EUROPEAN COMMUNITIES – ANTI-DUMPING

EUROPEAN COMMUNITIES – ANTI-DUMPING DUTIES ONMALLEABLE CAST IRON TUBE OR PIPE FITTINGSFROM BRAZIL
Report of the Panel
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7.125 In the underlying investigation, the European Communities defined the product underconsideration as: "threaded malleable cast-iron tube or pipe fittings … which are joined by ascrewing joining system, falling within CN code ex 7307 19 10".138 The European Communities alsofound that "malleable fittings produced by the Community industry and sold on the Communitymarket as well as malleable fittings produced in the countries concerned and exported to theCommunity were like products, since there were no differences in the basic physical and technicalcharacteristics and uses of the existing different types of malleable fittings".139
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5. Issue 5: constructed normal value -- product codes
(a) Arguments of the parties
7.141 Brazil asserts that Article 2.2.2, read together with Article 2.6, requires that where anidentical product exists, sales data relating to the SG&A and profits of that identical product must beused exclusively in constructing normal value. Only in the absence of sales of such an identicalproduct may data relating to sales of a product with closely resembling characteristics be used. Braziltherefore submits that the European Communities acted inconsistently with Article 2.2.2 inconstructing the normal value for certain product types (with codes “12” and “18”) by including datarelating to domestic sales of "non-identical" product types (with codes "68" and "69").149
7.145 Brazil objects to the European Communities' use of data from sales of types with internalproduct codes "68" and "69", submitting that the only domestically-sold product types to which theEC should refer when identifying amounts for SG&A and profits under Article 2.2.2 for exportedtypes with codes 12 and 18 are the product type with code 12 for which domestic sales are bothrepresentative and profitable. According to Brazil, the product type with code "12" is the identicalproduct type to product type "18". Brazil asserts that types in codes "68" and "69" have differenceswhich make them "non-comparable" with product types in code "18" and that the data from thesesales should have been excluded in the calculations under Article 2.2.2. Brazil submits thatArticle 2.2.2, read together with Article 2.6, makes clear that where an identical product exists, datarelating to its SG&A costs and profits shall be used. Only in the absence of such a product may datarelating to a non-identical but similar or closely resembling product be used.
149 Brazil does not refer in its second written submission to its claim under Article 2.4 that, havingincluded data from such sales, the European Communities violated Article 2.4 by refusing to make adjustmentsfor differences in physical characteristics affecting price comparability. We take Brazil’s response to PanelQuestion 45 and Brazil's second written submission to indicate that Brazil pursues this claim under Article 2.2.2,rather than Article 2.4. In any event, we recall our view supra, para. 7.140, that Brazil’s arguments with respectto the calculation of constructed normal value here relate to the identification of normal value under Article 2.2and 2.2.2, rather than to the requirement subsequently to ensure a fair comparison with export price underArticle 2.4.
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7.148 Article 2.6 of the Anti-Dumping Agreement contains a definition of the term "like product". Itreads:
2.6 Throughout this Agreement the term "like product" ("product similar") shallbe interpreted to mean a product which is identical, i.e. alike in all respects to theproduct under consideration, or in the absence of such a product, another productwhich, although not alike in all respects, has characteristics closely resembling thoseof the product under consideration.
7.149 The definition of "like product" in Article 2.6 governs how an investigating authorityidentifies the scope of the "like product" for the purposes of the investigation and of the Agreement.Once the investigating authority has identified the scope of the "like product", the scope of thatdefinition remains consistent.
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7.215 In this investigation, the European Communities defined the product under consideration as:"threaded malleable cast-iron tube or pipe fittings, which are joined by a screwing joining system,falling within CN code ex 7307 19 10".211 The European Communities also found that "malleablefittings produced by the Community industry and sold on the Community market as well as malleablefittings produced in the countries concerned and exported to the Community were like products, sincethere were no differences in the basic physical and technical characteristics and uses of the existingdifferent types of malleable fittings.
