for the present dispute.

 

3.         Preliminary Issues

 

3.1. The Claim under Article 2.1 of the Anti-Dumping Agreement

 

7.     Given that Article 2.1 does not impose any independent obligation on WTO Members, it cannot serve as a legal basis for a distinct claim in WTO dispute settlement proceedings. Furthermore, Article 2.1 does not cover the situations where there are no domestic sales "in the ordinary course of trade". Therefore, the facts of this case fall outside the scope of Article 2.1 of the Anti-Dumping Agreement.

 

3.2. The Claims under Article VI:1 of the GATT 1994

 

8.     Since Article VI:1 of the GATT 1994 does not impose any independent obligation on WTO Members, it cannot serve as a legal basis for a distinct claim in WTO dispute settlement proceedings. Therefore, Argentina cannot base any claim on Article VI:1 of the GATT 1994.

 

3.3. The Claim under Article 9:3 of the Anti-Dumping Agreement

 

9.     Article 9.3 of the Anti-Dumping Agreement addresses the comparison between (a) the anti‑dumping duties and (b) the dumping margins. It does not address the calculation of normal value. As a result, the complaining party must show something more than a simple erroneous calculation of normal value. The EU's interpretation is supported by the relevant case law. For example, in EC – Salmon, the Panel found that, in determining the dumping margin, the defending Member had acted inconsistently with a number of obligations imposed by Article 2 of the Anti‑dumping Agreement. However, the Panel rejected the complaining Member's claims under Article 9.3 of the Anti-Dumping Agreement. Argentina's claim under Article 9.3 is conditioned upon the success of Argentina's claims under Article 2 of the Anti-Dumping Agreement. In these circumstances, Argentina's claims fall outside the scope of Article 9.3 of the Anti-Dumping Agreement and must be rejected.

 

4.         Argentina's "As Such" Claims Against the Second Subparagraph of Article 2(5) of the Basic Regulation

 

4.1. The "As Such" Claim under Article 2.2.1.1 of the Anti-Dumping Agreement

 

4.1.1.   The reasons for rejecting Argentina's claim

 

4.1.1.1  Argentina is challenging "as such" a "measure" which does not exist

 

4.1.1.1.1     The scope, meaning and content of the second subparagraph of Article 2(5) of the Basic Regulation are clear on its face

 

10.   Article 2(5) gives the anti-dumping authorities certain alternative options for establishing or adjusting the "costs associated with the production and sale of the product under investigation" when one of the provisos defined in the first subparagraph of Article 2(5) applies. The second subparagraph of Article 2(5) of the Basic Regulation describes what the authorities can do after it has been determined that the records do not "reasonably reflect" costs, pursuant to the first subparagraph of Article 2(5) of the Basic Regulation.

 

11.   Given that the scope, meaning and content of the second subparagraph of Article 2(5) are clear "on its face", the consistency of the measure with the covered agreements must be assessed on the basis of the text of the legal instrument "alone".

4.1.1.1.2     Argentina distorts the scope, meaning and content of the second subparagraph of Article 2(5) of the Basic Regulation

 

12.   The "measure" invented by Argentina simply does not exist. This conclusion is supported by a number of considerations. First, the conditions that must be met in order to determine whether the company records "reasonably reflect" costs are outside the scope of the second subparagraph of Article 2(5) of the Basic Regulation. Second, the terms "reflect market values", "regulated market", "abnormally low", or "artificially distorted", which Argentina uses to describe the "measure" that it challenges, do not even exist in the text of the second subparagraph of Article 2(5).

 

4.1.1.1.3    The "various elements examined" by Argentina do not give to the second subparagraph of Article 2(5) the scope, meaning and content asserted by Argentina

 

13.   The first "element" identified by Argentina is the "historical perspective" of the second subparagraph of Article 2(5) of the Basic Regulation. However, the introduction of the second subparagraph of Article 2(5) in 2002 had no impact on the scope, the meaning or the content of the terms "reasonably reflect costs" in Article 2(5), which already existed in the first subparagraph of Article 2(5). The second "element" identified by Argentina is the "EU's practice". Nevertheless, the examples presented by Argentina in its first written submission do not suffice to establish a purported "practice" of the EU in the application of the second subparagraph of Article 2(5). The third element presented by Argentina consists of four judgments of the General Court of the EU. However, these judgments do not support Argentina's assertions since none of these judgments provides that the determination of whether company records "reasonably reflect costs" is made pursuant to the second subparagraph of Article 2(5).

 

4.1.1.2        Argentina has failed to establish that the purported "measure" that it challenges is "as such" inconsistent with the covered agreements

 

14.   Argentina has asserted that it presents this "practice" only to illustrate the scope and content of the purported "measure" that it challenges. However, in order to achieve this result, Argentina would need to establish (a) that the "practice" is not "distinct from the measure itself", but, on the contrary, forms an "integral part of the measure itself" and is "necessarily applied in all instances"; and (b) that this "practice" is "required" by the measure, which must be "mandatory" and constitute a "binding requirement" to apply the measure in the same way in all cases. In the present case, Argentina has failed to establish any of these two requirements for either the first, or the second subparagraph of Article 2(5).

 

15.   With regard to the first requirement, the plain text of the first subparagraph of Article 2(5) confirms that the provision affords broad discretion to the authorities to determine whether the records of a particular company "reasonably reflect costs", on the basis of their analysis of the facts in each individual case. With regard to the second, the evidence confirms the discretionary nature of Article 2(5). The use of the word "entitled" by the General Court confirms that, as a matter of municipal EU law, Article 2(5) is discretionary: it allows the authorities to take certain actions, but does not require them to do so in all cases.

 

4.1.1.3        Argentina advances an erroneous legal interpretation of Article 2.2.1.1 of the Anti-Dumping Agreement

 

4.1.1.3.1       The text of Article 2.2.1.1 of the Anti-Dumping Agreement

 

16.   First, Argentina's thesis is based on the assertion that the costs reflected in the company records do not need to be "reasonable". Argentina is wrong. It is counterintuitive to assert that Article 2.2.1.1 of the Anti-Dumping Agreement mandates the investigating authorities to base their calculations on costs that are "unreasonable". In any event, the Panel Report in Egypt – Steel Rebar actually contradicts Argentina's thesis. The fact that the Panel required the relevant item to be "reasonably related to the cost of producing and selling rebar" shows that the word "reasonably" is also attached to the word "costs" in Article 2.2.1.1.

 

17.   Second, Argentina seeks to dissociate the term "costs" in Article 2.2.1.1 from the word "prices". However, the Panel Report in EC – Salmon interpreted "costs of production" as "the price to be paid for the act of producing". This shows that the "cost of production" is linked to the prices to be paid for the act of producing. If the panel considered that the required costs are the expenses that have actually already been incurred by the producer, it would have used the past tense of the verb "be" in its Report. By using the terms "to be paid", this panel finding confirms that the "reasonable costs" required by Article 2.2.1.1 are not necessarily only the expenses that have already been incurred by the producer.

 

18.   Third, Argentina interprets the term "associated" in Article 2.2.1.1 as "actually incurred". It is submitted that the word "associated" has a broader meaning which captures a broader range of relations between the "costs" and the "production". Fourth, these terms "associated with the production and sale" are broad enough to capture the costs that would normally be associated with the production and sale of the goods. Fifth, Article 2.2.1.1 refers to the "costs associated with the production". It is uncontroversial that the cost of production depends on the cost of the raw material and other inputs used for the production and, hence to the prices of the raw material normally used for the production. Sixth, the use of the word "reflect" reinforces the conclusion that reasonableness in Article 2.2.1.1 is not limited only to the "expenses that have actually been incurred by the producer".

 

4.1.1.3.2       The context of Article 2.2.1.1 of the Anti-Dumping Agreement

 

19.   Argentina's main thesis finds no support in the analysis of the context of the provision. First, where the Anti-Dumping Agreement wishes to refer to the expenses actually incurred by the producer, it expressly states so. Second, if Article 2.2.1.1 intended to have the records include only the "expenses actually incurred", then Article 2.2.1.1 would have included only the condition that records should be kept in accordance with the GAAP.

 

20.   Third, Argentina is wrong when it asserts that the first sentence of Article 2.2.1.1 "refers to a cost allocation issue" and that "the second sentence provides what authorities have to do if they use an alternative cost allocation methodology". The first sentence of Article 2.2.1.1 uses the word "calculated" and not the word "allocation". Moreover, the first sentence of Article 2.2.1.1 refers to the records of the company as "data sources", while the second sentence refers to information that is not found in the records of the company, but that has been provided by the investigated companies in the course of the investigation. Finally, the second sentence of Article 2.2.1.1 allows the authorities to take into consideration "all available evidence on the proper allocation of costs, including that which is made available by respondents in the context of an anti-dumping investigation". This implies that the second sentence allows authorities to take into consideration cost information which is not found in the companies' records, but which has been provided later.

 

4.1.1.3.3       The object and purpose of the anti-dumping rules

 

21.   Article VI:1 of the GATT 1994 shows that the object and purpose of the WTO anti-dumping rules is to prevent the industries of the exporting country from damaging the industries of the importing country through the use of prices that are artificially low, because of some abnormal condition (hence the reference to "normal" value). A cost of the raw materials used to produce the dumped goods which is not "normal" and which causes the "normal value" of the goods not to be "normal", falls squarely within the type of conditions that the WTO anti-dumping rules aim to address.

 

4.1.1.3.4       The case law of the WTO dispute settlement system

 

22.   The Panel Report in Egypt – Steel Rebar confirms that the word "reasonably" is also linked to the word "costs" and, therefore, Argentina is wrong when it asserts that the costs reflected in the records do not need to be "reasonable". Likewise, the Panel Report in EC – Salmon establishes that "costs of production" means "prices to be paid for the act of producing" and not "expenses that have already been incurred by the producer". Most importantly, the Reports of the Appellate Body and the Panel in US – Softwood Lumber V clearly establish that Argentina's thesis is wrong. The Panel found that Article 2.2.1.1 does not impose on the investigating authorities any particular methodology in their assessing whether the records reasonably reflect costs. On appeal, the Appellate Body did not take issue with this interpretation of Article 2.2.1.1.

 

4.2. The "As Such" Claim under Article 2.2 of the Anti-Dumping Agreement

 

4.2.1.         The second subparagraph of Article 2(5) of the Basic Regulation is not "as such" inconsistent with the covered agreements

 

4.2.1.1  The meaning and content of the provision

 

23.   This broad discretion of Article 2.2 is established, inter alia, by the provision which allows investigating authorities to use "any other reasonable basis" in order to establish or adjust costs. At the same time, this provision does not "mandate" the authorities to use information from other representative markets. It only allows them to do so, if this is "reasonable".

 

24.   Such discretion is also to be found in the second paragraph of Article 2(5). This is confirmed by the authorities' practice in cases such as White phosphorus originating in Kazakhstan or Okoumé plywood originating in China, which prove that the second subparagraph of Article 2(5) does not oblige the EU to seek production cost information outside the country of origin in all cases. This discretion is also confirmed by the judgments of the courts of the EU, where the use of the words "may" and "entitled" shows that the second subparagraph of Article 2(5) allows the investigating authorities a broad discretion in the choice of "reasonable sources of information".

 

4.2.1.2        The second subparagraph of Article 2(5) is not "as such" inconsistent with the covered agreements

 

25.   A fundamental characteristic of an "as such" challenge against a "measure" is that the complaining party must establish that the measure is "necessarily inconsistent" with the covered agreements. Irrespective of whether using "information from other representative markets" is consistent with Article 2.2 of the Anti-Dumping Agreement, the second subparagraph of Article 2(5) does not "require" the investigating authority to use such information "in all cases".

 

4.2.2.         Argentina suggests an erroneous interpretation of Article 2.2 of the Anti-Dumping Agreement

 

26.   Neither Article 2.2.1.1 nor any other part of the Anti-Dumping Agreement provides a rule that explicitly deals with how costs should be determined when this proviso applies. Article 2(5) of the Basic Regulation properly deals with this issue in a manner which is fully consistent with the requirements of Article 2.2 of the Anti-Dumping Agreement.

 

27.   First, the notion of "cost of production in the country of origin" is a legal one, but establishing the cost of production in a particular case involves determinations of fact. Such determinations are made with the aid of evidence. It cannot be excluded that evidence relating to that determination might originate in other countries. Second, the possibility of using "any other reasonable method" in Article 2.2.2(iii) implies that Article 2.2, as a whole, does not impose an absolute prohibition on the use of data on the cost of production from countries other than the country of origin, where the conditions of production and sale are not in the "ordinary course of trade".

 

5.         Argentina's claims regarding the Anti-dumping Measures on Biodiesel

 

5.1. Argentina's Claim in Relation to the Use of the Records of the Investigated Companies

 

5.1.1.         The application of a measure that is found to be "as such" inconsistent with the covered agreements.

 

28.   Argentina asserts that a finding that a provision is "as such" inconsistent with Article 2.2.1.1 of the Anti-Dumping Agreement would necessarily lead to a finding that the application of that provision in a particular situation is also inconsistent with Article 2.2.1.1. Given that the second subparagraph of Article 2(5) of the Basic Regulation is not "as such" inconsistent with Article 2.2.1.1, the issue raised by Argentina is moot in the present case.

 

5.1.2.   The alleged "improper establishment of facts"

 

29.   In regard to trade, the notion of "distortion" implies an interference with the normal operation of the market. The distortion identified in the Definitive Regulation is that caused by the existence of an export tax on soya beans and oil. This tax had the consequence that the prices of these products in the domestic market were lowered, and that effect in its turn had consequences for those companies that used these products.

 

30.   The fact that, within the limits set by the state, market forces continue to operate, does not diminish or cancel the distortive effect on trade of an export tax. Likewise, the fact that domestic prices follow the trends in international prices is irrelevant in so far as the distortion accounts for the difference between those prices.

 

31.   As far as Argentina's assertions in relation to the "main raw material" for biodiesel are concerned, the EU notes that it based its calculation of the biodiesel's cost of production and normal value on the cost of soya bean already at the provisional stage and that the Argentine companies under investigation had not expressed any concern or other comment, following disclosure.

 

5.1.3.         The interpretation of Article 2.2.1.1 of the Anti-Dumping Agreement

 

5.1.3.1  The text of Article 2.2.1.1 of the Anti-Dumping Agreement

 

32.   Argentina repeats its main thesis that Article 2.2.1.1 allegedly refers to the "expenses actually incurred by the producer". First, Article 2.2.1.1 does not include the words "expenses actually incurred by the producer". Second, Article 2.2.1.1 uses the terms "costs associated with the production and sale of the product". The word "associated" has a broader meaning than the words "actually incurred" and captures a broader range of relations between the "costs" and the "production".

