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