TWN Info Service on WTO and Trade Issues (Nov14/11)
26 November 2014
Third World Network  

US AD measures on Vietnamese shrimp held WTO-illegal
Published in SUNS #7921 dated 21 November 2014
 
Geneva, 20 Nov (Kanaga Raja) -- A dispute panel at the World Trade Organisation (WTO) has largely ruled that anti-dumping (AD) measures imposed by the United States on certain shrimp from Viet Nam are inconsistent with its WTO obligations.
 
In its ruling issued on 17 November, the panel concluded that, to the extent that the measures at issue are inconsistent with the GATT 1994 and the Anti-Dumping Agreement, they have nullified or impaired benefits accruing to Viet Nam under those Agreements.
 
The panel recommended that the United States bring the relevant measures into conformity with its obligations under the GATT 1994 and the Anti-Dumping Agreement.
 
Providing some background to the dispute, the panel report said that the dispute concerns certain US laws, methodologies and practices with respect to the imposition of anti-dumping duties as well as certain US Department of Commerce (USDOC) actions and determinations in the shrimp proceedings.
 
The USDOC initiated its shrimp investigation in January 2004 and issued an anti-dumping order in February 2005. At the time of these panel proceedings, it had completed seven administrative reviews and conducted a first sunset review in which it determined that revocation of the anti-dumping duty order would be likely to lead to the continuation or recurrence of dumping.
 
In the shrimp proceedings, because Viet Nam has been designated by the USDOC as a non-market economy (NME), the USDOC applied a rebuttable presumption that all companies within Viet Nam are essentially operating units of a single government-wide entity and, thus, should receive a single anti-dumping duty rate (the Viet Nam-wide entity rate).
 
Vietnamese producers/exporters had to pass a "separate rate test" to receive a rate that was separate from the Viet Nam-wide entity rate. Those producers/exporters that did not establish that they were separate from the Viet Nam-wide entity received the Viet Nam-wide entity rate.
 
In addition, in the original investigation and in each of the administrative reviews, in light of the large number of Vietnamese respondents involved, the USDOC limited its examination and determined individual dumping margins for a limited number of companies.
 
According to the panel report, the USDOC assigned the companies who were not selected for individual examination and who demonstrated sufficient independence from government control a "separate rate".
 
In the original investigation, it assigned a single "Viet Nam-wide entity" rate to the Vietnamese respondents who did not demonstrate independence from government control. The Viet Nam-wide entity rate was determined on the basis of information contained in the petition. The USDOC continued to apply the same Viet Nam-wide entity rate in each of the administrative reviews.
 
The panel noted that Viet Nam makes claims with respect to the USDOC's final determinations in the fourth, fifth and sixth administrative reviews.
 
Viet Nam's claims regarding these three administrative reviews concern: (i) the use of zeroing in the calculation of dumping margins; (ii) the rate that was assigned to certain Vietnamese producers who did not demonstrate sufficient independence from government control and thus were deemed by the USDOC to be part of the so-called "Viet Nam-wide entity"; and (iii) the USDOC's failure to revoke the anti-dumping order with respect to certain respondent Vietnamese producers/exporters.
 
Moreover, Viet Nam also makes claims with respect to the USDOC's likelihood-of-dumping determination in the context of the sunset review.
 
In addition, Viet Nam also makes "as such" claims with respect to the following measures: The USDOC's "simple zeroing methodology" as applied in administrative reviews; the USDOC's practice with respect to the rate that is assigned to certain producers/exporters who do not demonstrate sufficient independence from government control (the NME-wide entity rate) in anti-dumping proceedings involving imports from NMEs; and Section 129(c)(1) of the US Uruguay Round Agreements Act (URAA).
 
Viet Nam's claims with respect to zeroing pertain to the "simple zeroing" methodology used by the USDOC in the context of administrative reviews. Viet Nam alleges that the USDOC, when calculating dumping margins on the basis of a comparison of a weighted-average normal value to individual export transactions, disregards negative comparison results (those for which the individual export transaction price exceeds the weighted- average normal value).
 
On whether Viet Nam has established the existence of the zeroing methodology as a measure which may be challenged as such, the panel noted Viet Nam's submission that various panel and Appellate Body reports have found that the zeroing methodology is an established norm which may be the subject of an "as such" claim and that the Appellate Body has concluded at least twice that the use of zeroing in administrative reviews is "as such" inconsistent with the Anti-Dumping Agreement.
 
