On January 5th, 2024, the Ministry of Commerce of China (MOFCOM) announced the commencement of its first trade remedy investigation for the year - an antidumping investigation on imported brandy from the European Union (the EU).

As stipulated in the Initiation Notice, the product under investigation (PUI) is “Spirits obtained by distilling grape wine in containers holding less than 200 liters (usually called Brandy) originating from EU member states". As an immediate issue of the investigation, a properly defined (or argued) scope of PUI may have direct impacts on both procedural aspects and, more importantly, the result of the investigation. First, it affects the scope of the products considered in the dumping investigation and ultimately impacts the calculation of the duty rate. Second, it may affect the product categorization of domestic like products and, consequently influence the findings of the injury investigation.

This article introduces the methodologies and practices employed by MOFCOM in defining and clarifying PUI, drawing upon our understanding and experience in China’s trade remedy investigations. We also provide some precedent examples to facilitate the illustration.

I. Introduction

Properly defining the PUI is the first of the linchpin issues in antidumping investigations. On the one hand, it sets the goal for the authority to look into and establish effective remedy policies in defending and preventing injurious dumped imports. On the other hand, it lays grounds for other key issues in antidumping investigations, especially for the calculation of dumping margin, identification of appropriate domestic like products, and the further clarification of domestic industries.

Notably, there is no domestic rule concerning how to define the scope of the PUI, nor does WTO agreement provide guidance on this issue. In practice, MOFCOM normally relies on the scope of the subject product as proposed in petitions. Moreover, during investigations and implementations of antidumping measures, the Chinese authority may adjust the scope based on requests from interested parties or on its own initiatives.

“Like products", either in exporting countries or the importing country, are those identical to the subject product or, in the absence of identical products, those possessing features mirroring the subject product. The identification of the domestic industry hinges on the scope of domestic like products discerned and therefore indirectly pivoted around definitions of subject products.

To adjust (or narrow) the scope of the PUI during the course of the investigation, the investigating authority promulgates a ministerial rule - the Provisional Rules on the Procedure of Adjustment to the Product Scope of Antidumping Investigation. This mechanism enables interested parties to apply for an adjustment or clarification procedure. 

II. Factors in Defining PUI and Like Products

The starting point for defining the scope of PUI is the proposition provided in the petition. Petitioners typically describe targeted imports by providing details including names, physical characteristics, chemical formula, end use, manufacturing process, grades, Harmonised System Code, and other relevant information. After recognised by MOFCOM in its Initiation Notices, the proposed scopes turn into official definitions of the PUI.

In standard practice, some features are often resorted to in defining scopes of the PUI, including physical characteristics and marketing features. In clarifying whether a product falls within the scope of investigations, descriptions of the PUI in the official notices serve as the primary reference point in practice. Factors not explicitly mentioned in the official notices do not seem to serve as clear delineations for distinguishing the product subject to investigations.

A. Physical and Chemical Indicators

One predominant approach employed to delineate the PUI involves describing its physical and chemical characteristics. Typically, these characteristics are central to descriptions of the PUI in the official notices. By providing these indicators, the authority and involved parties can easily single out the product concerned from the broader pool of imported products. Products whose physical and chemical properties diverge from those specified for the subject imports are exempt from investigations and applications of antidumping measures.

In the unbleached kraft liner antidumping investigation case in 2005, Korean exporters claimed product exclusion, asserting that the imported Korean products did not meet the physical properties of the subject product indicated in the initiation notice, and requesting the investigating authority to clarify Korean products fell outside the scope of the PUI. Upon scrutinizing the contested physical indicators, MOFCOM was convinced that two of the physical indicators of the Korean products did not coincide with those of the subject product, and for this reason, the authority ruled that imported Korean krafts were not within the purview of the product under investigation. Similarly, imported paperboards from an American producer were also deemed not to fall within the scope of consideration.[1]

In the PBT case in 2006, Japanese producers raised concerns about the imported refined PBT. The alleged PBT products were, in fact, a kind of further manufactured goods exhibiting significantly enhanced performance over ordinary PBTs. Indicators such as durability, electrical and mechanical performance, stability, and other properties differed from those of the subject product. Based on these factual distinctions, the authority confirmed that the refined PBTs were not a part of the subject product, and their imports were not subject to the investigation.[2]

In the PVC investigation case in 2003, the subject product discerned was the PVC powders. During the proceeding, some American exporters argued that EPVC and CPVC share no identical or similar physical indicators with the PVC under consideration, as such the ongoing investigation should not cover the production and sales of the EPVC and CPVC. MOFCOM closely examined parameters and indicators of the alleged PVC and the PVC powders, ultimately declaring that these indicators differed and the EPVC and CPVC were not within the product under consideration.[3]

However, for a product whose physical and chemical features accord with the stated characteristics of the PUI, it is likely to fall within the scope of investigation.

