I          Background

 

In September 2014, following an anti-dumping
investigation period, Morocco has imposed an 11 % tax duty against Turkish
hot-rolled steel exporters which has created fuss in Turkish hot-rolled steel
market and exporters.

 

Upon Morocco's anti-dumping measures on hot-rolled steel,
in October 2016, Turkey has filed a "Request for Consultations" against Morocco
before the World Trade Organization ("WTO")[1]. In
its request for consultations, Turkey alleges that anti-dumping duties imposed
by Morocco in September 2014 on imports of Turkish hot-rolled steel are
inconsistent with a number of procedural and substantive provisions of the
WTO's Anti-Dumping Agreement, the Agreement on Import Licensing Procedures as
well as the General Agreement on Tariffs and Trade 1994.

See at  https://www.wto.org/english/news_e/news16_e/ds513rfc_05oct16_e.htm

 

II         Basis
of the Consultation Request

 

- Turkey's Allegations against Morocco's Decision

 

The Request for Consultations dated October 3rd,
2016 ("Request") is circulated by the delegation of Turkey to the delegation of
Morocco and to the Chairperson of the Dispute Resolution Body under the
WTO.

 

Turkey's Request is based upon following allegations:

 

(i) Pursuant to Article 5.10 of the Anti-Dumping
Agreement, investigations shall be concluded in no case more than 18 months,
after their initiation. However, Turkey alleges that the Moroccan authorities have failed to comply with the rule of
18-month deadline for concluding the investigation according to Article 5.10 of
the Anti-Dumping Agreement.[1]

 

(ii) The Moroccan authorities applied facts available,
alleging that the information on sales to Morocco during the investigation
period provided by the Turkish exporters was incomplete and inconsistent. In
return, Turkey alleges that Moroccan authorities did not provide the Turkish
exporters the opportunity to explain the alleged discrepancies, disregarded
evidence on these discrepancies, and determined the dumping margins of the
Turkish exporters without using "special circumspection". Therefore,
Turkey alleges that this leads to inconsistency in light of Article 6.8 and
paragraphs 1, 3, 5, 6, and 7 of Annex II to the Anti-Dumping Agreement.

 

Pursuant to Article 6.8 of the Anti-Dumping Agreement,
determinations may be made on the basis of the facts available under limited
circumstances. The application of this possibility is regulated under Annex II
of the Anti-Dumping Agreement. In this regard, the investigating authorities should
specify the details and the method of the information that they request from
the interested parties. Besides, the authorities should also clarify that if
the interested parties do not provide the information in reasonable time, the
investigating authority may determine the case based on the facts available.
Information that is verifiable and submitted timely and appropriately should be
considered during the determinations. Furthermore, if the interested party has
acted to the best of its ability and yet has provided information that is not "ideal
in all respects", the authorities should still regard such information in their
determinations. However, if the authorities would not accept an evidence or
information, the reasons for such rejection should be given to the supplying
party and the supplying party should have the opportunity to provide
explanations within a reasonable period, due account being taken of the
time-limits of the investigation. If the explanations are rejected as well, the
reasons for considering the explanations unsatisfactory should be announced within
the scope of determinations. The authorities should also base their findings
with special circumspection and check independent sources, where practicable.
If, however, an interested party does not cooperate, relatively less favorable
results may be applicable to this party as it withheld relevant information
from the authorities.

 

(iii) Turkey alleges that the Moroccan authorities did
not disclose essential facts with respect to its decision to use facts
available, in breach of Article 6.9 of the Anti-Dumping Agreement; which
indicates that "The authorities shall,
before a final determination is made, inform all interested parties of the
essential facts under consideration which form the basis for the decision
whether to apply definitive measures. Such disclosure should take place in
sufficient time for the parties to defend their interests."

 

(iv) Moroccan authorities applied registration/licensing
requirements and failed to issue import licenses following the imposition of
provisional anti-dumping measures. This is considered as an additional "specific action against dumping of exports",
which can be taken only in accordance with the provisions of the General
Agreement on Tariffs and Trade ("GATT") as interpreted by the Anti-Dumping
Agreement and other relevant provisions of GATT, as appropriate, as per Article
18.1 of the Anti-Dumping Agreement.