 

33.   Third, Argentina is wrong when it asserts that there is no relation between the word "costs" and the notion of "prices", for purposes of Article 2.2.1.1. The Panel in EC – Salmon has confirmed that the ordinary meaning of the terms "cost of production" may be considered to be the "prices to be paid for the act of producing".

 

34.   Fourth, the Panel Report in EC – Salmon confirms that the "cost of production" is linked to the prices to be paid for the act of producing. By using the terms "to be paid", this Panel finding confirms that the costs captured by Article 2.2.1.1 are not the expenses that have actually been incurred by the producer. Fifth, Article 2.2.1.1 uses the terms "costs associated to the production", which the Panel in EC – Salmon has interpreted as the prices to be paid for the act of producing. The provision does not include the terms "incurred by the producer". Sixth, in US – Softwood Lumber V, both the Panel and Appellate Body accepted that an investigating authority is entitled to find that the company records do not "reasonably reflect costs", where they do not reflect prices charged at "arms-length" transactions.

 

5.1.3.2  The context of Article 2.2.1.1

 

35.   Argentina asserts that Article 2.2.1.1 does not require the costs to be "reasonable", but that it requires, instead, that "unreasonable" costs be "reasonably" reflected in the company records. The EU has already shown that the Panel Report in Egypt – Steel Rebar, to which we refer, contradicts Argentina's assertion.

 

36.   Article 2.2.1.1 does not impose any obligations on companies in relation to their accounting methods. It simply allows investigating authorities not to base their cost calculation on the companies' records, where either of the two conditions is not met. Argentina repeats the assertion that Article 2.2.1.1 deals with a "cost allocation issue". The EU has already exposed the fallacy of Argentina's assertion in the relevant section of this submission on the "as such" claim, to which we refer.

 

37.   Argentina also seeks to use as "context" the provisions of Article 2.2 of the Anti-Dumping Agreement and of Article VI:1(b)(ii) of the GATT 1994. The EU has already dealt with Argentina's interpretation of Article 2.2 of the Anti-Dumping Agreement and the issue of "country of origin" in the relevant section of this submission on the "as such" claim under Article 2.2 of the Anti-Dumping Agreement and we refer to that section.

 

38.   Article 2.2.2 conditions the use of the "actual data pertaining to production" costs on the existence of ordinary course of trade. This supports the EU's thesis that it was not obliged to use the "actual data pertaining to production and sales" of biodiesel as recorded in the investigated companies' accounts, because the production and sale of biodiesel were not in the ordinary course of trade. Moreover, where the amounts cannot be determined "on this basis", then Article 2.2.2(iii) allows the investigating authorities to use "any other reasonable method". It is noted that Article 2.2.2(iii) does not impose any requirement that, in these circumstances, the data on the cost of production must be those prevailing in the country of origin.

 

5.1.3.3  The object and purpose of the Anti-Dumping Agreement

 

39.   Argentina asserts that the EU's interpretation "subverts the fundamental purpose of the Anti-Dumping Agreement and uses the Agreement to address differences in price between the export price of the product concerned and international prices, instead of comparable prices on the domestic market". Argentina's assertion is wrong for a number of reasons.

 

40.   First, the Definitive Regulation's dumping determination is not based on the difference between the export price of biodiesel and the international price of biodiesel but on the comparison between the export price of the Argentine biodiesel and the normal value of the Argentine biodiesel. Second, the Definitive Regulation found that Argentine biodiesel was dumped into the EU and, as a result of that dumping, the EU's industry suffered material injury. This is precisely the object and purpose of the WTO anti-dumping rules, as expressed in Article VI:1 of the GATT 1994.

 

5.2. Argentina's Claim in Relation to "Country of Origin"

 

41.   On the basis of the observations previously mentioned, the EU considers that Article 2.2 of the Anti-Dumping Agreement and Article VI:1 of the GATT 1994 entitles the EU's investigating authorities to use the data that they used in order to calculate the normal value of Argentine biodiesel.

 

5.3.    Argentina's Claim in Relation to the Use of Costs Allegedly "not associated with the production and sale" of Biodiesel

 

42.   The EU has already shown above that the term "associated" has a broader meaning than the words "actually incurred", or "actually paid" and that the Panel Report in Egypt – Steel Rebar uses the term "pertain to the production". Moreover, Article 2.2.1.1 mentions the costs associated with the production, as opposed to the expenses incurred by the producer. As the Panel in EC – Salmon has confirmed, the "costs of production" should be understood as the prices to be paid "for the act of producing".

 

5.4. Articles 2.2 and 2.2.2(iii) of the Anti-Dumping Agreement and amounts for profits

 

43.   In setting the 15% margin of profit that the EU applied in constructing the normal value of biodiesel for Argentinian exporters, the EU was applying Article 2(3), first subparagraph, of the Basic Regulation, which follows the rule in Article 2.2 of the Anti-Dumping Agreement by specifying that a constructed normal value "shall be calculated on the basis of the cost of production in the country of origin plus a reasonable amount for selling, general and administrative costs and for profits".

 

44.   The EU submits that the method on the basis of which it determined the level of profits was reasonable and that the resulting margin was itself reasonable for the reasons stated below. Firstly, the figure is appropriate "on the basis of the reasonable amount of profit that a young and innovative capital intensive industry of this type under normal conditions of competition in a free and open market could achieve". Secondly, each situation must be assessed on its own merits taking into account the specific circumstances of the case. Thirdly, the figure was not out of line with that adopted in other investigations, for example that concerning biodiesel originating in the United States. Fourthly, the short and medium term borrowing rate in Argentina was around 14%, and it was reasonable to expect biodiesel producing companies to obtain a profit margin that exceeded this level. Fifthly, biodiesel companies enjoyed a level of profit higher than 15% during the investigation period, albeit that they benefited from distorted costs. Sixthly, comparison with the target profit for the domestic industry in the absence of dumped imports is not relevant because it has a different purpose than the construction of the normal value.

 

5.5. Article 2.4 of the Anti-Dumping Agreement and Allowances for Price Comparability

 

45.   The EU does not argue that a constructed price can never be the subject of adjustment in order to secure a fair comparison. Furthermore, the whole of Argentina's case with regard to Article 2.4 amounts to no more than an assertion that the method adopted by the EU for constructing the normal value could not, without adjustment, result in a fair comparison. There is no attempt to set the claim in a context, or to find guidance in the factors listed in Article 2.4 as appropriate for consideration as justifying allowances for differences. Such neglect is not surprising since none of them lends any support to the argument that Argentina presents.

 

5.5.1.         Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994 vis-à-vis the level of anti-dumping duties imposed

 

46.   Argentina's claims under Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994 are entirely consequential on the claims that the EU has answered in the preceding paragraphs. Since Argentina has failed to establish the earlier claims these consequential claims must also fail.

 

5.6.    Articles 3.1, 3.4, 3.5 of the Anti-Dumping Agreement vis-à-vis production capacity, utilization of capacity and return on investment

 

5.6.1.   Legal arguments and claims

 

47.   Argentina claims that the EU's treatment of "idle" plant in the context of capacity does not accord with the meaning of that word in the phrase "utilization of capacity" in Article 3.4 of the Anti-Dumping Agreement.

 

48.   There is no definition of "capacity" in the Agreement. In its Definitive Regulation the EU excluded "idle" plant, that is to say plant that "was not in such a state that it would have been available for use during the IP". Such plant would make no contribution to the "maximum amount or number that can be … produced", and its exclusion therefore accords with the ordinary meaning of the term "capacity".

 

49.   The EU submits costs of relevant undertaking are taken into account when considering other factors in the list in Article 3.4, notably the factor of "actual and potential decline in … profits". "Utilization of capacity" is a factor distinct from costs and should be treated as such.

 

50.   Whether the "idle" plants are included in the production capacity, or are excluded, the implications regarding injury are the same. In the first case the low capacity utilization is an indication of injury, in the second the closing or mothballing of plants is an indication of injury.

 

51.   Argentina accuses the EU of not making available the "publicly available material" relating to idle capacity. There is no such obligation in any of the provisions of the Agreement invoked by Argentina in its Panel Request, and it is therefore outside of the Panel's terms of reference.

 

52.   Argentina alleges that the presentation of data in the Definitive Regulation obstructed the arguments that the exporters wished to make about the causes of the EU's injury. However, all the data, concerning both "idle" and non-idle capacity were available to the exporters, and they were in no way inhibited from presenting arguments to the effect that the idle plants were a cause of injury. The factors listed in Article 3.4 are not exclusive.

 

53.   Argentina also raises the issue of proper "evaluation" in regard to the issue of return on investment which it alleges was based on a different dataset to that used for production capacity. The EU has already shown that this issue is outside the terms of reference of the Panel.

 

54.   Argentina argues that an assessment of "utilization of capacity" for the purposes of Article 3.4 that is based on a definition of capacity that is inconsistent with that provision, and was not based on positive evidence, etc., in some way disqualifies that assessment from contributing to a finding of causation vis-à-vis the utilization of capacity. However, Argentina cannot shortcut the requirements of Article 3.5, which addresses the issue of causation, by invoking similar concepts in Article 3.4.

 

55.   Argentina also alleges that the EU gave inadequate consideration to the issues of low capacity utilization and overcapacity. The data shows that the EU industry installed more capacity than there was demand in the EU, and possibly more capacity than EU demand plus export demand. However, the data available for the Definitive Regulation showed that capacity utilization, although low, was actually increasing and consequently could not have been a cause of injury in the sense of Article 3.5.

 

56.   Argentina also alleges that the capital intensive nature of the biodiesel industry aggravates its sensitivity to overcapacity as the cause of injury. However, this capital intensive nature is a constant feature of the industry, whereas the injury to the EU industry has not been constant but has developed over the period of investigation.

 

5.7.    Articles 3.1 and 3.5 of the Anti-Dumping Agreement vis-à-vis long-term commercial strategy

 

57.   Argentina argues that the mere fact that imports by the EU industry from Argentina and Indonesia aggravated the low capacity utilization rate invalidates the conclusion that these imports did not break the causal link between the dumped imports and the injury to the EU industry. The fact that the chain of causation was indirect does not mean that it did not exist. Consequently, this was not an injury caused by an "other factor" which, under Article 3.5, need to be separated and distinguished.

 

5.8. Articles 3.1 and 3.5 of the Anti-Dumping Agreement vis-à-vis double counting

 

58.   The evidence in question (Exhibit ARG-37, p. 35) concerned only one country, France, and came from only one producer, Diester. The evidence presented by Argentina itself indicates that the fall in production attributed to the French scheme in year 2011 was expected to be more than cancelled in 2012. The Definitive Regulation notes the financial performance of the sampled EU producers, which included Diester, declined only after the ending of the scheme.

 

59.   Argentina presents no evidence of detrimental consequences of double counting in other EU Member States, and, as it explains in the Definitive Regulation, the EU could find none.

 

5.9. Articles 3.1 and 3.5 of the Anti-Dumping Agreement Vis-à-vis Vertical Integration, etc.

 

60.   Almost all of the features identified by Argentina are constant in their nature and effects and therefore do not qualify as "causes" of injury within the meaning of Article 3.5. They cannot therefore be responsible for the deterioration in the condition of the industry which the EU has determined constitutes "injury" within the meaning of Article 3.4.

 

61.   Even if consideration is given to these factors Argentina never explains why vertical integration is a more efficient way of operating in this industry. Nor is it clear whether the advantage is claimed because of common ownership (which in any case does not extend to growers of beans) or geographic proximity.

 

6.         Conclusion

 

62.   Argentina has failed to make a prima facie case on any of its claims. The EU has shown that all of the claims pursued and developed in Argentina's first written submission are unfounded and based on erroneous interpretations of the covered agreements. The EU respectfully requests the Panel to reject all of Argentina's claims.

 

Annex C-2

Executive Summary of the Second Written

Submission of the European Union

1.     Introduction

 

1.     The European Union's second written submission focuses on the issues raised by Argentina in its Opening Statement and in its Replies to the Panel's Questions during the first substantive meeting with the Panel.

 

2.     Terms of Reference

 

2.     During the First Hearing, Argentina confirmed that it has abandoned the claims challenged by the EU as being outside the Panel's terms of reference. Argentina has also abandoned the claims against "implementing measures and related instruments" and "related measures and implementing measures". This confirms the consequences described in paragraph 13 of the European Union's first written submission.

 

3.     Preliminary Issues

 

3.1.  The Claims under Article 2.1 of the Anti-Dumping Agreement and Article VI:1 of the GATT

 

3.     Argentina accepts in essence that Article 2.1 of the Anti-Dumping Agreement (ADA) and Article VI:1 of the GATT cannot serve as a legal basis for "distinct" claims in WTO dispute settlement proceedings. Both parties agree on this point. However, Argentina asserts that its claims under these two provisions are "consequential" and dependant on its claims under Articles 2.2 and 2.2.1.1 of the ADA.

 

4.     First, the EU considers that the reasoning of the Panel in EU – Footwear supports the rejection of Argentina's corresponding claims in the present case. In that case the Panel argued that "under China's approach all dumping related claims could be brought under Article 2.1 alone, supported by the assertion that the obligations asserted are 'created' elsewhere". Importantly, the Panel also rejected China's claims under Article VI:1 of the GATT, stating that its analysis on the claims under Article 2.1 of the ADA also applied.

 

5.     Second, Argentina's assertion that its claims under these two Articles are "consequential" and dependant on other claims under different legal provisions essentially constitutes a request to the Panel to exercise judicial economy on these claims. Since Argentina recognizes that these claims do not aim at protecting some specific and distinct legal right or interest, the EU doubts whether raising them is compatible with the Members' obligations under Article 3.10 of the DSU.

 

6.     Third, there is nothing in Argentina's Panel Request that would indicate that Argentina was making some claims as "distinct" and others as "consequential". Indeed, the references to Article 2.1 of the ADA and Article VI:1 of the GATT seem to be on an equal footing with the references to other Articles in Argentina's Panel Request.

 

7.     The conclusion is that Argentina's new assertions on the "consequential" nature of its claims under Article 2.1 of the ADA and Article VI:1 of the GATT must be rejected for lack of proper legal basis.

 

8.     Moreover, in the present case both parties agree that there were no sales of biodiesel in Argentina in the ordinary course of trade. However, in its response Argentina fails to discuss the importance of the terms "in the ordinary course of trade" in Article 2.1 and the terms "when there are no sales of the like product in the ordinary course of trade" in the first line of the chapeau of Article 2.2. As a result, Argentina's statement fails to rebut the EU's objection that the facts of this case fall outside the scope of Article 2.1.

 

9.     The conclusion is that Argentina's claims under Article 2.1 of the ADA and Article VI:1 of the GATT are manifestly unfounded in law and must be summarily rejected by the Panel.