B. Technical Factors

Techniques applied and manufacturing facilities also play a paramount role in delineating subject products. In practice, MOFCOM usually assesses alleged non-subject products based on these technical factors.

In the unbleached kraft liner case, a Thai exporter contended that its exports notably differed from the description of the product under investigation, and moreover, its domestically sold products varied from both of its exported products and the PUI. After reviewing the technical indicators, the authority deemed the exporter’s products did not satisfy the technical parameters of the subject product. As a result, its exports were not subject to the investigation due to the identified discrepancies.[4]

Note that when parties based their exclusion claims on those technical parameters not included in the official description of the PUI, the authority was unlikely to support such claims.

An example can be observed in the cyclosiloxane antidumping investigation case in 2005. During the proceeding, some parties raised concerns regarding the description of the PUI provided in the initiation notice. They contended that the notice exclusively covered three product types and did not mention the other two types - D5 and D6, thus D5 and D6 should not be considered within the scope of the PUI. They also argued that the petitioners built their case on facts and statistics that failed to encompass the D5 and D6 subsets. In addition, technical specifications of the subject product, such as chemical formula, manufacturing process, end use, as well as physical and chemical properties were far from those of the D5 and D6 types. Despite these arguments and a request to clarify that D5 and D6 were not subgroups of the PUI, the authority rejected the arguments and continued to treat the two types as parts of the product concerned.[5]

Similarly, in the X-ray equipment investigation case of 2010, EU exporters and government officials argued that the imported equipment with an energy level exceeding 300 KV differed from those under 300 KV in terms of physical dimensions, technical performance, utility, end use, and customer groups. They asserted that these two groups were not alike, and terminating probes into the product of over 300 KV was appropriate. The authority rejected such arguments. First, differences in physical appearances were direct outcomes of a custom-made feature of the product. Producers can choose the appearance of the product on requests of their customers. Second, the fundamental function method of the two groups was essentially the same, with no disagreements among the involved parties on this point. Third, high energy level products were designed to monitor large objects but could also be used for examining small commodities. Consequently, the authority decided not to exclude the high energy level products from the scope of the subject product.[6]

Technique is another technical factor frequently used to delineate the scope of the PUI. Divergence in techniques applied in the manufacturing process may lead to controversies regarding the scope of the subject product.

In the Chloroprene Rubber case of 2016, parties acknowledged that there were only two manufacturing routes for producing the rubber. While most exporters deployed one route, a Japanese exporter deployed the other route. The authority explained its stance in the determination that, despite the divergence in the initial manufacturing route for rubbers, the latter stage of both approaches was, in essence, the same. Further, the authority emphasized that rubbers produced through both routes exhibited similar quality. For these reasons, the authority confirmed rubbers from the two manufacturing routes were both subject to the investigation.[7]

In the Wear Resistant Overlay investigation case of 2006, a German exporter argued, after a verification procedure, that its products differed from Chinese like products in terms of manufacturing process and techniques, and should not be deemed within the scope of the PUI. However, the authority held that products from the German exporter did not possess substantial differences compared to other imported products and Chinese products, even though the techniques employed in the fabrication process were not the same. In the end, the authority refused to exclude imports originating from the German exporters from the scope of the investigation.[8]

C. Quality

Some may raise concerns regarding the classification of high-quality imported products within the scope of standard product definitions. However, in most circumstances, the quality disparity is not sufficient to challenge an established official definition of subject products.

For example, in the Spandex investigation case of 2006, a Singaporean exporter submitted written requests claiming its brand product, Product L, fall outside the scope of PUI due to its higher market price and superior quality, surpassing ordinary spandex product. While acknowledging Product L’s premium quality and price, the authority found no substantial and essential difference in terms of chemical performance compared to other spandex. Consequently, the authority sustained its definition of the subject product and kept Product L as a part of it.[9]

D. Grade

It is common that a product may have several grades or types, and typically, all grades and types fall within the same scope of the subject product. However, MOFCOM may explicitly rule out certain grades in exceptional cases.

An indicative example is the redefinition of the subject product in the optical fibre investigation of 2006. The investigating authority initially defined the subject product to encompass three grades - grade A, grade B, and grade C. Some exporters argued that grade C differed significantly from grade A and B and should be excluded from the investigation. Chinese domestic companies countered, citing standards from the International Telecom Union and the International Electrical Committee that explicitly regarded the grade C as equivalent to the other two grades. The authority initially concluded on this issue that all three grades shared essential physical properties and manufacturing techniques, thus including grade C in the scope of the investigation.

At a later stage of the proceeding, some interested parties raised arguments that a newly-developed grade D should not be subject to the investigation as it was entirely different from the other three grades. Moreover, they argued that the initiation notice only mentioned grades A, B, and C; including grade D would unavoidably expand the PUI beyond the defined scope. Nonetheless, after considering the facts, the authority determined that grade D, while new, was not fundamentally different from the existing grades - it combined technical features of grade B and grade C, shared similar basic characteristics with the other three grades in terms of physical property and technical features, and had no distinct customer groups, distribution channels, or end-user compared to the other three - grade D and the other three grades were interchangeable and could cross-compete, it is still a subtype of optical fibre. The authority emphasized that the indicative list of grades A, B, and C in the initiation notice was not exhaustive but illustrative, it was the product description that played a pivotal role in defining the scope under investigation. Therefore, the authority concluded that grade D’s inclusion did not extend the scope of the investigation beyond its original description.[10]

Another example is the HSST investigation case of 2014, in which two exporters repeatedly sought clarifications that class S products were not within the scope of the subject product. They argued that the physical feature, end use, and product standards of class S were inconsistent with those of the subject product. They also argued that class S products could not be used in high-temperature and high-pressure environments, as described in the initiation notice as a salient feature. Additionally, they highlighted that class S had not been sold to independent Chinese customers, and therefore the imported class S products had not and would not cause injuries to the domestic industry. Upon review, the authority found that class S products met the description of the PUI: they were used in the same contexts as the subject product, namely in pipes at boilers and power stations; the absence of an industrial or product standard was inconsequential since class S's standard was irrelevant; and the lack of direct sales to independent Chinese customers was not a valid reason for exclusion. Therefore, class S products were also included in the ongoing investigation.[11]

E. Industrial Standards

Industrial or quality standards are frequently raised by interested parties as arguments for product differentiation. However, MOFCOM typically does not depend solely on these standards when determining the scope of the product concerned.

In the X-ray equipment investigation case of 2010, an EU exporter claimed that their EDS equipment had been accredited by EU competent authorities, whereas none of the Chinese EDS products had undergone similar scrutiny. Those imported EU EDS products trumped Chinese products in terms of power and data processing technologies. Counterarguments from other parties focused on the operational theory and physical performance of the products at issue. The authority concluded that compliance with EU standards did not affect the sales or production of EDS products within China and that these imported EDS products were in direct competition with local offerings. Therefore, MOFCOM determined that adherence to specific EU standards did not exclude the EDS from the scope of the investigation.[12]

F. No Domestic Equivalents

Challenges to the scope of subject products may arise when there is no domestic equivalent. In the early years of China’s investigation, some exporters succeeded in halting investigations by arguing the absence of a comparable Chinese product, but such claims have increasingly been refuted as domestic producers demonstrated their ability to manufacture the same product.

For instance, in the PET investigation case of 2003, some Korean exporters claimed that Chinese producers could not produce a comparable product to imported PETG, thus requesting product exclusion of the PETG products from the investigation. The authority, upon verification, acknowledged that while PETG was within the broad definition of the subject product and shared some general similarities with PET, there were significant differences from domestically produced PET in many ways. The authority was convinced that there were no domestically produced PETG-comparable like products in China, and thus the absence of PETC domestic injury. In this way, Korean exporters had substantiated their no-injury claims.[13]

However, in more recent cases, MOFCOM has been disinclined to exclude products based solely on the lack of domestic like products if other features align with the description of the subject product.

In the Photographic Paper and Paper Board investigation case of 2012, a Japanese exporter sought exclusion for certain types of imported products, claiming a lack of domestic production. The opposing parties counterargued that the proposed products share similarities in physical features, end use, HS code, technology and manufacturing facilities with other types of the subject product; more importantly, Chinese firms were capable of manufacturing them. The authority upheld the Chinese firms’ opinion and ruled that the essential differences between the proposed and subject products were not demonstrated, leading to the rejection of the exclusion requests.[14]

A similar situation unfolded in the spandex investigation, where two exporters claimed a lack of domestic capacity to produce a specific type of spandex. After examining facts and evidence in case records, the authority stated that productions of this product employed similar materials, technologies and manufacturing process as other types of the subject product. Moreover, the discovery that a petitioner held a patent for the product several years prior suggested the existence of both real and potential capacity to produce it in China. Therefore, the authority confirmed that Chinese producers had the capacity to fabricate this specific product and consequently rejected the exclusion request.[15]

G. HS Code

For every investigation, MOFCOM provides HS code(s) for the subject product in its public notices. These codes serve to facilitate the implementation of antidumping measures and provide clarity on the product scope. However, the codes are not definitive for scope clarification, a position MOFCOM has affirmed in several precedents.

