BACK TO MAIN  |  ONLINE BOOKSTORE  |  HOW TO ORDER

TWN Info Service on WTO and Trade Issues (Apr11/01)
1 April 2011
Third World Network

US measures on Brazilian orange juice ruled WTO-illegal
Published in SUNS #7118 dated 29 March 2011

Geneva, 28 Mar (Kanaga Raja) -- A dispute panel of the World Trade Organization (WTO) has ruled in favour of Brazil in a dispute brought by it against the United States over anti-dumping administrative reviews and other measures imposed by the United States on imports of certain orange juice from Brazil.

In a ruling issued on 25 March, the panel found, amongst others, that the US acted inconsistently with Article 2.4 of the Anti-dumping (AD) Agreement when it used "simple zeroing" to determine the margins of dumping, as well as in its "continued use" of "zeroing" in its proceedings under the orange juice anti-dumping order.

The panel recommended that the Dispute Settlement Body (DSB) request the US to bring its measures into conformity with its obligations under the AD Agreement.

The panel was composed of Mr Miguel Rodriguez Mendoza (Venezuela), Mr Pierre S Pettigrew (Canada) and Mr Reuben Pessah (Israel).

Subject to any appeal that either party may prefer on grounds of law to the Appellate Body and its ruling, the panel report and recommendations are to be automatically adopted by the DSB within 60 days.

In a press release issued on 25 March, Brazil said that it has received the panel's findings with satisfaction, which it said accepted the main issues raised by Brazil.

According to Brazil, the panel found that the use of "zeroing" in the two administrative reviews, as well as the "continued use" of this methodology in successive anti-dumping proceedings related to orange juice is inconsistent with Article 2.4 of the Anti-Dumping Agreement.

For the panel, said Brazil, the requirement of "fair comparison", in the first sentence of that Article, applies not only to the adequate selection of prices, but also to the comparison process itself. In sum, in the panel's wording, "a comparison methodology (such as 'simple zeroing') that ignores transactions, which if properly taken into account, would result in a lower margin of dumping, must be considered ‘unfair' and therefore inconsistent with Article 2.4".

Brazil noted that the panel exercised judicial economy with regard to the other claims presented, because it understood that it would not be necessary, for the purpose of resolving the dispute, to make any findings in respect of these claims.

Brazil said that besides itself, nine other countries (Canada, the European Union, Japan, Ecuador, Thailand, Mexico, Korea, Vietnam and China) have also brought claims against the United States at the WTO in respect of the same matter, which demonstrates the systemic interest and the commercial impact of the illegal American measure.

According to the panel report, the dispute concerns certain laws, regulations, administrative procedures, practices and methodologies for calculating dumping margins in administrative reviews, involving the alleged use of so-called "zeroing", and their application in anti-dumping duty administrative reviews regarding imports of certain orange juice from Brazil (case No A-351-840).

It also concerns the alleged use of "zeroing" in the anti-dumping duty investigation and in the second administrative review related to case No A-351-840 as well as to the continued use of the United States "zeroing procedures" in successive anti-dumping proceedings regarding imports of certain orange juice from Brazil.

The measures at issue are: (a) The anti-dumping duty investigation on certain orange juice from Brazil (the "Original Investigation"); (b) the 2005-2007 anti-dumping duty administrative review on certain orange juice from Brazil (the "First Administrative Review"); ( c) the 2007-2008 anti-dumping duty administrative review on certain orange juice from Brazil (the "Second Administrative Review"); and (d) the continued use of the US "zeroing procedures" in successive anti-dumping proceedings, in relation to the anti-dumping duty order issued in respect of imports of certain orange juice from Brazil.

According to the panel report, Brazil's complaint is focussed on the alleged use by the US Department of Commerce (USDOC) of a particular methodology, known as "zeroing", when calculating the margin of dumping of investigated exporters in the anti-dumping proceedings conducted against certain orange juice products from Brazil (case No. A-351.840).

In particular, Brazil challenges the alleged use of "simple zeroing" for the purpose of calculating the margins of dumping, cash deposit rates and relevant importer-specific assessment rates for two respondents, Sucocitrico Cutrale S. A. (Cutrale) and Fischer S. A. Comercio, Industria e Agricultura (Fischer) in the First and Second Administrative Reviews.

In addition, Brazil challenges the USDOC's alleged "continued use of zeroing" as "ongoing conduct" in successive anti-dumping proceedings, including in the original investigation resulting in the imposition of the anti-dumping duty order on certain orange juice products from Brazil, and each of the first three administrative reviews related to that order. It alleges two types of "zeroing" in this dispute, which it describes as constituting different aspects of the same methodology: "model zeroing" and "simple zeroing", said the panel.

