Regulation 2017/2321, which introduced a new methodology for calculation of normal value in trade defence cases (“New Methodology”), entered into force on December 20, 2017 (see here). Two years on, a review of the Commission’s implementation practice provides useful insight into questions of evidentiary burden, practical application, and selection of representative third country.
Before Regulation 2017/2321, if complainants alleged dumping by producers in a non-market economy (“NME”), they could disregard costs and prices in that country and “construct” normal value on the basis of costs of production in a market economy (“ME”) or “analogue” country, unless producers in the NME could prove market conditions prevailed in the relevant industry.
The New Methodology erased the distinction between MEs and NMEs (see here and here) and introduced a “country-neutral” approach. It also reversed the burden of proof, requiring EU complainants to establish that domestic prices and costs in the country of origin were subject to “significant distortions” before allowing them to construct normal value on the basis of undistorted costs in an “appropriate representative country.”
This new burden on complainants was tempered, however, by a provision that allowed them to rely on existing evidence of market distortions set out by the Commission in country- or sector-specific reports. To date, the Commission has published just one such report, on market distortions in China (“China Report”). A second report on Russia is currently being prepared, for likely release in 2020.
Since entry into force of Regulation 2017/2321, the Commission has only applied the New Methodology to investigations concerning China. In each of these cases, it relied heavily on the findings of its China Report.
As yet, there is no indication of the level of detail the Commission would require to demonstrate significant distortions in a country that is not covered by a Commission report (i.e., any country other than China).
Calculation of normal value
When the New Methodology was first introduced, its impact on the calculation of normal value was initially unclear. Would complainants need to prove market distortions for each individual cost item (i.e., raw material costs, energy costs, labour costs, etc.) and replace only those line items with undistorted costs, or would it be sufficient to prove market distortions generally and then replace all cost items with undistorted costs?
Commission practice has been very clear on this point: once the complainant has demonstrated significant distortions, it can construct normal value using only undistorted costs from a representative third country. In the absence of cooperation from the Government of China or exporting producers (and even in cases where there is “limited cooperation” from exporting producers), the Commission will then “construct the normal value exclusively […] on the basis of corresponding costs of production and sale in an appropriate representative country.”
Selection of representative third country
Previously, the only requirement for selection of an analogue country was that it be “an appropriate market-economy third country […] selected in a not unreasonable manner.”
Under the New Methodology, the Commission has specified four selection criteria: (1) the representative country must have the same level of economic development as the country of origin; (2) it must produce the product under review; (3) it must have readily available public data; and (4) “where there is more than one such country, preference shall be given, where appropriate, to countries with an adequate level of social and environmental protection.”
In practice, the first three criteria have carried by far the greatest weight. Even in cases where the criteria were met for more than one country, the Commission decided that the selected country was the “most appropriate” and that there was thus “no need to analyse further the question of social and environmental protection.”  Later, it went even further, stating that “[t]he fourth criterion on adequate level of social and environmental protection is only applicable in cases where no country can be selected based on the first three criteria.”
When proposing a suitable representative third country, complainants should therefore focus their energies on its level of economic development, its production of the like product, and availability of public information.
If you have any questions on how this may affect your organization, please contact: TMuellerIbold@cgsh.com, FCLaprevote@cgsh.com, Knobbs@cgsh.com, or your regular contacts at the firm.
 Regulation (EU) 2017/2321 of the European Parliament and of the Council of 12 December 2017 amending Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the European Union and Regulation (EU) 2016/1037 on protection against subsidized imports from countries not members of the European Union, OJ L338/1.
 Normal value is one of two key variables used to calculate dumping margins (the other being export price to the EU). It is usually based on domestic sales prices in the exporting country but, where these prices are distorted by State intervention, it can also be “constructed” using undistorted costs of production.
 Now, the only distinction is between WTO countries and non-WTO countries.
 Regulation (EU) 2016/1036 of the European Parliament and the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (codification), OJ L176/21 (“Basic Anti-Dumping Regulation”), Article 6a(c).
 Commission Staff Working Document on significant distortions in the economy of the People’s republic of China for the purposes of trade defence investigations, SWD(2017) 483 final/w, Brussels, December 20, 2017. The China report was published on the same day as Regulation 2017/2321 entered into force.
 See Commission press release, “The EU’s new trade defence rules and first country report,” MEMO/17/5377, December 20, 2017 (available here); Norwegian Institute of International Affairs, “Report on significant distortions in the economy of the Russian Federation for the purpose of trade defence investigations (EU-Russia trade) (available here).
 Commission Implementing Regulation (EU) 2019/687 of 2 May 2019 imposing a definitive anti-dumping duty on imports of certain organic coated steel products originating in the People’s Republic of China, OJ L116/5 (“Organic coated steel products”); Commission Implementing Regulation (EU) 2019/915 of 4 June 2019 imposing a definitive anti-dumping duty on imports of certain aluminium foil in rolls originating in the People’s Republic of China, OJ L146/63 (“Aluminium foil in rolls”); Commission Implementing Regulation (EU) 2019/1198 of 12 July 2019 imposing a definitive anti-dumping duty on imports of ceramic tableware and kitchenware originating in the People’s Republic of China, OJ L189/8 (“Ceramic tableware and kitchenware”); Commission Implementing Regulation (EU) 2019/1259 of 24 July 2019 imposing a definitive anti-dumping duty on imports of threaded tube or pipe cast fittings, of malleable cast iron and spheroidal graphite cast iron, originating in the People’s Republic of China and Thailand, OJ L197/2 (“Threaded tube or pipe cast fittings”); Commission Implementing Regulation (EU) 2019/1267 of 26 July 2019 imposing a definitive anti-dumping duty on imports of tungsten electrodes originating in the People’s Republic of China, OJ L 200/4 (“Tungsten electrodes”); Commission Implementing Regulation (EU) 2019/1379 of 28 August 2019 imposing a definitive anti-dumping duty on imports of bicycles originating in the People’s Republic of China, OJ L225/9 (“Bicycles”); Commission Implementing Regulation (EU) 2019/1662 of 1 October 2019 imposing a definitive anti-dumping duty on imports of ironing boards originating in the People’s Republic of China, OJ L252/1 (“Ironing boards”); Commission Implementing Regulation (EU) 2019/1693 of 9 October 2019 imposing a provisional anti-dumping duty on imports of steel road wheels originating in the People’s Republic of China, OJ L259/15 (“Steel road wheels”).
 In seven of the eight cases examined, the Commission reported an absence of cooperation from either the Government of China or exporting producers. In the Bicycles case, however, the Commission noted that exporting producers had provided “limited information”; however, it did not deem this sufficient to prevent it from constructing normal value exclusively on the basis of undistorted costs in a representative third country.
 Organic coated steel products, paragraph 93; Aluminium foil in rolls, paragraph 111; Ceramic tableware and kitchenware, paragraph 129; Threaded tube or pipe cast fittings, paragraph 106; Tungsten electrodes, paragraph 96; Bicycles, paragraph 118; Ironing boards, paragraph 100; Steel road wheels, paragraph 113.
 Regulation (EY) 2016/1036 of the European Parliament and of the Council on protection against dumped imports from countries not members of the European Union of 8 June 2016, OJ L 176/2, Article 2(7).
 As determined on the basis of gross national income per capita established in the databases of the World Bank or the Organization for Economic Cooperation and Development.
 Basic Anti-Dumping Regulation, Article 6a(a); see also, Ceramic tableware and kitchenware, paragraph 131.
 Steel road wheels, paragraph 134.
 Ceramic tableware and kitchenware, paragraph 145 (emphasis added).