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report of the ad contact group on anticircumvention
22 march 2011
the contact group (cg) on anticircumvention is comprised of representatives from brazil, china, the eu, india, japan and the united states. the group met internally on 22 february, 14 march and 17-18 march. it received input on 24 february and 15 march from other members, viz., certain asean members (indonesia, the philippines, singapore and thailand, coordinated by the latter), australia, canada, egypt, hong kong china, korea, new zealand, chinese taipei, south africa, and turkey. canada�s written input is attached. much of the group�s discussion centered on the proposed anticircumvention provisions set forth in the 2007 chairman�s draft text, past proposals made by members and the experience of members� investigating authorities and exporters.
the following are among the considerations that were discussed by or presented to the cg. the cg emphasizes that it does not consider these necessarily to represent an exhaustive or prioritized list of considerations, and that no recommendations or conclusions have been reached.
general: members are concerned about both the reality of and potential for circumvention and the measures that are being or might be taken to address circumvention. some perceive a need for anticircumvention rules to address or deter circumvention according to transparent and multilaterally agreed standards, while others worry that such rules will encourage the use of anticircumvention rules, lead to unjustified extension of antidumping duties or will impede legitimate investment and commercial activities, especially in third countries. some members explained that if the rules are either too limiting or too loose, their preference would be to retain the status quo. moreover, some members indicated that they have not yet implemented anti-circumvention rules in their domestic legislation in light of the absence of such provisions in the agreement.
form: members have varying views as to what may constitute a circumvention activity or practice. some view the scenarios of slight product modification, completion/assembly of parts/components in the importing country and completion/assembly in a third country as the leading examples of potential circumvention to be addressed, while others consider that such practices as transshipment, product mislabeling, importation document fabrication and product misclassification are the most prevalent circumvention practices, irrespective of whether they might also constitute infractions of customs law.
interrelationships: many members perceive important linkages between the issue of anticircumvention rules and the clarification or development of other rules, such as the concept of �product under consideration� under discussion in the rules negotiations and the wto�s harmonization work programme for rules of origin. some view any development of anticircumvention rules as needing to be accompanied by stronger disciplines on the concept of product under consideration, while others see this relationship from the reverse perspective. moreover, some prefer that questions relating to the precise scope of an antidumping measure be resolved through scope rulings and/or the application of origin rules, while others perceive that anticircumvention rules address a somewhat different phenomenon involving an intentional effort to avoid payment of an antidumping duty.
intent: members shared different views as to the proper consideration of a producer�s/exporter�s �intent� to circumvent an antidumping measure. some felt that a clear demonstration of intent through positive evidence would be an important requirement to meet before circumvention could be found, while others judged that such a standard was more akin to the higher standards of criminal law and that in other legal contexts, intent can reasonably be inferred through the examination of circumstantial evidence indicating the absence of other economic reasoning for the behavior in question, as was generally done in the chairman�s 2007 draft text. in this connection, these members suggested that it would be more appropriate to consider such indicia as any relationship or compensatory arrangements between parties, changes in trade patterns, competing commercial explanations for any change in the product or the production process and similar criteria. it was also noted that the apparent �intent� of an importer might also be a relevant factor to consider in certain circumstances.
initiation: some members stressed that any rules should require that anticircumvention inquiries may only be initiated on the basis of requests from one or several members of the domestic industry supported by evidence of the activity alleged, while others insisted that authorities should have the right to open ex officio inquiries, e.g., given the information that might be obtained by a member�s customs authorities.
scope: some members stressed that anticircumvention measures should be applied on an exporter-specific basis, and not country wide, as circumvention is a company-specific activity and any company not involved in circumvention should not be adversely affected. others expressed reservations about defining circumvention on the basis of �later-developed� products, noting that technological evolution is distinct from circumvention and the concept of �slight modification� should be adequate to address any problems in this regard.
transparency: most members expressed support for the adoption of transparency requirements in connection with the use and application of any anticircumvention rules and measures.
thresholds/�safe harbours�: many members attached importance to the use (or not) of parts-ratio and value-added thresholds, but had contrasting views as to the nature of that importance. a number of members underscored that such thresholds would provide crucial reassurance and greater predictability to legitimate investors, exporters and commercial operators, thus helping both authorities and commercial actors to better distinguish between permissible and actionable activities. others, however, expressed concern that such thresholds could simply provide �road maps� for acceptable circumvention practices, and that members could never agree on a uniformly appropriate level for such thresholds. in that regard, some members expressed an openness to consider the possibility of sector-specific thresholds, whether upon the adoption of any new rules or in the light of later administrative experience.
third country activities: the treatment of investments and operations in third countries attracted a significant number and range of comments and concerns. some proposed that third country completion/assembly activities should be excluded entirely from any anticircumvention rules, and others underscored that if such activities were to be covered, it was essential that dumping, or dumping, injury and causation, be confirmed before a measure could be imposed. others felt that third country operations today are a more prevalent form of circumvention than the historically prevalent form of importing country completion or assembly activity, and that any requirement to re-investigate dumping and injury in such circumstances ignores the particular need for and role of anticircumvention rules. in this regard, some suggested that the provisions of the 2007 chairman�s draft text regarding an assessment of dumping in such circumstances may not be necessary. finally, as noted earlier, third country operations featured prominently in the concerns of those troubled by the possibility of unfair or unnecessary investment barriers. others flagged that the scope of the third country provisions of the 2007 chairman�s draft text may not sufficiently address the range of possible circumvention scenarios, such as shipping a product from the country subject to a measure to a third country, where its chemical content is changed, before importation to the country imposing the measure.
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