In the HP-SSST investigation of 2012, some exporters requested the authority to clarify that two specific HS codes fell outside the scope of the subject product. The authority explained in its decision that the scope of the product shall be determined based on the product description, and HS codes are primarily utilized to gather import statistics and help Customs enforce provisional and final measures. The authority concluded that the scope of the investigation was clear and definitive, any adjustments of the HS codes would not necessarily change the scope of the subject product. [16]

An intriguing example is the pulp investigation case of 2014. After the preliminary decision, domestic producers requested to add a new HS code 47032100 to the scope for provisional duty supervision purposes. The authority found that imports under this code could not independently be used in producing the downstream product which the subject product could. Moreover, products under the new code differed in price and physical characteristics from the subject product. Thus, the request to expand the investigation’s scope to include the new HS code was denied.[17]

III. Product Scope Adjustment

The authority may narrow the scope of investigations or the implementations of antidumping measures when it deems it necessary to exclude certain elements of the products under consideration. Interested parties may also request for clarifications or exclusions related to the scope of the PUI or implementations. To govern such modifications, MOFCOM has established the Provisional Rules on the Procedure of Adjustment to the Product Scope of Antidumping Investigation, providing a regulatory framework for scope clarification or adjustments."

A. Typical Scenarios 

There are some precedents that the investigating authority modified the scope of investigations upon requests from interested parties. Grounds of such amendments are, for example, to improve the accuracy of the description of the scope concerned.

In the Unbleached Sack Paper investigation, some importers were unclear about the scope of the product subject to the provisional measure. The domestic producers requested accordingly to add a new item in the description of the PUI thereof. The authority later agreed to amend the scope, agreeing that incorporating quantitative indicators would help delineate the product scope more clearly.[18]

In the automobile investigation case, Chinese car-makers applied for the exclusion of certain car models from the scope. The authority assessed the proposed exclusions and found that, despite similarities in physical and chemical properties, end uses, distribution channels, marketing prices, and interchangeabilities with Chinese models, it was appropriate to grant the exclusion. This decision refined the scope of the investigation.[19]

In the PTA investigation of 2014, the authority provided a comprehensive justification for the final decision. In that case, some exporters claimed that QTA and EPTA  differed from the product under investigation and should be excluded from the scope. After a thorough review, the authority recognized substantial differences. First, QTA and EPTA possessed unique physical and chemical properties that resulted in different end uses. Second, the manufacturing facilities and processes for these products differed; PTA production was more extended and complex than that of QTA and EPTA. Third, the end uses varied greatly, with PTA primarily used to produce polyesters and fibers, applications for which QTA and EPTA were unsuitable. Fourth, there was a significant discrepancy in costs and selling prices, with QTA and EPTA being considerably cheaper than PTA. These factors led the authority to exclude QTA and EPTA from the scope of the investigation in its decision.[20]

B. Unsubstantiated Claims  

In some investigations, MOFCOM declined to adjust the scope of PUI when the requests from interested parties lacked substantial supporting evidence .

For example, in the Polyamide-6 probe, a request was raised by interested parties to have a particular type of product excluded. However, their failure to provide compelling evidence led to MOFCOM's dismissal of the request in its final decision.[21]

Disparities in emphasis between MOFCOM and requesting parties may also influence outcomes. In the Hydrazine Hydrate investigation, a French producer argued for the exclusion of specific product variants used for special purposes. The authority examined the submissions and concluded that the facts and evidence involved did not exhibit substantial differences between the proposed products and the product under investigation, although the request included descriptions of physical and chemical properties, end-use, and substitutability of the proposed product.[22]

Similarly, in the Toluidine case, a German exporter argued that the investigation improperly grouped three distinct products as one, which is not allowed by both Chinese regulations and WTO agreements. They argued that either divide the investigation into three parallel ones or exclude two of the three alleged products from the scope of the investigation. Contrarily, domestic producers insisted that the supposed three products were variations of a single product, sharing similar characteristics, manufacturing technologies, and costs. Upon review, MOFCOM concluded that the differences were normal for varying types of a single product and found no clear demarcation between them. The characteristics aligned with the subject product's description in the initiation notice. Consequently, the authority chose not to exclude any variants from the investigation's scope.[23]

IV. Summary

The precise delineation of the PUI is paramount to the legitimate interests of responding companies, applicants, and the investigating authority itself. Therefore, the authority typically attaches great importance to the arguments, comments, and claims concerning the definition and scope of the PUI. Going through the precedents, we observe a diversity of claims about the PUI's definition across various contexts, highlighting their influence on the outcomes of investigations.

