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Laws, Regulations and Methodology for Calculating Dumping Margins Zeroing

Key Facts
Short Title: US — Zeroing (EC)
Respondent: United States
Third Parties: Argentina; Brazil; Mexico; China; Chinese Taipei; Hong Kong; Norway; Turkey; Japan; Korea; India;
Complaintant(s): European Communities;
Dispute Number: DS294
Link to Dispute Site: http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds294_e.htm
Dispute Subject(s): Anti-dumping Measures;
Dispute Status: Concluded
Complaint by the European Communities.

The European Communities considered that there was a disagreement as to the existence or consistency with a covered agreement of the measures taken to comply with the rulings and recommendations of the DSB. Therefore, on 9 July 2007, the European Communities requested consultations under Article 21.5. Brazil and Korea requested to join the consultation. On 13 September 2007, the European Communities requested the establishment of a compliance panel. At its meeting on 25 September 2007, the DSB agreed to refer, if possible, the matter raised by the European Communities to the original panel. India, Japan and Mexico reserved their third-party rights. Subsequently, Korea, Norway, Chinese Taipei and Thailand reserved their third-party rights. On 28 November 2007, the European Communities requested the Director-General to compose the Panel. On 30 November 2007, the Director-General composed the Panel. On 26 May 2008, the Chairman of the Panel informed the DSB that it would not be able to circulate its report within 90 days after the date of referral given the delays in the composition of the Panel and the schedule adopted after consultations with the parties. The Panel expected to complete its work in October 2008.

On 17 December 2008, the compliance panel report was circulated to Members. The compliance Panel first found that it had no authority to make findings with respect to the EC claim that the Panel was improperly constituted under Articles 8.3 and 21.5 of the DSU.

With respect to the EC general claims of failure, by the United States, to fully implement the recommendations and rulings of the DSB in the original dispute, the compliance Panel found that:

(i) The United States failed to comply with the recommendations and rulings of the DSB in the original dispute and acted inconsistently with Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994 by determining, after the end of the reasonable period of time, the amount of anti-dumping duty to be assessed based on zeroing in the 2004-2005 administrative review in case 1 (Hot Rolled Steel from the Netherlands) and issuing assessment instructions pursuant to that determination and by determining, after the end of the reasonable period of time, the amount of anti-dumping duty to be assessed based on zeroing in the 2004-2005 administrative review in case 6 (Stainless Steel Wire Rod from Sweden) and issuing assessment instructions pursuant to that determination.

(ii) The United States failed to comply with the recommendations and rulings of the DSB in the original dispute by continuing to apply to imports of NSK cash deposit rates established in the 2000-2001 administrative review in case 31 (Ball Bearings from the United Kingdom), a measure which was found to be inconsistent with Articles 9.3 of the Anti-Dumping Agreement and VI:2 of the GATT 1994 in the original dispute.

(iii) The United States had not failed to comply with the recommendations and rulings of the DSB in the original dispute by taking actions to liquidate anti-dumping duties calculated with zeroing pursuant to final duty assessment determinations made before the end of the reasonable period of time (including pursuant to subsequent administrative reviews listed in the Annex to the EC Article 21.5 panel request).

(iv) The United States had not failed to comply with the recommendations and rulings of the DSB in the original dispute by determining, prior to the end of the reasonable period of time, the amount of anti-dumping duty to be assessed based on zeroing in the 2005-2006 administrative review determination in case 1 (Hot Rolled Steel from the Netherlands).

(v) The United States had not failed to comply with the recommendations and rulings of the DSB in the original dispute and has not acted inconsistently with Articles 2.4.2 and 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994 by establishing a new cash deposit rate based on zeroing in the 2004-2005 administrative review determination in case 6 (Stainless Steel Wire Rod from Sweden) because due to the revocation of the measure in question, no cash deposit requirement was actually imposed.

(vi) Having found that none of the sunset reviews with respect to which the European Communities made claims and which were within its terms of reference had, by the time of the establishment of the Panel, resulted in the continuation of the concerned anti-dumping orders, the panel made no findings in respect of the claims of the European Communities that the United States violated Articles 2.1, 2.4, 2.4.2 and 11.3 of the Anti-Dumping Agreement as a result of having relied on margins of dumping calculated with zeroing in the context of sunset reviews involving measures challenged in the original dispute.

(vii) the Panel made no findings with respect to the EC claim that the United States violated Articles 21.3 and 21.3(b) of the DSU by failing to take any measure to comply between 9 April and 23 April/31 August 2007.

With respect to the EC claims that certain US measures taken to comply were inconsistent with the US obligations under the covered agreements, the compliance Panel made no finding with respect to Section 129 determination in case 11, which it had found was not properly before it; the EC claims under Article 5.8 of the Anti-Dumping Agreement and Article VI:I of the GATT 1994 in respect of cases 2, 3, 4 and 5; and the EC claims under Article 6.8 and Annex II of the Anti-Dumping Agreement in respect of cases 2, 4 and 5.

