Anti-dumping duties

Evasion of anti-dumping duties

There are three typical ways to evade anti-dumping duties:

1. first, anti-dumping duties can be evaded by over-invoicing, i.e., by submitting falsified invoices showing an over-invoiced price. Since dumping occurs when goods from one country are sold below their normal value on the market of another country, i.e. the price of an export product is cheaper than the price in the export country, and the EU wants to counteract this by levying an anti-dumping duty, the actual purchase price can be manipulated by means of over-invoicing in such a way that it exceeds the dumping threshold when the goods are declared for release for free circulation in the EU.
2. In addition, there is the possibility of incorrect information regarding the country of origin of the goods. Chinese goods, for example, are first delivered to Taiwan, Thailand or Malaysia and then transferred to the EU. In the shipping documents, these countries then appear as producing countries, whereby the EU's ban on dumping does not apply with respect to these countries.
3. A method that can be detected quite easily in the course of a customs inspection can also be the incorrect classification of goods in the customs tariff.

According to Article 1 (1) of Regulation (EC) No 1225/2009, an anti-dumping duty may be levied on any product which is found to be dumped and whose release for free circulation causes injury. A product is considered to be dumped if its export price to the Community is lower than the price of the like product when sold for consumption in the exporting country, Article 1(2) of Regulation (EC) No 1225/2009.

The procedure for the determination of the anti-dumping duty is set out in Regulation (EC) No 1225/2009 and is limited in amount to the dumping margin found and, according to Article 9(5) of Regulation (EC) No 1225/2009, if a duty lower than the dumping margin is adequate to remove the injury to the Community industry, it should be less than the dumping margin.

According to Article 7 of Regulation (EC) No 1225/2009, provisional anti-dumping duties may be imposed. According to the Regulation, this occurs when a proceeding has been initiated pursuant to Art. 5 of the Regulation, a notice has been published to that effect and interested parties have been given adequate opportunity to submit information and make comments in accordance with Art. 5 (10), and a provisional determination has been made that dumping is taking place and that a Community industry is thereby injured, and that the Community interest calls for measures to remedy such injury, Art. 7 (1) Regulation (EC) No. 1225/2009. Should a provisional anti-dumping duty be imposed, the release for free circulation of the products concerned shall be conditional upon the provision of a security, equivalent to the amount of the provisional duty. Provisional anti-dumping duties are in principle valid for six months and for a maximum of nine months.

Provisional and definitive anti-dumping duties shall not be levied in lieu of, but in addition to, other import duties, Article 14 (1) of Regulation (EC) No 1225/2009.

However, anti-dumping duties are only in force for a limited period of time, i.e. only as long as it is necessary to render the injurious dumping ineffective. Definitive anti-dumping duties shall expire no later than five years from the date of their imposition or from the date of the last review, unless it is determined in a new review that there is a likelihood of continuation or recurrence of injury caused by dumping.

Importers may, upon request, obtain a refund of anti-dumping duties if they can show that the dumping margin is lower than the normal duty rate, Article 12 (8) UA 1 of Regulation (EC) No 1225/2009. Such request shall be made within 6 months of the date on which the definitive duties were established or the date on which the guarantee was definitively collected.

Circumvention of anti-dumping duties

With regard to the circumvention of anti-dumping duties, Art. 25 of the Customs Code provides some anti-dumping protection. This provision became important mainly in the context of intra-Community assembly operations. If, after the initiation of an anti-dumping proceeding or after the imposition of anti-dumping duties, assembly facilities are newly established or assembly operations are significantly expanded, there is a presumption, if there is a temporal link, that these actions are aimed at circumventing the anti-dumping measures (ECJ, judgment of 13.12.1989 C-26/88). In this case, the company must prove that the relocation is based on proper reasons and not for circumvention of the provision. In case of circumvention of anti-dumping duties, the EU has the measure to extend already existing anti-dumping duties to imports of the like product or parts thereof from third countries.

