TWN Info Service on WTO and Trade Issues
WTO rules against US in another "zeroing"
Geneva, 19 Jan (Kanaga Raja) -- The World Trade Organization (WTO) on Tuesday handed down yet another ruling that has found that the United States has acted inconsistently with its WTO obligations in its continued application of the "zeroing" methodology in calculating dumping margins during its anti-dumping duty investigations.
This time, a panel ruling (WT/DS402/R) has found
(The term "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 values of exports below the "normal" value, but ignores exports where prices are above the "normal" value.)
Before the panel, the
In the present instance, the dispute was brought by Korea against the United States concerning the United States' alleged application of the practice known as "zeroing" of negative dumping margins in calculating final margins of dumping in its investigations of three products from Korea, namely, stainless steel plate in coils (SSPC); stainless steel sheet and strip in coils (SSSS); and diamond saw-blades and parts thereof.
In a background to the dispute, the panel said that at issue is the alleged use by the United States Department of Commerce (USDOC) of the methodology commonly referred to as "zeroing" in the calculation of certain antidumping margins in its investigations of three products from Korea, namely, stainless steel plate in coils, stainless steel sheet and strip in coils and diamond saw-blades.
The measures at issue, as identified by
An amended final determination of dumping was published by the USDOC on 28 August 2001, in order to implement the recommendations of a WTO dispute settlement panel on issues unrelated to the alleged use of the zeroing methodology. Further, amended anti-dumping duty orders were published in 2003 in response to an appeal against the injury determination of the United States International Trade Commission.
According to the panel, Korea contends that the USDOC's use of the "zeroing" methodology affected the determination of the margin of dumping for the responding company, Korean exporter Pohang Iron & Steel Co., Ltd., and that this affected the determination of the "all others" rate.
In relation to the second product, stainless steel
sheet and strip in coils from
It argues that, in calculating the dumping margins for the relevant respondents, the USDOC: (i) identified different "models" (i. e., types of products based on the most relevant product characteristics); (ii) calculated weighted average prices for sales in the United States and weighted average normal values for sales 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 in doing so (v) set to zero all negative margins on individual models prior to summing the total amount of dumping for all models.
Korea submits that by applying this methodology, the USDOC calculated margins of dumping in amounts that exceeded the actual extent of dumping (if any) by the investigated companies and, consequently, that the United States collected anti-dumping duties in excess of those that would have been due had the zeroing methodology not been applied.
According to the panel,
Consequently, Korea argues that investigating authorities are not permitted to disregard some of the intermediate results of model-specific comparisons, or to treat some of those intermediate results as being greater or less than they actually are, and that the practice of zeroing, as employed by the USDOC, does not comport with this requirement.
According to the panel, Korea understands that while "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 the first sentence of Article 2.4.2 of the Anti-Dumping Agreement, it is also clear that the panel is not bound by the reasoning in prior Appellate Body and panel reports.
However, adopted reports create legitimate expectations among WTO Members, and "following the Appellate Body's conclusions in earlier disputes is not only appropriate, but is what would be expected from panels, especially where the issues are the same".
According to the panel, the United States does not contest the accuracy of Korea's description of the zeroing methodology as it relates to the investigations at issue in this dispute, nor does it contest that the evidence relied upon by Korea to substantiate its factual claims was generated by the Department of Commerce.
The United States recognizes that in US - Softwood Lumber V, the Appellate Body found that the use of zeroing with respect to the average-to-average comparison methodology in investigations was inconsistent with the first sentence of Article 2.4.2 when it interpreted 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.
However, said the panel, and to the extent
According to the
In its analysis, the panel noted that the
Notwithstanding that the
As to whether Korea has established that the USDOC "zeroed" in the measures at issue, the panel said that on the basis of the evidence, and in the light of the fact that the United States does not contest that the USDOC used the "zeroing" methodology in the manner described by Korea, in its view, Korea has established that the USDOC "zeroed" in the measures at issue.
On whether Korea has established that the methodology used by the USDOC is the same in all legally relevant respects as the methodology reviewed by the Appellate Body in US - Softwood Lumber V, the panel said that it examined the preliminary determinations, final determinations, amended final determinations, computer programmes and Issues and Decision Memorandum cited by Korea in an attachment to its first written submission.
On the basis of this evidence, the panel concluded that Korea has made a prima facie case that the methodology used by the USDOC in calculating the margins of dumping in the three anti-dumping investigations at issue, was the same in all legally relevant respects as the methodology found by the Appellate Body in US - Softwood Lumber V to be inconsistent with Article 2.4.2 of the Anti-Dumping Agreement.
This conclusion, said the panel, is supported by the fact that the United States acknowledges that the reasoning used by the Appellate Body in US - Softwood Lumber V is "equally applicable" to the margins at issue in this dispute.
On the issue of whether
Article 2.4.2 states: "Subject to the provisions governing fair comparison in paragraph 4, the existence of margins of dumping during the investigation phase shall normally be established on the basis of a comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions or by a comparison of normal value and export prices on a transaction-to-transaction basis. A normal value established on a weighted average basis may be compared to prices of individual export transactions if the authorities find a pattern of export prices which differ significantly among different purchasers, regions or time periods, and if an explanation is provided as to why such differences cannot be taken into account appropriately by the use of a weighted average-to-weighted average or transaction-to-transaction comparison."
The panel noted that
Therefore, model-specific results are only intermediate calculations and "[i]t is only on the basis of aggregating all such intermediate values that an investigating authority can establish margins of dumping for the product under investigation as a whole". A proper aggregation of the intermediate results of model-specific comparisons must reflect the result of all such comparisons, said the panel.
In relation to the reliance by
In contrast, added the panel, in its third party
submission, the European Union argues that the "Panel should follow
the rulings of the Appellate Body". The European Union supports
this position by referring to Appellate Body statements in US - Stainless
"In our view, there is not a system of precedent within the WTO dispute settlement system and panels are not bound by Appellate Body reasoning. However, we agree with Korea that adopted reports create legitimate expectations among WTO Members and that 'following the Appellate Body's conclusions in earlier disputes is not only appropriate, but is what would be expected from panels, especially where the issues are the same'", said the panel.
The panel noted that the Appellate Body's finding in US - Softwood Lumber V regarding "zeroing" in the context of the weighted average-to-weighted average methodology in original investigations, is consistent with its finding in EC - Bed Linen.
"In fact, panels considering the issue have found that 'there is now a consistent line of Appellate Body Reports' holding that the use of 'zeroing' as described by Korea in this dispute is inconsistent with the first sentence of Article 2.4.2. Further, three successive panels have reached the same conclusions as the Appellate Body on this issue."
The panel said that it has carefully considered the Appellate Body's reasoning in US - Softwood Lumber V and taken into consideration panel reports and the "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.
"We recall our finding that the zeroing methodology
at issue in this dispute is identical to that at issue in US - Softwood
Lumber V and that the legal issues raised in
In the light of this, and the fact that the respondent
has failed to advance any legal arguments to contradict the reasoning
in the line of cases cited by Korea, the panel said that it is satisfied
that Korea has established a prima facie case that the use of zeroing
by the USDOC in the calculation of the margins of dumping at issue is
inconsistent with the United States' obligations under the first sentence
This is because the USDOC did not take into account all comparable export transactions when calculating the dumping margins at issue, it added.
The panel concluded that the
The panel further concluded that, to the extent