 

3.2.  The Claims under Article 2.4 and Article 9.3 of the Anti-Dumping Agreement

 

3.2.1.      Argentina's claims fall outside the scope of these provisions

 

10.   The EU argues that Article 2.4 does not apply to the investigating authority's establishment of normal value and supports its interpretation with the Panel Report in Egypt – Steel Rebar. In that case, the Panel found that Article 2.4 "refers to the comparison of export price and normal value; i.e., the calculation of the dumping margin" and has to do "not with the basis for and basic establishment of the export price and normal value (which are addressed in detail in other provisions), but with the nature of the comparison of export price and normal value".

 

11.   In the case at hand, Argentina considers that investigating authorities have failed to calculate properly the product's normal value, resulting in a comparison between the normal value and the export price that was not "fair" (hence the alleged violation of Article 2.4) and a calculation of the "wrong" dumping margin. According to Argentina, the "wrong" dumping duty calculated was higher than the "correct" dumping margin (hence the alleged violation of Article 9.3).

 

12.  Therefore, Argentina is challenging the calculation of the normal value itself (which falls within the scope of Article 2.2) and not the "nature of the comparison" between normal value and export price, which is the subject matter of Article 2.4, or the comparison of the anti-dumping duties with the dumping margin, which is the subject matter of Article 9.3. Argentina's claims consequently fall outside the scope of these articles.

 

13.   The EU draws further support for this view from the Panel Report in EC – Tube or pipe fittings. In that case, Brazil argued that the EU had used some "wrong" data when constructing normal value and, consequently, had calculated the "wrong" normal value in breach of Articles 2.2 and 2.2.2 of the ADA. Brazil also argued that the EU had "breached the requirement to make a fair comparison between normal value and export price", in violation of Article 2.4. Given the similarity of these claims with the present case, the EU respectfully submits that the Panel should reject Argentina's claims under Article 2.4.

 

14.   In the specific circumstances of the present case, the rejection of Argentina's claims under Article 2.4 necessarily leads to the rejection of Argentina's claims under Article 9.3 because Argentina's case lies solely on the alleged "incorrect" calculation of the dumping margin.

 

3.2.2.      Argentina has failed to make a prima facie case

 

15.   First, Argentina should have shown that the definitive anti-dumping duties are higher than the definitive dumping margins. Instead of that, Argentina compares the definitive anti‑dumping duties with the provisional dumping margins.

 

16.   Second, in a Reply to a Panel's Question, Argentina reproduces an excerpt from the Panel Report in EU – Footwear (China) which is not relevant for the present case, because it addressed a very different situation and a very different claim. Indeed, China had only argued that Article 2.4 imposed obligations on the investigating authority when it was constructing normal value whereas Argentina asserts that its Article 2.4 claim does not relate to the construction of normal value.

 

17.   Moreover, Argentina refers to that excerpt out of context. The sentence in the Panel Report immediately following Argentina's excerpt states that "these allowances can only be made after the normal value and the export price have been established".

 

18.   Third, the Panel Report in EU-Footwear (China) actually supports the EU's position in the present case. That Panel Report confirms that Article 2.4 allows investigating authorities the discretion to make any "due allowances" that they consider necessary and to follow any "methodology" that they consider appropriate.

 

19.   These Panel findings are in line with the Panel Report in EC – Tube or Pipe Fittings which noted "the absence of any precise textual guidance in the Agreement concerning how adjustments are to be calculated", as well as the "absence of any textual prohibition on the use of any particular methodology adopted by an investigating authority with a view to ensuring a fair comparison".

 

20.   In the present case, Argentina has failed to show that the EU's investigating authorities have exercised their discretion in an arbitrary manner when comparing the normal value with the export price and establishing the dumping margin. This is an additional reason for which Argentina's claims under Article 2.4 must be rejected.

 

4.     Argentina has failed to make a prima facie case on its "As Such" Claims

 

4.1.  Introduction

 

21.   The EU has argued that, in order to make a prima facie case on its "as such" claim under Article 2.2.1.1 and Article 2.2 of the ADA, Argentina had to establish inter alia (a) the "precise content" of the measure that it challenges; and (b) that the challenged "measure" constitutes a binding requirement that requires the investigating authorities to apply it in all cases in a manner which is inconsistent with the covered agreements.

 

4.2.  The Requirement to Establish the "Precise Content" of the Written "Rule or Norm"

 

22.   In its recent Report in Argentina-Import Measures, the Appellate Body found that when bringing an "as such" challenge against a "rule or norm", the complaining party must clearly establish, inter alia, the "precise content of the challenged measure, to the extent that such content is the object of the claims raised".

 

23.   In the present case, Argentina has confirmed that it challenges "as such" a written piece of legislation, namely the second sub-paragraph of Article 2(5) of the Basic Regulation. However, Argentina has failed to establish the "precise content" of that written piece of legislation.

 

24.   First, the EU showed that Argentina has confused the scope of the first sub-paragraph of Article 2(5) with the scope of the second sub-paragraph of Article 2(5) of the Basic Regulation. This is confirmed by the evidence that Argentina itself has put on the record of the case such as the judgment of the General Court in Acron. The judgments of the EU's courts clearly show that the second subparagraph of Article 2(5) does not have the "precise content" asserted by Argentina.

 

25.   Moreover, the EU's authorities were already making the same determinations with respect to company records on the basis of the first subparagraph of Article 2(5) at a time when the second subparagraph of Article 2(5) did not even exist. A good example of this is the Regulation concerning Aluminium foil originating in China and Russia which included the legal test found in the first sentence of Article 2.2.1.1 of the ADA and the first subparagraph of Article 2(5) of the Basic Regulation. Additionally, this regulation also included the term "reliable", used by the Panel in US – Softwood Lumber V to describe the meaning of the terms "reasonably reflect costs" in Article 2.2.1.1 of the ADA.

 

26.   Second, Argentina itself has acknowledged that the "measure" it challenges is not found in the text of the second subparagraph of Article 2(5). Instead, it challenges the EU's application of Article 2(5) of the Basic Regulation only in certain specific circumstances, namely where "the prices of the inputs have been found to be artificially low or abnormally low because of an alleged distortion". Therefore, Argentina has failed to establish the "precise content" of the second subparagraph of Article 2(5) of the Basic Regulation.

 

27.   In US – Carbon Steel (India), India presented similar claims. However, the Appellate Body rejected India's claims and found that "it is not clear why a number of instances of the application of the measure should in this case conclusively establish the meaning of the measure at issue in general, which in this case is confined to [the defending party's legislation]". In the present case Argentina has also failed to establish the meaning of the second subparagraph of Article 2(5) in general. Consequently, this prevents Argentina from making a prima facie case on any of its "as such" claims, including under both Article 2.2.1.1 and 2.2 of the ADA.

 

28.   Third, Argentina has offered a number of different and inconsistent descriptions of the "content" of the measure that it is challenging both under Article 2.2.1.1 and under Article 2.2 of the ADA. For example, in paragraph 25 of its Opening Statement, Argentina asserts that the second subparagraph of Article 2(5) offers the authorities discretion and does not oblige them to act in any specific way. In contrast, in paragraphs 54, 68, 70 and 72 of this statement, Argentina asserts that "there is no discretion" and that the provision is mandatory.

 

29.   The consequence is that Argentina fails to establish the "precise content" of the second subparagraph of Article 2(5). In these circumstances, it is impossible for the Panel to understand precisely what is the "matter" before it.

 

30.   When the Panel prompted Argentina to show the source of these varying descriptions in the text of the second subparagraph of Article 2(5), Argentina failed to do so. Indeed, its reliance on Recital 4 of Regulation 1972/2002 is misplaced. This Recital cannot be used as a source of interpretation of all the situations covered by Article 2(5) of the Basic Regulation because it refers to "particular market situation" and makes no reference to situations where there are "no sales in the ordinary course of trade", which is the situation of the present case. Also, the first sentence of Recital 4 clearly shows that the determinations of whether the records "reasonably reflect costs" were already being made under the first subparagraph of Article 2(5), which already existed at the time of the introduction of Recital 4.

 

31.   Lastly, the European Union has provided examples of investigations to demonstrate that the second subparagraph of Article 2(5) does not oblige the investigating authorities to seek the cost-information outside the country of origin in all cases. In its response, Argentina argues that these examples are not relevant, because they do not "concern a situation in which the prices were found to be abnormally low or artificially low because of a distortion". This response confirms that Argentina does not challenge "as such" the second subparagraph of Article 2(5), but the purported application of that provision in certain specific examples.

 

32.   The conclusion is that Argentina has failed to establish the "precise content" of the second subparagraph of Article 2(5) of the Basic Regulation (or in the words of the Appellate Body the "meaning" of the second subparagraph of Article 2(5) "in general") for purposes of its "as such" claims under either Article 2.2.1.1, or Article 2.2 of the ADA.

 

4.3.    The Requirement to Establish that the Challenged Measure Mandates Conduct that is Necessarily Inconsistent with the Covered Agreements

 

33.   In US – Carbon Steel (India), India had put forward two alternative claims. First, that the covered agreement did not allow the defending party's investigating authorities to take certain actions. Second, that although the measure at issue provided that a specific administrative action may be taken (i.e. "an inference may be drawn"), it more accurately meant that in all cases the defending party's investigating authorities necessarily took that action. In support of its claims, India relied on the practice developed by the defending party's authorities but did not challenge "as such" that practice.

 

34.   In relation to India's first claim, the Appellate Body rejected it, noting that the measure was framed in "permissive terms". In relation to India's second claim, the Appellate Body found that the challenged measure was "a discretionary measure rather than a binding requirement" to act in a certain way. The Appellate Body also found that the "practice" identified by India was not required by the measure, but was rather developed pursuant to the discretion afforded by the measure. This meant that the "practice appeared to be distinct and separate from the measure at issue" and was not necessarily applied in all instances.

 

35.   In the present case, Argentina originally claimed that the second subparagraph of Article 2(5) "establishes a rule which is mandatory". However, according to its Opening Statement Argentina appears to have changed its claim. It now advances a new theory, pursuant to which "even if" the second subparagraph of Article 2(5) is discretionary and not mandatory, "the fact that the measure provides for the possibility" to act in a certain way "will necessarily be inconsistent with Article 2.2.1.1" of the ADA. Argentina has not provided further explanation about this new theory. Dealing with a similar situation in the case EC – Fasteners, the Appellate Body found that belated modifications of the nature of the complaining party's claims give rise to due process issues.

36.   In any event, this modification confirms that Argentina has failed to establish the "precise content" of the second subparagraph of Article 2(5) of the Basic Regulation and, in contrast, offers two contradictory theories of that "content". The EU respectfully submits that the Panel should reject the "as such" claims of Argentina in the present case, just like the Appellate Body rejected India's "as such" claims in US – Carbon Steel (India).

 

37.   Argentina's first theory is that "the use of the verb 'shall' in Article 2(5), second subparagraph is evidence of the mandatory nature of the measure". Like India US – Carbon Steel (India), Argentina relies on the EU's purported "practice" but does not make a claim that the "practice" itself constitutes a WTO-inconsistent measure.

 

38.   The Panel should apply the Appellate Body's legal test in US – Carbon Steel (India), namely to assess whether the second subparagraph of Article 2(5) of the Basic Regulation is "a discretionary measure", or "a binding requirement" to act in the same way in all cases.

 

39.   Moreover, the Panel should also take into consideration the General Court judgments put on the record by Argentina and showing that, just like in US – Carbon Steel (India), the exercise of the investing authorities' discretion is subject to "rules and disciplines separate from" the second subparagraph of Article 2(5), namely the general principles of the EU administrative law.

 

40.   The Panel should conclude that Argentina has failed to show that the second subparagraph of Article 2(5) "mandates" the investigating authorities to act inconsistently with Article 2.2.1.1, or Article 2.2 of the ADA. Consequently, Argentina's "as such" claims must be rejected.

 

41.   Argentina's new second theory is that the "mere fact that Article 2(5), second subparagraph, provides for the possibility [to find that records do not reasonably reflect costs because they are artificially low or abnormally low] would necessarily render the measure inconsistent with Article 2.2.1.1. The same reasoning applies to Argentina's claim under Article 2.2".

 

42.   If the Panel decides that it has the authority to assess this new belated theory, then the Panel should apply the legal test of US – Carbon Steel (India), namely to "assess whether, pursuant to the authorisation contained in the text of the measure, the investigating authority is required to act inconsistently" with the covered agreements.

 

43.   In addition, the Panel should also take into consideration the fact that there have been examples where the authorities have used domestic sources from the country of origin (like in the case of Okoume Plywood Originating in China), or the accounts of the parent company (like in the case of White Phosphorus Originating in Kazakhstan) in order to establish the "reasonable" costs. This evidence shows that the authorities' use of some "other reasonable basis" depends on the particular circumstances of each case. This means that the second subparagraph of Article 2(5) does not require the investigating authority to act inconsistently with the covered agreements.

 

44.   The Panel shall conclude that Argentina's "as such" claims must be rejected.

 

5.     Argentina suggests an Erroneous Interpretation of Article 2.2.1.1

 

5.1.  Argentina's Main Thesis

 

45.   Argentina's claim is premised on the theory that the terms "reasonably reflect the costs associated with the production and sale of the product under consideration" in Article 2.2.1.1 of the ADA mean that the records should include the expenses actually incurred by the company under investigation. Argentina's theory is that the costs do not need to be "reasonable" themselves, but that the records need to reflect "reasonably" the expenses actually incurred.

 

46.   Argentina has confirmed its claims and the fact that the first sentence of Article 2.2.1.1 relates exclusively to a cost allocation issue, in its Replies to the Panel's Questions. Argentina also provided a list of the types of situations that, in its view, would allow an investigating authority to disregard the recorded costs; all of them relate to the allocation of costs that have actually been incurred.

 

47.   It is important to note that contrary to the view of certain Third Parties, Argentina's claim does not entertain the possibility of disregarding the recorded costs in situations where there have been intra-group transactions on a non-arms' length basis.

 

48.   Therefore, Argentina has confirmed that its claim is premised on a specific legal interpretation of Article 2.2.1.1: (a) that the proviso on "reasonably reflect the costs" relates exclusively to the records and not the costs, i.e., that the costs themselves do not need to be reasonable; (b) that the records meet the condition of the proviso where they report the costs that have actually been incurred by the investigated company; (c) that the proviso of Article 2.2.1.1 relates exclusively to issues of proper allocation of the costs that have actually been incurred by the investigated company; and (d) that investigating authorities can never disregard or adjust the costs that have actually been incurred by the investigated company for other reasons, even where these costs are distorted.

 

49.   This means that, in order to make a prima facie case on its "as such" claim, Argentina must establish that this is indeed the proper interpretation of Article 2.2.1.1. This also means that the Panel is not required to assess whether the second subparagraph of Article 2(5) of the Basic Regulation is consistent with some other interpretation of Article 2.2.1.1 of the ADA.

