WTO Appellate Body Upholds Panel Findings in EU-Argentina Biodiesel Case
The WTO’s Appellate Body has supported an earlier panel’s mixed ruling in a dispute (DS473) brought by Argentina concerning the European Union’s duties on imported biodiesel, as well as certain aspects of the bloc’s anti-dumping rules.
Argentina challenged the EU measures at the WTO in December 2013 and a panel was established the following year to hear the case. A separate dispute (DS480) on the measure was tabled by Indonesia and is still ongoing. (See Bridges Weekly, 16 January 2014, 30 May 2013, and 24 October 2013)
In the trade jargon, “dumping” refers to when a product is sold abroad at prices below its normal value. The General Agreement on Tariffs and Trade (GATT)’s Article VI and the related Anti-Dumping (AD) Agreement allow WTO members to apply anti-dumping duties where such “dumping” is proven to injure domestic industry.
The previous panel said that the challenged provision of the EU’s anti-dumping policy does not violate the Anti-Dumping Agreement and the GATT 1994, while certain aspects of EU’s specific investigation into Argentine biodiesel producers and related duties were in breach of both accords. Both sides appealed the original panel report. (See Bridges Weekly, 7 April 2016 and 2 June 2016)
Raw materials prices
The anti-dumping measure at issue comes from an EU investigation into Indonesia and Argentine biofuel imports. The EU probe was launched in 2012 following a complaint by the European Biodiesel Board (EBB) – a domestic industry group representing three-quarters of the bloc’s biodiesel production.
Argentina is one of the world’s largest biodiesel exporters, with its producers primarily using soybeans as a raw material. It has claimed that the anti-dumping measures have cost it US$1.6 billion in lost sales per year, with the EU one of its major markets for the fuel.
Calculating dumping involves comparing a product’s export price with its domestic price, the latter of which is known as its normal value. Under certain conditions, EU anti-dumping law allows for constructing this normal value based on production cost, together with other costs and profits.
In constructing normal value, the EU authorities first used the actual soybean cost reported by Argentine producers, and initially imposed provisional duties at rates equal to the calculated dumping margin, ranging from 6.8 percent to 10.6 percent.
These duties were later revised upward to account for the impact of Argentina’s differential export tax system on soybeans, soybean oil, and the resulting biodiesel. The EU deemed that this export tax scheme brought domestic raw materials prices artificially low, meaning that consequently raw material costs were not appropriately reflected in Argentina producers’ records and should not be used in calculating normal value.
The EU instead used average international soybean reference prices published by Argentina’s agriculture ministry to determine normal value, deeming that dumping was actually at levels between 41.9 percent and 49.2 percent.
The EU appealed the panel’s finding that its authorities violated WTO rules by not using Argentina producers’ records in calculating production costs, as normally required by the global trade body in the construction of normal value.
The Appellate Body ultimately said that the EU investigators’ finding that domestic prices of soybeans in Argentina were below international prices due to the export tax system was not enough of a basis to ignore producers’ records. Furthermore, when using information from other countries, an investigating authority would need to adapt this information to determine production costs in Argentina.
The WTO judges said that the soybean price, which is based on international soybean prices after deducting fobbing costs, used for calculating Argentine production costs did not actually represent soybean costs for its biodiesel producers or exporters. Ultimately it agreed with the panel that the final EU duties were above those that would have been established had the process followed WTO rules, and were therefore illegal.
EU anti-dumping rules
The Basic Regulation dictates how the EU conducts its anti-dumping probes, with one of its provisions allowing for authorities to revise the costs for investigated producers/exporters should these not be “reasonably reflected” in their records. In such cases, costs for other producers or exporters can be used, or data from other “representative markets.”
The Appellate Body said that under this provision, the EU can conduct its anti-dumping investigations in a WTO-consistent way, such as by using information sourced from other countries and adapting it to reflect Argentine production costs. Ultimately, the Appellate Body said that Argentina failed to prove that this provision of EU anti-dumping policy violated WTO anti-dumping rules.
Going forward, if immediate compliance cannot be achieved, a reasonable period of time will be established for bringing the WTO-illegal measures in line with global trade rules. Should the parties later disagree on whether the EU has complied with the recommendations and rulings, WTO rules allow for compliance-related reviews, among other processes.
Parallel domestic proceedings
Argentine and Indonesian biodiesel producers had also filed cases against the EU authorities before the General Court of the European Union, in parallel to the WTO dispute proceedings. Those cases similarly dealt with the construction of normal value, including the EU authorities’ decision not to use producer records of costs.
Among other findings, the EU court deemed that the bloc’s investigative authorities did not demonstrate that Argentine prices for raw materials had suffered “appreciable distortion” due to the differential export tax system, ultimately saying that ignoring producer records was not in line with EU anti-dumping rules. Last month, the Court annulled the anti-dumping duties on the Argentine and Indonesian biodiesel producers who had tabled the case.