WHAT ARE THE MAIN POINTS OF THE NEW REGULATION?
The new regulation introduces a new “country neutral” system which will apply to countries whose economies are affected by “significant distortions”.
This new system will be based on reports detailing significant distortions in certain countries or sectors, that will be produced and regularly updated by the Commission when it “has well-founded indications of the possible existence of significant distortions”.
The construction of the normal value and the need to justify the use of domestic costs
In article 2.6a (a), it is stated that in case domestic prices and costs in the exporting country cannot be used to calculate the normal value, due to the existence of significant distortions, it “shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks”.
Domestic costs may be used “only to the extent that they are positively established not to be distorted, on the basis of accurate and appropriate evidence, including in the framework of the provisions on interested parties in point (c)”.
The definition of significant distortions
“Significant distortions within the meaning of point (a) are those distortions which occur when reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces as they are affected by substantial government intervention.”
The definition of significant distortion includes “Inter alia”: state intervention in the “ownership, control or policy supervision or guidance” of enterprises; state interference with respect to prices or costs; public policies discriminating in favour of domestic producers; the lack (or the discriminatory application or inadequate enforcement) of bankruptcy, corporate or property laws; distortions in wage costs; and access to finance granted by institutions linked to the state.
In Recital 4, it is further specified that significant distortions can be “direct or indirect”.
The regulation introduces a new system which will be triggered when the existence of significant distortions is proved. “When the Commission has well-founded indications of the possible existence of significant distortions”, it will produce reports describing the market circumstances of a certain country or sector.
Those reports will be then justify the use of the new methodology in anti-dumping investigations. Interested parties will be able to “rebut, supplement, comment or rely” on the report and the evidence on which it is based “in each investigation in which such report or evidence is used”.
One report already published by the European Commission is the “Staff working document on significant distortions in the economy of the People’s Republic of China for the purposes of trade defence investigations” . A summarized version of AEGIS Europe can be found here.
Use of the reports
According to the compromise text, the Union industry will be able to use the evidence present in the reports to justify the calculation of the normal value using the new methodology when filing a complaint.
The compromise does not mention a “provisional determination”, but says that when there is enough evidence on the existence of significant distortions, and the Commission “decides to initiate an investigation on that basis”, it shall be specified in the notice of initiation.
Then, interested parties have 10 days to comment on the sources the Commission intends to use to calculate the normal value. In addition, “any evidence regarding the existence of significant distortions can only be taken into account if it can be verified in a timely manner within the investigation.”
The compromise text says that where existing anti-dumping or anti-circumvention measures are based on the analogue country methodology, the new methodology shall not replace the original one until the date on which “the first expiry review of these measures, following the entry into force of Regulation …, is initiated”.
FOR MORE INFORMATION:
- European Parliament Press Release, EU anti-dumping measures that protect jobs: MEPs and ministers strike deal, 3/10/17.
- European Commission Press Release, Commission welcomes agreement on new anti-dumping methodology, 3/10/17.
- Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the European Union and Regulation (EU) 2016/1037 on protection against subsidised imports from countries not members of the European Union (COM(2016) 721 final – 2016/0351 (COD))
- AEGIS Europe Press Release, AEGIS Europe welcomes commitment to make new EU trade defence regime effective – the proof is in the pudding, 4/10/17.