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7.221 With respect to the EC cumulative analysis, Brazil alleges that the European Communitiesacted inconsistently with its obligations under: "Articles 3.1 and 3.3 to determine, on the basis of“positive evidence” and after an “objective examination” that the cumulative assessment of the effectsof the dumped imports was appropriate, as it reversed the burden of proof and assumed in favour ofcumulative assessment; Articles 3.1 and 3.3 by not identifying, on the basis of “positive evidence”and after an “objective examination”, that the dumped imports per each Member had the effectswhich it then may assess cumulatively; Articles 3.1 and 3.3 by reducing the conditions of competitiondetermination to the like product determination under Article 2.6; Articles 3.1 and 3.3 by failing toaddress, on the basis of “positive evidence” and after an “objective examination”, dissimilarities in theconditions of competition such as the differences in the product concerned, the trends of importvolumes and prices, the level of trade and the segmentation of the market; and Articles 3.1 and 3.3 byfailing to determine, on the basis of “positive evidence” and after an “objective examination” that thechannels of distribution were “the same or similar."214
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3.1 A determination of injury for purposes of Article VI of GATT 1994 shall bebased on positive evidence and involve an objective examination of both (a) thevolume of the dumped imports and the effect of the dumped imports on prices in thedomestic market for like products, and (b) the consequent impact of these imports ondomestic producers of such products.
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7.244 Brazil has focused its challenge concerning the “conditions of competition” in this dispute onfour elements in the EC cumulation determination—the consideration of the imported and domesticproduct, volume, price and channels of distribution. In particular, Brazil alleges breaches by theEuropean Communities of Articles 3.1 and 3.3 by reducing the conditions of competitiondetermination to the like product determination under Article 2.6; Articles 3.1 and 3.3 by failing toaddress, on the basis of “positive evidence” and after an “objective examination”, dissimilarities in theconditions of competition like the differences in the product concerned, the trends of import volumesand prices, the level of trade and the segmentation of the market; and Articles 3.1 and 3.3 by failing todetermine, on the basis of “positive evidence” and after an “objective examination” that the channelsof distribution were the same or similar."
a. Like product definition
7.245 Brazil asserts that the EC analysis of conditions of competition is a "tautology" and no morethan a repetition of the EC "like product" analysis. For Brazil, the European Communities approachleads to the conclusion that Article 3.3(b) has no effect as the test required under the said article isonly a repetition of the test under Article 2.6, and that this is against the principle of effective treatyinterpretation. Brazil argues that the European Communities did not conduct an objectiveexamination of the conditions of competition (such as the issues of different products (black heart vs.white heart), different pricing strategies and market segmentation).
7.246 Article 2.6 sets out the definition of "like product" for the purposes of the Agreement, as
follows:
Throughout this Agreement the term "like product" ("produitsimilaire") shall beinterpreted to mean a product which is identical, i.e. alike in all respects to theproduct under consideration, or in the absence of such a product, another productwhich, although not alike in all respects, has characteristics closely resembling thoseof the product under consideration.
7.247 We emphasise that Article 2.6 establishes the like product for the purposes of the entireinvestigation. Thus, an investigating authority is required to keep the like product consistent in itsdumping and injury determinations.
7.248 Article 3.3(b) explicitly requires an examination of the conditions of competition not onlybetween the imported products from different sources but also between the imported products and thelike domestic products. We understand that the reference in Article 2.6 to "the product underinvestigation" parallels the reference in Article 3.3(b) to "the imported products". It is thereforenatural that an injury investigation would focus upon the like product and the relationship in thedomestic marketplace between the like product and the imported product concerned. We thereforeexamine whether the European Communities maintained this consistency in its investigation.
7.249 In its assessment of the conditions of competition in the context of its cumulationdetermination, the European Communities submits to us that its practice, which it asserts it appliedalso in this case, is to examine the following criteria: like product finding; the significance of theimport volume level; the development and level of the prices of imports and their undercutting or notof the Community industry; and similarity of sales channels.229 The Definitive Regulation specificallyaddresses arguments