On Brazil's claims concerning the alleged use of "simple zeroing" in administrative reviews, the panel noted that Brazil claims that by allegedly calculating the margins of dumping, relied upon for the purpose of establishing the cash-deposit rates (CDRs), and the importer-specific assessment rates (ISARs) for Cutrale and Fischer in the First and Second Administrative Reviews through the use of "simple zeroing", the USDOC acted inconsistently with its obligations under Articles 2.4 and 9.3 of the AD Agreement and Article VI: 2 of the GATT 1994.

According to the panel, Brazil's complaint against the United States' alleged use of "simple zeroing" in the relevant administrative reviews is, first and foremost, premised on the view that "dumping" is defined, as a general matter, in the AD Agreement and the GATT 1994 in relation to the "product as a whole".

Thus, said the panel, the fundamental question that lies at the heart of Brazil's claims is the following: how does the AD Agreement define the notion of "dumping"? Is Brazil correct in submitting that "dumping" is a concept that relates to an exporter's overall pricing behaviour that Members are only entitled to measure with respect to the "product as a whole"? Or does the AD Agreement, as the United States argues, permit both this and a transaction-specific concept of "dumping"?

In its conclusions concerning the definition of "dumping", the panel said that the present controversy is the fifth dispute where a panel has been tasked with examining the notion of "dumping" in the context of a complaint against the United States' alleged use of "zeroing" in administrative reviews. In all but one of these disputes, panels have taken the view that the AD Agreement does not exclusively define "dumping" in relation to the "product as a whole". These panels have found that it is permissible to measure "dumping" in the context of duty assessment proceedings in the United States on a transaction-specific basis.

On the other hand, the panel added, the Appellate Body has consistently found that the only permissible interpretation of the notion of "dumping" is that it relates to the "product as a whole". Not surprisingly, the parties' arguments in the present dispute have closely followed the two currents of thought that have evolved in previous cases, with Brazil advocating the position taken by the Appellate Body and the United States the views of most of the previous panels.

"For the reasons we have tried to explain in the above analysis, we find it difficult to accept, on the basis of the arguments and jurisprudence we have reviewed, that the AD Agreement entertains only one exclusive definition of 'dumping'. However, there is no doubt in our minds that on the question of 'zeroing', and more particularly, the definition of 'dumping', the string of Appellate Body reports concerning mainly the United States' use of 'zeroing' in anti-dumping proceedings read loud and clear."

Although adopted panel and Appellate Body reports do not bind WTO Members beyond parties to a particular dispute, the Appellate Body has expressed the view that ensuring "'security and predictability' in the dispute settlement system, as contemplated in Article 3.2 of the DSU (Dispute Settlement Understanding), implies that, absent cogent reasons, an adjudicatory body will resolve the same legal question in the same way in a subsequent case". Indeed, the Appellate Body has held 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".

The Appellate Body's role in the WTO dispute settlement system is defined in terms of hearing appeals from panel cases and "limited to issues of law covered in the panel report and legal interpretations developed by the panel". Members are entitled to express their views on an Appellate Body report. However, unless the DSB decides not to adopt it, an Appellate Body report "shall be adopted by the DSB and unconditionally accepted by the parties to the dispute".

Institutionally, said the panel, the fact that all Appellate Body reports overturning panel findings on the question of "zeroing" have been adopted by the DSB implies acceptance by all WTO Members of their contents, and bestows upon them systemic legitimacy. Inevitably, irrespective of the position taken by those (and any future) panels on the definition of "dumping", the Appellate Body will decide the matter by following its previous rulings. Following this pattern, the "zeroing" question has tested the limits of the WTO dispute settlement system for almost 10 years now. It has occupied the work of Members, panels and the Appellate Body like no other controversy.

"We have no doubt that this experience has not served to advance the system's efficiency; and we note that Members have not only sought to resolve the issue of 'zeroing' through WTO dispute settlement, but they are also trying to address it through negotiations in the Negotiating Group on Rules in the context of the Doha Development Agenda," said the panel.

"With all these considerations in mind, and despite sometimes diverse positions existing even amongst ourselves as to different aspects of this debate, we believe that, on balance, our function under Article 11 of the DSU, and the integrity and effectiveness of the WTO dispute settlement system, are best served in the present instance by following the Appellate Body."

"Thus, we find that the only permissible interpretation of the definition of 'dumping' contained in Article 2.1 of the AD Agreement, with relevance for the entire AD Agreement, is one that is based on an understanding that 'dumping' can only be determined for the 'product as a whole', and not individual transactions."

