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TWN Info Service on WTO and Trade Issues
(Apr11/01) US measures on Brazilian orange juice ruled
WTO-illegal 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 The panel recommended that the Dispute Settlement
Body (DSB) request the The panel was composed of Mr Miguel Rodriguez
Mendoza ( 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, According to For the panel, said 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, 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, 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 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 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 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 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 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 "We are unable to agree with the 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 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 The panel concluded that 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
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 In its overall conclusions and recommendations,
the panel observed that the question at the centre of "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 -- 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 -- 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
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