The Panel further found that, to the extent that the measures taken by the United States to comply with the recommendations and rulings adopted by the DSB in the original proceeding are inconsistent with the obligations of the United States under the covered agreements, and to the extent that the United States has otherwise failed to implement the recommendations and rulings of the DSB in the original dispute, these recommendations and rulings of the DSB remain operative. It therefore made no new recommendation.

Appellate Body and Panel Reports Adopted

On 12 June 2003, the European Communities requested consultations with the United States concerning a methodology used by the US, among others, in the calculation of dumping margins, known as "zeroing". The "zeroing" methodology, generally speaking, involves treating specific price comparisons which do not show dumping as zero values in the calculation of a weighted average dumping margin.

The request concerns specific provisions of the US Tariff Act of 1930 and the Department of Commerce implementing regulation as well as US Department of Commerce methodology and its determinations in specific cases involving products imported from the EC.

The EC has indicated specific aspects of the zeroing methodology that it will raise in the consultations, including the way in which it is applied in calculating dumping margins, its impact on determinations of injury, its impact in cases which would otherwise be de minimis, and the level of the dumping margins in 21 specific US anti-dumping cases.

The EC has attached to its request details of those specific cases, alleging that in each of them the US used zeroing methodology. Most of the products in these cases were steel. The EC asserts that in each case the dumping margin without zeroing would have been lower, de minimis or negative. In the EC's view, the Act, regulation, methodology and these specific determinations appear to be inconsistent with the United States' obligations under the following WTO provisions:

* Articles 1, 2.4, 3, 5.8, 9.3, 9.5, 11, 18.3 and 18.4 of the Anti-Dumping Agreement;

* Articles VI:1 and VI:2 of the GATT 1994;

* Article XVI:4 of the WTO Agreement.

On 27 June 2003, India and Korea requested to join the consultations. On 30 June 2003, Japan and Mexico requested to join the consultations.

On 8 September 2003, the European Communities requested further consultations with the United States. The EC wished to add ten more cases to the list of specific cases.

The EC indicated specific aspects of the zeroing methodology that it will raise in the additional consultations, including the way in which it is applied in calculating dumping margins, its impact on determinations of injury, its impact in cases which would otherwise be de minimis, and the level of the dumping margins in specific US anti-dumping cases.

In the EC's view, these additional specific determinations appear to be inconsistent with the US obligations under the same WTO provisions mentioned above.

On 25 September 2003, Mexico requested to join the consultations.

On 5 February 2004, the EC requested the establishment of a panel. On 16 February 2004, the EC submitted a revised request for the establishment of a panel. At its meeting on 17 February 2004, the DSB deferred the establishment of a panel. At its meeting on 19 March 2004, the DSB established a panel. Argentina, Brazil, China, India, Japan, Korea, Mexico, Norway and Chinese Taipei reserved their third-party rights. On 23 March 2004, Hong Kong, China reserved its third-party right. On 30 March 2004, Turkey reserved its third-party right. On 27 October 2004, the Panel was composed.

On 22 March 2005, the Chairman of the Panel informed the DSB that it would not be possible for the Panel to complete its work in six months in light of the schedule which had been agreed after consultations with the parties, and that the Panel expected to complete its work in July 2005. On 1 July 2005, the Panel informed the DSB that due to its continued consideration of the issues in this dispute, it would not be possible for the Panel to complete its work by the end of July, and that the Panel expected to complete its work in September 2005.

On 31 October 2005, the Panel Report was circulated to Members. In its Report:

* The Panel unanimously upheld the claims of the European Communities as they relate to the specific determinations of dumping made by the United States Department of Commerce in the 15 original investigations at issue. The Panel also unanimously upheld the claims of the European Communities in respect of what was described by the Panel as the United States "methodology" of zeroing in original investigations. In doing so, the Panel found that the United States "methodology" of zeroing was a "norm" capable of being challenged in WTO dispute settlement proceedings.

* The Panel unanimously rejected the claims of the European Communities with respect to United States law, finding that the provisions in question did not speak to the issue of zeroing.

* The Panel rejected all of the claims of the European Communities in the context of reviews of existing measures. However, one member of the Panel dissented from this aspect of the Panel's findings. The dissenting member of the Panel would have upheld the claims of the European Communities as they relate to the 16 specific determinations of dumping in reviews as well as the United States "methodology" of zeroing in the context of reviews. The dissenting member of the Panel would also have found one provision of a United States regulation to be WTO-inconsistent in respect of reviews.

* The Panel recommended that the DSB request the United States to bring its measures into conformity with its obligations under the AD Agreement.

At its meeting of 6 December 2005, following a joint request by the parties, the DSB agreed to extend the time period for the adoption of the panel report until 31 January 2006. On 17 January 2006, the European Communities notified its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the Panel. On 30 January 2006, the United States notified its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the Panel. On 15 March 2006, the Chairman of the Appellate Body informed the DSB that it would not be able to circulate its report within the 60-day period due to the time required for completion and translation of the report, and that it estimated it would be circulated to WTO Members no later than 18 April 2006.

