eu rules of origin of anti-dumping proceedings

Practical Trade & Customs Strategies © Thomson Reuters/WorldTrade Executive 2012 �

Rules of Origin, continued on page 2

Customs Valuation, continued on page 5

WTE

PRACTICAL

TRADE & CUSTOMS STRATEGIESWTE

TRADE & CUSTOMS STRATEGIES

In ThIs Issue

September 30, 2012Volume 1, Number 2

Stepping Back: Bridging Customs Valuation Strategies

By Kristine Price (Ernst & Young LLP)

Much attention is often spent by customs professionals considering if, when, and how their companies will need to present documented support to customs authorities of related party transfer prices as qualifying transaction values. As enforcement by both customs and income tax authorities is reportedly increas-ing worldwide, some countries doing so in an integrated fashion, it is growing ever necessary for customs professionals to recognize inconsistent treatment and to understand the linkages and barriers.

Evolving Nature of Customs Authority Positions Interpretations of the WTO Valuation Agreement continue to evolve and

vary within and among WTO member countries throughout the world. Public-private efforts to leverage or reconcile transfer pricing and custom approaches continue to present a less than clear picture. The World Customs Organization

EU Rules of Origin of Anti-dumping Proceedings

By Renato Antonini and Eva Monard (Jones Day)

The globalization of production processes creates complexities for accessing the origin of imports. 1 In particular, the concept of “origin” in trade remedy investigations should be nuanced. The application of trade defense remedies will depend, inter alia, on the origin of the imported products. In addition, in a trade remedy proceeding, an investigating authority must determine who qualifies as a “domestic producer”. 2 Should the rules of origin play a role in these determinations and, if so, which rules of origin should be applied? Recent developments in the trade defense field in the European Union (EU) illustrate the various ways investigating authorities may address these matters.

Imposition of Trade Remedies on Products Originating in a Particular Country

In early September, the EU announced its anti-dumping proceeding con-cerning imports of crystalline silicon photovoltaic modules and key components (i.e. cells and wafers) originating in the People’s Republic of China. The notice of initiation3 of this proceeding is notable for several reasons. This anti-dump-

Corporate Profit Allocation and Customs ValuationWhat are the transfer pricing approaches that support the division of profits? What should be considered when determining the best approaches for supporting customs values? Though the application of customs valuation rules may remain vague in the future, customs professionals will nonetheless need knowledge of transfer pricing and corporate profit allocation in order to conduct effective party valuation planning for customs purposes.

Origin of Anti-dumping Proceedings in the EUShould the rules of origin play a role in trade remedy proceedings and, if so, which rules of origin should be applied? Recent developments in the trade defense field in the EU illustrate the various ways investigating authorities may address these matters. Page 1

Navigating Global Trade PressuresThe current economic climate poses a challenge to tax authorities who are aggressively pursuing multinational companies on customs and indirect tax positions to meet their revenue collection targets. Page 3

Trademark Protection at the BorderBranding an item does not come easy, and counterfeit insults the work of an IP owner if certain precautions are not taken. A little-known provision of the customs law allows for a greater level of IP protection. Page 14

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Anti-DumpingRules of Origin from page 1


ing investigation, according to some, may be the highest valued trade defense investigation carried out by the EU Institutions in history. The launch of the investigation heightened tensions between the EU and China in the field of trade, especially after China’s numerous warnings about possible retaliation if this case was initiated. Moreover, this is the first notice initiating an anti-dumping in-vestigation against China that no longer includes a reference to the EU’s “individual treatment” regime (which follows the findings of the World Trade Organization (WTO)’s Dispute Settlement Body4).

Beyond the above concerns, however, we will focus on what sets this case apart from other notices of initiation, namely it references a provi-sion of the EU’s Basic Anti-Dumping Regulation5 relating to the rules of origin applicable in anti-dumping proceedings:

“The origin of the product under investiga-tion exported from the country concerned will be examined in the light of that and other informa-tion gathered in this investigation. If appropriate, special provisions may be adopted, for instance, on the basis of Article 14(3) of the basic Regula-tion.”6

Article 14(3) of the EU’s Basic Anti-Dumping Regulation provides for the possibility to adopt “[s]pecial provisions, in particular with regard to the common definition of the concept of origin”. The EU thus opens the possibility to adopt special rules of origin for determining the origin of prod-ucts covered by any anti-dumping measures im-posed as a result of the investigation. Such rules of origin would differ from the normally applicable non-preferential rules of origin. A similar provi-sion is included in the EU’s Basic Anti-Subsidy Regulation7 (Article 24(3)).

