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TWN Info Service on WTO and Trade Issues (Feb09/07)
11 February 2009
Third World Network

Trade: WTO again strikes down US practice of "zeroing"
Published in SUNS #6635 dated 9 February 2009

Geneva, 6 Feb (Kanaga Raja) -- The Appellate Body of the World Trade Organization on 4 February handed down another ruling -- again holding that the United States had acted inconsistently with its obligations under the GATT 1994 and the Anti-Dumping Agreement in its continued application of the "zeroing" methodology in calculating dumping margins in periodic reviews of certain specified anti-dumping measures that it has maintained against the European Communities.

In a ruling handed down last year, and adopted by the Dispute Settlement Body in April, the Appellate Body had reversed a panel ruling (in a dispute raised by Mexico against the US on anti-dumping duties on stainless steel imports) that in effect allowed "zeroing" in some instances. (See SUNS #6474 dated 15 May 2008.)

("Zeroing" is used when a member, in an anti-dumping investigation or finding of "dumping" and "margin of dumping" that results in a levy of countervailing duties, for comparison values, uses values of exports below the "normal" value, but ignores exports where prices are above the "normal" value.)

The Panel in the US vs EC dispute (dealt with by the Appellate Body) had said (in para 256 of the Appellate Body report) that while it "shared a number of concerns" expressed by the US vs Mexico panel on stainless steel, it "recognized that the Appellate Body had reversed the findings of that panel," and that the Appellate Body report had "gained legal effect through adoption by the DSB."

In its report now on the US-EC dispute, the Appellate Body of the WTO (WT/DS350/AB/R) recommended that the Dispute Settlement Body request the United States to bring its measures, found to be inconsistent with the GATT 1994 and the Anti-Dumping Agreement, into conformity with its obligations under those Agreements.

In its ruling, the Appellate Body not only upheld parts of the earlier panel ruling but also reversed several of its findings with respect to the European Communities' claims.

The panel ruling, which found the US "zeroing" methodology to be WTO-illegal, was issued last October, and the European Communities and the United States each appealed certain issues of law and legal interpretations developed in the panel report (DS350).

In a statement issued in Brussels, the European Commission welcomed the ruling against the US. It said that the WTO has once again confirmed that zeroing is in breach of trade rules and has required the US to reduce or abolish anti-dumping duties on a wide range of EC exports, which were artificially inflated by zeroing.

EC trade spokesperson, Peter Power, said: "This is an important decision and will lend continued credibility to the WTO dispute settlement system, and to the legitimate use of Trade Defence instruments to fight unfair trade. Given the repeated WTO findings against the use of zeroing by the US, the Commission hopes that the US will abandon this practice and fall into line with other WTO Members."

The finding against the US is in line with a series of anti-dumping disputes that have been brought against the US, in which the Appellate Body has 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".

Providing some background to the dispute, the Appellate Body report noted that the Panel was established to consider a complaint by the European Communities concerning the continued application by the United States of anti-dumping duties resulting from anti-dumping duty orders enumerated in 18 cases, as calculated or maintained in place pursuant to the most recent proceedings at a level in excess of the margin of dumping that, in the European Communities' view, would have resulted from the correct application of the relevant provisions of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the "Anti-Dumping Agreement").

The European Communities also challenged the specific instances of application of the zeroing methodology in four original anti-dumping investigations, 37 periodic reviews, and 11 sunset reviews pertaining to the same 18 cases. (For a report on the panel ruling, see SUNS #6560 dated 3 October 2008.)

The panel report, circulated to Members on 1 October 2008, found that:

(a) the 14 anti-dumping proceedings identified in the European Communities' panel request, but not in its request for consultations, were within the Panel's terms of reference.

(b) the European Communities' claims in connection with the continued application of the 18 anti-dumping duties were not within the Panel's terms of reference.

( c) the European Communities' claims regarding the four preliminary determinations identified in its panel request were not within the Panel's terms of reference.

(d) the United States had acted inconsistently with its obligations under Article 2.4.2 of the Anti-Dumping Agreement by using model zeroing in the four original investigations challenged by the European Communities in this dispute.

(e) the United States had 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 29 periodic reviews challenged by the European Communities in this dispute; and

(f) the United States had acted inconsistently with its obligations under Article 11.3 of the Anti-Dumping Agreement by using, in eight sunset reviews challenged by the European Communities in this dispute, dumping margins obtained through the use of model zeroing in prior investigations.

The Panel recommended that the Dispute Settlement Body request the United States to bring its measures, found to be inconsistent with the GATT 1994 and the Anti-Dumping Agreement, into conformity with its WTO obligations, but declined to make a suggestion as to how the DSB recommendations and rulings could be implemented by the United States.

