Brazil on the lookout for dumping by exporters

By Meluleki Nzimande and Robyn Muller, Webber Wentzel
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Indian exporters to Brazil, beware. The Brazilian trade authority DECOM is policing exporters that may be dumping products in the country. Webber Wentzel’s international trade law team recently assisted in the successful defence of a South African stainless steel producer, Columbus Stainless, against an anti-dumping application in Brazil.

Columbus is Africa’s only producer of stainless steel flat products. It exports some of its products to international markets, including Brazil.

Meluleki Nzimande Partner Webber Wentzel
Meluleki Nzimande
Partner
Webber Wentzel

Earlier this year DECOM initiated an anti-dumping investigation into whether Columbus, along with exporters from China, Finland, Germany, Korea, Taiwan, the US and Vietnam, had been dumping stainless steel products in the Brazilian market (i.e. exporting the products at lower prices than they would normally charge in their domestic markets). The investigation was initiated in April, after Brazilian producers of competing stainless steel products launched an application which complained that imports were reducing their market share and thereby causing them harm.

The period under investigation for determining the dumping margin was from 1 January to 31 December 2011 and the injury investigation period was from 1 January 2009 until 31 December 2011. The investigation related to flat-rolled products of austenitic and ferritic stainless steels, cold rolled, at least 0.35 but less than 4.75 millimetres thick.

One of the challenges faced by Columbus was the complexity involved in accurately describing the products under investigation and then making a fair comparison with domestically sold products. Further complexity was created by DECOM’s requirement that the responses to the exporter’s questionnaire be in Portuguese.

WTO criteria

In terms of the World Trade Organization (WTO) anti-dumping agreement, the following four elements must exist for dumping to occur: (1) there must be a product in the domestic market which is identical or similar to the product under investigation in the export market; (2) the exported goods must be sold at a lower price than that of the like product in the domestic market; (3) there must be material injury to the market to which the dumped products are exported; and (4) a causal link must exist between the injury sustained and the exported products.

Article 5.8 of the anti-dumping agreement provides that an anti-dumping investigation must be terminated where the investigating authorities determine that the margin of dumping, the volume of dumped imports, actual or potential, or the injury is negligible. The volume of dumped imports will be considered negligible where the exports from a particular country account for less than 3% of the total imports of the country initiating the application or where exports from countries which individually account for less than 3% collectively account for less than 7% of the total imports of the initiating country.

Robyn Muller Attorney Webber Wentzel
Robyn Muller
Attorney
Webber Wentzel

To benefit from protections under the WTO agreement and domestic laws which give effect to it, targets of anti-dumping investigations must cooperate fully with the investigating authorities. This process involves completing the exporter’s questionnaire to the investigation authorities’ satisfaction, and disclosing confidential information on different aspects of the target’s business. In this regard, exporters can benefit from the experience and knowledge of counsel when determining the relevant factual matrix and the legal parameters within which arguments should framed.

Success for Columbus in this matter would depend on the following factors: (1) the facts which Columbus made available to DECOM; (2) ensuring that Columbus cooperated with DECOM and responded fully to questions put to it in the exporter’s questionnaire; and (3) Columbus making a sustainable case that South Africa did not export significant quantities of the product under investigation to Brazil during the period of investigation and consequently that South Africa was not the cause of the injury alleged by the Brazilian complainants.

Exemptions granted

Following the submissions made on behalf of Columbus to DECOM, it was found that the company’s exports to Brazil were not significant during the period of investigation. For this reason, Columbus was exempted from the continuing anti-dumping investigation.

DECOM also found that US exports represented only 1% of Brazil’s total imports of stainless steel, so the US was also exempted from the investigation. The investigations were terminated in respect of South Africa and the US but will continue in respect of the remaining countries.

The early victory not only saved Columbus significant amounts in terms of the cost of defending against the application, but also preserved the company’s access to the Brazilian market. Continued access to this market contributes to the preservation and growth of jobs in the South African manufacturing sector and the health of the South African economy.

Meluleki Nzimande is a partner at Webber Wentzel, where Robyn Muller is a candidate attorney. Webber Wentzel is one of the leading corporate law firms in Africa and the South African member of ALN, a group of Africa’s 12 foremost law firms.

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