Determination of Injury in Anti-Dumping Investigations: Turkey’s Side of the Story

I – Introduction

In a world ruled by the global economy, protection of international
trade from unfair competition holds great importance. Unfair competition can
develop out of various trade forms such as dumping or subsidy. Between global
players, such protection against these forms is maintained through customs taxes
and other similar foreign trade policies like anti-dumping measures.

In Turkey, as a frequent exerciser of anti-dumping
measures since 1989, anti-dumping practices are governed within scope of the Law
No. 3577 on Prevention of Unfair Competition in Imports ("Law") and the
secondary legislation, which is a transposition of the Agreement on
Implementation of Article VI of The General Agreement on Tariffs and Trade 1994
("Anti-Dumping Agreement"). In light of the Law, the authority to initiate a
dumping or subsidy examinations, upon complaint or, where necessary, ex officio, is given to the Ministry of
Economy's Directorate General of Imports ("Directorate")[1].

During an examination, the Directorate first begins
the task of determining whether the imports are in fact being dumped or subsidized,
and if so, to what extent. If the imports turn out to be dumped or subsidized, the
Directorate should then determine whether an injury is incurred by the domestic
industry. Therefore, not only the existence of dumping but also existence of
injury must be revealed for applying certain anti-dumping measures.

II – Definition of Injury

Article 2 of the Law defines injury as "Material damage to a production line, material
damage threat to a production line or a tangible delay in establishing such
production line". This definition is in parallel with the definition
brought by Anti-Dumping Agreement, which sets forth that under the Anti-Dumping
Agreement the term "injury", unless otherwise specified, means
material injury to a domestic industry, threat of material injury to a domestic
industry or material retardation of the establishment of such industry.[2]

Within this perspective, injury occurs when dumped product leads to (i) material damage or
(ii) material damage threat on a production line of "a similar product"[3] or
(iii) a tangible delay in establishing such production line. Determination of
injury, at first, requires designation of a "similar product" and producers of
similar product.

III – Criteria for Injury Determination

Under Turkish legislation, the Regulation on the
Prevention of Unfair Competition in Imports ("Regulation") sets forth the
principles for injury determination.

The Regulation accepts that "determination of material injury shall be based on positive evidence
and shall involve an objective examination of both the volume of dumped or
subsidized imports and the effect of such imports on prices in the domestic
market for like products, and the consequent impact of those imports on the
domestic industry".[4]

– Determination of material injury

Following criteria is considered in determination of material
injury:

(i) There should be a significant increase in the volume
of dumped or subsidized imports, either in absolute terms or relative to
production or consumption in Turkey.

(ii) Dumped or subsidized imports should cause an undercutting
in the prices of similar product in Turkey or such imports should depress prices
to a significant degree or prevent price increases.

(iii) Dumped or subsidized imports should affect the
domestic production line negatively (in terms of economic factors such as actual
and potential decline in sales, profits, output, market share, productivity,
return on investments, and utilization of capacity as well as factors affecting
domestic prices and the magnitude of the margin of dumping; actual or potential
negative effects on cash flow, inventories, employment, wages, growth, ability
to raise capital or investments).

– Determination
of material injury threat

For determination of the material injury threat, following
criteria should be taken into account:

(i) Dumped or subsidized imports should show a
significant rate of increase into the domestic market in a way to indicate the
likelihood of substantially increased importation,

(ii) There should be a sufficient and freely
disposable capacity of the exporter or an imminent and substantial increase in
such capacity indicating the likelihood of substantially increased dumped or subsidized
exports to Turkey, taking into account the availability of other export markets
to absorb any additional exports,

(iii) Import prices should have a significant
depressing or suppressing effect on domestic prices, and would likely increase
demand for further imports,

(iv) Inventories of the investigated product should
also be taken into account, and

(v) As regards the subsidy investigations, the nature
of the subsidy in question and the trade effects likely to arise therefrom will
be reviewed.

In any case, none of these factors by themselves can
necessarily provide a decisive guidance in injury evaluation.

– Casual link
between the dumped import and the damage

Following determination of dumping and the injury,
Article 3.5 of the Anti-Dumping Agreement which reads as "It must be demonstrated that the dumped imports are (…), causing injury
within the meaning of this Agreement.", requires a causal link between
dumped imports and the injury incurred by domestic production for
implementation of dumping measures. For instance, in case the negative effects
exposed to the domestic production originate from decrease in customer demand
or consumption changes and not caused by dumped imports, dumping measures should
not be implemented.

IV – An Example of Injury and Injury Threat
Determination[5]

Existence of injury in the competing domestic industry
can be illustrated simply with an example. For this purpose, the tables below
show the data on the imports of an X product from country A to country B over
the years.

As seen in the tables above, while product X is being
imported to country B over dumped prices, its import price is gradually decreasing.
As a result of the dumped imports between the years of 2003-2006, dumped
imports show a significant rate of increase in comparison to both domestic
production and total imports from other countries. Tables also demonstrate that
dumped imports  have a significant
depressing and suppressing effect on domestic prices and caused decline in
domestic production as well as domestic product's market share. Also, the
correspondence and causation amongst the percentage distribution of the foregoing
parameters can be used to verify the casual link between the dumped import and
the damage.

In light of the foregoing, for this present case it
can be argued that foregoing parameters fulfill the conditions for injury as
well as injury threat.

V – Conclusion

Existence of dumping alone is not sufficient for
implementing anti-dumping measures. To do so, (i) injury and (ii) causal link
between dumped imports and the damage that injure domestic production are also
necessary. Therefore, process of injury determination play a substantial role
in Turkish anti-dumping investigations.

Authors: Gönenç
Gürkaynak Esq., Ceren Yıldız and Ecem Elver, ELIG, Attorneys-at-Law

First published in Mondaq on
April 18, 2017 

[1] Article 4 of the Law No. 3577 on
Prevention of Unfair Competition in Imports.

[2]
Article 3.1 of the Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994.

[3]
Under Article 4 of the Regulation on the Prevention of Unfair Competition in
Imports, similar product is defined as "product
which carries the same characteristics with a dumped or subsidized product, or
another product with similar characteristics if there is no product with same
characteristics".

[4]
Article 17 of the Regulation on the Prevention of Unfair Competition in
Imports.

[5] Onur ELELE, Uluslararası
Ticarette Damping ve Antidamping (Yaklaşım Yayıncılık 2008), 49