According to the Appellate Body report, the European Communities on appeal raised the following issues:

(a) Whether the Panel erred in finding that the European Communities' claims regarding the continued application of 18 anti-dumping duties did not fall within the Panel's terms of reference and, more specifically: (I) whether the Panel erred in finding that the European Communities failed to identify the specific measure at issue with regard to these claims, as required by Article 6.2 of the DSU; and (ii) whether the Panel acted inconsistently with Articles 7.1, 7.2, 11 and 12.7 of the DSU in reaching its finding.

(b) If the Appellate Body reverses the Panel's finding that the European Communities failed to comply with the requirements of Article 6.2 of the DSU, then whether the Appellate Body should complete the analysis and find that: (I) the continued application of the 18 anti-dumping duties fell within the Panel's terms of reference; and (ii) the continued application of the 18 anti-dumping duties is inconsistent with Articles VI: 1 and VI: 2 of the GATT 1994, Articles 2.4, 2.4.2, 9.3, 11.1 and 11.3 of the Anti-Dumping Agreement, and Article XVI: 4 of the WTO Agreement.

( c) Whether the Panel erred in finding that the European Communities' claims concerning four preliminary measures were outside the Panel's terms of reference.

(d) If the Appellate Body reverses the Panel's finding that the European Communities' claims concerning the four preliminary measures were outside the Panel's terms of reference, then whether the Appellate Body should complete the analysis and find that: (I) the four preliminary determinations are within the scope of these proceedings; (ii) the preliminary result of the periodic review is inconsistent with Articles 2.1, 2.4, 2.4.2, 9.3, and 11.2 of the Anti-Dumping Agreement and Articles VI: 1 and VI: 2 of the GATT 1994; and (iii) the preliminary results of the sunset reviews are inconsistent with Articles 2.1, 2.4, 2.4.2, 11.1, and 11.3 of the Anti-Dumping Agreement.

The Appellate Body report cited issues raised on appeal by the United States to include:

-- Whether the Panel erred in finding that 14 periodic review and sunset review determinations that were identified in the European Communities' panel request, but not in the European Communities' consultations request, were within the Panel's terms of reference; and whether the continued application of the 18 duties were not included in the consultations request and, consequently, fell outside the Panel's terms of reference.

Regarding zeroing in periodic reviews, the Appellate Body report said that the following issue is raised on appeal by the United States: Whether the Panel erred in finding that the United States acted inconsistently with Article 9.3 of the Anti-Dumping Agreement and Article VI: 2 of the GATT 1994 by using simple zeroing in 29 periodic reviews.

Regarding zeroing in periodic reviews, the following issues are raised on appeal by the European Communities:

(a) Whether the Panel acted inconsistently with its duties under Article 11 of the DSU in finding that the European Communities had failed to demonstrate that the United States Department of Commerce (the "USDOC") used simple zeroing in seven of the periodic reviews at issue; and

(b) If the Appellate Body reverses the Panel's finding that the European Communities had not shown that simple zeroing was used in seven periodic reviews, then whether the Appellate Body should complete the analysis and conclude that the United States acted inconsistently with Article 9.3 of the Anti-Dumping Agreement and Article VI: 2 of the GATT 1994 in respect of these reviews.

Regarding zeroing in sunset reviews, the following issue is raised on appeal by the United States: Whether the Panel acted inconsistently with its duties under Article 11 of the DSU in finding that the United States failed to comply with its obligations under Article 11.3 of the Anti-Dumping Agreement in the eight sunset review determinations at issue in this dispute.

Regarding the Panel's recommendations, the Appellate Body noted that the following issue is raised on appeal by the European Communities: Whether the Panel erred in rejecting the European Communities' request for a suggestion pursuant to Article 19.1 of the DSU.

In its findings and conclusions, the Appellate Body said:

(a) regarding the European Communities' claims concerning the continued application of the 18 anti-dumping duties at issue:

(I) reverses the Panel's finding that the European Communities failed to comply with Article 6.2 of the DSU, and finds, instead, that the panel request identifies the specific measures at issue;

(ii) declines to make additional findings concerning whether the Panel acted inconsistently with Articles 7.1, 7.2, 11, and 12.7 of the DSU;

(iii) concludes that the continued application of the anti-dumping duties in each of the 18 cases was identified in the request for consultations;

(iv) finds that the continued use of the zeroing methodology in successive proceedings in which duties resulting from the 18 anti-dumping duty orders are maintained, constitute measures that can be challenged in WTO dispute settlement;

(v) regarding Ball Bearings and Parts Thereof from Italy (Case II), Ball Bearings and Parts Thereof from Germany (Case III), Ball Bearings and Parts Thereof from France (Case IV), and Stainless Steel Sheet and Strip in Coils from Germany (Case VI):

