Info Service on WTO and Trade Issues (Feb09/15)
adopts rulings in EC-US "zeroing" dispute
in SUNS #6644 dated 20 February 2009
Geneva, 19 Feb (Kanaga Raja) -- The WTO Dispute Settlement Body on Thursday
adopted the report of the Appellate Body(AB) and the report of the panel
(as modified by the AB) in relation to a dispute brought by the European
Communities against the United States over its continued application
of the "zeroing" methodology in calculating dumping margins
in periodic reviews of certain specified anti-dumping measures maintained
against the European Communities.
4 February, the Appellate Body held 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, and recommended
that the Dispute Settlement Body request the United States
to bring its measures into conformity with its obligations under those
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. (See SUNS #6635 dated 9 February
2009 for a full report on the Appellate Body ruling.)
its statement at the DSB, the EC said that the issue of zeroing is not
a new one. Indeed, the practice of zeroing was first condemned in 2001
in a WTO dispute against the EC (bed linen case brought by India
against the EC) and led to its abandonment by the EC.
EC said that the Appellate Body has since maintained a consistent and
coherent line on this issue. It confirmed on several occasions that
zeroing runs foul of fundamental obligations of the Anti-Dumping agreement:
to establish dumping in respect of an exporter and a certain product
and to conduct a fair comparison between export prices and normal value.
EC said that these earlier decisions had already made clear that the
practice of zeroing, whether in original investigations or in reviews,
was per se WTO incompatible. And it is regrettable that unlike the EC
after the bed linen ruling, the US refused to
draw the inevitable consequences of these earlier decisions.
said the EC, the US chose to question
the authority of the Appellate Body of the WTO and the dispute settlement
system as a whole, by forcing other WTO members into continued litigation
only to get the opportunity to re-argue its position over and over again
and delay compliance.
it to say that fourteen WTO disputes have been brought in less than
a decade against the US on zeroing
(both as the unique subject of the dispute or as part of a wider dispute).
Despite having been condemned by panels and the Appellate Body a number
of times, the US
refused to comply and abolish zeroing."
EC warmly welcomed the Appellate Body decision to reject all grounds
of appeal put forward by the US and uphold the Panel's findings that:
(i ) the US was in violation of 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 at issue; (ii) that the US violated Article 11.3
of the Anti-Dumping Agreement by using, in eight sunset reviews at issue,
dumping margins obtained through so-called "model" zeroing
in original investigations.
EC also stressed another fundamental aspect of the Appellate Body report,
namely, its conclusion that a challenge may be brought in the WTO against
the continued use of the zeroing methodology in successive proceedings
in which duties resulting from specific anti-dumping duty orders are
Appellate Body confirmed that in seeking an effective resolution of
its dispute with the US, the EC, rather than having to challenge each
new investigation and review separately, is entitled to make a case
against the "continued use" of the zeroing methodology against
the "duty" as a whole in the specified cases, under the scrutiny
of WTO dispute settlement.
findings are of systemic importance, said the EC, adding that as in
the present dispute, there are clearly cases where the measure at issue
consists of an ongoing conduct, with prospective application and a life
potentially stretching into the future.
EC also regarded the Appellate Body's findings on the matter of susceptibility
to WTO challenges of the duty as a measure as an important landmark
which contributes to the credibility of the WTO dispute settlement system
as a whole and will represent a powerful tool against the abuse of trade
is not just the conclusion reached by the Appellate Body on the matter
of the duty as a measure which merits attention, but also the fact that
the Appellate Body confirmed in its analysis that the distinction between
"as such" and "as applied" should not be considered
as to governing the definition of a measure for the purposes of WTO
dispute settlement. The EC welcomed the clarification that the said
distinction, however useful, does not exhaustively define the types
of measures that may be subject to challenge in the WTO.
EC said that the only reservation that it would make concerns the Appellate
Body's conclusion that it could not complete the analysis and make findings
on whether the continued application of zeroing by the US in 14 of the
18 anti-dumping cases and in 2 of the 7 periodic reviews at issue, was
its statement, the US expressed disappointment
at the Appellate Body's findings, which it said both incorrectly expanded
the scope of the proceedings and disregarded the careful bargain struck
as part of the Uruguay Round Agreements.
US regretted that the Appellate Body,
once again, has failed to accept the permissibility of zeroing under
the covered agreements, and has imposed obligations on members where
there are none.
US said that in reaching its finding
on the inconsistency of zeroing in reviews, the Appellate Body relied
on the same flawed interpretation that it offered in previous reports.
According to the Appellate Body, the concepts of "dumping"
and "margin of dumping" are exporter-based and preclude a
finding that dumping can exist with respect to an individual transaction.
said the US, the Appellate
Body has manufactured a conflict where there is none -- dumping may
be an exporter-related concept, but dumping can still exist on a transaction-by-transaction
US was also disturbed by the Appellate
Body's approach to Article 17.6 (ii) of the Anti-Dumping Agreement.
