Sunset Reviews: Beyond anti-dumping

In a Sunset Review the authorities are called upon to merely focus their inquiry on the "likelihood of continuation or recurrence" of dumping and injury in the event the measure were no longer imposed.

THE Designated Authority (DA) resorts to anti-dumping measures after conducting an investigation, as prescribed by the Anti-Dumping Agreement (ADA) under the World Trade Organisation rules. Usually, the action is in the form of a special levy over and above the Customs duty.

These measures, to counter dumping and avoid injury to domestic industry,are imposed usually for five years, the maximum period allowed under the ADA. Extending the anti-dumping measures thereafter is subject to Reviews, as prescribed under the ADA.

Article 11 of the ADA deals with Reviews. Article 11.3 deals with sunset reviews, which in pertinent part states that "any definitive antidumping duty shall be terminated on a date not later than five years from its imposition, unless the authorities determine, in a review initiated before that date on their own initiative or upon a duly substantiated request made by or on behalf of the domestic industry within a reasonable period of time prior to that date, that the expiry of the duty would be likely to lead to continuation or recurrence of dumping and injury."

Standards for distinction
The three pillars for an anti-dumping measure are establishment of dumping, injury and causal effect. The procedures laid out for the original investigation include meeting various standards laid out under the ADA. These include determination of dumping (Article 2), determination of injury (Article 3), manner of initiation and conducting the investigation (Article 5) and the evidentiary standards (Article 6). The ADA provides for investigations to be terminated forthwith should the dumping margin be minimal less than 2 per cent or the dumped quantity is less than 3 per cent of the total volume of imports. These threshold limits are called de-minimis standards.

Now the critical question is whether the process for the establishment of these three pillars during the original investigation can be used in during a Review. A WTO Panel in the US Sunset Review of Anti-Dumping Duties on corrosion-resistant carbon steel flat products from Japan addressed this issue in great detail. The Panel was set up to find if there was any distinction between the original investigation and a Sunset Review.

The Panel referred to Article 31.1 of the Vienna Convention on the Law of Treaties ( generally accepted as customary rule for interpretation of International Treaties) which reads: "A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose."

Relying heavily on the rules provided under the said Treaty, the Panel concluded that Article 11.3 itself did not set forth any evidentiary requirement in a Sunset Review. It further noted Article 11.3 did not contain any cross-reference to the evidentiary rules relating to initiation of investigations contained in Article 5.6, which deals with evidentiary standards required for self-initiated investigations.

The Panel observed: "Although paragraphs 4 and 5 of Article 11 contain several cross-references to other Articles in the Anti-dumping Agreement, no such cross-reference has been made in the text of Article 11 to Article5.6. Therefore, their failure to include a cross-reference in the text of Article 11.3, or, for that matter, in any other paragraph of Article 11, to Article 5.6 (or vice versa) demonstrates that the drafters did not intend to make the evidentiary standards of Article 5.6 applicable to sunset reviews."

Article 5.6 deals with a situation where an investigating authority initiates investigation on a suo motu basis in an original investigation. Thus, the WTO Panel was clearly demonstrating the difference between the process laid out for the original investigation and a Review, both initiated on a suo motu basis by the DA.

Similarly, the WTO panel contended that Article 11.3 does not provide by way of reference, for any de-minimis standards in making the determinations in Sunset Reviews. The Panel noted that Article 5.8 contains rules applicable only to original investigations and not to Reviews under Article 11.3. It concluded that in the absence of cross-references in Article 11 to Article 5.8 and vice versa to indicate that the drafters did not intend to have the obligations of Article 5.8 to apply in equal measure to Sunset Reviews. Therefore, the Panel held that the US Sunset Regulations, which requires that a 0.5 per cent de-minimis standard to apply in Sunset Review, as against 2 per cent de-minimis standard in an original investigation, not to be an inconsistent practice.

The Panel also observed: "We believe it is appropriate to point out that original investigations and sunset reviews are distinct processes with different purposes, and that the text of the anti-dumping Agreement distinguishes between investigations and reviews". It noted that the determination to be made in a Sunset Review to be different in certain fundamental respects from the nature of the determination to be made in an original investigation.

It noted that in a Sunset Review the authorities are called upon to merely focus their inquiry on the "likelihood of continuation or recurrence" of dumping and injury in the event the measure were no longer imposed. In contrast, in an original investigation, the authorities should investigate the existence of dumping, injury and causal link between the two so as to impose anti-dumping measures. Having highlighted the fundamental qualitative differences in the these two processes, the Panel also noted "that it would not be surprising to us that the textual obligations pertaining to each of the two processes may differ." The Appellate body of the WTO, in the US also reached an identical conclusion regarding the relationship between Reviews and original investigation within the Subsidy and Countervailing Measures.

The implications of this decision by the WTO Panel are enormous for the Indian exporters especially those already facing anti-dumping measures in other countries. Authorities could initiate Sunset Reviews even if such an initiative does not contain evidentiary standards as prescribed under Article 5.6. Thus the exporters may not even be given appropriate reasoning as to why the Review is being initiated.

The de-minimis standard, as prescribed under Article 5.8, is not applicable in a Sunset Review. In fact, the Authorities could have a different de-minimis standard, of say 0.5 per cent for Sunset Reviews compared to 2 per cent in case of original investigations, as prescribed under Article 5.8.

Similarly, the other standards as prescribed under various Articles for the original investigation but not having a cross-reference to Article 11.3 shall not be applicable to Sunset Reviews.

This means that one may have to bear a much higher and stricter norms during a Review after suffering the levy of anti-dumping measures for five years.

Consequent to these decisions, many exporters fear the rigours of a self- initiated Sunset Review that could be far stricter than the original investigations. The fear of the exporters from the domestic companies, especially of developing countries such as India is that they could never get out of this legal cesspool, especially in view of the requirements of Article 11.3 and as interpreted in the US judgement.

Published at: http://www.thehindubusinessline.com/2005/01/26/stories/2005012602180900.htm