 

In addition, Turkey also alleges that the foregoing measure
imposed by Morocco is inconsistent with Articles I:1, X:1, X:2, X:3(a) and XI:1
of the GATT and Articles 3.2 and 3.3 of the Import Licensing Agreement.

 

Article I of the GATT regulates the General
Most-Favoured-Nation Treatment, which stipulates that any advantage, favour,
privilege or immunity granted by any contracting party to any product
originating in or destined for any other country shall be accorded immediately
and unconditionally to the like product originating in or destined for the
territories of all other contracting parties. Relevant paragraphs of Article X
stipulate in general that relevant laws, regulations, judicial decisions and
administrative rulings of general application and agreements affecting
international trade policy shall be published in a manner as to enable
governments and traders to become acquainted with them. Relevant measures
including new or more burdensome requirements, restrictions or prohibitions on
imports shall not be enforced before such measure has been officially
published. Publication and administration of trade regulations shall be
administered in a uniform, impartial and reasonable manner. Furthermore, the
referred Article XI:1 of the GATT stipulates that no prohibitions or
restrictions other than duties, taxes or other charges shall be instituted or maintained on imports and
exports of the GATT contracting parties.

 

Article 3 of the Import Licensing Agreement regulates
the "Non-Automatic Import Licensing" while Articles 3.2 and 3.3 stipulate that
such licensing shall not have trade-restrictive or distortive effects on imports
additional to those caused by the imposition of the restriction (i.e. they
it should not be more administratively burdensome than absolutely necessary to
administer the measure). Licensing requirements for purposes other than the
implementation of quantitative restrictions shall be published with sufficient
information in a manner as to enable other member countries and traders to know
the basis for granting and/or allocating licenses.

 

(v) Turkey alleges that the Moroccan authorities did
not provide a reasoned and adequate explanation regarding their findings of
injury and causation. In this regard, Turkey alleges that there was
inconsistency with certain paragraphs of the Article 3 of the Anti-Dumping
Agreement (Articles 3.1, 3.2, 3.4, and
3.5).

 

Article 3 of the Anti-Dumping Agreement regulates the
determination of injury. Accordingly, injury should be determined based on
positive evidence and involve objective examination of the volume and effect of
the dumped imports and their impact on domestic producers. The effect analysis
should evaluate the increase in and price undercutting by the dumped imports
while the impact analysis should consider all relevant economic factors and
indices having a bearing on the state of the industry. In addition, the causal
relationship between the dumped imports and the injury to the domestic industry
should be demonstrated by the investigating authority through examination of
all relevant evidence and disaffiliate factors that are injuring the domestic
industry other than the dumped imports. Among these factors are "the volume and prices of imports not sold at
dumping prices, contraction in demand or changes in the patterns of
consumption, trade restrictive practices of and competition between the foreign
and domestic producers, developments in technology and the export performance
and productivity of the domestic industry".

 

In light of the foregoing, Turkey indicates that
Morocco's investigation and definitive measures cannot be reconciled with the
Anti-Dumping Agreement as the measure in subject was not initiated and
conducted in accordance with the provisions of the Anti-Dumping Agreement as
stipulated by Article 1 of the Anti-Dumping Agreement and no action against
dumping of exports from Turkey should be taken, as the investigation and
relevant measures are not in accordance with the provisions of GATT as
stipulated by Article 18 of the Anti-Dumping Agreement.

 

- Current Status of the Consultations

 

Currently, Turkey's request for consultations with the
respondent is waiting. As published in WTO's webpage[2] no
dispute panel has been established yet and no withdrawal or mutual agreement
been notified.

 

III       Consultation
Process under WTO

 

- WTO's Dispute
Settlement Mechanism

 

The dispute settlement procedure of the WTO is governed
by the Understanding on Rules and Procedures Governing the Settlement of
Disputes ("DSU"). This entered into force on January 1st, 1995 after
the modifications made in the GATT, which was increasingly unable to resolve
major trade conflicts between its member countries. While the DSU retains
diplomatic elements - for example, the goal of the process is to secure a "mutually
agreed solution" and contains provisions that may foster a negotiated outcome -
it sets out a mechanism that is overall more "rule-bound" than the process
developed under the GATT.[3]
Thereby, following its enforcement in 1995, the DSU has gained practical importance
as members have frequently resorted to using this mechanism.

