On March 29, 2016, a World Trade Organization (WTO) dispute settlement panel issued a mixed ruling in Argentina's challenge to the EU's antidumping regulation and imposition of antidumping duties to biodiesel imported from Argentina.1 Antidumping duties, which are permitted under the WTO agreements under set guidelines, are tariffs placed on goods that enter a market at a price that is deemed to be "below normal value," or less than the actual cost of production and sale in the exporter's home market. In 2013, the EU applied antidumping duties ranging from 22 to 25.7 percent on biodiesel imported from Argentina.
Although Argentina did not prevail in its challenge of the EU's underlying legal framework for applying antidumping duties to imports, the WTO panel agreed that the EU applied antidumping duties to Argentinean biodiesel products in a manner that is inconsistent with its WTO obligations.
The parties have 60 days from the date of the panel decision to bring the decision to the WTO Appellate Body for a review of the panel's legal analysis.
Argentina's "As Such" Legal Challenge to the EU's Antidumping Regulation
Argentina challenged certain provisions of the EU's Basic Regulation "as such," or independent of the EU's application of the regulation to specific factual circumstances. Based solely on the language of the regulation, Argentina argued that the EU authorities are required to determine that the costs of production and sale of a product under antidumping investigation are not "reasonably reflected" in the producer's records when such reported costs are "abnormally" or "artificially" low. In essence, the EU authorities are required to reject or adjust such costs and instead adjust or establish the costs on the basis of other information, such as costs in another country of origin. In Argentina's view, this language precludes EU authorities from making an independent assessment of whether such "abnormally low" costs are actually the result of market values or prices in antidumping investigations. In its defense, the EU argued that its investigating authority exercises discretion by its assessment of the facts of each particular investigation, thus fulfilling the obligation of Article 2.2 of the Antidumping Agreement and Article VI:1 of GATT 1994. The panel agreed with the EU, noting that the text of the regulation merely provides the investigating authority with instruction for what to do after making a factual determination that the records presented do not reasonably reflect costs.
Argentina also argued that these provisions limit the methods that the EU investigating authorities may use when they determine a producer's records do not reasonably reflect the costs of production in violation of Articles 2.2 of the Antidumping Agreement and VI:1 of GATT 1994. However, the panel found that the language of the regulation is permissive on its face and, therefore, does not limit the investigating authority's discretion to use a wide range of information when constructing a normal value in the event that a producer's records do not reflect the costs of production.
Claims Concerning Antidumping Duties Imposed on Biodiesel from Argentina
Argentina also brought several claims under the Antidumping Agreement and GATT 1994 against the EU's specific application of antidumping measures to imports of biodiesel from Argentina. The most significant of these claims are described below.
Whether the EU failed to use the producers' records to calculate COP
In its investigation, the EU authorities disregarded the records kept by Argentine producers for soybeans and soybean oil used in the production of biodiesel, because the prices were deemed "artificially lower than the international prices due to the distortion created by the Argentine export tax system" and, therefore, did not reflect the actual cost of the main raw material. Argentina argued that this is not a legally permissible reason for disregarding the records submitted by the producers under the Antidumping Agreement and GATT 1994. The panel agreed, finding that the EU authorities derogated from using the costs reflected in the producers' records based on findings that were not legally sufficient to determine that the costs reported did not reflect the actual costs associated with the production and sale of biodiesel. The panel therefore found that the EU acted inconsistently with Article 2.2 of the Antidumping Agreement but declined to make separate findings under Articles 2.1 of the Antidumping Agreement and VI:1 of GATT 1994.
Whether the EU failed to construct the "normal value" on the basis of Argentine COP
Argentina also challenged the EU authorities' use of a price for soybeans that reflects the "level of international prices" rather than the domestic price of soybeans in Argentina. Although the prices used by the EU were published by Argentina's Ministry of Agriculture, Argentina argued that these prices were FOB reference prices and therefore not a permissible substitute for the prices recorded by the producers. The EU argued that because these prices were recorded by the Government of Argentina, they technically constitute prices "in the country of origin" in accordance with Article 2.2 of the Antidumping Agreement.
