TWN Info Service on WTO and Trade Issues (Mar09/09)
27 March 2009
Third World Network

US "zeroing" practice again challenged at WTO
Published in SUNS #6665 dated 23 March 2009

Geneva, 20 Mar (Kanaga Raja) -- The controversial practice of "zeroing" applied by the United States in determining anti-dumping margins has once again come under challenge at the WTO Dispute Settlement Body (DSB), with Thailand bringing a dispute this time over certain anti-dumping measures imposed by the United States on imports of plastic carrier bags from Thailand.

The Dispute Settlement Body on Friday agreed to establish a panel at the request of Thailand to examine the US measures at issue.

Although it was a first-time request by Thailand, the US did not block the establishment of the panel, as it was entitled to, on account of a prior agreement between the US and Thailand.

The third parties to the dispute are Japan, the EC, Chinese Taipei and Argentina.

The US "zeroing" methodology has come up for challenge at the DSB on numerous occasions and had been repeatedly struck down as being WTO-incompatible.

The latest such ruling was issued on 4 February, in a dispute brought by the EC against the US, when the Appellate Body again held that the US 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.

(On 19 February, the DSB adopted the panel and Appellate Body reports in the dispute. On Friday, the US announced at the DSB meeting that it intends to comply with its WTO obligations in this dispute and will be considering carefully how to do so. It said that it will need a reasonable period of time.)

The finding against the US in that dispute was in line with rulings in 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".

("Zeroing" is a term 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.)

In the present dispute, in a communication to the DSB, Thailand said that it had requested consultations with the United States on 26 November 2008 concerning anti-dumping measures imposed by the United States on imports of plastic carrier bags from Thailand. Consultations were held on 28 January 2009. While these consultations assisted in clarifying the issues before the parties, they failed to resolve the dispute.

Thailand said that the specific measure at issue is the anti-dumping order imposed by the United States on plastic carrier bags from Thailand and the final determination by the United States Department of Commerce (USDOC), as amended, leading to that order.

According to the Thai communication, the United States initiated its anti-dumping investigation of plastic carrier bags from Thailand on 1 April 2002. The investigation was conducted by the USDOC.

The final determination in this investigation was published on 18 June 2004 and an amended final determination was published by the USDOC on 15 July 2004. Following a final determination of injury by the United States International Trade Commission, the United States issued an anti-dumping duty order on imports of polyethylene retail carrier bags from Thailand on 9 August 2004.

Thailand said that in the final determination, as amended, the USDOC used the "zeroing" methodology to determine the final dumping margins for certain Thai exporters subject to the order. Accordingly, for certain Thai exporters of plastic retail bags, the final determination, as amended, as well as the Order, reflected and included anti-dumping margins that were calculated on the basis of "zeroing".

"The use of the 'zeroing' methodology is evident from the computer programs used to calculate the margins of dumping in the Final Determination, as amended, on which the anti-dumping duty order was based," complained Thailand.

More specifically, added Thailand, the methodology of "zeroing" negative anti-dumping margins in the above determination refers to the following:

(1) different "models," i. e., types, of products are identified based on the most relevant product characteristics;

(2) weighted average prices in the United States and weighted average normal values in the comparison market are calculated on a model-specific basis for the entire period of investigation;

(3) the weighted average normal value of each model is compared to the weighted average United States price for that same model;

(4) to calculate the dumping margin for an exporter, the amount of dumping for each model is added up and then divided by the aggregated United States price for all models;

(5) before summing up the total amount of dumping for all models, all negative margins on individual models are set to zero.

Through this method, the USDOC calculates margins of dumping and collects anti-dumping duties in amounts that exceed the actual extent of dumping, if any, by the investigated companies.

Thailand considered that this measure is inconsistent with the obligations of the United States under the provisions of the GATT 1994 and the Anti-Dumping Agreement.

Thailand argued that through the USDOC's methodology of "zeroing", the United States treats transactions with negative dumping margins as having margins equal to zero in determining weighted average anti-dumping margins in an anti-dumping investigation.

"The use of 'zeroing' led the United States to make a finding of dumping where none would have otherwise been made or to calculate inflated margins of dumping."

Thailand considered that the USDOC's use of its methodology of "zeroing" (in the final determination, as amended, which was a basis for the Order) is inconsistent with the obligations of the United States under the first sentence of Article 2.4.2 of the Anti-Dumping Agreement.

The Thai communication noted that the "zeroing" methodology that the USDOC used in its anti-dumping investigation of plastic carrier bags from Thailand is identical to the methodology that was held to be inconsistent with the obligations of the United States under the Anti-Dumping Agreement in the following disputes: United States - Final Dumping Determination on Softwood Lumber from Canada and United States - Anti-Dumping Measures on Shrimp from Ecuador, and United States - Measures Relating to Shrimp from Thailand.

In its statement at the DSB, Thailand said that the dispute involves the use by the United States of zeroing in weighted-average to weighted-average price comparisons in an original anti-dumping investigation.

It said that the DSB has adopted rulings and recommendations finding the use of this type of zeroing to be WTO-inconsistent on several occasions, such as US - Measures Relating to Shrimp from Thailand (DS343) and most recently, United States - Continued Existence and Application of Zeroing Methodology (DS350).

The US said that it does not object to the establishment of the panel at this time, adding that Thailand and the US have reached an agreement on a procedural framework that should permit the resolution of the matter on an expedited basis. The US said that it will notify the agreement to the DSB shortly.

In other actions, a first-time request for the establishment of a panel by Mexico against US measures concerning the importation, marketing and sale of tuna and tuna products was blocked by the US. Panel establishment would be automatic when Mexico makes a request for the second time.

The DSB adopted the report of the panel (DS362) concerning a dispute raised by the US against Chinese measures affecting the protection and enforcement of intellectual property rights.

Meanwhile, under the agenda item of surveillance of implementation of recommendations adopted by the DSB, in the dispute concerning Section 211 of the Omnibus Appropriations Act of 1998 (the DSB adopted rulings and recommendations on 2 February 2002), the US said that a legislative proposal relating to Section 211 has been introduced in the current US Congress. The US administration will work with Congress with respect to appropriate statutory measures that would resolve the matter.

In a dispute concerning US anti-dumping measures on certain hot-rolled steel products from Japan, another long-standing item on the DSB surveillance agenda, the US said that on 22 November 2002, the US Department of Commerce issued a new final determination in the hot-rolled steel anti-dumping duty investigation that the US said implements the rulings and recommendations of the DSB with respect to the calculation of anti-dumping margins in that investigation. It said that the US administration will work with Congress with respect to appropriate statutory measures that would resolve the matter.

In yet another surveillance item, concerning Section 110(5) of the US Copyright Act, the US said that both the US and the EC reached a temporary resolution of the dispute, which was notified to the DSB on 23 June 2003. That temporary arrangement covered the period through 20 December 2004. The US said that its administration will work closely with the US Congress and will continue to confer with the EC in order to reach a mutually satisfactory resolution of the matter. +