It is the EU’s well-established practice to impose trade defense measures on products origi-nating in (a) particular country/countries.8 The EU, for instance, dismissed a request to impose anti-dumping measures on the basis of the country of provenance, stating that “it is the consistent practice of the Community to impose anti-dump-ing measures solely on products originating in a third country”.9 Other users of trade defense measures generally take a similar approach. As a result, identifying the origin of imported products is important in assessing whether the import of such products will be subject to trade defense measures.

Practical Trade & Customs Strategies © Thomson Reuters/WorldTrade Executive 2012 ��

Anti-Dumping


Rules of Origin, from page 2Such determination is made on the basis of

rules of origin. But which rules of origin? Are these rules of origin identical to the rules that are being applied for other purposes? The principles laid down in the WTO Agreement on Rules of Origin apply to rules of origin used in non-preferential commercial policy instruments, including for the purpose of applying trade defense measures.10

Article 3(a) of the WTO Agreement on Rules of Origin provides that, upon the implementation of the results of the harmonization work program, WTO Members must apply rules of origin equally for all purposes covered by the Agreement. How-ever, currently, the harmonization work program, originally intended to be completed by 1998, still is being developed under the auspices of the World Customs Organization (the WCO Technical Com-mittee) and the WTO (the WTO Committee on Rules of Origin). Thus, the requirement to apply rules of origin equally for all purposes has not yet materialized. Furthermore, if countries managed to obtain a consensus in relation to harmonized rules of origin, it is unclear whether the provision requiring an equal application for all purposes would remain the same. The application of the harmonized rules for all non-preferential pur-poses, in particular trade remedies, is one of the most contentious issues within the WTO Commit-tee on Rules of Origin.

Nevertheless, the EU in principle applies its general non-preferential rules of origin in deter-mining the origin of imported products when assessing whether trade remedy duties are due.11 Practitioners have often forgotten Article 14(3) of the EU’s Basic Anti-Dumping Regulation and its corresponding provision in the EU’s Basic Anti-Subsidy Regulation which allow for the adoption of special rules of origin for the purposes of anti-dumping measures. The notice of initiation of the solar panels proceeding suggests, however, that this provision might become very well known to most practitioners in the near future.

It will be quite interesting to see if, and, eventually to what extent, the EU will divert from its normal non-preferential rules of origin. Any special rules of origin must comply with the requirements laid down in Article 2 of the WTO Agreement on Rules of Origin. If the EU adopts special rules of origin for the imposition of anti-dumping measures on solar panels, this will likely play a part in the evolution of EU trade remedies law.

Rules of Origin and the Concept of the Domestic Industry

Determination of the domestic industry (for the EU, the Union industry) is another field in trade remedy investigations where rules of ori-gin could play a crucial role. A complaint, which requests the initiation of a trade defense investi-gation, can only be accepted if it has been lodged on behalf of the Union industry. The assessment of the existence of injury, an element that must be present before a decision to impose trade defense duties can be made, is conducted with respect to the domestic industry. In determining whether an investigation can move forward, as well as whether or not injury has occurred, it is neces-sary to establish who is a domestic producer, or, in other words, which production activities are sufficient to qualify as a domestic producer.

It may seem that the rules of origin that would apply to make this determination would be similar to those used to determine the scope of application of the possible measures. However, investigating authorities are reluctant to engage in such practice and tend to make the determina-tion of the domestic industry on rather vague grounds. The WTO Agreement on Rules of Origin allows for this dual-sided approach by providing that the determinations made for the purposes of defining “domestic industry” or “like products of domestic industry” or similar terms, wherever they apply, are not covered by the concept of “rules of origin”. As a result, the WTO Agreement on Rules of Origin does not provide for any obliga-tions in this respect. Also the WTO Anti-Dump-ing and Anti-Subsidy Regulation do not specify on which basis this assessment should be made, thereby leaving investigating authorities with a fair amount of discretion.

