Targeted dumping is said to exist when the export price to certain producers or regions or during certain time periods is significantly different from others. Since, the dumped sales remain masked in such cases, the Anti-Dumping Agreement permits a deviation from the normal methodologies for the determination of margin of dumping in these cases. In such cases, the weighted average normal value is compared with individual export transactions for the calculation of the margin of dumping. In order to avoid a situation of mathematical equivalence, "zeroing" may be employed.

A product is said to be dumped when it is exported to a particular country at a price, i.e., export price, lower than the price at which it is sold in the domestic market, i.e., normal value. The "margin of dumping" is the difference between the normal value and the export price. According to Article 2.4.2 of the Anti-Dumping Agreement (hereafter "ADA"), the margin of dumping can be calculated using the following three methodologies:

  1. Comparison of a weighted average normal value with a weighted average export price (the W-W methodology),
  2. Comparison of normal value and export prices on a transaction-to-transaction basis (the T-T methodology), and
  3. Comparison of weighted average normal value and the prices of individual export transactions (the W-T methodology).

According to Article 2.4.2 of the ADA, while the W-W and the T-T methodologies may be applied any situation, the W-T methodology can only be used in exceptional circumstances. The Directorate General of Trade Remedies (DGTR) generally employs only the first methodology, i.e., the W-W methodology. The W-T methodology may be used in circumstances where the export price varies significantly depending on the purchaser, region or time period. In other words, the product is sold at dumped prices to certain producers or regions or during certain time periods. This pattern of dumped sales is "masked" by rest of the sales that are made at higher prices. This practice is otherwise called "targeted dumping".

Consider, for example, a producer engaged in the manufacturing of a particular product. The product is sold in the home as well as export markets. The normal value determined for the producer is $1,000. The producer exports the product to two Indian customers, A and B. While it is sold to A at an export price of $500, it is sold to B at an export price of $1,500. The calculation of the margin of dumping for the producer using W-W and T-T methodologies will yield a result nil margin of dumping despite the product being sold to customer A at significantly dumped prices. This is possible because of the sale made to customer B at significantly higher price. The W-T methodology is intended to prevent this situation and unmask the dumping.

For the purpose of employing the W-T methodology, the second sentence of Article 2.4.2 of the ADA requires an investigating authority to identify "a pattern of export prices which differ significantly among different purchasers, regions or time periods". Identifying these "pattern transactions" is a statistical exercise. For example, the United States employs the Cohen's d test. Accordingly, the weighted average export price to a specific purchaser (or region or time period, as applicable), i.e., the test group, is compared with the weighted average export price to all other purchasers (or regions or time periods, as applicable), i.e., the comparison group. A Cohen's d coefficient of 0.8 or more is considered significant and in such cases, the test group is classified as "pattern transactions". As per the WTO Panel Report in United States — Differential Pricing Methodology (DS534), both lower prices sales which are being masked and the higher priced sales which makes the masking possible can be termed as "pattern transactions". The Panel Report further states that the W-T methodology for calculation of the margin of dumping shall be employed only for the "pattern transactions". For the rest of the export transactions, the margin of dumping shall be calculated normally using the W-W or the T-T methodologies. Hence, the final margin of dumping would be the aggregate of the margins of dumping calculated separately for the sets of pattern and non-pattern transactions.

Additionally, the second sentence of Article 2.4.2 of the ADA also requires the investigating authority to justify the use of the W-T methodology over the W-W or the T-T methodologies. The United States uses the "meaningful difference test" for this purpose. According to the test, the margin of dumping is calculated using either the W-W or the T-T methodologies and the W-T methodology. On comparison of the two resultant margins of dumping, in case the one calculated using the W-T margin is relatively higher than the other by 25% or pushes the other above de-minimis levels, the difference is considered meaningful. This is used as the appropriate justification.

An issue that continues to perplex investigating authorities and the WTO alike is the possibility of a "mathematical equivalence". It is observed that the W-T methodology generally provides the same margin of dumping as that calculated as per W-W or T-T methodologies. This results in the failure of the W-T methodology in solving the issue it was meant to solve, i.e., targeted dumping. A solution, strongly advocated by the United States, is "zeroing". Zeroing is the practice of treating negative margins of dumping as zero and not allow it to offset positive margins of dumping. Hence, the final margin of dumping would be influenced only by the dumped transactions. While the practice of zeroing has generally been outlawed, the United States argues that in the absence of zeroing, targeted dumping would continue to be unaddressed.

On the application of zeroing, the Panel Report in US – Washing Machines (DS464) held that while zeroing should not be undertaken for individual export transactions, investigating authorities may zero the margin of dumping for non-pattern transactions if it is found to be negative. However, on appeal, the Appellate Body disagreed with the Panel. The Appellate Body held that the W-T methodology can be applied to the calculation of the margin of dumping for the pattern transactions and the non-pattern transactions be excluded completely. However, the WTO Panel Report in United States — Differential Pricing Methodology (DS534), which was issued later, disagreed with both the Panel and the Appellate Body reports in DS464. The Panel held that it is appropriate to apply zeroing in determination of the margin of dumping for pattern transactions as per the W-T methodology. However, zeroing continues to be prohibited for the margins of dumping calculated under the W-W and the T-T methodologies.

Rule 6(iv) under Annexure I of the Anti-Dumping Rules of India permits the use of the W-T methodology in case of targeted dumping. The rule is a verbatim reproduction of Article 2.4.2 of the ADA. However, the DGTR has never explored this methodology as of date. There has not been any finding of the DGTR where even the existence of targeted dumping has been investigated. DGTR may, in future investigations, explore the existence of targeted dumping and ensure no exporter escapes clouding their dumping practices.

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