The material conditions for the imposition of anti-circumvention measures are outlined in Art. 13 (1) and (2) of the Basic Anti-dumping Regulation. Accordingly, a circumvention measure can be implemented if five criteria are met: similarity of the products already subject to measures and those for which circumvention measures are to be applied; a change in trade patterns; no other sufficient reason or economic justification for this change in trade patterns; undermining of the remedial effects of the anti-dumping measure; and evidence of dumping. In cases of assembly operations, the requirements of Article 13(2) of the Basic Anti-dumping Regulation must also be considered, including the total value of the assembled parts and the manufacturing costs incurred in the country where the circumvention occurs.

By contrast, the introduction of anti-circumvention measures is not contingent on changes in the competitive conditions of the affected market since the introduction of the anti-dumping measures or whether such measures are in the interest of the Union. The detailed conditions are as follows:

Circumvention measures may only be applied to products that are similar to those covered by the original measure. Otherwise, a new investigation under Art. 5 of the Basic Anti-dumping Regulation would be necessary. Goods are considered alike if they share the same basic physical and technical (or chemical) characteristics and uses. Minor changes, such as mixing with another substance, are acceptable as long as they do not affect the use. If defining the modified product in terms of technical characteristics is difficult, a value threshold may be set to ensure that the modified product and the product subject to measures are treated as identical.

A change in trade patterns is considered to have occurred if imports from the country subject to anti-dumping measures have decreased, while imports of similar products from the country under anti-circumvention investigation (and not previously subject to measures) have increased, indicating substitution.

Article 13(1) of the Basic Anti-dumping Regulation does not require full substitution. It is sufficient if a clear and sustained substitution trend is identifiable over an extended period. It is not necessary for imports from the third country to be at the same level as imports from the country subject to anti-dumping measures. Nor is it necessary for the decline in imports from one country and the increase from another to happen simultaneously.

In the absence of adequate cooperation from the companies involved, the Commission typically relies on the Union's external trade statistics (Eurostat) to assess trade patterns.

This holds even if the product only partially corresponds to a CN code. Significant indications of a change in trade patterns can also come from the trade statistics of the exporting country under anti-dumping measures, which may show increased exports of the product to the third country accused of circumvention. Cooperating companies from the third country are free to prove to the Commission that they have not contributed to the change in trade patterns. This is often demonstrated by companies that are actual producers of the product, have not or only minimally purchased goods from the country under measures, and have not or only marginally sold goods from this country into the Union. For these companies, the anti-circumvention investigation is typically closed without extending the measures.

The third condition for imposing an anti-circumvention duty is that there is no sufficient cause or economic justification for the change in trade patterns. A sufficient justification is usually not assumed if the trade pattern change coincides with the introduction of the measures. In the absence of other explanations, this condition is generally met since the introduction of the measure itself is not considered sufficient justification.

However, if other reasons for the change in trade patterns are put forward, such as by cooperating companies, the information will be closely examined by the Commission. For example, potential cost savings (e.g., relocating packaging to a low-wage country) must be weighed against additional expenses (e.g., increased transportation costs).

General assertions that the third country has offered incentives to foreign investors or that labor costs are lower are insufficient, especially if labor costs represent only a small portion of total costs. However, genuine manufacturers who do not source their raw materials from the country subject to measures can often demonstrate this successfully.

The imposition of circumvention measures also requires evidence that injury has occurred or that the remedial effects of the duty are being undermined. According to Art. 13 (1) of the Basic Anti-dumping Regulation, it is not necessary to prove both injury and undermining; proof of either is sufficient. Regarding "injury," reference can be made to the relevant provisions in Art. 3 of the Basic Anti-dumping Regulation. When determining whether the duty's remedial effect is being undermined, trends in volume and prices are particularly relevant.

Regarding import volumes, it is assessed whether a substitution effect has occurred, i.e., whether the products from the original investigation have been partially or fully replaced by products subject to the anti-circumvention investigation. Since this condition is already evaluated in the context of changes in trade patterns, it is generally considered met. Past practice has, however, recognized exceptions under the de minimis rule of Art. 9 (3) of the Basic Anti-dumping Regulation, which allowed minor circumvention, though this practice has rightly been discontinued as imports from the "circumventing country" are attributed to the country subject to measures.

