USTR - WTO Panel Finds for United States in "Zeroing" Dispute with Japan
                 
The Office of the United States Trade Representative

WTO Panel Finds for United States in "Zeroing" Dispute with Japan
09/20/2006


WASHINGTON - U.S. Trade Representative Susan C. Schwab announced today that a WTO panel has found in favor of the United States on Japan’s challenge to the United States’ use in antidumping administrative reviews of "zeroing" – a technique used in measuring alleged incidents of selling below fair value, or dumping.

In a previous dispute, the Appellate Body found that the WTO Antidumping Agreement prohibits zeroing in such reviews. The panel also concluded that zeroing is permitted in some circumstances in antidumping investigations.

"We welcome the panel’s careful and reasoned analysis on the issue of ‘zeroing’ in administrative reviews," said Ambassador Schwab. "This marks the second report in which a panel of antidumping experts has found that the Antidumping Agreement does not prohibit ‘zeroing’ in that context. That analysis is a model for how WTO adjudicatory bodies should do their job, demonstrating a solid commitment to their responsibility first and foremost to apply the WTO agreements as written."

Background

When the U.S. Department of Commerce ("Commerce") calculates a weighted average dumping margin for a given company, it typically takes into account numerous comparisons between sales in the United States and sales in the home market or third country market (or costs in the home market). It is not uncommon for Commerce to find that some comparisons reveal dumping (e.g., the price in the United States is lower than the home market price), while others reveal no dumping (e.g., the price in the United States is higher than the home market price). Where a comparison reveals no dumping, Commerce assigns a zero to that comparison, rather than a negative number equal to the amount by which the U.S. price exceeds the home market price. This practice is commonly referred to as "zeroing."

The WTO Antidumping Agreement contemplates three methodologies for calculating a dumping margin in investigations: average-to-average, transaction-to-transaction, and average-to-transaction. In addition to the question of the use of zeroing for each methodology, there is a question as to whether zeroing can be used in different types of antidumping proceedings, including investigations, administrative reviews, and sunset reviews.

The Appellate Body had previously found that zeroing using the average-to-average methodology in investigations is prohibited, and this panel agreed with the Appellate Body.

In August the Appellate Body circulated its report in Softwood Lumber, in which it concluded that zeroing using the transaction-to-transaction methodology in investigations is also prohibited. This panel concluded the opposite, i.e., that zeroing in the transaction-to-transaction methodology in investigations is permitted. The panel had finalized its report before the Appellate Body released its report in Softwood Lumber.

In April the Appellate Body released its report in EC Zeroing, in which it concluded that zeroing in administrative reviews is prohibited. This panel considered the reasoning of the Appellate Body, but concluded based on a thorough examination of this reasoning and the language of the Antidumping Agreement that zeroing in administrative reviews is permitted.