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TWN Info Service on WTO and Trade Issues (Jan10/06)
29 January 2010
Third World Network

WTO again strikes down US "zeroing" practice again
Published in SUNS #6849 dated 26 January 2010

Geneva, 25 Jan (Kanaga Raja) -- The Dispute Settlement Body (DSB) of the World Trade Organization has handed down yet another ruling holding that the United States had acted inconsistently with its obligations under the Anti-Dumping (AD) Agreement in using the "zeroing" methodology to determine dumping margins - this time, in its anti-dumping investigations of polyethylene retail carrier bags from Thailand.

In a ruling handed down on 22 January, the panel recommended that the DSB request the United States to bring its measures into conformity with its obligations under the Anti-Dumping Agreement.

In the dispute, the US conceded before the panel the "facts" of the case raised by Thailand, and also that it violated Article 2.4.2 of the Anti-Dumping Agreement, as interpreted or clarified by the Appellate Body in the US softwood lumber dumping dispute raised by Canada. Also, by a procedural agreement between Thailand and the US, it was also agreed that the reasonable period for implementation would be six months, if the ruling was confined to the violation of Art. 2.4.2. (See below).

It is not very clear why the two sides could not settle the dispute on this basis - excepting for the benefit it conferred to trade lawyers on both sides, and finding some work for the Secretariat and the three panelists.

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.

This time, the case was brought by Thailand against the United States concerning the United States' alleged application of the practice known as "zeroing" of negative dumping margins in the United States' determination of certain margins of dumping in its anti-dumping investigation of polyethylene retail carrier bags from Thailand.

("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 the values of exports below the "normal" value, but ignores exports where prices are above the "normal" value.)

Explaining the factual aspects of the dispute, the panel said that the measures at issue in the dispute were the anti-dumping order imposed by the United States on polyethylene retail carrier bags from Thailand (the Order) and the Final Determination by the United States Department of Commerce (USDOC), as amended, leading to that Order.

Thailand claimed that in its Final Determination, as amended, the USDOC used the "zeroing" methodology to determine the final dumping margins for individually investigated Thai exporters subject to the Order whose margins of dumping were not based on total facts available.

In particular, Thailand has claimed that, in calculating the anti-dumping margins for the relevant exporters, the USDOC:

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

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

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

(iv) calculated the dumping margin for an exporter by summing up the amount of dumping for each model and then dividing it by the aggregated United States price for all models; and

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

According to Thailand, through this method, the USDOC calculated margins of dumping and collected anti-dumping duties in amounts that exceeded the actual extent of dumping, if any, by the investigated companies, contrary to the first sentence of Article 2.4.2 of the Anti-Dumping Agreement.

In a written submission to the panel, the US acknowledged the accuracy of Thailand's description of the Department of Commerce's use of "zeroing" in calculating the dumping margins for the individually investigated exporters whose margins of dumping were not based on total facts available.

The United States recognized that in US - Softwood Lumber Dumping, the Appellate Body found that the use of "zeroing" with respect to the average-to-average comparison methodology in investigations was inconsistent with Article 2.4.2, by interpreting the terms "margins of dumping" and "all comparable export transactions" as used in the first sentence of Article 2.4.2, in an integrated manner.

The United States also acknowledged in its written submission that this reasoning is equally applicable with respect to Thailand's claim regarding the individually investigated exporters whose margins of dumping were not based on total facts available in the investigation at issue.

(In a posting on the International Economic Law and Policy Blog - http://worldtradelaw.typepad.com/ielpblog/ - US trade lawyer Simon Lester said that it was hard to know what to make of a WTO panel decision such as in this panel report. In a nutshell, he said, Thailand alleged that the US used "zeroing" in the anti-dumping proceeding at issue, in violation of the AD Agreement. In response, the US did not contest the facts or the applicable law. In fact, the parties had a whole procedural agreement where they laid all of this out, including the period of time for implementation, he pointed out.

(In an agreement with Thailand on the procedures relating to the dispute, the US said that it will not contest Thailand's claim that the measures identified in the request for the establishment of a panel are inconsistent with the first sentence of Article 2.4.2 of the Anti-Dumping Agreement on the grounds stated in United States - Final Dumping Determination on Softwood Lumber from Canada.

