KTC ' S USE OF CONSTRUCTED VALUE TO DETERMINE NORMAL VALUES FOR INDAH KIAT AND PINDO DELI

D. KTC ' S USE OF CONSTRUCTED VALUE TO DETERMINE NORMAL VALUES FOR INDAH KIAT AND PINDO DELI

1. Arguments of Parties

  (a)

  Indonesia

  7.87 Indonesia asserts that the KTC violated Article 2.2 of the Agreement by failing to make the necessary determinations under that article before resorting to constructed normal value with respect to Indah Kiat and Pindo Deli. According to Indonesia, the KTC did not make any determination as to whether or not there were no sales of the subject product in the ordinary course of trade in the Indonesian market, or whether the volume of such sales were low, or whether such sales did not permit a proper comparison because of a particular market situation.

  (b)

  Korea

  7.88 Korea contends that because domestic sales data submitted by Indah Kiat and Pindo Deli were found to be unreliable and not used by the KTC in its normal value determinations, the KTC could not possibly follow the hierarchy set forth in Article 2.2 before resorting to constructed normal value. The KTC's inability to follow this hierarchy was a direct result of the Sinar Mas Group's non- cooperation, hence it should not complain about the legal consequence of that fact.

2. Arguments of Third Parties

  (a)

  United States

  7.89 The United States argues that Article 2.2 of the Agreement does not prevent an IA from using constructed value as the basis of normal value determinations once the IA, consistently with Article

  6.8 and Annex II of the Agreement, resorts to facts available because of an interested party's failure to submit necessary information within a reasonable period of time. In the view of the United States, Article 2.2 imposes no obligations with respect to the use of facts available.

3. Evaluation by the Panel

  7.90 Indonesia submits that the KTC violated Article 2.2 of the Agreement by resorting to constructed normal value without making the necessary determinations under that provision which would justify such resorting.

  7.91 Article 2.2 of the Agreement reads: "When there are no sales of the like product in the ordinary course of trade in the

  domestic market of the exporting country or when, because of the particular market situation or the low volume of the sales in the domestic market of the exporting

  country 2 , such sales do not permit a proper comparison, the margin of dumping shall

  be determined by comparison with a comparable price of the like product when exported to an appropriate third country, provided that this price is representative, or with the cost of production in the country of origin plus a reasonable amount for administrative, selling and general costs and for profits.

  2 Sales of the like product destined for consumption in the domestic market of the exporting country shall normally be considered a sufficient quantity for the

  determination of the normal value if such sales constitute 5 per cent or more of the sales of the product under consideration to the importing Member, provided that a lower ratio should be acceptable where the evidence demonstrates that domestic sales at such lower ratio are nonetheless of sufficient magnitude to provide for a proper comparison."

  7.92 We note that Article 2.2 allows the IA to base its normal value determination on the constructed value only when there are no sales of the like product in the ordinary course of trade in the domestic market of the exporting country, or when, because of the particular market situation or the low volume of the sales in the domestic market of the exporting country, such sales do not permit

  a proper comparison.

  7.93 Korea concedes that the KTC resorted to construction without making these determinations because the domestic sales data provided by Indah Kiat and Pindo Deli were unreliable as they failed to submit CMI's financial statements and accounting records to the KTC investigators during the verification.

  7.94 The issue is whether or not the KTC violated Article 2.2 of the Agreement by failing to make

  a determination as to whether or not one of the two bases that would allow resorting to constructed normal value was present in the investigation at issue. We recall our finding above (para. 7.72) that the KTC's decision to disregard the domestic sales data submitted by Indah Kiat and Pindo Deli was not WTO-inconsistent because those data were not verifiable. It follows that the KTC could not possibly carry out the determinations set out under Article 2.2 of the Agreement before resorting to constructed normal value for Indah Kiat and Pindo Deli. We therefore conclude that the KTC did not act inconsistently with Article 2.2 in basing its normal value determination on constructed value under

  Article 2.2 for these two companies and reject Indonesia's claim. 157