The panel rejected the EU's defense, observing that the EU authorities considered that the reference price reflected the international price of soybeans in the absence of the Argentine export tax system. Thus, "the EU authorities selected this cost precisely because it was not the cost of soybeans in Argentina." For these reasons, the WTO panel found that the EU acted inconsistently with its obligations under Article 2.2 of the Antidumping Agreement. Again, the panel found it unnecessary to conduct a separate analysis under Article 2.1 of the Antidumping Agreement and Article VI:1 of GATT 1994.
Whether the EU failed to make a fair comparison between normal value and "export price"
Argentina argued that the EU failed to make due allowance for differences affecting price comparability (such as taxation) and therefore failed to make a fair comparison between normal value (NV) and export price (EP) in violation of Article 2.4 of the Antidumping Agreement. The panel disagreed, noting that in this particular case, and given the way the EU authorities calculated NV, the tax system is not a difference for which "due allowance" should have been made in the EU's calculation in order to arrive at a "fair comparison" between the NV and EP of biodiesel from Argentina.
Whether the EU failed to base the determination of profits on a "reasonable method"
Argentina argued that the EU failed to calculate the amount of profits – a component of the broader dumping margin calculation – on a reasonable method in violation of Article 2.2 of the Antidumping Agreement. The EU refuted this claim, noting that the 15 percent profit margin it attributed to the biodiesel industry in Argentina was a reasonable estimate given that the industry was still a young and innovative capital-intensive industry during the investigation period. The panel determined that Argentina failed to demonstrate that the methodology used by the EU was unreasonable and therefore rejected Argentina's claim.
Whether the EU imposed excessive antidumping duties on biodiesel from Argentina
Argentina argued that the EU imposed antidumping duties on biodiesel imported from Argentina in excess of the "dumping margin" – the level at which such goods entered the EU below NV. The panel agreed, noting its previous findings that the EU failed to calculate the dumping margin in a manner consistent with the Antidumping Agreement. It therefore found that the EU acted inconsistently with Article 9.3 of the Antidumping Agreement and Article VI:2 of GATT 1994 by imposing antidumping duties in excess of the margins of dumping that should have been established under Article 2 of the Antidumping Agreement and Article VI:1 of GATT 1994, respectively.
Whether the EU erred in its examination of the impact of dumped imports in the EU
Argentina argued that the EU impermissibly excluded "idle capacity" in its calculation of the level of injury to the EU market, a prerequisite to the imposition of antidumping duties. The panel once again agreed with Argentina, finding that the EU acted inconsistently with Articles 3.1 and 3.4 of the Antidumping Agreement in its examination of the impact of the dumped imports on the domestic industry in the EU, specifically in relation to production capacity and capacity utilization.
Whether the EU failed to properly assess the injury potentially caused to its domestic industry by "other factors"
Finally, Argentina argued that the EU acted inconsistently with Article 3.1 and 3.5 of the Antidumping Agreement, because it failed to appropriately assess the level of injury to the EU domestic market caused by dumped biodiesel imports from Argentina. Such "injury determinations" are a prerequisite to the application of antidumping duties under WTO law. Argentina specifically challenged the EU authorities' consideration of factors other than the injury caused by dumped imports, such as: (i) the overcapacity of the EU domestic industry; (ii) the EU domestic industry's imports of biodiesel; (iii) the EU domestic industry's lack of vertical integration and access to raw materials; and (iv) the alleged "double-counting" regimes of certain member states. The panel rejected Argentina's arguments with respect to each of these "other factors," finding that the EU authorities' analysis and conclusions in each instance were those of an unbiased and objective investigating authority.
Footnote
1 Panel Report, European Union – Anti-Dumping Measures on Biodiesel from Argentina, WT/DS473/R (29 March 2016), available at https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds473_e.htm.
Originally published on 4 April 2016Visit us at mayerbrown.com
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