Having concluded that "dumping" cannot have a transaction-specific meaning, the panel then examined the merits of Brazil's claims under Articles 2.4 and 9.3 of the AD Agreement and Article VI: 2 of the GATT 1994.

The panel found that, on balance, and taking into account important systemic concerns, it is impermissible to compare export price with normal value in such a way that does not result in a determination of "dumping" for the "product as a whole".

"In this light, a comparison methodology (such as ‘simple zeroing') that ignores transactions, which if properly taken into account, would result in a lower margin of dumping, must be considered ‘unfair' and therefore inconsistent with Article 2.4".

It therefore concluded that "simple zeroing" is inconsistent with the "fair comparison" requirement that is prescribed in Article 2.4 of the AD Agreement.

The panel recalled that it had found that the WAMs (weighted-average margins) and ISARs determined for both Cutrale and Fischer in the First Administrative Review were calculated through the use of "simple zeroing". In the case of Fischer, the WAM determined by the USDOC was relied upon for the purpose of establishing Fischer's CDR. Likewise, because the WAM determined for Cutrale was considered to be de minimis under United States law, a CDR of 0% was applied to entries of Cutrale's products in the subsequent period.

In the panel's view, the obligation under Article 2.4 is focussed on the "comparison" between export price and normal value, not its impact. In other words, it is the nature of the "comparison" itself, and not the results of that comparison, that is disciplined under Article 2.4. Thus, a "comparison" between export price and normal value that involves "simple zeroing" will be "unfair" for the purpose of Article 2.4, irrespective of whether the final margin of dumping actually applied is considered to be de minimis.

It found that by using "simple zeroing" to calculate the WAMs (relied upon for the purpose of setting CDRs) and the ISARs for both Cutrale and Fischer in the First Administrative Review, the United States failed to perform a "fair comparison" between export price and normal value, and thereby acted inconsistently with Article 2.4 of the AD Agreement.

On the issue of "simple zeroing" in the Second Administrative Review, the panel recalled that it had found that the WAM and ISAR determined for Cutrale in the Second Administrative Review were calculated through the use of "simple zeroing". It also made the same finding with respect to Fischer.

The US argued that, even according to the Appellate Body's rationale relied upon by Brazil, the determination of a 0% margin of dumping for Fischer cannot be considered to infringe Article 2.4 because a 0% margin cannot be said to be "artificially inflated" or "inherently unfair". Similarly, the US argued that even accepting the Appellate Body's line of reasoning with respect to Article 2.4, in order for there to be an infringement of the "fair comparison" requirement in the context of administrative reviews, any use of "simple zeroing" must result in excessive collection of duties.

"We are unable to agree with the United States' submissions," said the panel, adding that in its view, it follows that a "comparison" between export price and normal value that involves "simple zeroing" will be "unfair" for the purpose of Article 2.4, irrespective of whether the final WAM or final ISAR actually imposed is 0%.

The panel thus found that by using "simple zeroing" to calculate the WAMs (relied upon for the purpose of setting CDRs) and the ISARs for both Cutrale and Fischer in the Second Administrative Review, the United States failed to perform a "fair comparison" between export price and normal value, and thereby acted inconsistently with Article 2.4 of the AD Agreement.

Having found that the measures challenged by Brazil are inconsistent with Article 2.4 of the AD Agreement, the panel considered that it was not necessary, for the purpose of satisfactorily resolving this dispute, to make additional findings with respect to Brazil's claims that the same measures are also inconsistent with Article 9.3 of the AD Agreement and Article VI: 2 of the GATT 1994. On this basis, it decided to exercise judicial economy and declined to make any findings in respect of these claims.

The panel also addressed Brazil's challenge regarding the alleged "continued use by the United States of zeroing procedures in successive anti-dumping proceedings under the Orange Juice Order, including the original investigation and any subsequent administrative reviews by which duties are applied and maintained over a period of time".

In its conclusions regarding the existence of the "continued zeroing" measure, the panel said that overall, the evidence submitted by Brazil reveals that the USDOC applied a computer programme that included an instruction to "zero" in the original investigation and in the First, Second and Third Administrative Reviews, for the purpose of calculating the WAMs and the ISARs of the relevant respondents.

The evidence also shows that this instruction was actually executed in the first three administrative reviews under the orange juice anti-dumping duty order. Moreover, the Issues and Decision Memoranda from the three administrative reviews strongly suggest that, at the time they were issued, the USDOC intended to continue to take the same approach to calculating margins of dumping in the future.