 

5.2.    Argentina suggests an Erroneous Interpretation of Article 2.2.1.1 of the Anti-Dumping Agreement

 

50.   First, the EU notes that the "legislative history" leading to the adoption of Article 2.2.1.1 actually contradicts: (a) Argentina's assertion that the proviso relates only to cost allocation issues; and (b) Argentina's excessively restrictive interpretation of the terms "reasonably reflect the costs". Therefore, Argentina fails to substantiate its interpretation of Article 2.2.1.1.

 

51.   Second, Argentina's discussion of the Panel Report in US – Softwood Lumber V is not convincing because Argentina focuses on a statement of the Panel which it reads out of context. A more detailed analysis of the Panel's findings shows that they actually contradict Argentina's claims in the present case. Indeed, the Panel's finding was that Article 2.2.1.1 does not mandate, or require investigating authorities to reject the recorded costs. In contrast, the Panel did not find that Article 2.2.1.1 does not allow investigating authorities to disregard the recorded costs, where they consider that they are not "reasonable" because they do not reflect market values. Therefore, the statement of the Panel, to which Argentina refers, has limited scope: the Panel finds that the investigating authorities are not obliged to treat the recorded costs in a certain way; but the Panel does not find that the authorities are not allowed to disregard the recorded costs as "unreasonable", where these costs do not reflect market values.

 

52.   Quite to the contrary, the analysis of the entire reasoning of the Panel confirms that Article 2.2.1.1 allows authorities to disregard the recorded costs, where they do not reflect market values. The Panel expressly acknowledged that the recorded costs would be "reasonable" for purposes of Article 2.2.1.1, only if it could be shown that they corresponded to market prices.

 

53.   In the case of Tembec, the investigating authority followed a methodology which used the "market values" as "benchmark" and compared the values recorded in the books with market values in order to determine whether the recorded values were "reasonable" for purposes of Article 2.2.1.1. The Panel's treatment of this methodology it important for the present case because it confirms that the notion of "reasonably" in the first sentence of Article 2.2.1.1 is not limited only to the records, but also covers the recorded costs and values. It also confirms that investigating authorities can use market prices as "benchmarks" in order to confirm the "reasonableness" of the recorded costs and values. The same conclusions are drawn from the Panel's assessment of the West Fraser investigation which accepted that "an arm's length test" may be carried out in order to determine whether these costs are "reliable", and that the recorded costs may be adjusted accordingly. The Panel's approach was confirmed by the Appellate Body on appeal.

 

54.   The conclusion is that the Panel Report in US – Softwood Lumber V directly contradicts the main thesis of Argentina's challenge and leads to the rejection of Argentina's claims under Article 2.2.1.1 of the ADA.

 

55.   Third, Argentina's argumentation is based on the theory that a dumping determination cannot rest on "external factors unrelated to the exporter or producer". However, Article VI of the GATT does not limit the notion of dumping only to situations that arise out of the exporters' "voluntary" pricing behaviour. Quite to the contrary, the notion of dumping also covers situations that are created by the action of governments and are, in that sense, "exogenous" or "external" to the "intention" of the exporters.

 

56.   This interpretation is supported by considering the Note 2 Ad Article 6 paragraphs 2 and 3 (i.e. "Multiple currency practices can in certain circumstances constitute a subsidy to exports […] or can constitute a form of dumping […] which may be met by action under paragraph 2 [of the Article VI of the GATT]. By "multiple currency practices" is meant practices by governments or sanctioned by governments"), with due regard to the negotiating history of the Note and the context in which it appears. Its purpose is filling out the definitions contained in those provisions.

 

57.   This has two important implications. Firstly, the text of the GATT expressly provides that government action can lead to a situation of dumping and that importing countries may impose anti-dumping duties. The consequence is that Argentina's legal interpretation of Article 2.2.1.1 fails. Given that this erroneous legal interpretation of Article 2.2.1.1 is the basis for both (a) the "as such" claim against the second subparagraph of Article 2(5) of the Basic Regulation; and (b) the claim against the specific anti-dumping measure on biodiesel, Argentina cannot make a prima facie case on either of these claims.

 

58.   Secondly, the fact that the GATT expressly refers to multiple currency practices as a type of government measure that may lead to a situation of dumping provides some insights on the nature and market effects that such measures should have in order to fall within the scope of the dumping provisions in Article VI and the ADA.

 

59.   Multiple currency practices involve a government induced manipulation of the ordinary operation of the market, which substantially affects and distorts pricing. These are precisely the characteristics of Argentina's export tax on soya beans. Argentina has expressly acknowledged that (a) the export tax on soya beans is a measure of the Government of Argentina and (b) that the effect of the export tax on soya beans is to reduce the domestic price of soya beans in Argentina in comparison to the level that this domestic price would have in the absence of the export tax. Consequently, Argentina's export tax falls squarely within the types of government measures that may lead to dumping and that "may be met by action" under Article VI:2 of the GATT.

 

60.   Fourth, Argentina makes certain inconclusive statements in relation to the Panel Report in EC – Salmon. Firstly, Argentina fails to address the Panel's choice of words, contradicting its theory that Article 2.2.1.1 restricts the notion of "reasonably reflect costs" only to those that have actually already been incurred by the investigated company.

 

61.   Secondly, Argentina asserts that the price used by the EU's investigating authorities "is clearly not the price to be paid by the Argentinean producers for domestic purchases of soybeans in Argentina". This contradicts Argentina's previous acknowledgements regarding the "price to be paid" by the Argentinian producers for domestic purchases of soya beans, in the absence of the government measure that distorts the price of soya beans.

 

62.   It is noted that the information provided by Argentina in its Replies to the Panel's Questions confirms that the export tax on soya beans indeed constitutes a mechanism for distorting the price of soya beans. Argentina has also confirmed that the reason for which it determines this "reference FOB price" is to "monitor possible pricing divergences in the local market. The effect of that mechanism is to ensure that the resulting domestic price for soya beans is below the domestic price that would have prevailed in the absence of the export tax.

 

63.   Therefore, the way Argentina implements the export tax on soya beans constitutes, is in essence, a mechanism of intervention on the domestic price of soya beans.

 

64.   Fifth, Argentina makes some statements in relation to the terms "associated with the costs" in Article 2.2.1.1 of the ADA, which are not convincing. Indeed, Argentina qualifies the "reference FOB price" as a "hypothetical benchmark price" and asserts that the FOB reference price is "not a 'real' price in the sense that it is an average that is used for the calculation of the export tax. Argentina thus contradicts its previous acknowledgement that in the absence of the export tax, the domestic price of soya beans would have been the "reference FOB price" less the transaction and fobbing costs.

 

65.   In the present case, the investigating authorities took as a basis the FOB reference price (which the Government of Argentina itself had determined) and followed exactly the methodology that Argentina itself acknowledges would lead to the calculation of the domestic soya bean prices in the absence of the export tax.

 

66.   The conclusion is that Argentina's interpretation of Article 2.2.1.1 of the ADA is erroneous. Consequently, Argentina fails to make a prima facie case on the claims that it bases on Article 2.2.1.1.

 

6.      Argentina Suggests an Erroneous Interpretation of Article 2.2 of the Anti-Dumping Agreement

 

67.   First, Argentina's main assertion is that the distinction between costs and evidence pertaining to the determination of costs suggested by the EU is "artificial" and has no basis in the text or the context of Article 2.2. However, the ADA itself makes such a distinction, when it contains a specific Article entitled "Evidence"(i.e., Article 6). Therefore, Argentina's assertion is unfounded.

 

68.   Second, Argentina advances various arguments on the interpretation of Article 2.2.2(iii) of the ADA. Its main argument is that "the use of data other than that of the country of origin must explicitly be provided for" and that Article 2.2.2 of the ADA supposedly "does not provide for a similar exception or authorisation for the determination of the cost of production". Argentina also asserts that "Article 2.2.2 lays down the criteria for determining the reasonable amounts of SG&A and for profits only and not for the cost of production". As well as "the fact that Article 2.2.2(iii) refers to any other reasonable method for the determination of SG&A and profits can certainly not be applied to the determination of the cost of production".

 

69.   Argentina's arguments are not convincing because the chapeau of Article 2.2.2 and Article 2.2.1.1 use the same terms to refer to the same production and sales costs. There is no reason for which the "any other reasonable method" of Article 2.2.2(iii) would relate only to the production and sales costs of the chapeau of Article 2.2.2, but not the same production and sales costs mentioned in Article 2.2.1.1.

 

70.   Third, despites questions from the Panel, Argentina has failed to explain how an investigating authority could determine costs in a situation where there are no usable data from the country of origin.

 

71.   Consequently, Argentina has failed to substantiate its interpretation of Article 2.2 and has failed to make a prima facie case on the claims that it bases on this provision.

 

7.      Argentina has failed to make a prima facie case on its claims under Article 2.2.1.1 and Article 2.2 of the Anti-Dumping Agreement against the Anti-Dumping Measure on Biodiesel

 

72.   Argentina has failed to show that the prices used by the EU's investigating authorities were from "outside the country of origin". Argentina has simply asserted that "the EU did not use the domestic price of soybeans" and that "the EU failed to construct normal value on the basis of the cost of production in the country of origin".

 

73.   The EU considers that, the prices used by the investigating authorities were from the country of origin and reflected the cost of soya beans that Argentine producers of biodiesel would have to incur, in the absence of the export tax.

 

74.   Consequently, Argentina fails to make a prima facie case on its claims against the anti-dumping measure on biodiesel under Article 2.2 of the ADA, irrespective of whether that provision allows the use of evidence from outside the country of origin, or not.

 

8.     Argentina has failed to make a prima facie case on its claims in Relation to Profits

 

75.   In its Replies to the Panel's Questions, Argentina appears to draw a distinction between the "reasonable method" of Article 2.2.2(iii) and the figure of profits to be established. Argentina notes that Article 2.2.2(iii) does not "use the terms 'any reasonable amount'" and, on that basis, Argentina appears to assert that the profit figure does not need to be "reasonable", but that the methodology must be "reasonable". This assertion that is clearly wrong. The chapeau of Article 2.2 refers to a "reasonable amount for administrative, selling and general expenses and for profits".

 

76.   In any event, the methodology followed by the investigating authorities in the present case closely resembles the methodology followed by the US authorities and approved by the Panel in US – Softwood Lumber V, albeit in order to calculate a different cost item. This is clearly a "method" for the calculation of the profits that is "reasonable".

 

77.   In these circumstances, the EU submits that the Panel should reject Argentina's claim, just as the Panel rejected Canada's "post hoc rationalisation" objections in US – Softwood Lumber V.

 

9.     Article 3 Claims

 

78.   Argentina persists in accusing the EU of having adopted the wrong definition of capacity. In the provisional and definitive Regulations the EU described the state of the various EU biodiesel producing facilities, and gave a clear explanation of the criterion it applied in assessing utilisation of capacity. While rejecting the EU's explanation Argentina has quietly abandoned its own criterion of capacity based on the notion of what a plant was "designed to produce". Instead, it proposes a new criterion of "potential" for production. Its suggestion that the negotiating history contributes to the interpretation of the text lacks all conviction, and trails off into platitude.

 

79.   Argentina's only interest in the data on "capacity utilisation" is to proceed to the further step of identifying it as an "other factor" cause of injury. During the investigation the exporters suggested that the injury was caused through over-expansion. However, the evidence obtained by the EU and Argentina itself acknowledges that what it calls the "enormous overcapacity" is "continuous" and "existed in 2009", i.e. throughout the period considered. To the contrary, the EU believes that capacity utilisation is an indicator of the level of efficiency at which an industry is operating.

 

80.   Argentina again accuses the EU of failing to make an objective assessment in its evaluation of production capacity and utilisation of capacity. The best answer that the EU can give is to ask the Panel to examine the careful justification for its conclusions that was provided by the EU, in particular in the Definitive Regulation at Recitals 130 to 133, and 161 to 171. These passages speak for themselves.

 

81.   On the issue of causation, Argentina's argument hypothesises the "total elimination of imports originating in Argentina and Indonesia" as compared to the EU volume of production. The EU does not see what would be learnt from such an exercise. Indeed, the aim of the causation analysis, in situations where there are said to be "other factors", is to separate and distinguish the various causes.

 

82.   Argentina suggests that these imports and the anti-dumping proceedings are being choreographed by multinational companies for ends of their own. It means that corporate groups "might have decided that their interests were better served by activating trade defence mechanisms in the European Union". Firms producing in the EU are, regardless of ownership, in principle entitled to the remedies provided by the anti-dumping legislation if the conditions set out there are satisfied. The idea that a firm might see an advantage in having its own goods subjected to anti-dumping duties seems somewhat far-fetched. Furthermore, the EU (consistent with Article 4.1(i) of the ADA) has already excluded three producers from the definition of the EU industry because the high level of their imports from Argentina.

 

83.  The EU maintains that Argentina's claim that the EU, when examining injury in accordance with Article 3.4 of the ADA, failed to properly consider the factor 'return on investment' is outside the Panel's terms of reference because it was not mentioned in the Panel Request. The EU supports its contention referring to the Appellate Body Report China – Raw Materials in which the claimants "failed to present the legal basis for their complaints with sufficient clarity to comply with Article 6.2 of the DSU".

 

84.   The importance of examining each of the factors listed in Article 3.4 of the ADA has been stressed by the Appellate Body in Thailand-H-Beams. There are fifteen of these factors. Clearly it would not be sufficient for the panel request to merely state that they had not been properly examined without indicating which factors in particular the failure lay.

 

85.   Argentina's reference to the Appellate Body's report in the Wheat Gluten case on the issue of "continuing" conditions has no bearing on the point that the EU has made. Rather it addresses the timing of injury caused by various factors. The EU makes provision for such issues of timing to be taken into account by tracking developments in the condition of the domestic industry, and the potential causes of injury, over a "period considered" of three and a half years, ending in the dumping "investigation period" of one year. It is just this approach that enables the EU to respect the obligation to separate and distinguish the various factors that may be causing injury. In particular, it permits the EU to distinguish those factors that are changing from those that are constant.

 

10.   Conclusion

 

86.   Argentina has failed to make a prima facie case on any of its claims. The European Union respectfully requests the Panel to reject all of Argentina's claims.

 

 

Annex C-3

Executive Summary of the Statement of the European Union

at the First Meeting of the Panel

1.         Introduction

 

1.     The opening statement of the EU will focus on some of the issues raised by certain Third Parties in their submissions.