 

The DSU proceeds through three main stages: (i) consultation;
(ii) adjudication; and, if necessary, (iii) implementation.

 

- Consultations
Process

 

As the first prerequisite step to be taken before the adjudication
stage, consultations process starts with filing of a "Request for
Consultations". This process is set out for reaching an amicable solution
between parties.

 

Following the receipt date of complainant's request, unless
otherwise mutually agreed, the respondent should reply to the request within ten
days and, in any case, collaborate in good faith within a period of maximum thirty
days. Non-collaboration of the respondent in due time (i.e. not responding to the request in ten days or not collaborating in thirty
days, unless otherwise agreed) would give the complainant the right to
directly proceed to the adjudication stage and request establishment of a panel[4].

 

If the dispute is not resolved within sixty days after
the date of receipt of the request for consultations, the complainant may
request the establishment of a panel. The complainant may request a panel
during the sixty-day period, if the consulting parties jointly consider that
consultations have failed to settle the dispute.[5]

 

- What Happens
After the Consultations?

 

If the consultations fail to settle the dispute, upon
the complainant's request from the Dispute Settlement Body, a panel is
established within forty five days. The panel, by way of hearing written and
oral arguments from both parties, issues an interim report which will be
followed by the final report. In no case should the period from the
establishment of the panel to the circulation of the report to the members
exceed nine months.[6]

 

This settlement procedure, from establishment of the
panel until adaptation of the report, lasts usually up to nine - twelve months,
depending on parties' calling for the appeal procedure.

 

Following the litigation process, parties may adopt 3
positions accordingly with the panel's report; (i) compliance with the
recommendations of the panel/the appellate body (implementation), (ii) in case of non-compliance with the
recommendations in due time, affected party's request for compensation payment
(payment of compensation), (iii) in
case of non-compliance with the recommendations and non-payment of the
compensation,  affected party's request
for authorization to introduce retaliatory measures against the offending
country (retaliatory measures).

 

IV       Former Turkey Specific WTO Complaints

 

Since the DSU' enforcement in 1995, while 513
complaint have been filed to the DSU, not all of them have resulted in panels.
To date, 96 of the cases have been finalized with withdrawal or mutual
agreement by parties before establishment of a panel.

 

Whether as the complainant or the respondent, Turkey
has participated to 12 cases in total. While Turkey has made 3 applications to
the DSU for consultations, there are 9 complaints filed against Turkey thus
far.[7]

 

V         Conclusion

 

WTO plays a substantial role in preserving the growing
international trade worldwide. Therefore, in order to assure a reliable and
foreseeable international trade environment for the member countries, a developing
dispute settlement mechanism has significant pertinence. In the wake of WTO's praiseworthy
yet still improving settlement system, outcome of the dispute between Turkey
and Morocco remains as an object of curiosity for Turkish market players.

 

 

 

The
content of this article is intended to provide a general guide to the subject
matter. Specialist advice should be sought about your specific circumstances.

 

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

 

 

 

First published in
Mondaq on November 18,  2016.

 

 

[1]
According to the statements of the President of the Turkish Steel Exporters
Association, the investigation has been concluded on August 12th
instead of July 21st. See http://ticaretgazetesi.com.tr/fastan-celik-ihracatcilarina-anti-damping-vergisi
(latest access on November 17th, 2016)

 

[2]
See at  https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds513_e.htm
(latest access on November 17th, 2016)

 

[3]
Daniel T. Shedd, Brandon J. Murrill, Jane M. Smith, "Dispute Settlement in the
World Trade Organization (WTO): An Overview" see https://www.fas.org/sgp/crs/misc/RS20088.pdf

 

[4]
Article 4(3) of the Understanding on Rules and Procedures Governing the
Settlement of Disputes

 

[5]
Article 4(7) of the Understanding on Rules and Procedures Governing the
Settlement of Disputes

 

[6]
Article 12(9) of the Understanding on Rules and Procedures Governing the
Settlement of Disputes

 

[7]
Lists of WTO panel and Appellate Body reports are available at WTO's website at
https://www.wto.org/english/tratop_e/dispu_e/dispu_current_status_e.htm