The panel recalled that in US - Continued Zeroing, the evidence the Appellate Body considered was sufficient to establish the existence of the "continued zeroing" measure challenged in that dispute demonstrated that the USDOC: used "zeroing" in the original investigation; used "zeroing" in four successive administrative reviews; and relied in a sunset review upon margins of dumping determined through the use of "zeroing". Although the pattern of use of "zeroing" in the present dispute is not exactly the same, there is nevertheless, in the panel's view, sufficient evidence to establish the existence of the "continued use" measure that Brazil challenges.

The panel concluded that Brazil has established the existence of the USDOC's "continued use" of "zeroing procedures" as a "measure" in the form of "ongoing conduct" under the orange juice anti-dumping duty order.

The panel recalled that it had already found that the USDOC's use of "simple zeroing" is inconsistent with Article 2.4 of the AD Agreement. In its view, it necessarily follows that the "continued use" of the "zeroing procedures" must also be inconsistent with the same provision. Thus, it found that the United States' "continued use" of "zeroing" under the orange juice anti-dumping duty order is inconsistent with Article 2.4 of the AD Agreement.

Brazil claims that the USDOC's "continued use" of "zeroing" is also inconsistent with Articles 2.4.2 and 9.3 of the AD Agreement and Article VI: 2 of the GATT 1994.

Having found that the "continued zeroing" measure challenged by Brazil is inconsistent with Article 2.4 of the AD Agreement, the panel considered that it is not necessary, for the purpose of satisfactorily resolving this dispute, to make additional findings with respect to the same measure under Articles 2.4.2 and 9.3 of the AD Agreement and Article VI: 2 of the GATT 1994.

On this basis, it decided to exercise judicial economy and declined to make any findings in respect of Brazil's claims under Articles 2.4.2 and 9.3 of the AD Agreement and Article VI: 2 of the GATT 1994.

In its overall conclusions and recommendations, the panel observed that the question at the centre of Brazil's complaint in this dispute has been well litigated in WTO dispute settlement. This core question concerns how the AD Agreement (and Article VI of the GATT 1994) defines the notion of "dumping": is it a concept that relates to an exporter's overall pricing behaviour that can only be measured with respect to the "product as a whole"; or can it also be conceived of and measured on a transaction-specific basis?

"Although fundamental and of critical importance to the operation of the AD Agreement, our evaluation of the parties' arguments and relevant jurisprudence has led us to conclude that there exists no single answer to this question. The objective lack of clarity on this issue, to some extent also recognized by the Appellate Body, lends legitimacy to both parties' positions."

However, the Appellate Body has consistently only found room for there to be one permissible interpretation of "dumping"; and for the important systemic reasons described above, the panel said that it has decided to follow this interpretation and come to the final conclusions expressed in this report.

"Nevertheless, we wish to once again emphasize that all Members have a strong systemic interest in seeing that a lasting resolution to the 'zeroing' controversy is found sooner rather than later. In this regard, we note that Members have not only sought to resolve the issue of 'zeroing' through WTO dispute settlement, but they are also trying to address it through negotiations in the Negotiating Group on Rules in the context of the Doha Development Agenda."

The panel concluded that Brazil has established that:

-- the United States acted inconsistently with Article 2.4 of the AD Agreement when it used "simple zeroing" to determine the weighted-average margins of dumping (used to set the cash-deposit rates) and the importer-specific assessment rates of Cutrale and Fischer in the First and Second Administrative Reviews under the orange juice anti-dumping duty order; and

-- the United States' "continued use" of "zeroing" in proceedings under the orange juice anti-dumping duty order is inconsistent with Article 2.4 of the AD Agreement.

The panel made no findings, based on judicial economy, in respect of Brazil's claims:

-- under Article 9.3 of the AD Agreement and Article VI: 2 of the GATT 1994, concerning the United States' alleged use of "simple zeroing" in the First and Second Administrative Reviews under the orange juice anti-dumping duty order; and

-- under Articles 2.4.2 and 9.3 of the AD Agreement and Article VI: 2 of the GATT1994, concerning the United States' "continued use" of "zeroing" in proceedings under the orange juice anti-dumping duty order.

The panel concluded that to the extent the United States has acted inconsistently with Article 2.4 of the AD Agreement, it has nullified or impaired benefits accruing to Brazil. It recommended that the Dispute Settlement Body request the United States to bring its measures into conformity with its obligations under the AD Agreement. +

 


BACK TO MAIN  |  ONLINE BOOKSTORE  |  HOW TO ORDER