 

2.         Third-party submissions reveal broader consensus on certain issues

 

2.     A number of Third Parties, in particular the United States, Australia and Turkey, have expressed views that are very close to the legal interpretations and arguments put forward by the EU in its First Written Submission. This is also partially the case for Third Parties that have generally supported Argentina's claims like China. The conclusion that the EU draws from the submissions of the Third Parties is that there is broad consensus that, in principle and in certain circumstances, Article 2.2.1.1 allows investigating authorities to disregard company records, where the costs recorded are not reasonable. There is also broad consensus that, in principle and in certain circumstances, Article 2.2 allows the authorities to use evidence from outside the country of origin in order to calculate the cost of production in the country of origin.

 

3.     However, there seems to be a disagreement on which are the "certain conditions" that must be met, for these principles to apply. On that regard, the EU stresses that Article 2(5) of the Basic Regulation does not allow "unfettered discretion" to its authorities, which are required to act reasonably and are subject to judicial control. In any case, the EU argues that the present panel is not required to come up with any exhaustive lists of conditions.

 

4.     More importantly, the panel only needs to determine whether Argentina has made a prima facie case on its claims. To do so, the Panel only needs to decide whether Argentina has met its burden of showing (a) that the specific provisions of Article 2(5) of the Basic Regulation, which it challenges "as such", fall within the category of what is not permissible under Article 2.2.1.1 and (b) that it is never permissible to use evidence from outside the country of origin in order to calculate the costs of production. Since Article 2(5) of the Basic Regulation does not define the terms "reasonably reflects costs" nor define the conditions that would allow the investigating authorities to seek outside the country of origin the evidences for the costs, the EU does not see how it is possible for Argentina to succeed in its "as such" claims.

 

3.         Broader legal points raised by some Third Parties

 

5.     The EU considers that some broader legal interpretations advanced by certain third parties, which Argentina has not put forward, are outside the Panel's terms of reference, or fall outside the scope of the present dispute. In any case, these interpretations are also legally erroneous, as further explained.

 

4.         Export taxes or duties

 

6.     Regarding the impact of export taxes and export duties on anti-dumping investigations, some Third Parties have expressed the view that anti-dumping rules cannot be used to address the distortive effects of export duties, asserting that Article XI:1 of the GATT allows the imposition of export duties. This view is legally incorrect because there is nothing in the GATT that would prevent an investigating authority from taking into consideration the distortive effects of export duties and export taxes when constructing the normal value of the product under consideration.

 

7.     More precisely, Article XI:1 does not allow anything, but only contains a prohibition. The definition of quantitative restrictions does not include export duties and export taxes. But, this does not mean that Article XI:1 authorises WTO Members to introduce export duties or export taxes.

8.     The fact that export duties and export taxes fall outside the scope of Article XI:1 of the GATT does not mean that the effects of such export taxes and export duties fall outside the scope of Article VI of the GATT. Using a similar reasoning to that of Appellate Body in the case Argentina – Import Measures, the EU notes that Article XI:1 does not contain any "express language identifying its relationship" with Article VI of the GATT. Moreover, there is no language in Article XI:1 or Article VI of the GATT stating that the anti-dumping authorities of WTO Members cannot take into account the distortive effects of export duties or export taxes in anti-dumping investigations. Lastly, there is no specific obligation or language in Article XI:1 that could be said to conflict with the provisions of Article VI of the GATT. The use of the forceful term "condemn" in Article VI provides further support for the conclusion that export duties and export taxes and their distortive effects do not fall outside the scope of Article VI of the GATT and of anti-dumping investigations.

 

9.     The Panel's rejection of Argentina's claims in the present dispute will not have the effect of indirectly declaring all export taxes or export duties as WTO-inconsistent because the investigation will still be subject to the strict procedural requirements of the Anti-Dumping Agreement and not necessarily always lead to a finding of dumping.

 

10.   The distortive effects of export taxes and export duties are well known and well documented. They are the result of government intervention and of the protection afforded to the exporting country's downstream industry.

 

5.         The notion of dumping

 

11.   It has been argued by certain third parties that the anti-dumping rules are "only concerned with examining the private pricing behaviour of producers". As a consequence of this purported "nature" of dumping, "the investigation authority cannot reject the costs recorded in the producer/exporter's accounts on grounds exogenous to that producer/exporter", such as the "full range of governmental policy interventions that are entirely outside the control of the producer/exporter themselves". The EU believes that the panel should reject these erroneous assertions for a number of reasons.

 

12.   There is no textual basis in Article VI of the GATT or in the Anti-Dumping Agreement for such a "subjective element" in the anti-dumping rules that would consider dumping as an intentional "price discrimination". To the contrary, both Article VI:1 of the GATT and Article 2 of the Anti-Dumping Agreement define dumping in objective terms: introduction of products "into the commerce of another country at less than the normal value of the products".

 

13.   Dumping is not defined by reference to the domestic prices in the exporting country but by reference to the "normal value" of the products. Article VI:1 of the GATT lists certain types of evidence that could be used as proxy to identify the "normal value". This article confirms that dumping is not related to exporters' purported "intention" but only to the value that the products should have in normal circumstances. Also, the calculation of dumping would be deprived of practical effects if "exogenous" costs elements beyond the exporters own control would be excluded. Anti-dumping rules would thus be rendered ineffective.

 

14.   Article VI:5 of the GATT acknowledges that there can be situations which could be subject of both a countervailing duty and an anti-dumping duty. Therefore, the text of this article acknowledges that government actions may be at the source of dumping and material injury. To further support this conclusion, the EU relies on the Appellate Body report in the case United States – Anti-dumping and Countervailing duties (China) in which it was established that "exogenous factors", such as the actions of the government of the exporting country, may very well be the source of dumping.

 

15.   The reliance of certain Third Parties on the Appellate Body Reports in the zeroing cases is misguided. Indeed, in this case the Appellate Body was not dealing with the construction of the normal value, but only whether the investigating authority should look at individual transactions separately, or whether it should look at the "aggregation of all export transactions". The Appellate Body discussed the export price part of the comparison and not the normal value.

 

6.         The situation under the anti-dumping Code in the 1980s

 

16.   Another Third Party referred to the situation that prevailed under the anti-dumping Code and especially views and documents from 1982 and 1984. The EU considers that the passages cited by Indonesia do not support its interpretation of Article 2.2.1.1 of the Anti-Dumping Agreement since the Code was very different from the current version of the Anti-Dumping Agreement and did not include any provision like Article 2.1.1.1.

 

17.   In the alternative, should those statements still have some relevance today, they would contradict Indonesia's and Argentina's interpretation of Article 2.2.1.1. Indeed, in its Article 1(4) the anti-dumping Code did not provide that the costs should normally be calculated on the basis of the records kept by the investigated companies, or that these records should reasonably reflect the costs associated with the production and sale of the relevant goods. To remedy this omission, WTO members have included the first sentence of Article 2.2.1.1 in the Anti-Dumping Agreement: costs reflected in companies' records must be reasonable.

 

18.   In any event, paragraph 5 of the draft recommendation on the implementation of the anti-dumping Code, to which Indonesia refers, expressly limits the scope of the recommendation to situations where the inputs are purchased "in the ordinary course of trade". However, Article 2.2.1.1 of the Anti-Dumping Agreement applies to situations where there are no sales in the ordinary course of trade such as in the present dispute.

 

7.         Argentina has failed to make a prima facie case on its "as such" challenge under Article 2.2.1.1 of the Anti-Dumping Agreement

 

19.   The EU considers Argentina's "as such" challenge against the second subparagraph of Article 2(5) of the EU's Basic Regulation is a more relevant point for the Panel's analysis. In the light of certain comments made by Third Parties in their submissions, the EU will submit the following: first, Argentina's failure to establish, as a matter of fact, the content and scope of the second subparagraph of Article 2(5); second, Argentina's failure to articulate properly, let alone establish, the "precise content" of the "norm or rule" that it purports to challenge "as such" and third, Argentina's failure to establish that the "norm or rule" that it purports to challenge "as such" is the type of measure that can be the subject of an "as such" challenge.

 

8.         The scope of the second subparagraph of Article 2(5)

 

20.   It is by now clear to all participants in these proceedings that Argentina's challenge against the second subparagraph of Article 2(5) of the Basic Regulation under Article 2.2.1.1 of the Anti‑Dumping Agreement is factually wrong. In its First Written Submission, Argentina has simply confused the scope of the second subparagraph of Article 2(5) with the scope of the first subparagraph of Article 2(5). Any other theory advanced by China and Indonesia is factually untenable. This is made clear by the text of the two subparagraphs of the Article 2(5) of the Basic Regulation. It is also made clear by the fact that the EU had already made determinations similar to the ones challenged by Argentina in the present case, on the basis solely of the first subparagraph of Article 2(5), before the second subparagraph of Article 2(5) was even introduced. Indonesia even acknowledges this latter fact in footnote 27 of its Third Party Submission.

 

21.   While the first subparagraph of Article 2(5) is repeating "verbatim the conditions on the first sentence of Article 2.2.1.1 of the Anti-Dumping Agreement", the second subparagraph does not relate to Article 2.2.1.1, but simply fills a gap, describing what actions authorities are authorised to take in order to calculate the costs when the company records cannot be used. In the Anti-Dumping Agreement, the closest provision to this second paragraph is subparagraph (iii) of Article 2.2.2, which refers to "any reasonable method" and to "any reasonable basis". This article was the inspiration for the drafting of the second subparagraph of Article 2(5). Therefore, the EU concludes that Argentina has simply directed its "as such" challenge under Article 2.2.1.1 of the Anti-Dumping Agreement against the wrong provision of the Basic Regulation.

 

9.         Argentina has failed to establish the "precise content" of the "norm or rule" that it challenges

 

22.   The Appellate Body has confirmed that, in order to substantiate an "as such" claim, the complaining party must first establish, inter alia, the "precise content" of the "rule or norm" that it challenges. In the present case, Argentina has failed to articulate properly, let alone establish, the "precise content" of the norm that it challenges "as such" under Article 2.2.1.1 of the Anti-Dumping Agreement.

 

23.  If Argentina is challenging "as such" Article 2(5) of the Basic Regulation "and more specifically its second paragraph", this challenge must fail. Indeed, there is broader consensus that this subparagraph allows EU authorities to act in a certain manner but does not oblige them, or mandate them to do so. If Argentina does not challenge this provision, its position is inconsistent. It challenges the "condition" that "refers in particular to situations where the prices are 'artificially low' or 'affected by a distortion'", the purported "continuous and established practice" of the EU, and Article 2(5) second paragraph of the Basic Regulation" which purportedly "refers to situations where the prices of an input are 'abnormally or artificially low' because they are set in a 'regulated market' or because of the existence of some alleged 'distortion' on the domestic market".

 

24.   Since Argentina has already acknowledged that it does not challenge "as such" any "practice" and consequently that any such challenge against a "practice" would be outside the Panel's terms of reference, it could assumed that Argentina challenges a written "norm or rule", i.e the second subparagraph of Article 2(5). Nonetheless, Argentina still does not offer consistency even in the description of the content of that "norm or rule" it is "as such" challenging. The EU understands that Argentina considers that the challenged "measure" is to be found beyond the actual text of Article 2(5) of the Basic Regulation. However, the EU submits that Argentina has failed to articulate properly and to establish with the requisite evidence the "precise content" of its claims.

 

10.       Article 2(5) of the Basic Regulation allows the investigating authorities discretion

 

25.   The EU believes that it by now clear that Art 2(5) does not mandates the investigating authorities to act in a particular manner and allows the authorities' discretion. In light of the recent Appellate Body Report in US – Carbon Steel (India), the discretionary nature of Article 2(5) of the Basic Regulation is fatal to Argentina's "as such" claims against Article 2(5).

 

26.   The EU finds problematic assertions like one made by China, which considers that in order to challenge "as such" a "rule or norm", it is "not necessary to show that it 'mandates' a WTO‑inconsistent outcome in every case". First, China does not offer any textual basis. Second, China's reference to the paragraph 172 of the Appellate Body Report in US – Oil Country Tubular Goods Sunset Reviews contradicts its position. Indeed, this paragraph does not refer to the "particular circumstances" asserted by China. Also China fails to explain how its assertion can be compatible with the nature of an "as such" claim, which according to the Appellate Body is directed against "laws and regulations". To the contrary, China's assertion transforms in essence every "as applied" claim to an "as such" claim, by renaming the application of the law in a specific case to an application in "particular", or "defined", or "at least certain" circumstances. Therefore, China's assertions must be rejected.

 

11.       The meaning of the term "associated" in Article 2.2.1.1 of the Anti-Dumping Agreement

 

27.   The EU in its First Written Submission noted that the ordinary meaning of the term "associated" is broader than the meaning of the words "actually incurred". It also noted that the Panel Report in Egypt-Steel Rebar supports its understanding of the ordinary meaning of the term "associated", because it uses the term "pertain", instead of the words "actually incurred".

 

28.   Indonesia disagreed with EU interpretation and noted that the chapeau of Article 2.2.2 of the Anti-Dumping Agreement also uses the term "pertain" to "refer to the actual data" of the company under investigation. The EU believes that its interpretation is the preferable one for several reasons.

 

29.   The ordinary meaning of the term "pertain" is "be appropriate" or "related". These terms are broader than the words "actually incurred". Therefore that ordinary meaning does not limit Article 2.2.1.1 to only those costs that have "actually been incurred" by the specific company under investigation.

 

30.   The EU's interpretation is confirmed by the context in which these terms are used. Indeed, Article 2.2.1.1, which is the subject of the present analysis, does not use the words "actual data" contained in the chapeau of Article 2.2.2 and referred by Indonesia, but the word "reasonably".

 

31.   The chapeau of Article 2.2.2 of the Anti-Dumping Agreement uses the term "pertaining to" in the context of the "ordinary course of trade". In contrast, the words "ordinary course of trade" are not found in Article 2.2.1.1 of the Anti-Dumping Agreement. Therefore, the term "pertaining to" in the chapeau of Article 2.2.2 is used in order to convey a different meaning form the term "associated" in Article 2.2.1.1 of the Anti-Dumping Agreement.

 

32.   The EU notes that the chapeau of Article 2.2.2, in combination with subparagraph (iii) of Article 2.2.2, provides that, in the absence of "ordinary course of trade", the investigating authority may use "any other reasonable method".

 

12.       Issues relating to Argentina's "as applied" claims

 

33.   The EU disagrees with the argument made by China that it has used "an average of the FOB reference prices" without making any "adjustment to this evidence". The EU's position was acknowledged by Argentina.

 

34.   The EU also disagrees with certain Third Parties taking the view that the prices used by the investigating authority were not from the "country of origin" for a number of reasons: the investigation revealed that the prices used were actually fixed by the government of Argentina, the prices were applied in Argentina, paid in Argentina and ensured that Argentinian producers of soya bean and soya bean oil received the same net price irrespective of the destination of their goods. This is not a case of application of the proviso on "information from other representative markets", but a case of application of the proviso on "any other reasonable basis", authorised by Article 2(5).

