Understanding The EU's Anti Circumvention Rules

Since the entry of WTO, European and American countries have set up anti dumping barriers to China's exports. Many Chinese enterprises have adopted overseas factories to process factories and re exported European and American countries to avoid high anti-dumping duties.

However, this response is triggering sanctions imposed by European and American countries on Chinese enterprises to implement anti circumvention measures.

Not long ago, the European Commission made an anti circumvention arbitration on leather shoes originating in China. It concluded that Chinese shoe companies had evade the practice of Macao by way of Macao or completed the post processing process in the EU, and imposed a 16.5% anti-dumping duty on the products involved.

This is undoubtedly a heavy blow for Chinese shoe enterprises that have already set up and are preparing to establish overseas channels. These enterprises should not only bear the high cost of production and labor, but also face the risk of EU's anti circumvention sanctions.

If the EU's anti circumvention laws do not know or are not well prepared, those enterprises that set up factories overseas may again encounter the problem of anti circumvention.

Therefore, understanding the EU's anti circumvention rules is a compulsory course for Chinese enterprises accused of dumping in the EU.

The EU's anti circumvention law originated from the EU's anti circumvention legislation in the 80s of last century. At that time, exporters from Japan and South Korea began to build assembly plants in the European community because they could not bear the burden of the high anti-dumping duty imposed by the European Union countries. They were also known as the cone factories or moved to the third countries that had not been levying anti-dumping duties, and then assembled by importing spare parts in importing countries or third countries, thus continuing to sell at low prices in the European community.

The European community believes that this kind of operation is a disguised dumping action. It evades the anti-dumping duty, which makes the European Union's efforts to shield the dumping damage and protect the European community through anti-dumping duties.

The EU began to implement anti circumvention law in 1987. For decades, the EU has established the most complete anti circumvention legal system in the world.

In the EU's anti circumvention clause, circumvention is defined as the change in the way of operation of the assembly plant and similar operations established in the European Union or in a third country. If there is no adequate justification and economic rationality, only to avoid the Levy of anti-dumping duties, and there is evidence that the products of these assembly plants are being sold at a dumping price, and the remedial effect of the already imposed anti-dumping duties on their domestic industries has been weakened, the European Commission can include the finished products of these assembly plants in the category of anti-dumping duties.

The ways and means of the 2004 are becoming more and more complex. In 2004, the new EU anti circumvention law further stipulated that the scope of anti circumvention should be extended to the following four evasive actions: first, make minor changes to the products instead of making fundamental modifications to the products; the purpose is to make the products fall into the customs code which does not impose anti-dumping duties; the two is to bypass the export commodities to the third countries which have not been imposed anti-dumping duties, and then re export the EU, so that the products come from countries that do not levy anti-dumping duties; three, to obtain higher anti-dumping duties by exporting the enterprises with lower tax rates through export countries, and four to export parts and components in the EU or third countries to avoid anti-dumping duties which are only covered by the manufactured goods of the exporters. In recent years, with the development of international trade, exporters have avoided anti-dumping duties.

The EU's standards of anti circumvention behavior include the following three requirements: the European Commission can implement anti circumvention measures: time requirements.

The beginning or expansion of such evasive actions, such as assembly and operation, occurs before or after the anti-dumping investigation of the finished goods of the exporter.

All the spare parts used come from countries that are subject to anti-dumping duties.

This means that the assembly business, whether before or after the EU anti-dumping action, has been included in the category of anti circumvention; the value of spare parts.

The spare parts or raw materials from countries charged with anti-dumping duties must exceed 60% of the total value of all the spare parts used for assembly.

However, if the value added of these spare parts in the assembly process exceeds 25% of the production cost, it is considered that there is no circumvention. This means that even if the components from the dumping country are more than 60%, it may still be exempt from the Levy of anti-dumping duties.

The condition of exempt from taxation is to investigate whether the value added of components in assembly business has reached a standard of quantity. If the value added reaches 25% of the production cost, it will not be regarded as circumvention. This provision reflects that the EU's anti circumvention system encourages foreign investment in high value-added production, encourages the introduction of technology and increases employment opportunities in the EU, so as to serve the technological progress of the European Union and the prosperity of the European Union's economy.

Practical consequences.

The assembly product destroys the remedial effect of the anti-dumping duty on the price and quantity of similar products, and the evidence that the similar products are originally dumped still exists.

The two conditions that must be satisfied in implementing anti circumvention are emphasized. First, if the act of assembling does not damage the effectiveness of anti-dumping duty, it is not necessary to take sanctions against anti circumvention measures.

Second, before adopting anti circumvention measures, the European Union must compare the price of assembled manufactured goods with the normal value of the previous dumping products. Only when the price of manufactured goods is below the normal value can it prove that dumping exists and is taxed.

The establishment of this principle is to prevent the abuse of anti circumvention measures.

However, this provision does not specify that when the dumping margin of the assembly differs from that of the original manufactured goods, it will leave room for the EU authorities to exercise discretion in the implementation of anti circumvention.