Under EU law, dumped and subsidised imports are, ‘(clumsy though it may be)[, assessed by] a mechanism designed to redress, as nearly as possible, an imbalance considered unfair to the domestic industry’. [i] In effect, that mechanism seeks to equalize competitive conditions. [ii] While a number of ‘types’ of measures are available,[iii] inevitably, the imposition of anti-dumping or anti-subsidy measures leads to a price increase. That may make it difficult for foreign producer-exporters from a country affected by trade remedy measures to market their goods in the European Union. Often, for the producer-exporter concerned, this leads to a reduction in export volumes and a loss of market shares. In order to avoid those negative consequences, some producer-exporters – at times in cooperation with an importer or a trader [iv] – look for ways to circumvent the measures imposed on their products. Indeed, the more intrusive the measures, the greater the incentive to circumvent them. That is where ‘anti-circumvention’ measures come into play.
The diligent student of WTO law will pause here. ‘Anti-circumvention’ measures? ‘Those do not feature in the WTO Anti-Dumping Agreement (or, for that matter, the WTO Agreement on Subsidies and Countervailing Measures)!’ That is correct. WTO law contains no specific rules relating to anti-circumvention measures. [v] For the purposes of EU law, that implies that there exists a certain policy space, unassumed by public international law, which may be filled by an approach specific to the EU legal order. [vi]
That approach is reflected in Articles 13 and 23 of the Basic Anti-Dumping and Anti-Subsidy Regulations. At their simplest, the measures introduced by those provisions must be viewed as an extension of existing measures to other products, undertakings, or countries to cover the alleged circumvention practices. To the Court, that is borne out by the purpose and general scheme of the Basic Anti-Dumping and Basic Anti-Subsidy Regulations, given that ‘the sole purpose of a regulation extending an anti-dumping [or a countervailing] duty is to ensure that the duty is effective and to prevent its circumvention’. [vii] As such, a measure extending a definitive anti-dumping or countervailing duty ‘is merely ancillary to the initial act establishing that duty, which protects the effective application of the definitive measures.’ [viii]
Under Articles 13 and 23 of the Basic Anti-Dumping and Anti-Subsidy Regulations, measures may be extended to imports from [ix] third countries of the like product, whether slightly modified or not, or to imports of the slightly modified like product from the country subject to measures, or parts thereof, when circumvention of the measures in force is taking place.
Materially, that requires that the European Commission (‘the Commission’), as the EU institution in charge of trade defence investigations, establish three conditions for proving ‘circumvention’ practices. [x] First, there must be a change in the pattern of trade between a third country and the European Union or between individual companies in the country subject to measures and the European Union. Second, that change must stem from a practice, process or work for which there is insufficient due cause or economic justification other than the imposition of the duty. Third, there must be evidence of injury to EU industry or that the remedial effects of the anti-dumping duty are being undermined. Fourth, there must be evidence of dumping. [xi] Those aspects are primarily factual.
But what is the evidentiary threshold to initiate an investigation into circumvention practices? Articles 11(3) and 23(3) of the Basic Anti-Dumping and Anti-Subsidy Regulations follow the ordinary ‘sufficiency of the evidence’ standard. [xii] The Court, however, appears to have suggested that a lower threshold is also admissible. Thus, in its judgment in Maxcom v City Cycle Industries, the Court held that the Commission must have available ‘evidence which prima facie suggests circumvention practices’. [xiii] And yet, that language is nowhere found in the text of the Basic Anti-Dumping or Anti-Subsidy Regulations. Whichever position one is to take on that matter, in practice, the Commission will not normally initiate an investigation unless it possesses at least considerable, if not convincing evidence of circumvention practices.
Now, while the practice of circumvention in reality takes place at the level of the private operator, the assessment of circumvention takes place for the third country as a whole. Thus, the Commission is not required, for the purposes of proving circumvention, to carry out an analysis of the situation of every individual producer-exporter of the like product in that country. [xiv] Instead, once the objective characteristic of circumvention are established generally, the measures are extended for all producer-exporters in the third country – whether they engage in circumvention practices or not. That is one of the most important features of the anti-circumvention instrument under EU law: the existence of some circumvention leads to the presence of duties for all producers-exporters of the like product in that country. [xv] In other words, under EU law, the anti-circumvention instrument is the figurative sledgehammer to crack a nut.
