TWN Info Service on WTO and Trade Issues (Oct08/05)
6 October 2008
Third World Network

Trade: US "zeroing" methodology again found to be WTO-illegal
Published in SUNS #6560 dated 3 October 2008 

Geneva, 2 Oct (Kanaga Raja) -- The World Trade Organization on Wednesday held that the United States had acted inconsistently with its obligations under the GATT 1994 and the Anti-Dumping Agreement in its application of the "zeroing" methodology in the calculation of dumping margins in certain specified anti-dumping measures that it has maintained against the European Communities.

The dispute (DS350) was brought by the EC against the United States on its continued existence and application of zeroing methodology.

This finding against the US is just another in a series of anti-dumping disputes that have been brought against the US, in which dispute panels and the Appellate Body have repeatedly ruled that the practice of zeroing by the US in anti-dumping investigations was contrary to the WTO agreements.

The US -- the main, if not currently, the only exponent of this concept -- has been strongly disputing this, and has specifically proposed changes to the rules to permit such "zeroing". And in the US Congress, key Senators and Congressmen, including the chair of the House Ways and Means Committee (dealing with trade agreements), have told the US Trade Representative that unless the WTO rules are changed to allow "zeroing", Congress would not be able to accept any trade agreement out of the Doha talks.

In what appeared to be a concession to the US, a draft consolidated Chair's texts of the Anti-Dumping and Subsidies and Countervailing Measures Agreements circulated last December by the Chair of the WTO Negotiating Group on Rules expressly allows the practice of zeroing in several limited circumstances. However, the zeroing provisions outlined by the Rules Group Chair in his text were sharply criticized by a large number of countries at the WTO.

The EC dispute against the US is with regard to the practice and methodologies for calculating dumping margins involving the use of zeroing, and the application of zeroing in certain specified anti-dumping measures maintained by the US.

On 2 October 2006, the EC requested consultations with the US concerning its continued application of the "zeroing" methodology. In particular, the request for consultations concerned (i) the implementing regulation (19 CFR Section 351) of the US Department of Commerce, especially section 351.414( c)(2); and (ii) the Import Administration Anti-dumping Manual (1997 edition), including the computer program(s) to which it refers.

The EC argued that based on these regulations, the US Department of Commerce continued to apply the "zeroing" methodology in the determinations of the margin of dumping in the final results of the anti-dumping administrative reviews concerning various EC goods, and any assessment instructions issued pursuant to those final results.

On 9 October 2006, in a further request for consultations, the EC identified additional administrative reviews in which the US Department of Commerce applied the "zeroing" methodology in calculating the margin of dumping, and requested that those cases be added to the list.

According to the panel report, the dispute involves the EC's claims regarding the continued application by the US of anti-dumping duties resulting from the anti-dumping orders enumerated in 18 cases, as calculated or maintained in place at a level in excess of the margin of dumping that in the EC's view would have resulted from the correct application of the relevant provisions of the Anti-Dumping Agreement.

The EC also challenged the specific instances of application of what it described as the "zeroing methodology" in 4 anti-dumping investigations, 37 periodic reviews and 11 sunset reviews pertaining to the same 18 cases.

On 6 July 2007, the WTO Director-General composed the panel, with the Chair being Dr Faizullah Khilji (Pakistan), and the other members being Mr Michael Mulgrew (Australia) and Ms Lilia R. Bautista (the Philippines).

However, on 8 November 2007, Ms Bautista resigned following her elevation to the Appellate Body. On 27 November 2007, the parties appointed Ms Andrea Marie Brown (Jamaica) as the new panel member to replace her.

In its findings, the panel concluded that the United States acted inconsistently with the obligation set out under Article 2.4.2 of the Anti-Dumping Agreement by using model zeroing in the four investigations at issue in this dispute.

It also concluded that the United States acted inconsistently with its obligations under Article VI: 2 of the GATT 1994 and Article 9.3 of the Anti-Dumping Agreement by applying simple zeroing in the 29 periodic reviews at issue in this dispute.