That provision states that where a panel finds that a relevant provision
of the Agreement admits of more than one permissible interpretation,
the panel shall find the authorities' measure to be in conformity with
the Anti-Dumping Agreement if it rests on one of those permissible interpretations.
that Article 17.6 (ii) requires a panel, and the Appellate Body, to
determine whether the interpretation proposed by a member is permissible,
the US said that the
Appellate Body, however, failed to take that approach. Instead of examining
interpretation, the Appellate Body began by reiterating its analysis
of the Anti-Dumping Agreement. It then found that the US
interpretation of the Anti-Dumping Agreement led to a result that contradicted
the result of the Appellate Body's analysis -- and on that basis alone,
said that the US
interpretation could not be permissible.
is a simple non sequitur," said the US,
adding that if Article 17.6 (ii) only sanctioned interpretations that
all yield the same result, Article 17.6 (ii) would have no function.
US also said that the Appellate Body
never actually examined the meaning of "permissible". Instead,
it simply asserted "the rules and principles of the Vienna Convention
cannot contemplate interpretations with mutually contradictory results."
US noted that at the end of the Uruguay
Round negotiations, Article 17.6 (ii) was the key to the acceptance
of the other provisions of the Anti-Dumping Agreement. The existence
of such a provision confirms that members were aware that the text would
pose particular interpretive challenges, at least in part because it
was drafted to cover varying and complex anti-dumping systems around
the world and long-standing differences concerning methodology. The
negotiators there indicated that it would be a legal error not to respect
a permissible interpretation of the Anti-Dumping Agreement.
US deeply regretted the Appellate
Body's disregard for the meaning and importance of Article 17.6 (ii).
US also commented on a number of procedural
findings by the Appellate Body.
said that it failed to see how the EC's reference, in its panel request,
to the "application or continued application of anti-dumping duties
in 18 cases" could in any way meet the requirement in Article 6.2
of the Dispute Settlement Understanding (DSU) to identify the specific
measures at issue.
the US view, it was the panel that adopted
the correct approach when it found that the EC could not meet the requirements
of Article 6.2 by referring to duties in a general way, detached from
any underlying administrative determinations.
US was also concerned by the Appellate
Body's statement that the panel in the dispute "appear[s] to have
acceded to the hierarchical structure contemplated in the DSU",
a statement that is neither explained nor supported.
US said that the DSU does not establish
a common-law system, in which Appellate Body findings on legal issues
become binding precedents. On the contrary, the only thing in the DSU
that resembles a hierarchical structure is the role assigned to the
Ministerial Conference and the General Council by Article IX: 2 of the
WTO Agreement -- those bodies have the exclusive authority to adopt
binding interpretations of the covered agreements.
an intervention, Japan said that
the Appellate Body once again confirmed its previous findings that simple
zeroing in periodic reviews is inconsistent with the Anti-Dumping Agreement
and the GATT 1994.
Norway said that the Appellate Body
has once again confirmed the illegality of the "zeroing methodology".
The Appellate Body thus confirmed that the US cannot escape its WTO obligations
by creating a "moving target" of measures that are re-determined
Brazil said that the Appellate Body
has once again concluded that the Anti-Dumping Agreement does not allow
margins of dumping to be calculated based on the zeroing methodology.
The lack of support for this methodology in the negotiated texts should
be, by this point in time, beyond any reasonable doubt. It is a matter
of systemic concern that members continue to be compelled to re-litigate
an issue that has been so clearly settled by the Appellate Body.
India welcomed the Appellate Body
report in the dispute regarding the clarification given by the Appellate
Body on the issue of WTO-inconsistency of the "zeroing" practice.
It also welcomed the Appellate Body findings with respect to the simple
zeroing in periodic reviews reaffirming its previous rulings that simple
zeroing in periodic reviews is inconsistent with the Anti-Dumping Agreement.
India further welcomed the Appellate
Body findings that the continued application of anti-dumping duties
after sunset reviews, where the margins of dumping were calculated through
the use of zeroing methodology in the original investigations, is also
inconsistent with Article 11.3 of the Anti-Dumping Agreement, relating
to sunset reviews.
under the agenda item of surveillance of implementation of recommendations
of the DSB, the EC, in relation to its regime for the importation, sale
and distribution of bananas, said that it stands ready to implement
the recommendations made in the Ecuador report
by means of modifying its bound duty.
said that it had started negotiations last week not only with Ecuador but also with other MFN suppliers
with rights to reach an agreement regarding the rebinding of the EC
tariff on bananas.
said that requests made to the EC to simply sign the draft agreement
established in the margins of the July Ministerial last year simply
disregard the fact that the signature of that agreement was subject
to the successful adoption of the agriculture modalities.
said that, we are now engaged in negotiations to discuss the possibility
of concluding a draft agreement with a number of elements based in the
July 2008 text, subject to necessary adjustments to the current situation
and we hope that all banana suppliers will constructively engage in
the necessary discussions," said the EC. +
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