-- finds that the Panel's factual findings sufficiently establish the continued use of the zeroing methodology in successive proceedings whereby duties in these cases are maintained;

-- concludes that the application and continued application of anti-dumping duties is inconsistent with Articles 9.3 of the Anti-Dumping Agreement and Article VI: 2 of the GATT 1994 to the extent that the duties are maintained at a level calculated through the use of the zeroing methodology in periodic reviews;

-- concludes that the application and continued application of anti-dumping duties is inconsistent with Article 11.3 of the Anti-Dumping Agreement to the extent that reliance is placed upon a margin of dumping calculated through the use of the zeroing methodology in making sunset review determinations; and

-- declines to make additional findings under Articles 2.1, 2.4, 2.4.2, and 11.1 of the Anti-Dumping Agreement, Article VI: 1 of the GATT 1994, and Article XVI: 4 of the WTO Agreement for purposes of resolving this dispute;

(vi) declines to complete the analysis in respect of the remaining 14 of the 18 anti-dumping cases at issue; and

(b) regarding the European Communities' claims concerning four preliminary determinations:

(I) reverses the Panel's finding that the European Communities' claims concerning the four preliminary determinations were outside the Panel's terms of reference; and

(ii) declines the European Communities' request for a finding that the four preliminary determinations are inconsistent with "the provisions of the GATT 1994 and the Anti-Dumping Agreement cited in the Panel proceedings";

( c) upholds the Panel's finding that the 14 periodic and sunset reviews were within the Panel's terms of reference;

(d) upholds the Panel's finding that the United States acted inconsistently with Article 9.3 of the Anti-Dumping Agreement and Article VI: 2 of the GATT 1994 by applying simple zeroing in the 29 periodic reviews, and accordingly declines to rule on the conditional appeals of the European Communities regarding the Panel's finding;

(e) as regards the European Communities' claims concerning the seven periodic reviews:

(I) finds that the Panel acted inconsistently with Article 11 of the DSU when it found that the European Communities had not shown that simple zeroing was used in the seven periodic reviews at issue and, consequently, reverses this finding of the Panel;

(ii) completes the analysis and finds that the European Communities has shown that simple zeroing was used, and that the United States acted inconsistently with Article VI: 2 of the GATT 1994 and Article 9.3 of the Anti-Dumping Agreement by applying simple zeroing in the periodic reviews in Steel Concrete Reinforcing Bars from Latvia (Case I - No. 3); Stainless Steel Bar from Germany (Case IX - No. 33); Stainless Steel Bar from Germany (Case IX - No. 34); Stainless Steel Bar from Italy (Case XI - No. 39); and Certain Pasta from Italy (Case XIII - No. 43); and

(iii) declines to complete the analysis in respect of the periodic reviews in Stainless Steel Bar from France (Case V - No. 20) and Stainless Steel Bar from France (Case V - No. 21);

(f) dismisses the United States' claim that the Panel acted inconsistently with Article 11 of the DSU in finding that the United States acted inconsistently with Article 11.3 of the Anti-Dumping Agreement with regard to the eight sunset reviews and, consequently, upholds this finding of the Panel; and

(g) rejects the European Communities' request for a suggestion under Article 19.1 of the DSU.

The Appellate Body recommended that the DSB request the United States to bring its measures, found to be inconsistent with the GATT 1994 and the Anti-Dumping Agreement, into conformity with its obligations under those Agreements.

Meanwhile, in what one trade lawyer (posted on the International Economic Law and Policy Blog) has viewed as the possible end of the debate on the issue of "zeroing" within the WTO's judicial bodies, one Member of the Appellate Body Division, in a concurring opinion, made the following statement in relation to part of the Appellate Body report (section V. C. 2, the section refers to the concept of "dumping" and "margins of dumping" in the Anti-Dumping Agreement):

"305. Over a period of time, successive panels and the Appellate Body have engaged in a very considerable interpretative enterprise to determine whether the Anti-Dumping Agreement and Article VI of the GATT 1994 prohibit the use of zeroing. At the heart of the debate is a contestation as to the correct interpretation of the concept of dumping. The Appellate Body has interpreted dumping to be an exporter-specific concept, requiring that a determination be made for the product under consideration. By contrast, successive panels have found that dumping is permissibly determined at the level of individual export transactions. To resolve this difference, the text, context, and object and purpose have been carefully scrutinized, as well as supplementary means of treaty interpretation. Each interpretation has found support in different places. These interpretative exercises have not lacked for hermeneutic ingenuity, and each has generated its own puzzles: witness the question of mathematical equivalence and the consequential issue of textual redundancy.