The United States also acted inconsistently with its obligations under Article 11.3 of the Agreement by using, in the eight sunset reviews at issue in this dispute, dumping margins obtained through model zeroing in prior investigations.

The panel recommended that the DSB request the United States to bring its measures into conformity with its obligations under the WTO Agreement.

The panel also found that the 14 anti-dumping proceedings that were identified in the EC's panel request, but not in its consultations request, are within its terms of reference.

The panel however ruled that the EC's claims in connection with the continued application of the 18 anti-dumping duties were not within its terms of reference, and that the EC's claims regarding the four preliminary determinations identified in its panel request were outside its terms of reference.

The panel rejected the EC's request that the panel suggest the WTO-consistent steps that the US might take on the issue of zeroing in implementing the recommendations and rulings of the DSB in this dispute.

In declining to make any suggestion on how the US may implement the DSB recommendations and rulings, the panel said that it was evident under the Dispute Settlement Understanding, particularly Article 19.1 thereof, that Members must implement DSB recommendations and rulings in a WTO-consistent manner.

The panel report has a minority view, but does not identify the member with a dissenting view. Panel reports rarely have a minority view.

In the minority opinion on the EC's claims regarding zeroing in investigations and zeroing in periodic reviews, one member of the panel disagreed with the legal reasoning developed by the majority regarding the EC's claims on simple zeroing in periodic reviews, and, in part, model zeroing in investigations.

The minority panel member (who is not identified) however agreed with the conclusions reached by the majority of the members of the panel regarding all the claims raised by the EC in this dispute.

The minority member said that the majority considers that a permissible interpretation of the Anti-Dumping Agreement is that dumping may be determined in connection with individual export transactions. The panel member noted, however, that the majority also considers the alternative interpretation, i. e., that dumping may be determined for the product under consideration as a whole, to be permissible within the meaning of Article 17.6(ii) of the Anti-Dumping Agreement.

The issue, the minority member added, was therefore, whether the relevant provisions of the Agreement allow more than one permissible interpretation regarding the WTO-consistency of model zeroing in investigations and simple zeroing in periodic reviews. In this regard, the panel member agreed with the view of the Appellate Body that under Articles VI: 1 and VI: 2 of the GATT 1994 and Article 2.1 of the Anti-Dumping Agreement, "dumping" and "margins of dumping" can only be found for the product under consideration as a whole.

The member was of the view that there would be an anomaly if multiple margins were calculated for the same exporter. A determination of dumping for the product under consideration as a whole is also necessary in order to make a determination regarding the volume of dumped imports, injury and causal link.

The panel member also disagreed with the majority's opinion that dumping is not necessarily and exclusively an exporter-specific concept and that one can calculate an importer-specific margin of dumping.

The member was of the view that no provision in the Anti-Dumping Agreement suggests that dumping margins may be established for individual importers. Furthermore, the member was of the view that the reference to "margin of dumping" in Article 9.3 indicates that dumping may only be determined consistently with the provisions of Article 2 and in relation to the product under consideration as a whole for an exporter.

The panel member also disagreed with the concerns expressed by the majority in this case that the prohibition of simple zeroing in periodic reviews would favour importers with high margins vis-a-vis importers with low margins. How an anti-dumping duty is to be collected is for the authorities to determine, the only requirement is that the duty collected not exceed the exporter-specific margin of dumping calculated for the product under consideration as a whole.

The panel member did not agree with the majority that the recognition of a prospective normal value system in Article 9.4(ii) of the Anti-Dumping Agreement reinforces the argument that dumping may be determined on the basis of individual export transactions. This reasoning mixes duty collection at the time of importation with a determination of final duty liability. Article 9.3 of the Agreement makes it clear that the amount of duty collected at the time of importation does not represent a margin of dumping. In the member's view, the duty collected at the time of importation is subject to review under Article 9.3.2 of the Anti-Dumping Agreement.

The member saw nothing in the Agreement to suggest that the duty collected in a prospective normal value system is exempt from a review under Article 9.3. +