Legality of adjusting input prices in a final product's price in anti-dumping investigations

What is it about?

Legality of adjusting input prices in a market economy's final product's price in anti-dumping investigations In anti-dumping procedures, the EU authorities have adjusted State-distorted input costs in the constructed normal value to market benchmarks. This methodology increases the amount of anti-dumping duties and hence import barriers to foreign goods produced with low-priced raw materials. Such cost adjustments are based on certain EU anti-dumping provisions that implement corresponding World Trade Organization (WTO) rules under which the cost of input must be derived, as a principle, from the records of target companies in the exporting country if those records, inter alia, reasonably reflect production costs of the product under investigation. But in the case of input costs distorted by the government, the EU authorities have typically deviated from this principle relying on alternative sources on the grounds of unreasonable costs. While the EU jurisprudence has so far been generally lenient towards this methodology as applied to significant distortions in the raw material (upstream) market, the recent WTO appellate ruling in EU–Biodiesel is rather negative on its use in the presence of the valid domestic records. This article examines the EU anti-dumping practice as reviewed in both EU and WTO judicial proceedings and discusses some legislative reforming options under both regimes. It concludes that the WTO anti-dumping rules should be amended to allow market-oriented cost adjustments in the normal value, on the one hand, and ensure parallel export price adjustments, on the other.

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Why is it important?

Input cost adjustments artificially inflate dumping margins and lead to higher anti-dumping duties. This methodology is applicable to market economies. The EU recently revised its anti-dumping law to cope with possible China's transition to market economy status. This article defends this methodology but argues that WTO law should be amended, as the Appellate Body's ruling in EU-Biodiesel found this methodology illegal.

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