the lesser duty rule in the eu’s

www.huawei.com

HUAWEI TECHNOLOGIES CO., LTD.

The Lesser Duty Rule in the EU’s

Modernization of TDIs Initiative.

James Lockett

C5 Annual Forum on International Trade Disputes

Brussels, 11 October 2016

HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential 2

Content

Click to add Title

2 Click to add Title

1

The Lesser Duty Rule in the Modernization of TDIs

The Lesser Duty Rule: Setting the Scene

Click to add Title3 Are Changes to the Lesser Duty Rule Justified?


WTO Agreements

Article 9.1 of the ADA: “The decision whether or not to impose an anti-dumping duty in cases

where all requirements for the imposition have been fulfilled, and the decision whether the

amount of the anti-dumping duty to be imposed shall be the full margin of dumping or less,

are decisions to be made by the authorities of the importing Member. It is desirable that the

imposition be permissive in the territory of all members, and that the duty be less than the

margin if such lesser duty would be adequate to remove the injury to the domestic industry”.

A similar provision is included in Article 19.2 of the ASCM.

Rationale: Minimization of trade restrictions. Proposed by the EU during the Uruguay Round

as a result of EU/EC practice introducing the lesser duty rule concept in late 1980s/early

1990s.


…and EU Legislation

The application of the lesser duty rule (LDR) is mandatory under EU legislation (both

provisional and definitive duties), e.g.:

The Basic Anti-Dumping Regulation provides that: “[t]he amount of the anti-dumping duty shall not

exceed the margin of dumping established but it should be less than the margin if such lesser duty

would be adequate to remove the injury to the Community industry” (Article 9(4)).

The Basic Anti-Subsidy Regulation provides that: ” [t]he amount of the countervailing duty shall not

exceed the amount of countervailable subsidies established but it should be less than the total

amount of countervailable subsidies if such lesser duty would be adequate to remove the injury to

the Community industry” (Article 15(1)).


Content

Click to add Title


1


The Lesser Duty Rule: Setting the scene



The Lesser Duty Rule in the Commission’s TDI Modernization proposal

The Commission’s 2013 proposal calls for the abolition of the lesser duty rule in two

instances:

in AD cases when “structural raw material distortions” exist;

in AS cases.

Aim: to discourage third country governments and economic operators to engage in

practices such as subsidization and interference in trade of raw materials.


Subsequent steps in the legislative process

The European Parliament (first reading) supported the Commission’s proposal and

advocated the non-application of the LDR in three more situations in AD cases:

when the exporting country has an insufficient level of social and environmental standards (no

ratification of core ILO conventions or environmental agreements to which EU is party);

when the complainants are largely SMEs;

when subsidies are found to exist either in the AD case itself or in an AS case concerning the same

product.

Deadlock in Council in 2014: the Council could not reach agreement during the Italian

Presidency in 2014:

Discussions postponed.


More Recent Developments

The Commission Steel Communication (March 2016) revives TDIs modernization

discussions, including a proposal to extend the removal of the LDR to situations where the

market of the exporting country is subject to significant distortions.

Common core demands from Germany and France (May 2016): removal of LDR in presence

of structural raw material distortions (export taxes/restrictions; subsidies; dual pricing) and

‘massive over-capacities’.

No compromise reached by Dutch Presidency.


Content

Click to add Title


1


The lesser duty rule: setting the scene



Impact of the Removal of the Lesser Duty Rule

Over-protection of the EU industry? If injury has been removed, what reason for higher

duties?

Unnecessary to impose higher duties than those already removing injury;

Broad definition of structural raw material distortions: much discretion left to authorities, and no

clear tie to AD/CVD issues.

Potential increase of WTO challenges:

Higher risks of double remedies in parallel AD/AS?

Violation of WTO non-discrimination principle arising from selective application of the LDR.

Setting a bad precedent internationally which would damage EU exporters who would face

higher duties.

Social and environmental standards do not provide basis for TDIs.


Selective Application of Lesser Duty Rule

Obligation for the EU to apply its trade laws and regulations on a non-discriminatory basis:

The application of the LDR is subject to the MFN rule; the WTO+ nature of this obligation does not

exempt the EU from the obligation of applying its anti-dumping duties in a non-discriminatory basis;

Identical treatment must be granted to similarly situated countries (EC-Tariff Preferences);

Art 9.2 ADA: “When an anti-dumping duty is imposed in respect of any product, such anti-dumping

duty shall be collected in the appropriate amounts in each case, on a non-discriminatory basis on

imports of such product from all sources found to be dumped and causing injury….”

Selective application of LDR as suggested by the EU legislator may result in instances of de facto

discrimination, particularly if the criteria are not clearly set (e.g., definition of structural raw material

distortions extremely broad…).

Copyright©2011 Huawei Technologies Co., Ltd. All Rights Reserved.

The information in this document may contain predictive statements including, without limitation, statements regarding the future financial and

operating results, future product portfolio, new technology, etc. There are a number of factors that could cause actual results and developments to

differ materially from those expressed or implied in the predictive statements. Therefore, such information is provided for reference purpose only and

constitutes neither an offer nor an acceptance. Huawei may change the information at any time without notice.

Thank youwww.huawei.com

the lesser duty rule in the eu’s

Documents