 

35.   Consequently, Argentina's "as applied" claim against the Definitive Regulation, based on Article 2.2 of the Anti-Dumping Agreement, must fail. And this, irrespective of whether Article 2.2 allows investigating authorities to seek evidence from outside the country of origin in order to calculate the costs of production in the country of origin.

 

 

Annex C-4

Executive Summary of the Statement of the European Union

at the Second Meeting of the Panel

1.     Introduction

 

1.     The European Union's Opening Statement will address the points raised by Argentina in its Second Written Submission.

 

2.     Terms of Reference / Panel's Findings

 

2.     In relation to Argentina's "as such" claim, the only measure before the Panel is the second subparagraph of Article 2(5) of the Basic Regulation, as well as any subsequent amendments or replacements to that specific subparagraph. In relation to Argentina's "as applied" claims, the only measures before the Panel are the Provisional Regulation and the Definitive Regulation, as well as any subsequent amendments or replacements to these specific Regulations.

 

3.     Argentina has failed to make a prima facie case on its "as such" claims

 

3.1.    Argentina has failed to establish the precise content of the second subparagraph of Article 2(5) of the Basic Regulation

 

3.1.1.         Argentina misrepresents the scope of the second subparagraph of Article 2(5) of the Basic Regulation

 

3.1.1.1     The text of the second subparagraph of Article 2(5) of the Basic Regulation

 

3.    In paragraph 26 of its Second Written Submission, Argentina acknowledges that the first subparagraph of Article 2(5) "implements the particular obligations laid down by Article 2.2.1.1 of the Anti-Dumping Agreement" and "closely mirrors the wording of Article 2.2.1.1". Paradoxically, Argentina continues to insist that it is the second subparagraph of Article 2(5) that provides the legal basis for the decision not to rely on the records of the investigated companies.

 

4.     In paragraphs 12 and 18 of its Second Written Submission, Argentina draws a distinction between what it calls the "first part of Article 2(5) second subparagraph [and] the second part of that provision". Argentina also asserts that the options given to the investigating authorities under "the second part of Article 2(5) second subparagraph" "imply" that they also constitute the "reasons why information of the domestic market cannot be used". However, there is nothing in the text of either the first or the second subparagraph of Article 2(5) that could support Argentina's assertion.

 

3.1.1.2     The lack of similarity with the EC-Fasteners case

 

5.     In paragraph 15 of its Second Written Submission, Argentina compares the present dispute with the situation faced by the Panel in EC – Fasteners. In that case, the Appellate Body found that in the absence of a specific provision, Article 9(5) of the Basic Regulation also concerned the calculation of dumping margins.

 

6.     In the present situation, the first subparagraph of Article 2(5) addresses precisely the question of the conditions that must be met in order to base the cost calculation on the company records.

 

3.1.1.3     Recital 4 of Regulation 1972/2002

 

7.     Argentina has repeatedly referred to Recital 4 of Regulation 1972/2002, with which the second subparagraph was added to Article 2(5). However, the text of that Recital does not support Argentina's arguments.

8.     First, the text of Recital 4 shows that Article 2(5) had already been the legal basis for the authorities' determination of whether the records reasonably reflected costs, before the introduction of the second subparagraph of Article 2(5). Second, in paragraph 69 of its Second Written Submission, Argentina confuses the sales of the like product [governed by Article 2(3)] with the "records that do not reasonably reflect the costs" associated with the production and sale of the relevant product. Third, in paragraph 70 of its Second Written Submission, Argentina asserts that Recital 4 "emphasises that the records must be found not to reasonably reflect the costs". However, Recital 4 expressly refers to guidance as to what has to be done after it has already been determined that the records do not reasonably reflect the costs. Fourth, Recital 4 does not have any impact on the interpretation of "reasonably reflect costs".

 

3.1.1.4        The alleged "background" of the second subparagraph of Article 2(5) of the Basic Regulation

 

9.     Argentina continues to insist that the "purpose" of the introduction of the second subparagraph of Article 2(5) "was to provide a legal basis for the authorities to achieve effects similar to those applied under NME treatment to Russia, although it was being granted full MES".

 

10.   In support of its assertions, Argentina refers to several comments of scholars listed in paragraph 43 of its First Written Submission. However, at the time of the publications, all the scholars referred to were actively involved in defending Russian companies in anti-dumping investigations relating to the application of Article 2(5) of the Basic Regulation. In these circumstances, it is doubtful whether their statements can be used as a source of interpretation of Article 2(5).

 

3.1.1.5     The judgments of the General Court

 

11.   Argentina has submitted as Exhibits certain judgments of the General Court which actually contradict its description of the scope of the second subparagraph of Article 2(5).

 

12.   The General Court's judgments in Cases T-235/08 and T-118/10 confirm three points. First, that the first subparagraph of Article 2(5) is the legal basis that authorises the investigating authorities to determine whether the records "reasonably reflect costs". Second, that the second subparagraph of Article 2(5) only provides the alternative sources of data that the investigating authorities may use when it has already been determined that the company records cannot be used, pursuant to the first subparagraph of Article 2(5). Third, that the first and the second subparagraphs of Article 2(5) authorise the investigating authorities to take certain actions, but do not mandate them to do so.

 

3.1.1.6        Examples of application of the first subparagraph of Article 2(5) of the Basic Regulation by the European Union's investigating authorities before 2002

 

13.   Argentina insists that the EU's investigating authorities had never determined that company records do not "reasonably reflect costs" before 2002.

 

14.   First, the EU's investigating authorities routinely used the provision which today is the first subparagraph of Article 2(5) in order to determine whether the company records "reasonably reflect" the relevant costs between 1995 and 2002, at a period when the second subparagraph of Article 2(5) did not exist. Example are the 2000 investigation on Urea and Ammonium Nitrate originating in Algeria et al., the 2001 investigation on certain Iron or steel ropes and cables originating in the Czech Republic, Russia, Thailand, et al., the 1996 investigation on Polyester textured filament yarn originating in Indonesia and Thailand, and the 2000 investigation on Tube or pipe fittings originating in Brazil, the Czech Republic, et al.

 

15.   Second, Argentina errs when it asserts that the investigations involving an application of Article 18 of the Basic Regulation are not relevant for purposes of Article 2(5). Even where they apply Article 18, the EU's investigating authorities still use the information supplied by the companies to the extent possible. Examples are the 2000 investigation on Synthetic staple fibres of polyester originating in Australia, Indonesia and Thailand and the investigation on Aluminium foil originating in China and Russia.

 

3.1.2.      Other shortcomings of Argentina's "as such" claims

 

16.   To sum up, Argentina purports to challenge "as such" the second subparagraph of Article 2(5) of the Basic Regulation under Article 2.2.1.1 and Article 2.2 of the Anti-Dumping Agreement. Argentina's challenge under Article 2.2.1.1 of the Anti-Dumping Agreement must be rejected for the simple reason that the scope of the second subparagraph of Article 2(5) has nothing to do with the content of the first sentence of Article 2.2.1.1 of the Anti-Dumping Agreement.

 

3.1.2.1     The text of the second subparagraph of Article 2(5) of the Basic Regulation is clear

 

17.   In its Second Written Submission, Argentina refers to the Appellate Body Report in US – Corrosion Resistant Steel and acknowledges that when a measure is challenged "as such" the starting point for the analysis "must be the measure on its face". Argentina also refers to the Appellate Body Report in US – Hot Rolled Steel and acknowledges that "further examination is required", only if the "meaning or content of the measure is not evident on its face".

 

18.   The EU has explained the reasons for which the scope, meaning and content of the second subparagraph of Article 2(5) are clear and evident on the basis of the provision's text. Argentina has actually acknowledged this fact in paragraph 50 of its Second Written Submission when it took issue with the EU's "exclusively focusing on the terms of Article 2(5), second subparagraph".

 

3.1.2.2        Argentina's description of the second subparagraph of Article 2(5) of the Basic Regulation

 

19.   The text of Argentina's Second Written Submission in essence confirms the EU's objection: there is still no concise and uniform description of the meaning and content of the second subparagraph of Article 2(5), despite the clarity of the provision's text.

 

20.   Argentina has also failed to identify the "precise content" of the second subparagraph of Article 2(5). Therefore, Argentina cannot make a prima facie case on an "as such" claim against the second subparagraph of Article 2(5) either under Article 2.2.1.1, or under Article 2.2 of the ADA.

 

3.2.    Argentina has failed to show that the Second Subparagraph of Article 2(5) of the Basic Regulation is "As Such" inconsistent with the Covered Agreements

 

3.2.1.      Argentina ignores the Appellate Body Report in US – Carbon Steel (India)

 

21.   In its Second Written Submission, Argentina asserts that "there is no provision" in the covered agreements which "establishes a mandatory/discretionary standard that the Panel would have to apply". However, Argentina omits to mention that the Appellate Body has used the "discretionary" nature of particular measures as a ground for rejecting "as such" claims against them. The most recent example is the Appellate Body's Report in US – Carbon Steel (India).

 

22.   In its Second Written Submission, Argentina states that providing for the possibility of "the use of a basis other than the cost of production in the country of origin renders the measure inconsistent with Article 2.2 of the ADA". However, Argentina is not consistent in its description of the content of the second subparagraph of Article 2(5) and has failed to establish that this provision mandates any particular conduct which is necessarily inconsistent with the covered agreements.

 

3.2.2.         Argentina's refusal of the discretion afforded to the investigating authorities by the second subparagraph of Article 2(5) of the Basic Regulation

 

3.2.2.1     The text of the second subparagraph of Article 2(5) of the Basic Regulation

 

23.   The text of the second subparagraph of Article 2(5) says nothing about the determination of whether the company records can be used or not. Therefore, Argentina cannot assert that the text of the second subparagraph of Article 2(5) "mandates" any conduct in relation to the determination of whether company records reasonably reflect costs.

24.   Argentina's arguments are based on the use of the word "shall" in the text of the second subparagraph of Article 2(5). However, the word "shall" in the text of the second subparagraph of Article 2(5) addresses the obligation of the investigating authorities to proceed with the construction of the normal value so that they can complete the anti-dumping investigation. It does not relate to any single method that the investigating authorities may use in order to establish or adjust the costs.

 

3.2.2.2     The alleged "practice" of the European Union's investigating authorities

 

25.   In paragraphs 102 to 104 of its Second Written Submission, Argentina states that "in all cases which involved a situation of 'abnormally low' or 'artificially low' prices caused by an alleged 'distortion', information on the domestic market could not be used and the authorities used information from other representative markets".

 

26.   As already noted, the investigations of the EU's authorities do not support Argentina's arguments on the purported "absence of discretion" afforded by the second subparagraph of Article 2(5).

 

3.2.2.3     The judgments of the General Court

 

27.   In paragraph 105 of its Second Written Submission, Argentina states that the "use of the word 'entitled'" in the judgments of the General Court "does not confirm that Article 2(5) is discretionary". However, the ordinary meaning of the word "entitle" is "to grant someone a right". The use of the word "entitled" means that the General Court considers that the second subparagraph of Article 2(5) grants to the investigating authorities the right to act in a certain way, without obliging them.

 

28.   Moreover, Argentina omits to mention that the relevant paragraph of the General Court's judgment, to which it refers, reads as follows: "The institutions were therefore fully entitled to conclude that …". This makes clear that the General Court was actually examining whether the investigating authorities had gone beyond the discretion that both the first and the second subparagraphs of Article 2(5) affords them.

 

3.3.  Conclusion

 

29.   To sum up, Argentina has failed to make a prima facie case on its "as such" claims against the second subparagraph of Article 2(5) under Article 2.2.1.1 and Article 2.2 of the ADA.

 

4.     Argentina advances an erroneous interpretation of Article 2.2.1.1 of the ADA

 

4.1.  The text of Article 2.2.1.1 of the Anti-Dumping Agreement

 

30.   Argentina reiterates that this provision requires the "records to reasonably reflect" the relevant costs and that there is no "reasonableness test of the cost elements themselves". In support of its assertions, Argentina inaccurately refers to paragraph 7.393 of the Panel Report in Egypt – Steel Rebar. The real text contradicts Argentina's understanding and confirms the EU's interpretation.

 

31.   In paragraph 113 of its Second Written Submission, Argentina asserts "the term 'costs' as 'charges or expenses' refers to a concrete amount by opposition to a hypothetical value". However, the use of these "hypothetical" amounts is allowed by Article 2.2 of the ADA in constructing the normal value.

 

32.   In paragraphs 115 to 117 Argentina states that the relevant costs "are necessarily the costs of the specific exporter/producer" who is involved in the anti-dumping investigation. However, the ADA allows the investigating authority to use costs from outside the specific company.

 

33.   In paragraph 116 Argentina misrepresents the Panel's Report in Egypt – Steel Rebar. In reality, the Panel's findings are the opposite of what is asserted by Argentina, showing that the determination of whether company records "reasonably reflect costs" depends on the facts of each case.

 

34.   In paragraph 117, Argentina misquotes paragraph 7.483 of the Panel Report in EC – Salmon. The Panel does not "note" that the costs "necessarily refer to the costs actually incurred" but referred to costs associated with the production and sale "of the like product".

 

4.2.  The Context of Article 2.2.1.1 of the Anti-Dumping Agreement

 

35.   In paragraph 119 of its Second Written Submission, Argentina asserts that the second and third sentences of Article 2.2.1.1 "illustrate the types of issues that may arise under the second condition of Article 2.2.1.1, first sentence". However Argentina fails to take into consideration the important textual differences between these sentences.

 

36.   In paragraphs 122 to 126, Argentina asserts that "the costs associated with the production and sale' do not need to be reasonable. This argument fails on the basis of the texts of the chapeau of Article 2.2, Article 2.2.1.1 and Article 2.2.2(iii).

 

37.   In paragraphs 127 to 133, Argentina seeks to build certain arguments on the purported definition of dumping. However, in paragraph 127 Argentina omits to mention that the condition for the application of Article 2.1 is the existence of domestic sales in the ordinary course of trade. Also, in paragraphs 128 to 134, Argentina refers to the zeroing cases without mentioning that they did not involve the construction of normal value.

 

4.3.  The Object and Purpose of the Anti-Dumping Agreement

 

38.   Argentina discusses two points: (a) the ad hoc group on the implementation of the anti-dumping code of the Tokyo Round; and (b) the negotiating history of the Anti-Dumping Agreement in the Uruguay Round. However, none of them supports Argentina's position.

 

39.   In relation to the first point, the documents discussed by Argentina in paragraphs 142 to 144 of its Second Written Submission are irrelevant for the present dispute. In relation to the second point, the negotiating history of Article 2.2.1.1 actually supports the European Union's interpretation.

