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  5. The WTO Appellate Body Circulated its Report Regarding Korea’s Anti-Dumping Duties on Pneumatic Valves from Japan

The WTO Appellate Body Circulated its Report Regarding Korea’s Anti-Dumping Duties on Pneumatic Valves from Japan

The WTO Appellate Body Found Korea's Measure Inconsistent with the WTO Agreement and Recommended That Korea Bring Its Measure Into Conformity

September 11, 2019

On September 11 (Geneva time: September 10), 2019, the Appellate Body of the World Trade Organization (WTO) circulated its report regarding the Republic of Korea (ROK)’s measure imposing anti-dumping duties on valves for pneumatic transmission (pneumatic valves) from Japan, which has been examined by the WTO at the request of Japan.
 
The WTO Appellate Body accepted core claims of Japan and ruled that the ROK’s imposition of anti-dumping duties on the products in question are inconsistent with the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Anti-Dumping Agreement) due to defects in determination of injury and a causal relationship, as well as in transparency in its investigation procedure. The Appellate Body recommended that the ROK bring its measure into conformity with the Agreement.

1. Overview

On March 15, 2016, Japan requested the establishment of a panel under the WTO Agreement regarding the ROK’s measure imposing anti-dumping duties on pneumatic valves from Japan, and on July 4, 2016, a panel under the WTO Agreement was established.

Japan claimed that the ROK’s imposition of anti-dumping duties is inconsistent with the Anti-Dumping Agreement due to defects in the determination of injury and a causal relationship, as well as in transparency in its investigation procedure.

On April 12, 2018, the WTO circulated a panel report, which presented a ruling that the ROK’s imposing of anti-dumping duties was inconsistent with the Anti-Dumping Agreement because of defects in the determination of injury and a causal relationship, as well as in transparency in its investigation procedure. Accordingly, the panel report requested that the ROK bring its measure into conformity with the Anti-Dumping Agreement. At the same time, the panel report did not accept Japan’s claims on several other issues or make any decision thereof, since these issues were deemed to be outside the terms of reference of the panel.

Therefore, on May 28 and June 4, 2018, Japan and the ROK requested an appeal to the WTO Appellate Body regarding these issues for the Appellate Body’s ruling on them.

2. Major rulings in the Appellate Body Report

(1) The Appellate Body accepted Japan’s position that the ROK’s imposition of anti-dumping duties is inconsistent with the WTO Anti-Dumping Agreement and recommended that the ROK bring its measure into conformity with the Agreement, showing the ruling as below.

  1. Regarding the assumption based on which the ROK determined that the dumped imports of the products in question from Japan had caused material injury to the domestic industry, the ROK did not provide appropriate explanations that the imports of Japanese products in question depressed or suppressed the prices of domestic valves, which is inconsistent with Articles 3.1 and 3.2 (demonstration of price effects of dumped imports on domestic like products) of the Anti-Dumping Agreement. (The Appellate Body maintained the panel’s relevant findings)
    • The valves originating from Japan have higher value and functions than those from the ROK, and the ROK did not provide appropriate explanations, first of all, on whether or not the prices of these valves from Japan and the ROK are comparable.
    • The ROK did not provide sufficient explanations that the imports of the products in question from Japan, whose value is higher than those from the ROK, depressed or suppressed the prices of domestic products, whose prices are basically lower than those of Japanese valves.
  2. The ROK’s measure is inconsistent with Articles 6.5 and 6.5.1 of the Anti-Dumping Agreement due to defects in the handling of confidential information. (The Appellate Body upheld the panel’s decision.)

(2) Moreover, regarding the panel’s decision that avoided ruling on the ROK’s inconsistency with the Agreement on several other issues including below, the Appellate Body admitted Japan’s appeal and revoked the panel’s decision.

  1. The ROK did not take sufficient procedures in determining whether or not there has been a “significant increase” in dumped imports and determining the price effects of the dumped imports, which is inconsistent with Articles 3.1 and 3.2 of the Anti-Dumping Agreement;

  2. Without analyzing the total domestic production, the ROK treated only two companies, which were the applicants for the ROK’s anti-dumping investigation, as the “domestic industry” and relied solely on the data that these two companies submitted, which is inconsistent with Articles 3.1 and 4.1 of the Anti-Dumping Agreement; etc.
     

3. Future schedule

The report of the Appellate Body will be officially adopted by the WTO Dispute Settlement Body (DSB) within 30 days.

Japan demands that the ROK to promptly implement the recommendations presented in the report and to immediately eliminate its measure that the Appellate Body determined to be inconsistent with the Anti-Dumping Agreement.

Japan will have a right to invoke countermeasures in line with the procedures under the WTO Agreement if the ROK fails to implement the WTO recommendations.

4. Significance

This report of the WTO Appellate Body is significant not only in that it recommends the correction of the ROK’s arbitrary anti-dumping measure but also in that it reaffirmed that the abuse of protectionist trade remedies, which are often observed in developing countries, etc., is not permitted under the WTO Agreement. In addition, the clear statement made by the Appellate Body that the panel’s avoidance of making determination on part of the issues that Japan claimed was incorrect is in line with the standpoint of Japan, the country supporting the international rule-making that maintains and develops the trustworthy dispute settlement system.

5. References

(1) Pneumatic valves

Pneumatic valves are parts (valves) which control the flow of compressed air in extending, retracting and rotating pneumatic cylinders by making use of the air, which are applied to assembly or conveyor equipment in semiconductor or automobile manufacturing plants.

(2) Anti-dumping duty

An anti-dumping duty is a customs duty imposed on a certain product by an importing country where it is demonstrated through an official investigation that the export price of the product is less than its selling price destined for consumption in the exporting country and the dumped imports are causing injury to the competing industry in the importing country. The amount of anti-dumping duty cannot exceed the difference between the export price of the product and the domestic selling price of the like product in the exporting country.

(3) Total export value of the products in question from Japan to the ROK

Japan’s annual exports of pneumatic valves to the ROK amounts to approximately 6.4 billion yen, among which the total export value of the valves subject to the imposition of the anti-dumping duties by the ROK is approximately 4.0 billion yen (as of 2018).

(4) Previous press releases regarding this matter

[i] Japan Requests Consultations with the Republic of Korea Under the WTO Agreement Regarding the Republic of Korea’s Measure Imposing Anti-dumping Duties on Valves for Pneumatic Transmission From Japan
 

[ii] Japan Requested the Establishment of a Panel under the WTO Agreement Regarding the Republic of Korea’s Measure Imposing Anti-Dumping Duties on Valves for Pneumatic Transmission from Japan

[iii] A Panel was Established under the WTO Agreement Regarding the Republic of Korea’s Measure Imposing Anti-Dumping Duties on Valves for Pneumatic Transmission from Japan

[iv] Korea's Anti-Dumping Duties on Pneumatic Valves From Japan Inconsistent with WTO Agreement -The panel upholds Japan's claims on this matter-

[v] Japan Appealed to the WTO Appellate Body Regarding the Republic of Korea’s Measure Imposing Anti-Dumping Duties on Pneumatic Valves from Japan

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