In terms of prices, it is usually sufficient to establish that the current export prices from the country involved in circumvention are below those established in the original investigation.
It is sometimes also noted that the current export prices are below the injury threshold set in the original investigation. The Commission has previously examined undermining based on both quantity and price, although under Article 13(1) of the Basic Anti-dumping Regulation, undermining in just one of these areas would suffice.

Lastly, the imposition of anti-circumvention measures requires evidence of dumping in relation to the normal values established previously. The level of dumping does not need to match that in the original case, but a positive dumping margin must be present.

Recalculation of the dumping margin takes into account the normal value from the original investigation, current export prices, and potentially some adjustments, such as transportation and insurance costs.

Art. 13(2) of the Basic Anti-dumping Regulation provides a specific rule for circumvention through assembly, both in third countries and within the EU.

Circumvention measures can be imposed on these assembly operations if six conditions are met: similarity of the products; changes in trade patterns, which must show that the assembly began or expanded shortly before or after the imposition of the original anti-dumping measure; 60% of the parts’ total value comes from the country under measures; the added value in the assembly country does not exceed 25% of the total manufacturing cost; the remedial effects of the existing measures are undermined; and dumping exists relative to the previously established normal values.

Assembly within the meaning of Article 13(2) of the Basic Anti-dumping Regulation is considered to occur if 60% or more of the parts used, measured by total value, originate from the country subject to measures. This provision reflects the EU's view on distinguishing between genuine production and so-called "screwdriver factories." The term "origin" in the German version of Art. 13(2) is not to be understood as per customs law but also includes goods shipped from the relevant country.
However, companies are free to prove that the parts originate elsewhere. If the Commission refuses to review submitted evidence, it violates the principles of fair procedure and proportionality.

According to Art. 13(2), the value of parts from the country subject to measures must constitute 60% or more of the total value of the parts used in the assembled product. This is based on the pure material value of the fully assembled goods, not their sales value. The value of parts is generally calculated from the purchase prices at delivery to the assembly company.
If parts are supplied by affiliated companies, it must be determined whether the purchase prices correspond to market prices.

Circumvention duty cannot be imposed if the value added through assembly exceeds 25% of the total manufacturing costs. This condition further clarifies the Union's concept of "screwdriver factories." Manufacturing costs include labor and production overheads but not material costs.
In particular, distribution, administrative, and other overhead costs, as well as profits, are excluded. Research and development costs, which some companies classify as manufacturing costs and others as SG&A costs, should be uniformly considered manufacturing overheads.

Legal protection against anti-dumping duties

Depending on the circumstances, legal protection against safeguard measures exists under national or Union law, possibly even under both legal systems. Although the safeguard duties are determined by Council regulations and thus under Union law, they are levied by customs notification under national law against the importer. This means that the importer, as the addressee of the national customs decision, enjoys legal protection under national law.

However, errors in the procedure leading to the regulation and errors in the regulation itself can also be criticized in the context of a national legal dispute. If questions regarding the interpretation of anti-dumping regulations arise in the context of national legal proceedings, the national court dealing with the dispute is entitled to refer the matter to the ECJ in accordance with Art. 267 TFEU (referral procedure) and, if it is a court of last instance, is even obliged to do so. However, according to established case law, plaintiffs who could have asserted the invalidity of the anti-dumping regulation by way of a direct action before the Court of First Instance in Luxembourg, but failed to do so, are prevented from doing so by way of national proceedings.

The direct action before the Court of First Instance pursuant to Art. 263 TFEU
is open to the parties directly and individually affected by the regulations. In practice, direct action is the most common form of legal protection against anti-dumping and anti-subsidy regulations.

While the admissibility of an action based on individual concern can generally be affirmed for exporters against whose exports measures have been imposed, the question is more difficult for importers. Importers may be individually concerned if they are related to exporters from third countries whose products are subject to anti-dumping duties and the export price was calculated on the basis of their sales prices on the Community market. Finally, the Court has recognized standing when an independent importer challenges a regulation and claims the existence of exceptional circumstances characterizing it. In any case, the plaintiff bears the burden of demonstrating and proving that he is individually concerned.