On 18 April 2006, the Appellate Body report was circulated to Members. The Appellate Body reversed the Panel's finding that zeroing, as applied by the USDOC when assessing final anti-dumping duty liability for particular importers in the administrative reviews at issue, is not inconsistent with Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994.

The Appellate Body upheld the Panel's finding that the zeroing methodology, as it relates to original investigations, is inconsistent, as such, with Article 2.4.2 of the Anti-Dumping Agreement.

On 9 May 2006, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report.

Implementation Status of Adopted Reports

At the DSB meeting on 30 May 2006, the United States announced that it intended to implement the DSB recommendations and rulings but that they would need a reasonable period of time to do so. On 28 July 2006, the United States and the European Communities informed the DSB, pursuant to Article 21.3(b) of the DSU, that they had agreed that the reasonable period of time for the United States to implement the DSB recommendations and rulings shall be 11 months, expiring on 9 April 2007.

At the DSB meeting on 24 April 2007, the United States said that after the correction of a clerical error in the determination of one investigation, they would have fully implemented the DSB recommendations and rulings. The European Communities commended the United States for the steps it had taken to secure compliance, but said it was questionable if it had fully implemented the DSB recommendations and rulings.

On 4 May 2007, the United States and the European Communities notified the DSB of an Understanding regarding procedures under Article 21 and 22 of the DSU. On 9 July 2007, the European Communities requested consultations under Article 21.5 of the DSU. On 20 July 2007, Brazil and Korea requested to join the consultations. On 13 September 2007, the European Communities requested the establishment of an Article 21.5 panel. At its meeting on 25 September 2007, the DSB agreed, if possible, to refer the matter raised by the European Communities to the original panel.

Panel Proceedings
Brief DateBrief Description
05/18/2005U.S. Comments on the EC's Replies to the Panel's Questions in Connection with the Second Substantive Meeting (pdf)
05/13/2005U.S. Answers to the Panel's Questions in Connection with the Second Substantive Meeting (pdf)
04/27/2005Closing Statement of the United States at the Second Panel Meeting (pdf)
04/26/2005Opening Statement of the United States at the Second Panel Meeting (pdf)
04/22/2005Executive Summary of the Second Written Submission of the United States (pdf)
04/13/2005Second Written Submission of the United States (pdf)
04/07/2005U.S. Answers to the Panel's Questions in Connection with the First Substantive Meeting (pdf)
03/18/2005Questions from the United States to the European Communities (pdf)
03/17/2005Closing Statement of the United States at the First Substantive Meeting (pdf)
03/16/2005Opening Statement of the United States at the First Substantive Meeting (pdf)
02/10/2005Executive Summary of the First Written Submission of the United States (pdf)
01/31/2005First Written Submission of the United States (pdf)
Appeal Proceedings
Brief DateBrief Description
03/01/2006Oral Statement of the United States (pdf)
02/13/2006U.S. Appellee Sumbission (pdf)
02/01/2006U.S. Appellant Submission (pdf)
Recourse to Article 21.5 of the DSU by the EC
Brief DateBrief Description
05/15/2008Comments of the United States on the Replies of the EC to the Questions from the Panel (pdf)
05/08/2008Answers of the United States to Questions from the Panel to the Parties (pdf)
04/10/2008Closing Statement of the United States of America at the Substantive Meeting of the Panel (pdf)
04/09/2008Opening Statement of the United States of America at the Substantive Meeting of the Panel (pdf)
03/17/2008Executive Summary of the Rebuttal Submission of the United States of America (pdf)
03/07/2008Rebuttal Submission of the United States of America (pdf)
02/18/2008Executive Summary of the First Written Submission of the United States of America (pdf)
02/08/2008First Written Submission of the United States of America (pdf)
Recourse to Article 21.5 of the DSU by the EC: Appeal Proceedings
Brief DateBrief Description
03/23/2009Oral Statement of the United States
03/10/2009U.S. Appellee Submission (pdf)
03/03/2009U.S. Appellant Submission (pdf)

Arbitration under Article 22.6 of the DSU
Brief DateBrief Description
07/20/2010U.S. Comments on the EU’s Response to Further Additional Questions from the Arbitrator
07/14/2010U.S. Response to Further Additional Questions from the Arbitrator
06/11/2010U.S. Comments on the EU’s Response to Additional Questions from the Arbitrator
06/02/2010U.S. Response to Additional Questions from the Arbitrator
06/02/2010U.S. Comments on Japan’s Response to Questions from the Arbitrator
05/21/2010U.S. Closing Statement at the Meeting with the Arbitrator
05/20/2010U.S. Opening Statement at the Meeting with the Arbitrator
05/07/2010U.S. Answers to the Questions from the Arbitrator
04/01/2010U.S. Comments on Japan's Request to Participate
03/30/2010U.S. Written Submission
03/16/2010U.S. Comments on the EU's Comments regarding Japan's Communication to the DSB
03/11/2010U.S. Comments on Japan's Communication to the DSB
07/26/2010U.S. Response to the Follow-up Questions from the Arbitrator
07/28/2010U.S. Comments on the EU’s Response to the Follow-up Questions from the Arbitrator