 

5.     Argentina advances an erroneous interpretation of Article 2.2 of the ADA

 

40.   Argentina's Second Written Submission does not provide any convincing factual evidence or legal arguments to support its excessively restrictive interpretation of the chapeau of Article 2.2 of the Anti-Dumping Agreement. For example, in paragraph 152, Argentina's argument is circular. In paragraphs 153 and 156 Argentina contradicts itself with respect to paragraph 154.

 

6.     Factual Elements Relating to the Biodiesel Investigation

 

41.   There are no "factual inconsistencies" in the EU's submissions and statements in the present dispute.

 

42.   Indeed, in paragraph 169 of its Second Written Submission, Argentina actually confirms that prices were "published by the government of Argentina". In paragraph 174, Argentina makes reference to the use of the term "particular market situation" in the Definitive Regulation. However, this notion is not relevant in the present dispute. In this paragraph, Argentina also makes reference to the "DET system" and the "export tax on soybean and soybean oil" whereas there is no real difference between the two terms. In paragraph 172, Argentina asserts that there is a contradiction regarding the levels of imports between the figures in the Regulations and those presented in the Reply to the Panel's Question 78. However, there is non since Recital 133 of the Provisional Regulation refers to imports by EU's "producers" rather than to the "industry".

 

7.     Paragraphs 175 to 196 of Argentina's Second Written Submission

 

43.   In paragraphs 185 to 187, Argentina is relying on the wrong legal authority since the relevant findings of the Panel in Egypt – Steel Rebar, do not relate to the issue of "benchmarking". In paragraphs 188 and 189, Argentina contradicts its Reply to Question 43. In paragraphs 191 and 193 although the FOB reference prices "reflected" international prices, Argentine-determined FOB reference prices cannot themselves be "international prices". Finally, in paragraph 192 Argentina's theory is incorrect because the third sentence of Article 2.2.1.1 expressly provides that costs can be adjusted in certain circumstances.

 

8.     Argentina's Other Claims

 

8.1.  The issue of Profits

 

44.   Argentina has failed to make a prima facie case on its claims against the amount of profits established by the investigating authorities. For example, in paragraph 145 Argentina appears to assert that it is the methodology that needs to be "reasonable" and not the profit figure that needs to be "reasonable'. However Article 2.2 of the ADA expressly refers to a "reasonable amount for […] profits".  

 

8.2.  The claim under Article 2.4 of the Anti-Dumping Agreement

 

45.   First, if Argentina refers to the concept of "differences affecting price comparability", in the sense of Article 2.4 of the ADA, the EU confirms that it denies that such differences exist in the present case.

 

46.   Second, Argentina has admitted during the First Hearing that it does not claim that the investigating authorities should have added the value of the export tax to the export price of biodiesel.

 

47.   Third, Argentina reverses the order of the analysis by stating that the investigating authorities could have acted consistently with Article 2.4, while acting inconsistently with Article 2.2 of the ADA.

 

8.3.  The claim under Article 9.3 of the Anti-Dumping Agreement

 

48.   In paragraph 209, Argentina statement confirms that it is in reality challenging the construction of normal value. Such a challenge may fall within the scope of Article 2, but falls outside the scope of Article 9.3 of the Anti-Dumping Agreement.

 

49.   In paragraph 213, Argentina states that the EU's interpretation could lead to a situation, which is not the type of situations that Article 9.3 covers.

 

50.   Finally, in paragraph 213, Argentina refers to paragraph 132 of the Appellate Body Report in US – Zeroing (EC). However these findings have no relation to the construction of normal value, or to a claim under Article 9.3 of the Anti-Dumping Agreement which is based on an allegedly erroneous construction of normal value, similar to the claims put forward by Argentina in the present case.

 

9.     Article 3 Claims

 

51.   In paragraph 216, Argentina continues to treat the issue of "utilisation of capacity" as a stand-alone issue, divorced from its context.

 

52.   Recital 131 of the Definitive Regulation sets out the findings of the investigation. Since Argentina accepted the investigating authorities' provisional judgment on the matter, Argentina should also accept the authorities' final judgment.

 

53.   Argentina refers to the case of Diester. The verification of Diester took place before the Provisional Regulation had been adopted and when the issue of "idle" plants had not emerged as a serious factor.

 

54.   As regards causation and the role of overcapacity, the investigating authorities had made clear that the production figures presented in the Provisional Regulation could no longer be relied upon.

 

55.   Argentina argues that the EU was in effect a trader in biodiesel. This contradicts Argentina's previous allegation that the industry vastly overextended its production capacity.

56.   Argentina wrongly accuses the investigating authorities of failing to examine double-counting regimes other than the French regime.

 

57.   The investigating authorities' findings did not dispute that other factors had contributed to the situation of the EU industry. However, having analysed and distinguished those factors, they found that they did not undermine the conclusion that the dumped imports were a cause of the material injury that had been identified.

 

Annex C-5

Executive Summary of the European Union's Request

for a Preliminary Ruling

 

1.     Introduction

 

1.     Article 6.2 of the Dispute Settlement Understanding (DSU) requires that a request for the establishment of a panel (Panel Request) must, inter alia, (a) identify the specific measures at issue; (b) provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly; and (c) indicate whether consultations were held. Argentina's Panel Request in the present case fails to meet these requirements. For this reason, the European Union requests the Panel to issue a preliminary ruling, confirming that the claims identified in the present submission are outside the Panel's terms of reference.

 

2.     The Panel's Working Procedures provide, in paragraph 7, that a party shall submit any request for a preliminary ruling at the earliest possible opportunity and in any event no later than in its first written submission to the Panel. The Working Procedures also provide that, if the European Union requests such a ruling, Argentina shall submit its response to the request prior to the first substantive meeting of the Panel, at a time to be determined by the Panel. Therefore, the European Union's request for a preliminary ruling is submitted timely and properly, in accordance with the Panel's Working Procedures.

 

2.     Argentina's Failure to identify the "Specific Measures at Issue"

 

3.     The need for precision in panel requests flows from the two essential purposes of the terms of reference: (a) to define the scope of the dispute and (b) to serve the due process objective of notifying the parties and third parties of the nature of the complainants' case.^[134] To meet this need of precision, a Panel Request must specify the measures challenged with sufficient particularity, so as to indicate the nature of the measure and the gist of what is at issue.^[135]

 

4.     Argentina's Panel Request contains a section entitled "1. The Measures at issue." This section purports to "enumerate" the "measures" which Argentina is challenging. The section contains two paragraphs.

 

5.     Paragraph 1(A) of Argentina's Panel Request starts by mentioning Article 2(5) of Council Regulation (EC) 1225/2009 and continues by referring to "any subsequent amendments, replacements, implementing measures and related instruments or practices." This phrase also appears in footnote 7 of Argentina's Panel Request, which compliments Argentina's definition of what Argentina calls the "Basic Regulation."

 

6.     Paragraph 1(B) of Argentina's Panel Request lists certain "anti-dumping measures imposed by the European Union." Footnote 3 mentions Commission Regulation 490/2013, while footnote 2 mentions Council Implementing Regulation 1194/2013. Paragraph 1(B) concludes by asserting that the "measures at issue" also include "any subsequent amendments, replacements, related measures and implementing measures."

 

7.     These elements in Argentina's Panel Request fail to comply with the provisions of Article 6.2 of the DSU, because they fail to "identify the specific measures at issue."

 

8.     In particular, the references to "implementing measures and related instruments or practices" and to "related measures and implementing measures" are too vague and do not allow the identification of the specific instruments that the references aim to cover. The Appellate Body has already found that references to "implementing measures and other related measures" do not "identify the specific measures at issue, as required in Article 6.2 of the DSU and, therefore, fall outside the panels' terms of references.^[136]

 

9.     Consequently, Argentina's claims against "implementing measures and other related measures" in Paragraph 1(A) and footnote 7 of its Panel Request, as well as Argentina's claims against "related measures and implementing measures" in Paragraph 1(B) of its Panel Request, fall outside the Panel's terms of reference.

 

3.     Argentina's Failure to "Present the Problem Clearly"

 

10.   The requirement to "present the problem clearly" aims at enabling the Panel, the defending party and third parties to know which obligations are allegedly violated, as well as how the challenged measures are allegedly inconsistent with these obligations. The general requirement to "present the problem clearly" has two aspects. First, the panel request must identify the "legal basis" of the complaint. In order to meet the requisite standard of clarity, the panel request may be required to specify particular sub-paragraphs of a treaty provision.^[137] Second, the panel request must "plainly connect the challenged measures with the provisions of the covered agreements claimed to have been infringed."^[138] Argentina's Panel Request fails to meet both these requirements.

 

3.1. The "inter alia" legal basis

 

11.   Argentina's Panel Request has a Section "2", entitled "Legal Basis for Claims." Sub‑section 2(A) includes a paragraph that reads: "Argentina considers that [name of measure] is inconsistent as such with, inter alia, the following provisions of the [names of covered agreements]."

 

12.   The use of the words "inter alia" indicates that the list of provisions of the covered agreements expressly listed in Sub-section 2(A) of Argentina's Panel Request is not exhaustive. Argentina retains for itself the possibility to add more, unspecified provisions of the covered agreements, as "legal bases" for its claims after the circulation of the Panel Request. Neither the European Union, nor the Panel has any idea of what claims or legal bases Argentina will finally present in this case: the words "inter alia" make the list of claims in Argentina's Panel Request completely open-ended.

 

13.   Consequently, Argentina's Panel Request fails to identify properly the legal basis of the complaint and fails to "present the problem clearly." This is inconsistent with Article 6.2 of the DSU and places the relevant claims outside the Panel's terms of reference.

 

3.2. Paragraph 2(B)6 of Argentina's panel request

 

14.   Sub-section 2(B) of the Panel Request purports to present Argentina's views on the "anti‑dumping measures imposed by the European Union on imports of biodiesel originating in, inter alia, Argentina." The introduction of Sub-section 2(B) includes a footnote 8, which refers the reader to footnote 3. Footnote 3 refers to Commission Regulation 490/2013 and to Council Implementing Regulation 1194/2013.

 

15.   Paragraph 2(B)6 of Argentina's Panel Request states that these two legal instruments are inconsistent with Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT, because "the European Union imposed and levied anti-dumping duties in excess of the margin of dumping that should have been established in accordance with Article 2 of the Anti-dumping Agreement." This paragraph fails to meet the requirements of Article 6.2 of the DSU, for a number of reasons.

 

16.   First, Paragraph 2(B)6 alleges that the challenged measures are inconsistent with "Article 9.3 of the Anti-Dumping Agreement." However, Article 9.3 of the Anti-Dumping Agreement is composed of a chapeau and three sub-paragraphs. Each of these deals with a different set of conditions. Argentina's Panel Request fails to mention the specific sub-paragraph of Article 9.3, with which the challenged measures are supposed to be inconsistent. This runs against Article 6.2 of the DSU, which requires Panel Requests to refer to the specific sub-paragraph of the WTO treaty provision that is supposed to be infringed by the challenged measure, where there are such sub‑paragraphs containing different sets of obligations.^[139]

 

17.   Second, Argentina fails to articulate clearly the exact claim it advances. Paragraph 2(B)6 alleges that the European Union "imposed and levied anti-dumping duties in excess of the margin of dumping that should have been established." From this wording it is not clear whether Argentina actually challenges (a) the comparison between the anti-dumping duty and the margin of dumping (e.g., that there was some numerical mistake in the text of the Regulation resulting in the mentioned amount of the duty being higher than the mentioned amount of the dumping margin); or (b) the method of calculation of the margin of dumping itself. In other words, it is not clear whether Argentina's challenge should be understood as being directed against the "in excess", or against the "should have been established."

 

18.   In that context, it is noted that the calculation of the anti-dumping duty is discussed in paragraphs 214 to 219 and in Article 1 of the Council Implementing Regulation. In contrast, the calculation of the margin of dumping is discussed in paragraphs 59 to 65 of the Council Implementing Regulation. Paragraph 2(B)6 of Argentina's Panel Request fails to explain plainly which of these two different sections of the Council Implementing Regulation it challenges. The result is that the European Union does not understand the scope of the challenge against which it must defend itself and the Panel does not understand the scope of the challenge facing it.

 

19.   Third, even if we assume arguendo that Argentina actually challenges the method of determining the dumping margin, then again Paragraph 2(B)6 fails to comply with the requirements of Article 6.2 of the DSU. The determination of the dumping margin was based on (a) the calculation of the "normal value"; (b) the calculation of the "export price"; (c) the comparison between them; and (d) the analysis of certain requests presented by Argentinean exporters. Both the Commission Regulation and the Council Implementing Regulation discuss each of these issues separately, in four different sections with four different titles.^[140] Paragraph 2(B)6 fails to explain plainly which of these issues (and which of the corresponding sections of the Regulations) it challenges. Again, the European Union and the Panel cannot understand the scope of the challenge facing them.

 

20.   Fourth, even if we further assume arguendo that Argentina actually challenges only the fourth relevant section of the Regulations, i.e., the one entitled "Dumping Margins", then again Paragraph 2(B)6 fails to comply with the requirements of Article 6.2 of the DSU.

 

21.   The relevant section 2.4 of the Council Implementing Regulation discusses two different and distinct issues. First, in paragraphs 59 to 60, the Regulation discusses a request advanced by "all cooperating Argentine exporting producers" in relation to the imposition of a "single duty for all cooperating exporting producers." Second, in paragraphs 61 to 64, the Regulation discusses a completely different request submitted by another three companies. These companies requested to "be included in the list of cooperating exporting producers." Their request was rejected because, either they were not exporting themselves to the European Union, or because they were not producing biodiesel during the investigation period. Paragraph 2(B)6 of the Panel Request does not provide the faintest indication of which of these two issues Argentina is actually challenging. Again, the European Union and the Panel cannot understand the scope of the challenge facing them.

 

22.   Consequently, Paragraph 2(B)6 of Argentina's Panel Request falls outside the Panel's terms of reference.

 

4.     Argentina's Panel Request Expands the Scope of the Dispute

 

23.   Consultations requests constitute a prerequisite for panel requests and, as a result, they "circumscribe the scope of panel requests."^[141] The Appellate Body has held that a panel request cannot include claims (either in relation to "challenged measures", or in relation to "legal bases"), which were not included in the corresponding consultations request, where these "new" claims "expand the scope of the dispute",^[142] or have the effect of "changing the essence of the complaint."^[143]

 

24.   In the present case, Argentina's Panel Request includes a great number of such new claims, which expand the scope of the dispute and change the essence of the complaint set out in Argentina's request for consultations (Consultations Request).

