Assessing Article 2(6a) in light of the Biodiesel rulings

Transcription

1 Assessig Article 2(6a) i light of the Biodiesel ruligs Richard Luff Parter, Va Bael & Bellis Coferece o Trade Defece Istrumets Brussels, 26 October

2 Outlie v The Biodiesel cases AB Report, EU Biodiesel (Argetia) (DS 473) Pael Report, EU Biodiesel (Idoesia) (DS 480) v v v The ew Article 2(6a) of the Basic Regulatio WTO compatibility i light of Biodiesel Coclusio 2

3 AB Report, EU Biodiesel (Argetia) (DS 473) Adopted o 26 October 2016 Violatio of Article 2.2 of the ADA Whe costructig ormal value, out-of-coutry evidece may be used, but must be adapted to reflect the cost of productio i the coutry of origi Violatio of Article of the ADA Costs shall ormally be calculated o the basis of the records kept by the exporter or producer. Provided: records kept by the producers reasoably reflect the costs associated with the productio ad sale of the product cocered AB: records eed to suitably ad sufficietly correspod to costs that have a geuie relatioship to the productio ad sales Rejected EU argumet that the costs themselves must be reasoable 3

4 Pael Report, EU Biodiesel (Idoesia) (DS 480) Adopted o 28 February 2018 Same violatios of Article 2.2 ad of the ADA Violatio of Article 2.2.2(iii): failure to determie a profit cap Costructed profit caot be higher tha profit ormally realized by other producers o sales of the same geeral category i the domestic market Pael: positive obligatio to calculate a profit cap, that caot be excused due to a lack of iformatio à à Burde would otherwise be o exportig producers to calculate a cap Profit ormally realized also icludes profits from sales otherwise regarded as ot made i the ordiary course of trade 4

5 The ew Article 2(6a) of the Basic Regulatio (1) Article 2(6a) applies if it is determied that it is ot appropriate to use domestic prices ad costs due to the existece of sigificat distortios. (2) If so, ormal value shall be costructed exclusively o the basis of costs of productio ad sale reflectig udistorted prices or bechmarks. (3) To costruct ormal value, the sources the Commissio may use iclude: a) correspodig costs i a appropriate represetative coutry with a similar level of ecoomic developmet, provided the relevat data are readily available; b) udistorted iteratioal prices, costs, or bechmarks; c) domestic costs, but oly to the extet that they are positively established ot to be distorted o the basis of accurate ad appropriate evidece, icludig i the framework of the [coutry reports]. (4) Costructed ormal value shall iclude a udistorted ad reasoable amout for SG&A ad profits 5

6 WTO compatibility of Article 2(6a) First, is the existece of sigificat distortios a valid basis for usig a costructed ormal value? (Steps 1 ad 2) Article 2.2 of the ADA: Whe there are (1) o sales i the ordiary course of trade i the domestic market; or whe, (2) because of the particular market situatio; or (3) the low volume of the sales i the domestic market, such sales do ot permit a proper compariso, the margi of dumpig shall be costructed. Secod, if costructed value may be used : 1. Is it permissible to exclude certai costs of productio ad sale that do ot reflect udistorted prices ad bechmarks, whe costructig ormal value? (Step 2) 2. I the absece of accurate records from producers, is it permissible to rely o udistorted prices ad bechmarks? (Steps 2 ad 3) 3. I the absece of accurate records from producers, is it permissible to calculate a udistorted ad reasoable amout for SG&A ad profits? (Step 4) 6

7 WTO compatibility of Article 2(6a) (1) Permissible to exclude certai costs of productio ad sale that do ot reflect udistorted prices ad bechmarks, whe costructig ormal value? Article ADA: costructed costs shall be calculated o the basis of records kept by the producers, provided the records: à are i accordace with the GAAP of the exportig coutry, ad à records kept by the producers reasoably reflect the costs associated with the productio ad sale of the product cocered i.e. suitably ad sufficietly correspod to costs that have a geuie relatioship to the productio ad sales i the domestic market (Biodiesel) Therefore, if there are accurate records of costs icurred i the exportig coutry, these must be used. 7

8 WTO compatibility of Article 2(6a) I Biodiesel the EU sought to disregard costs ad prices it cosidered did ot reflect market practice Argumet that prices be reasoable i practice idetical to the argumet that prices ot suffer from sigificat distortios, defied as: à Article 2(6a)(b): [T]hose distortios which occur whe reported prices or costs are ot the result of free market forces because they are affected by substatial govermet itervetio. However, Biodiesel cofirmed that there is o requiremet uder Article 2.2 that costs be reasoable costs, ecoomically udistorted or based o free market forces. Article of the ADA cocered with accurate corporate reportig (GAAP etc.) 8

9 WTO compatibility of Article 2(6a) (2) I the absece of accurate records, permissible to rely o udistorted prices ad bechmarks to costruct ormal value? Biodiesel: Ay iteratioal prices or bechmarks used must reflect the actual productio ad costs i the domestic market Article 2(6a) seems to require the exact opposite: that domestic costs reflect iteratioal prices ad bechmarks à Use of appropriate represetative coutry or udistorted iteratioal prices, costs, or bechmarks. à Sice, per defiitio, either optio reflects the distortios i the domestic market, it appears they caot accurately reflect the domestic market 9

10 WTO compatibility of Article 2(6a) (3) I the absece of accurate records from producers, is it permissible to calculate a udistorted ad reasoable amout for SG&A ad profits? Article 2.2.2(iii) ADA: Whe SG&A ad profit caot be based o sales i the ordiary course of trade, they may be established o the basis of ay other reasoable method, provided that the amout for profit so established shall ot exceed the profit ormally realized by other exporters or producers o sales of products of the same geeral category i the domestic market of the coutry of origi. Biodiesel (Idoesia): à Profit ormally realized also icludes profits from sales otherwise regarded as ot made i the ordiary course of trade Meas actual profits have to be used from producers i the same geeral category ad precludes use of represetative coutry/iteratioal bechmarks. 10

11 Coclusio Article 2(6a) as applied would violate Articles 2.2 ad Article 2(6a) as such might ot ecessarily violate Articles 2.2 ad because it does ot madate the Commissio to act icosistetly with those provisios: - Use of the word appropriate (does this leave a certai margi of discretio?) - But whe see together with coutry reports that coclude to the existece of sigificat distortios, does the Commissio still have a choice? Is it ot de facto required to coclude that domestic prices caot be used? 11

12 Thak you Richard Luff Parter Va Bael & Bellis 166 Chaussée de la Hulpe B-1170 Brussels Tel Fax