"306. This debate at once demonstrates the robustness of the WTO's system of dispute settlement, but also its limits. The interpretation of the covered agreements requires scrupulous adherence to the disciplines of the customary rules of interpretation of public international law. Those disciplines are directed towards arriving at a coherent and harmonious interpretation to develop an answer to an interpretative problem and thereby provide certainty as to the rights and obligations of the parties. Variability, contradiction, and uncertainty stalk the interpretative enterprise, but they are the hallmarks of its failure, not its success. Just as the interpreter of a treaty strives for coherence, there is an inevitable recognition that a treaty bears the imprint of many hands. And what is left behind is a text, sometimes negotiated to a point where an agreement to regulate a matter could only be reached on the basis of constructive ambiguity, carrying both the hopes and fears of the parties. Interpretation is an endeavour to discern order, notwithstanding these infirmities, without adding to or diminishing the rights and obligations of the parties.

"307. Article 2.1 of the Anti-Dumping Agreement illustrates this problem. Nothing could be more important than the definition of the concept of "dumping". It is foundational and applies throughout the Agreement, as the clear wording of Article 2.1 makes plain. It cannot have variable or contradictory meanings, for that would infect the entire Agreement. Yet the definition is cast at a high level of generality. The definition makes no attribution of agency; it does not say who introduces a product into the commerce of another country. Article 2.1 might so easily have included the words "by an exporter", but it does not. So too, the definition might have referred to the product as a whole, and not simply a product. The definition is inchoate, and thus it must be interpreted.

"308. The Appellate Body has found contextual support for its interpretation of "dumping" as a product-wide and exporter-specific concept by reference to other provisions in the Anti-Dumping Agreement. In particular, the Appellate Body has emphasized the significance of Articles 2.4, 2.4.2, 5.8, 6.10, 9.5, and 3.1 and concluded that the cumulative contextual force of these provisions is dispositive of the meaning attaching to the concept of "dumping", and excludes an interpretation of dumping that is transaction-specific.

"309. There can be little doubt that the Anti-Dumping Agreement requires aggregation. In Article 6.10, an individual margin of dumping must be determined for each known exporter. Article 3.1 requires an assessment of the volume of dumped imports and their effect. Save for the most exceptional case where an importation consists only of a single transaction (for example, the importation of a large piece of capital equipment), this is an exercise that requires a determination by taking into account the entire volume of dumped imports. Under Article 5.8, a de minimis assessment could not be made with respect to an individual export transaction; and Article 9.5 requires a determination of individual margins of dumping for any exporters who have not exported the product during the period of investigation.

"310. While aggregation is an unavoidable requirement of the Anti-Dumping Agreement, these provisions are not clear as to what it is that must be aggregated. Does aggregation require the aggregation of all comparison results, positive and negative, or does it suffice to aggregate only those comparison results that are positive, having considered all transactions and determined which are dumped and which are not. The Appellate Body has found that aggregation must give equal weight to all comparison results if the exercise is to be fair and arrive at a determination for the product as a whole; successive panels have found no such requirement, save where the first methodology in Article 2.4.2 refers in express terms to all comparable export transactions.

"311. The interpretative endeavour has ranged far and wide. The Appellate Body has emphasized that dumping is an exporter-specific concept. Panels have pointed out that the liability for anti-dumping duties rests upon importers. The Appellate Body views its interpretation as one that respects the differences in the prospective and retrospective systems of duty assessment; its critics think otherwise.

"312. There is little point in further rehearsing the fine points of these interpretations. In my view, there is every reason to survey this debate with humility. There are arguments of substance made on both sides; but one issue is unavoidable. In matters of adjudication, there must be an end to every great debate. The Appellate Body exists to clarify the meaning of the covered agreements. On the question of zeroing it has spoken definitively. Its decisions have been adopted by the DSB. The membership of the WTO is entitled to rely upon these outcomes. Whatever the difficulty of interpreting the meaning of dumping', it cannot bear a meaning that is both exporter-specific and transaction-specific. We have sought to elucidate the notion of permissibility in the second sentence of Article 17(6)(ii). The range of meanings that may constitute a permissible interpretation does not encompass meanings of such wide variability, and even contradiction, so as to accommodate the two rival interpretations. One must prevail. The Appellate Body has decided the matter. At a point in every debate, there comes a time when it is more important for the system of dispute resolution to have a definitive outcome, than further to pick over the entrails of battles past. With respect to zeroing, that time has come.

"313. For these reasons, I concur in the decision reached by the Division in section E [of the report] that the United States acted inconsistently with Article 9.3 of the Anti-Dumping Agreement and Article VI: 2 of the GATT 1994 by using simple zeroing in periodic reviews." +

 


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