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TWN Info Service on WTO and Trade Issues (Oct11/04)
31 October 2011
Third World Network


US "zeroing" practice again challenged at WTO
Published in SUNS #7248 dated 27 October 2011

Geneva, 26 Oct (Kanaga Raja) - The controversial practice of "zeroing" employed by the United States in its determination of final dumping margins in anti-dumping investigations has again been challenged at the World Trade Organization (WTO), this time with China bringing a dispute over this issue.

The dispute brought by China against the United States concerns the "zeroing" practice used by the United States Department of Commerce (USDOC) in its anti-dumping measures on certain frozen warmwater shrimp, and diamond sawblades and parts thereof, from China.

This dispute was brought up for the first time by China at a meeting of the Dispute Settlement Body (DSB) on Tuesday. The US did not block panel establishment at this instance, as it was entitled to, on account of a prior procedural agreement between the two parties.

Japan, the European Union, Korea, Thailand, Viet Nam and Honduras reserved their third-party rights to the dispute.

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

In its communication to the DSB, China, in reference to frozen warmwater shrimp, said that the United States initiated an anti-dumping investigation of certain frozen warmwater shrimp from China on January 27, 2004 (Investigation No. A-570-893). The specific measures at issue in this dispute are the anti-dumping order imposed by the United States on certain frozen warmwater shrimp from China, as amended, and the final determination by the USDOC, as amended, leading to that order.

According to the Chinese communication, in the final determination, as amended, the USDOC used the "zeroing" methodology in determining the final dumping margins for three individually investigated Chinese exporters, for which margins above the 2 per cent de minimis level were calculated.

With respect to diamond sawblades and parts thereof, China said that the United States initiated an anti-dumping investigation of diamond sawblades and parts thereof from China on June 21, 2005 (Investigation No. A 570-900). The specific measures at issue in this dispute are the anti-dumping order imposed by the United States on diamond sawblades and parts thereof from China, as amended, and the final determination by the USDOC, as amended, leading to that order.

In the final determination, as amended, the USDOC used the "zeroing" methodology in determining the final dumping margins for three individually investigated Chinese exporters, for which margins above the 2 per cent de minimis level were calculated.

According to the communication, in respect of the two investigations identified above, the USDOC's methodology of "zeroing" negative dumping margins may be described more specifically in the following:

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

(b) 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;

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

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

(e) before summing the total amount of dumping for all models, all negative margins on individual models (i.e., where the weighted average normal value is less than the weighted average export price) are set to zero.

Through this method, said the Chinese communication, the USDOC calculates margins of dumping and collects cash deposits in amounts that exceed the actual extent of dumping, if any, by the said individually investigated exporters.

In addition, in respect of the anti-dumping investigation of certain frozen warmwater shrimp, on the basis of the individual dumping margins calculated with the application of zeroing, the USDOC further calculated a weighted-average margin (known as the "separate rate") that applies to the cooperating non-mandatory respondents.

China considers these measures to be inconsistent with the obligations of the United States under the provisions of the GATT 1994 and the Anti-Dumping Agreement.

Through the use of "zeroing," the United States treats transactions with negative dumping margins as having margins equal to zero in determining weighted average dumping margins in an anti-dumping investigation, said China, adding that the use of "zeroing" led the United States to find dumping where none would have otherwise been found or to calculate dumping margins that are inflated.

China considers that, in the specific measures at issue as identified above, the USDOC's use of "zeroing" in calculating the margins of dumping for the individually investigated exporters and the "separate rate" for the cooperating non-mandatory respondents is inconsistent with the obligations of the United States under the Anti-Dumping Agreement.

Specifically, China considers that the measures are inconsistent with the first sentence of Article 2.4.2 of the Anti-Dumping Agreement.

The Chinese communication noted that the "zeroing" methodology that the USDOC used in its anti-dumping investigations of shrimp and diamond sawblades from China is virtually 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; United States - Anti-Dumping Measures on Shrimp from Ecuador; United States - Anti-Dumping Measures on Polyethylene Retail Carrier Bags from Thailand; and United States - Measures Relating to Shrimp from Thailand.

In its statement at the DSB on Tuesday, China said that the US initiated an anti-dumping investigation of certain frozen warmwater shrimp from China on 27 January 2004, and an anti-dumping investigation of diamond sawblades and parts thereof from China on 21 June 2005.

In the final determination of each investigation, as amended, the USDOC used the "zeroing" methodology in determining the final dumping margins for three individually investigated Chinese exporters respectively.

China considered that in the measures at issue, the USDOC's use of "zeroing" in calculating the margins of dumping for the individually investigated exporters and the "separate rate" for the cooperating non-mandatory respondents is inconsistent with the obligations of the US under the Anti-Dumping Agreement.

It said that the application of "zeroing" in calculating the margins of dumping by the US had been repeatedly declared WTO-inconsistent by various panels and the Appellate Body.

Referring to the agreement on procedures that it had reached with the US with respect to this dispute, China said that it believes that this agreement would ensure that the proceedings move smoothly and quickly, and contribute to the prompt settlement of the dispute.

In its statement at the DSB, the US said that while it believed that the initiation of this dispute was unnecessary, it was pleased that the parties were able to reach a procedural agreement which should expedite the proceedings and decrease the burden on the parties and the system.

The US noted that the US Department of Commerce has discontinued zeroing in the context of average-to-average comparisons in investigations.

 


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