Once circumvention is established, it falls on the individual producer-exporter to seek an individual exemption, for their particular situation, from the extended measures. [xvi] However, that is not always easy as such an exemption is subject to its own objective requirements. [xvii] What is more, depending on where the circumvention practices take place, it is not the producer-exporter but the importer into the European Union, which must request, and which may challenge, the decision to grant or not grant an exemption. [xviii]
Against that background, is it advisable to ‘duck and cover’, instead of cooperating with the investigation at issue, in the hope that a lack of evidence leads to a finding of ‘no circumvention’?
That tactic would be ill-advised. Snow and adolescence are the only problems that disappear if you ignore them long enough. [xix] True, the Basic Anti-Dumping and Anti-Subsidy Regulations contain no provision that confers on the Commission, in an investigation to establish whether there has been circumvention, the power to compel producer-exporters which are the subject of a complaint to participate in the investigation or to provide information. However, precisely because of the lack of such a provision, the Court has recognised that the Commission is ‘reliant on the voluntary cooperation of the interested parties to provide it with the necessary information’. [xx] The converse would undermine the ‘efficiency’ of the anti-circumvention instrument. [xxi]
Therefore, while, principally, the burden of proving circumvention falls on the Commission, the Basic Anti-Dumping and Anti-Subsidy Regulations [xxii] caters for the possibility to lessen that burden by allowing an investigation to be based on facts available. [xxiii] Hence, a party which chose not to cooperate may be treated less favourably than if it had had cooperated, or cooperated more fully, in establishing the existence of circumvention practices for the purposes of Articles 13(1) and 23(1) of the Basic Anti-Dumping and Anti-Subsidy Regulations. [xxiv]
As this short excursion has shown, although equally clumsy as the instruments leading to anti-dumping and anti-subsidy measures, the anti-circumvention instrument is a powerful instrument of EU trade remedy law. However, it does not appear to be fully autonomous. As per the Court’s obiter dictum in Commission v Kolachi Raj Industrial, measures introduced to combat circumvention practices would be merely ancillary to the original measure and exit solely to uphold the efficiency of those original measures. [xxv] That would imply that the latter immediately fall with a successful challenge to the former. The Commission’s practice in relation to review investigation shows that it does not appear to fully share that line. [xxvi] That, however, remains for future case-law to determine.
-Nicolaj Kuplewatzky[i]
[i] Référendaire, Chambers of Advocate General Bobek, Court of Justice of the European Union. The views and opinions expressed herein are exclusive to the author and do not reflect those of the Court of Justice of the European Union.
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[i] Opinion of Advocate General Sharpston of 11 November 2013, Case C-638/11 P Council v. Gul Ahmed Textile Mills, EU:C:2013:277, paragraph 60. [ii] See judgment of 3 December 2020, Changmao Biochemical Engineering v Distillerie Bonollo and Others (C‑461/18 P, EU:C:2020:979, paragraph 68. See also Nicolaj Kuplewatzky, Defining Anti-Dumping Duties under European Union Law, 10(2) TRADE L. & DEV. 455 (2018). [iii] The most common types of measures employed by the European Union being tariffs and tariff-rate quotas. [iv] See, for instance, judgment of 10 March 2021, Von Aschenbach & Voss (C‑708/19, EU:C:2021:190, paragraph 45). [v] Although the so-called ‘Dunkel draft’ text did some language for that purpose. See Yanning Yu, ‘Circumvention and Anti-Circumvention Measures: the Impact on Anti-Dumping Practice in International Trade’ (Kluwer Law International London, 2008), p. 135 et seq. [vi] Recital (20) of Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (OJ L 176, 30.6.2016, p. 21) (‘the Basic Anti-Dumping Regulation’) and recitals (18) to (20) of Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union (OJ L 176, 30.6.2016, p. 55) (‘the Basic Anti-Subsidy Regulation’).. To that effect, judgment of 16 July 2015, Commission v Rusal Armenal (C‑21/14 P, EU:C:2015:494, paragraph 48). [vii] See, to that effect, judgment of 12 September 2019, Commission v Kolachi Raj Industrial (C‑709/17 P, EU:C:2019:717, paragraph 96 and the case-law cited). Emphasis added. [viii] Ibid. Emphasis added. [ix] Note that the Basic Anti-Dumping and Anti-Subsidy Regulations do not make an extension of measures contingent on the origin of the product concerned but merely their provenance. See judgment of 12 September 2019, Commission v Kolachi Raj Industrial (C‑709/17 P, EU:C:2019:717, paragraphs 103 and 106). [x] To that effect, judgment of 12 September 2019, Commission v Kolachi Raj Industrial (C‑709/17 P, EU:C:2019:717, paragraph 75 and the case-law cited). [xi] See Articles 13(1) and 23(1) of the Basic Anti-Dumping and Basic Anti-Subsidy Regulations. See also judgment of 26 January 2017, Maxcom v Chin Haur Indonesia (C‑247/15 P, C‑253/15 P and C‑259/15 P, EU:C:2017:61, paragraph 57). [xii] See, for instance, Articles 5(9)/10(11) (‘original’ investigations) and 11(2) and (3)/18(2) and (3) (‘review’ investigations) of the Basic Anti-Dumping and Anti-Subsidy Regulations. [xiii] Judgment of 26 January 2017, Maxcom v Chin Haur Indonesia (C‑247/15 P, C‑253/15 P and C‑259/15 P, EU:C:2017:61, paragraph 58 and the case-law cited. Emphasis added. [xiv] Ibid, paragraph 59. [xv] To that effect, Articles 13(1) and 23(1) of the Basic Anti-Dumping and Anti-Subsidy Regulations. [xvi] For examples of successful requests for exemption from circumvention practices outside and inside the European Union, respectively, see, for instance, Council Implementing Regulation (EU) No 723/2011 of 18 July 2011 extending the definitive anti-dumping duty imposed by Regulation (EC) No 91/2009 on imports of certain iron or steel fasteners originating in the People’s Republic of China to imports of certain iron or steel fasteners consigned from Malaysia, whether declared as originating in Malaysia or not (OJ L 194, 26.7.2011, p. 6), recital (62) et seq and Commission Implementing Regulation (EU) 2017/271 of 16 February 2017 extending the definitive anti-dumping duty imposed by Council Regulation (EC) No 925/2009 on imports of certain aluminium foil originating in the People's Republic of China to imports of slightly modified certain aluminium foil (OJ L 40, 17.2.2017, p. 51), recital (68) et seq. [xvii] See, Articles 13(4) and 23(6) of the Basic Anti-Dumping and Anti-Subsidy Regulations. [xviii] Cf the third and fourth subparagraphs of Articles 13(4) and 23(6) of the Basic Anti-Dumping and Anti-Subsidy Regulations. See also judgment of 10 March 2021, Von Aschenbach & Voss (C‑708/19, EU:C:2021:190, paragraphs 44 to 47). [xix] As per Earl Wilson. [xx] See judgment of 26 January 2017, Maxcom v City Cycle Industries (C‑248/15 P, C‑254/15 P and C‑260/15 P, EU:C:2017:62, paragraph 62 and the case-law cited). [xxi] Ibid, paragraph 67 and the case-law cited. Emphasis added. [xxii] See Articles 18(1) and 18(6) of the Basic Anti-Dumping Regulation. [xxiii] Cf judgment of 26 January 2017, Maxcom v City Cycle Industries (C‑248/15 P, C‑254/15 P and C‑260/15 P, EU:C:2017:62, paragraph 65. [xxiv] Ibid, paragraph 66. [xxv] See judgment of 12 September 2019, Commission v Kolachi Raj Industrial (C‑709/17 P, EU:C:2019:717, paragraph 96 and the case-law cited). [xxvi] See, for instance, the approach taken as regards the judgment of 29 January 2014, Hubei Xinyegang Steel v Council (T‑528/09, EU:T:2014:35) in Commission Implementing Decision (EU) 2018/928 of 28 June 2018 terminating the re-opening of the investigation concerning the judgments in joined cases C-186/14 P and C-193/14 P in relation to Council Regulation (EC) No 926/2009 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain seamless pipes and tubes of iron or steel originating in the People's Republic of China and Commission Implementing Regulation (EU) 2015/2272 imposing a definitive anti-dumping duty on imports of certain seamless pipes and tubes of iron or steel originating in the People's Republic of China following an expiry review pursuant to Article 11(2) of Council Regulation (EC) No 1225/2009 (OJ L 164, 29.6.2018, p. 51).