 

25.   These new claims include the following: (1) a new claim against a new "measure", which Argentina calls "practices" related to Article 2(5) of Council Regulation 1225/2009 (Panel Request Paragraph 1(A)); (2) an unclear "as applied" claim against Article 2(5) of Council Regulation 1225/2009 (Panel Request Paragraph 2(B)3); (3) a new claim under Article 9.3 of the Anti-dumping Agreement against Article 2(5) of Council Regulation 1225/2009 (Panel Request Paragraph 2(A)3); (4) a new claim under GATT Article VI:1 against Article 2(5) of Council Regulation 1225/2009, alleging use of information other than that in the country of origin (Panel Request Paragraph 2(A)1); (5) a new claim under GATT Article VI:1 against Article 2(5) of Council Regulation 1225/2009, alleging not using the records kept by the producers and, further alleging, using costs not associated with the production and sale of the product under consideration (Panel Request Paragraph 2(A)2); (6) new claims under Articles 2.2 and 2.2.1.1 of the Anti-dumping Agreement against Article 2(5) of Council Regulation 1225/2009, alleging using costs not associated with the production and sale of the product under consideration (Panel Request Paragraph 2(A)2); (7) a new claim under Article 2.1 of the Anti-dumping Agreement against the Commission Regulation and the Council Implementing Regulation, alleging "unreasonable" determination of the amounts of profits (Panel Request Paragraph 2(B)4).

 

26.   The sheer number and breadth of these new claims suffices to illustrate that Argentina's Panel Request seeks to expand the scope of the dispute. The individual analysis of each of these new claims further establishes that Argentina's Panel Request changes the "essence" of the complaint.

 

4.1. New "measures" presented by Argentina for the first time in the Panel Request

 

27.   Paragraph 1(A) of Argentina's Panel Request challenges for the first time "related practices", in addition to Article 2(5) of Council Regulation 1225/2009. In contrast, Argentina's Consultations Request did not include any such reference. Argentina's Consultations Request, in its Paragraph b., refers solely to Article 2(5) of Council Regulation 1225/2009, i.e., a specific, written legal provision. The claim against "related practices" is a new claim, which expands the scope of the dispute and changes the essence of Argentina's complaint.

 

28.   There are no facts that could support a finding that this new claim might "reasonably be said to have evolved" from the consultations. Argentina was fully aware of the European Union's interpretation and application of Article 2(5) of Council Regulation 1225/2009 already at the time of its Consultations Request. This is evidenced, inter alia, by the fact that Argentina's Consultations Request included claims against the Commission Regulation and the Council Implementing Regulation, which were based on Article 2(5) of Council Regulation 1225/2009. Therefore, Argentina's decision to add the new claim against "related practices" in its Panel Request cannot be said to have "evolved" from the consultations.

 

29.   It is also noted that the Consultations Request expressly stated that Argentina challenges Article 2(5) of Council Regulation 1225/2009 "as such." The reference to an "as such" claim further shows that Argentina was challenging a specific, written legal provision and not the application of that legal provision. Argentina's attempt to add a claim on the application of Article 2(5) of Council Regulation 1225/2009 changes the essence of the original complaint.

 

30.   Consequently, the claim against "related practices" in Paragraph 1(A) of Argentina's Panel Request expands the scope of the dispute and changes the essence of the complaint and, therefore, falls outside the Panel's terms of reference.^[144]

 

4.2. New "Legal Bases" raised by Argentina for the first time in the Panel Request

 

4.2.1.         The new and unclear "as applied" claim against Article 2(5) of Council Regulation 1225/2009

 

31.   Between Paragraph 2(B)3 and Paragraph 2(B)4 of the Panel Request, Argentina has inserted a new, not-numbered paragraph which seems to introduces an "as applied" challenge against Article 2(5) of Council Regulation 1225/2009. The role of this not-numbered paragraph is ambiguous. The Consultations Request expressly stated in Paragraph b. that Argentina was challenging Article 2(5) of Council Regulation 1225/2009 only "as such", without any reference to an "as applied" claim. The Panel Request repeats the reference to the "as such" claim in the last sub-paragraph of the chapeau of Paragraph 2(A).

 

32.   On its face, it is not clear whether this not-numbered paragraph is intended to introduce an "as applied" claim against Article 2(5) of Council Regulation 1225/2009. In any event, if we assume arguendo that Argentina is introducing an "as applied" claim against Article 2(5) of Council Regulation 1225/2009, then such claim is new and expands the scope of the original dispute, as presented in Argentina's Consultations Request. In addition, it seems to be misplaced in section B, which rather deals with the provisional and the definitive regulations.

 

33.   There are no facts that could support a finding that this new claim might "reasonably be said to have evolved" from the consultations. Argentina was fully aware of the European Union's interpretation and application of Article 2(5) of Council Regulation 1225/2009 already at the time of its Consultations Request. This is evidenced, inter alia, by the fact that Argentina's Consultations Request included claims against the Commission Regulation and the Council Implementing Regulation, which were based on Article 2(5) of Council Regulation 1225/2009.

 

34.   Therefore, all the elements that would have allowed Argentina to include the "as applied" challenge against Article 2(5) of Council Regulation 1225/2009 were at the disposal of Argentina already at the time it submitted its Consultations Request. However, Argentina did not advance these claims in its Consultations Request. Allowing Argentina to ignore the consequences of its own decision and put forward a completely new list of claims in its Panel Request would dilute the role of the Consultations Request.

 

35.   Consequently, this claim of Argentina falls outside the Panel's terms of reference.

 

4.2.2.         The new claim against Article 2(5) of Council Regulation 1225/2009 based on Article 9.3 of the Anti-dumping Agreement

 

36.   Paragraph 2(A)3 of Argentina's Panel Request introduces a new claim against Article 2(5) of Council Regulation 1225/2009, based on Article 9.3 of the Anti-dumping Agreement. Argentina claims for the first time that Article 2(5) of Council Regulation 1225/2009 is "as such" inconsistent with Article 9.3 of the Anti-dumping Agreement, because, allegedly, the "amount of the anti-dumping duty to be imposed exceeds the margin of dumping."

 

37.   This claim did not exist in Argentina's Consultations Request. Paragraph b. of the Consultations Request (which dealt with Article 2(5) of Council Regulation 1225/2009) did not make any reference to Article 9.3 of the Anti-dumping Agreement. Moreover, Paragraph b. of the Consultation Request did not make any reference to an alleged "excess" of the anti-dumping duty, if compared with the margin of dumping. Therefore, there is no doubt that the claim in Paragraph 2(A)3 of the Panel Request is a new claim, which expands the scope of the dispute and changes the essence of Argentina's original complaint.

 

38.   There are no facts that could support a finding that this new claim might "reasonably be said to have evolved" from the consultations. Argentina was fully aware of the European Union's interpretation and application of Article 2(5) of Council Regulation 1225/2009 already at the time of its Consultations Request. Argentina was also aware of all the facts that would have allowed Argentina to allege that the anti-dumping duty was in excess of the dumping margin. This is evidenced, inter alia, by the fact that Argentina's Consultations Request included claims under Article 9.3 of the Anti-dumping Agreement against the Commission Regulation and the Council Implementing Regulation, which were based on Article 2(5) of Council Regulation 1225/2009.^[145]

 

39.   Therefore, all the elements that would have allowed Argentina to challenge Article 2(5) of Council Regulation 1225/2009 under Article 9.3 of the Anti-dumping Agreement were at the disposal of Argentina already at the time it submitted its Consultations Request. However, Argentina did not advance these claims in its Consultations Request. Allowing Argentina to ignore the consequences of its own decision and put forward a completely new list of claims in its Panel Request would dilute the role of the Consultations Request.

 

40.   Consequently, Argentina's new claim against Article 2(5) of Council Regulation 1225/2009, alleging an inconsistency with Article 9.3 of the Anti-dumping Agreement, as well as that the anti-dumping duty allegedly "exceeds" the dumping margin, falls outside the Panel's terms of reference.

 

4.2.3.         New claims against Article 2(5) of Council Regulation 1225/2009 based on Article VI:1 of the GATT 1994

 

41.   Paragraph 2(A)1 and Paragraph 2(A)2 of Argentina's Panel Request include new claims against Article 2(5) of Council Regulation 1225/2009 that are based on Article VI:1 of the GATT 1994. Argentina's Consultations Request did not include any claim based on Article VI:1 of the GATT. It also did not include any claims against Article 2(5) of Council Regulation 1225/2009 based on the GATT 1994.^[146] Therefore, these claims are new and they expand the original scope of the dispute.

 

42.   There are no facts that could support a finding that this new claim might "reasonably be said to have evolved" from the consultations. Already at the time of its Consultations Request, Argentina was fully aware that Article 2(5) of Council Regulation 1225/2009 is part of the European Union's anti-dumping legislation. Therefore, there was nothing preventing Argentina from challenging Article 2(5) of Council Regulation 1225/2009 under Article VI:1 of the GATT, which is part of the GATT Article dealing with anti-dumping. This is evidenced, inter alia, by the fact that Argentina's Consultations Request already included claims against Article 2(5) of Council Regulation 1225/2009 that were based on the Anti-dumping Agreement.

 

43.   Moreover, Argentina cannot argue that adding new claims under Article VI:1 of the GATT does not change the "essence" of the complaint, alleging that the original complaint was already based on the Anti-dumping Agreement and further alleging that its scope is the same with the scope of Article VI of the GATT. If Article VI:1 of the GATT and the provisions of the Anti-dumping Agreement included in Argentina's Consultations Request had identical scope, then the addition of a claim based on GATT Article VI:1 in the Panel Request would have been redundant and the Panel would simply exercise judicial economy on it. The fact that Argentina chose to add the new GATT Article VI:1 claim in its Panel Request shows that Argentina considers that the two sets of provisions have different scope and that the "essence" of GATT Article VI:1 is different from the "essence" of the provisions of the Anti-dumping Agreement included in the Consultations Request. Therefore, by adding the GATT Article VI:1 claim in its Panel Request, Argentina confirms that it changes the "essence" of its original complaint.

 

44.   Consequently, Argentina's new claims under Article VI:1 of the GATT fall outside the Panel's terms of reference.

 

4.2.4.         New claims against Article 2(5) of Council Regulation 1225/2009 based on Articles 2.2 and 2.2.1.1 of the Anti-dumping Agreement

 

45.   In Paragraph 2(A)2 of its Panel Request, Argentina alleges the violation of Articles 2.2 and 2.2.1.1 of the Anti-dumping Agreement "for two reasons." As "second reason", Argentina asserts that Article 2.2 and 2.2.1.1 of the Anti-dumping Agreement "require that the costs used be associated with the production and sale of the product under consideration."

 

46.   These are new claims against Article 2(5) of Council Regulation 1225/2009, which were not included in Argentina's Consultations Request; the corresponding paragraph in Argentina's Consultations Request appears to be Paragraph b.2, which (a) includes only a claim based on Article 2.2.1.1 of the Anti-dumping Agreement and (b) refers to the calculation of costs "on the basis of records kept by the exporter." The new claims in Argentina's Panel Request expand the scope of the dispute and change the essence of the complaint because (a) they introduce a new legal basis (i.e., Article 2.2 of the Anti-dumping Agreement); and (b) they introduce a new type of complaint (i.e., the alleged use of costs not "associated with the production and sale of the product under consideration").

 

47.   There are no facts that could support a finding that these new claims might "reasonably be said to have evolved" from the consultations. Argentina was fully aware of the European Union's interpretation and application of Article 2(5) of Council Regulation 1225/2009 already at the time of its Consultations Request. Argentina was also aware of all the facts that would have allowed Argentina to articulate this claim in its Consultations Request. This is evidenced, inter alia, by the fact that Argentina's Consultations Request included claims against the Commission Regulation and the Council Implementing Regulation alleging a violation of Articles 2.2 and 2.2.1.1 of the Anti‑dumping Agreement and referring to the alleged inclusion of "costs not associated with the production and sale of the product under consideration."^[147]

 

48.   Therefore, Argentina could have made this claim against Article 2(5) of Council Regulation 1225/2009 in its Consultations Request, but did not do so. Allowing Argentina to ignore the consequences of its decision and put forward a completely new list of claims in its Panel Request would dilute the role of the Consultations Request.

 

49.   Consequently, Argentina's new claims against Article 2(5) of Council Regulation 1225/2009, based on Article 2.2 and Article 2.2.1.1 of the Antidumping Agreement and alleging the use of costs not associated with the production and sale of the product under consideration, are outside the Panel's terms of reference.

 

4.2.5.         The new claim against the Commission Regulation and the Council Implementing Regulation based on Article 2.1 of the Anti‑dumping Agreement

 

50.   In paragraph 2(B)4 of its Panel Request, Argentina alleges that the European Union acted inconsistently with "Articles 2.1, 2.2 and 2.2.2(iii) of the Anti-dumping Agreement", because it failed to determine the "amounts of profit" on the "basis of a reasonable method." The corresponding paragraph in Argentina's Consultations Request is Paragraph a.5, where Argentina alleges that the European Union failed to determine the "amounts of profit" in "accordance with the rules established under" Articles 2.2 and 2.2.2 of the Anti‑dumping Agreement.

 

51.   These two paragraphs provide a good example of the difference between (a) "refining the contours" of a claim and (b) expanding the scope of the dispute. The Panel Request relies on Article 2.2.2(iii) of the Anti-dumping Agreement, while the Consultations Request referred to Article 2.2.2 in general. This development can probably "reasonably be said" to have "evolved from the consultations." The same can be said for the description of the claim: the Panel Request alleges a determination not "on the basis of a reasonable method", while the Consultations Request mentioned more generally a determination not "in accordance with the rules established under" Articles 2.2 and 2.2.2. The text of the Panel Request is a more precise version of the more general text used in the Consultations Request.

 

52.   In contrast, Argentina's addition of a new claim under Article 2.1 of the Anti-dumping Agreement cannot "reasonably be said" to have "evolved from the consultations." Argentina was in possession of all the elements that would have allowed it to advance a claim under Article 2.1 of the Anti-dumping Agreement already at the time of the Consultations Request. The potential "refining of the contours" of Argentina's claims, brought about by the consultations, was the clarification of the precise sub-paragraph of Article 2.2.2 that would serve as legal basis for its claim. Argentina went farther than that in its Panel Request: it added a new legal basis for its claim.

53.   At the time of the Consultations Request, Argentina decided not to challenge the European Union's determination of profits under Article 2.1 of the Anti-dumping Agreement, although it could have done so. Article 6.2 of the DSU requires that Argentina be now held to the consequences of that decision.

 

54.   Consequently, Argentina's new claim under Article 2.1 of the Anti-dumping Agreement in paragraph 2(B)4 of its Panel Request is outside the Panel's terms of reference.

 

5.     Conclusion

 

55.   The European Union requests the Panel to issue a preliminary ruling confirming that the claims of Argentina's Panel Request that are discussed in the present submission are outside the Panel's terms of reference.

 

56.   The European Union also requests that this preliminary ruling be issued before the date on which the European Union's first written submission is due. This will allow the European Union to identify the precise claims to which it will need to defend itself in its first written submission.

 

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