For the responding companies, to defend their interests on the issue of the scope of PUI, there are two key procedural opportunities to present their claims and rebuttals during an investigation. The first is during the comment period following the initiation and the underlying applications. Usually, responding companies have 20 days post-initiation to contest the authority’s initiation and applications. This window is the singular chance to challenge the authority in the pre-initiation stage during the investigation and may have a significant impact on the investigation if arguments against the PUI's credibility in the applications are convincing. The second opportunity is to challenge the claims and arguments from domestic producers and any initial or preliminary authority findings on the PUI, this could arise at any stage during the investigation. Success in these challenges may greatly affect the outcome of the investigation, however, they would no longer affect the decision to initiate the investigation.

[Note] 

[1] Determination of Antidumping Investigation against unbleached kraft liner from Thailand, the United States, Korea and Taiwan region, Notice of MOFCOM, No. 60 of 2005.

[2] Determination of Antidumping Investigation against Polybutylene Terephthalate Resin from Japan and Chinese Taiw42, Notice of MOFCOM, No. 42 of 2006.

[3] Determination of Antidumping Investigation against PVC from the United States et.al., Notice of MOFCOM, No. 48 of 2003.

[4] Determination of Antidumping Investigation against unbleached kraft liner from Thailand, the United States, Korea and Taiwan region, Notice of MOFCOM, No. 60 of 2005.

[5] Determination of Antidumping Investigation against dimethyl cyclosiloxane from Japan, the United States, Britain and Germany, Notice of MOFCOM, No. 123 of 2005.

[6] Determination of Antidumping Investigation against X－Ray Security Inspection Equipment from EU, Notice of MOFCOM, No. 33 of 2010.

[7] Determination of Antidumping Investigation against Chloroprene Rubber from Japan, EU and the United States, Notice of MOFCOM, No. 79 of 2016.

[8] Determination of Antidumping Investigation against Wear Resistant Overlay from EU and the United States, Notice of MOFCOM, No. 93 of 2006.

[9] Determination of Antidumping Investigation against spandex from Japan et.al., Notice of MOFCOM, No. 74 of 2006.

[10] Determination of Antidumping Investigation against optical fibre from Korea, Japan and the United States, Notice of MOFCOM, No. 42 of 2006.

[11] Determination of Antidumping Investigation against Certain Alloy Steel Seamless Tubes and Pipes for High Temperature and Pressure Service from the United States, EU and Japan, Notice of MOFCOM, No. 34 of 2014.

[12] Determination of Antidumping Investigation against X－Ray Security Inspection Equipment from EU, Notice of MOFCOM, No. 33 of 2010.

[13] Determination of Antidumping Investigation against PET from Korea, Notice of MOFTEC, No. 3 of 2003.

[14] Determination of Antidumping Investigation against Photographic Paper and Paper Board from Japan, EU and the United States, Notice of MOFCOM, No. 10 of 2012.

[15] Determination of Antidumping Investigation against spandex from Japan et.al., Notice of MOFCOM, No. 74 of 2006.

[16] Determination of Antidumping Investigation against Certain Alloy Steel Seamless Tubes and Pipes for High Temperature and Pressure Service from the United States, EU and Japan, Notice of MOFCOM, No. 72 of 2012.

[17] Determination of Antidumping Investigation against cellulose pulp from the United States, Canada, and Brazil, Notice of MOFCOM, No. 18 of 2014.

[18] Determination of Antidumping Investigation against Unbleached Sack Paper from the United States, Japan and  EU, Notice of MOFCOM, No. 48of 2016.

[19] Determination of Antidumping Investigation against Saloon cars and Cross-country cars from the United States, Notice of MOFCOM, No. 20 of 2011.

[20] Determination of Antidumping Investigation against PTA from Thailand and Korea, Notice of MOFCOM, No. 5 of 2014.

[21] Determination of Antidumping Investigation against Polyamide-6 from the United States et.al., Notice of MOFCOM, No. 15 of 2010.

[22] Determination of Antidumping Investigation against Hydrazine Hydrate from the United States, France, Japan and Korea, Notice of MOFCOM, No. 36 of 2005.

[23] Determination of Antidumping Investigation against Toluidine from EU, Notice of MOFCOM, No. 44 of 2013.