(According to the agreement between the US and Thailand, provided that the panel's finding is limited to a finding that the measures identified in the attached request for the establishment of a panel are inconsistent with the first sentence of Article 2.4.2 of the Anti-Dumping Agreement, the parties agree that, pursuant to Article 21.3(b) of the DSU, the reasonable period of time for bringing each such measure into conformity with the Anti-Dumping Agreement will be six months, beginning on the date on which the DSB adopts the report of the panel.

(According to Lester in the IELP blog post, the US would not contest the claim, the panel would find a violation, the US would not appeal (presumably), and the implementation period would be six months. So how to characterize such an approach by the parties and the panel, he asked, adding: Is this akin to pleading "no contest"? He also said that this is not the first time this has occurred. It was also the way the US - Shrimp AD Measure - Ecuador case was handled. And that case had two of the same panelists as the Carrier Bags case, he noted.)

In its ruling, the panel was of the view that the evidence is sufficient to establish that the USDOC: (I) identified different "models," i. e., types, of products based on the most relevant product characteristics, (ii) calculated weighted average prices in the United States and weighted average normal values in the comparison market on a model-specific basis, for the entire period of investigation, (iii) compared the weighted average normal value of each model to the weighted average United States price for that same model, and (iv) calculated the dumping margin for an exporter by summing up the amount of dumping for each model and then dividing it by the aggregated US price for all models.

The panel recalled that it has already found that Thailand has established that (v) the USDOC set to zero all negative margins on individual models before summing the total amount of dumping for all models.

In light of these considerations, and in the absence of any denial by the United States, the panel said that it was satisfied that Thailand has demonstrated that the methodology applied by the USDOC in calculating the margins of dumping that were not based on total facts available in the Order imposing anti-dumping duties on certain polyethylene retail carrier bags from Thailand, and the Final Determination (as amended) leading to that Order, was the same in all legally relevant respects as the methodology that was found by the Appellate Body in US - Softwood Lumber V to be inconsistent with Article 2.4.2 of the Anti-Dumping Agreement.

The panel said that it has carefully considered the Appellate Body's reasoning in US - Softwood Lumber V and taken into consideration the finding of the panel in US - Shrimp (Ecuador) that there is a consistent line of Appellate Body Reports finding that "zeroing" in the context of the weighted average-to-weighted average methodology in original investigations is inconsistent with Article 2.4.2, first sentence.

Given that the issues raised by Thailand's claim are identical in all material respects to those addressed by the Appellate Body in Softwood Lumber V, the panel said that it was satisfied that Thailand has established a prima facie case that the use of zeroing by the USDOC in the calculation of the margins of dumping in respect of the measures at issue is inconsistent with the United States' obligations under Article 2.4.2 of the Anti-Dumping Agreement because the USDOC did not calculate these dumping margins on the basis of the "product as a whole", taking into account all comparable export transactions in calculating the margins of dumping.

The panel noted also that the United States "acknowledges" that the reasoning of the Appellate Body in US - Softwood Lumber V "is equally applicable with respect to Thailand's claim regarding the individually investigated exporters whose margins of dumping were not based on total facts available in the investigation at issue".

In light of its finding that Thailand has made a prima facie case of violation in respect of the measure at issue, and in the absence of arguments from the United States to the contrary, the panel ruled in favour of Thailand.

The panel therefore concluded that the USDOC, by using "zeroing" in the manner described above, has acted inconsistently with the United States' obligations under Article 2.4.2 of the Anti-Dumping Agreement.

In its conclusions and recommendation, the panel said that the United States acted inconsistently with Article 2.4.2, first sentence, of the Anti-Dumping Agreement by using "zeroing" in the Final Determination, as amended, and the Order to determine the dumping margins for individually investigated Thai exporters whose margins of dumping were not based on total facts available.

Under Article 3.8 of the DSU, in cases where there is an infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment of benefits under that agreement.

Accordingly, the panel concluded that, to the extent the United States has acted inconsistently with the provisions of the Anti-Dumping Agreement, it has nullified or impaired benefits accruing to Thailand under that Agreement.

The panel therefore recommended that the Dispute Settlement Body request the United States to bring its measures into conformity with its obligations under the Anti-Dumping Agreement. +

 


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