In 2010, the EU Institutions initiated an anti-dumping, an anti-subsidy, and a safeguard pro-ceeding concerning imports of WWAN modems from China. The anti-dumping and anti-subsidy complaints were lodged by one EU company, which was considered to constitute the entire Union production of WWAN modems. Through-out the investigations, several arguments were presented in relation to the status of this com-plaining company. Several interested parties ques-tioned whether this company could be considered as a Union “producer” in view of the company’s allegedly limited production activities in the EU itself, given the outsourcing of significant parts of its production to China.

�� © Thomson Reuters/WorldTrade Executive September 30, 2012

Anti-Dumping

Rules of Origin, from page 17

European Union and Chinese leaders agreed on Thursday to avoid trade protectionist measures following months of increasing tensions between the global partners with China undertaking to continue to invest in European debt.

At a summit in Brussels, the 15th between the world’s largest trading bloc and China, the second largest economy, Premier Wen Jiabao sought to play down a dispute with Europe over Beijing’s export policies and trade practices.

Eventually, the EU company was taken over by one of the Chinese exporting producers and withdrew its complaints. In turn, the investiga-tions were terminated without the EU Institutions taking any position on this line of argument. However, it can be expected that in the near fu-ture, other trade remedy investigations by the EU, possibly even those already ongoing, will give rise to similar questions. In such case, it remains to be seen whether the EU will also provide the necessary answers.

The interaction between trade remedy inves-tigations and the concept of origin is certainly something to be followed up on in the EU and in other countries that are using the anti-dumping, anti-subsidy, or safeguard instruments. o

1 The views adopted in this article represent the per-sonal opinions of the authors and not the position of Jones Day.2 Additionally, rules of origin also play a role in as-sessing whether or not circumvention of trade defense measures is taking place. This aspect will not be ad-dressed in this article.3 OJ 2012, C 269, 6.9.2012, p.54 DS397, European Communities – Definitive Anti-Dump-ing Measures on Certain Iron or Steel Fasteners from Chi-na.5 Council Regulation (EC) No 1225/2009 of 30 Novem-ber 2009 on protection against dumped imports from countries not members of the European Community.6 See note 5.

7 Council Regulation (EC) No 597/2009 of 11 June 2009 on protection against subsidized imports from countries not members of the European Community8 Although a recent judgment of the EU’s General Court dismissed the arguments relied upon by the applicant to claim that an anti-dumping investigation cannot be opened against a simple producer, see Gen-eral Court, Since Hardware (Guangzhou) v Council, case T-156/11, 18 September 2012.9 See Commission Decision of 28 September 2001 ter-minating the anti-dumping proceeding concerning imports of colour television receivers originating in Turkey, OJ 2001, L272, p. 37, recital 15.10 See Article 1.2 of the WTO Agreement on Rules of Origin.11 The EU’s anti-circumvention provisions will not be discussed here.

Renato Antonini ([email protected]) is a Partner and Eva Monard ([email protected]) is an Associate in the Brussels office of Jones Day. Mr. Antonini focuses on EU trade and WTO laws relating to trade protection measures and dispute settlements. He has extensive experience in EU and Italian customs and export control law, including tariff classification, customs valuation, dual-use goods, and sanctions. Ms. Monard’s practice focuses on WTO law and EU trade, export controls, and customs law. She has assisted clients in EU trade defense investigations involving antidumping, anti-subsidy, safeguard, and anti-cir-cumvention issues as well as in a full range of other trade matters. She also has successfully defended cli-ents’ interests before EU institutions and EU courts.

Trade

“We both (China and the European Union) follow free and open economic and trade policies, reject trade protectionism and work to advance economic globalization,” Wen told a business conference on the sidelines of the summit.

Wen and EU leaders Herman Van Rompuy and Jose Manuel Barroso emphasized the size and interdependence of their relationship which has seen trade double in size over the past eight years.

EU, China Leaders Avoid Protectionism After Trade Rows

By Sebastian Moffett and Kevin Yao (Reuters)

eu rules of origin of anti-dumping proceedings

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