Viet Nam further argues that a measure found by the Appellate Body to be "as such" inconsistent with a covered agreement is not specific to the facts of any particular dispute; by their nature, "as such" claims are of general and prospective application and an Appellate Body finding of violation in respect of such a claim concerns the authority's on-going failure to bring the practice into conformity with clearly established obligations.
 
According to Viet Nam, the zeroing methodology still exists as a measure which may be challenged "as such" despite the fact that the USDOC modified its calculation methodology.
 
Viet Nam also argues that the USDOC could easily re-start applying the zeroing methodology in administrative reviews because it has the authority to do so under US law.
 
Following its analysis, the panel concluded that Viet Nam has failed to establish the existence of the alleged measure (simple zeroing methodology used by the USDOC in administrative reviews) as a rule or norm of general and prospective application.
 
Consequently, it did not consider the parties' arguments concerning the consistency of the alleged measure with Article 9.3 of the Anti-Dumping Agreement and Article VI: 2 of the GATT 1994. It therefore found that Viet Nam did not establish that the USDOC's simple zeroing methodology in administrative reviews is inconsistent "as such" with Article 9.3 of the Anti-Dumping Agreement and Article VI: 2 of the GATT 1994.
 
The panel then addressed Viet Nam's request that it find that the application of the zeroing methodology to calculate dumping margins for the individually-examined respondents in the fourth, fifth and sixth administrative reviews is inconsistent with Article 9.3 of the Anti-Dumping Agreement and Article VI: 2 of the GATT 1994.
 
On whether Viet Nam has established that the zeroing methodology was applied in the fourth, fifth and sixth administrative reviews, the panel noted that the United States does not contest Viet Nam's allegation that the USDOC applied the zeroing methodology when calculating dumping margins at issue. The United States contends, however, that the application of zeroing is not inconsistent with the covered agreements.
 
According to the panel, in the present dispute, Viet Nam has submitted sufficient evidence indicating that the USDOC applied the zeroing methodology in the calculation of dumping margins of individually-examined respondents in the administrative reviews at issue.
 
"As the United States did not provide arguments or evidence to rebut the presumption raised by Viet Nam, we conclude that Viet Nam has demonstrated that the USDOC applied simple zeroing in the calculation of margins of dumping of individually-investigated respondents in the fourth, fifth and sixth administrative reviews."
 
On whether the application of zeroing in the fourth, fifth and sixth administrative reviews is inconsistent with Article 9.3 of the Anti-Dumping Agreement and Article VI: 2 of the GATT 1994, the panel noted Viet Nam's submission that the Appellate Body has consistently found that the USDOC's use of zeroing in administrative reviews is inconsistent with Article 9.3 of the Anti-Dumping Agreement and Article VI: 2 of the GATT 1994.
 
Viet Nam observes that the Appellate Body repeatedly rejected the same arguments that are again being made by the United States in this dispute and urges the panel to follow the clear and consistent decisions by the Appellate Body.
 
The panel said: "We have carefully considered and assessed the arguments made by the parties in the present dispute. We note that the very same arguments that the United States makes before us were rejected by the Appellate Body in prior disputes, in which it concluded that the very same measure which is now before us, namely the zeroing methodology as applied by the USDOC in administrative reviews, is inconsistent with Articles 9.3 of the Anti-Dumping Agreement and Article VI: 2 of the GATT 1994."
 
Following an objective assessment of the matter, and after a careful review of the findings, the panel said that it saw no reason not to rely on the interpretation of the relevant provisions and on the reasoning developed by the Appellate Body in relation to the issue of zeroing in these prior disputes.
 
It therefore found that the application by the USDOC of the simple zeroing methodology to calculate the dumping margins of mandatory respondents in the fourth, fifth and sixth administrative reviews of the shrimp order is inconsistent with United States' obligations under Article 9.3 of the Anti-Dumping Agreement and Article VI: 2 of the GATT 1994.
 
The panel then went on to address Viet Nam's claims with respect to what it terms the USDOC's "NME-wide entity rate practice".
 
Viet Nam includes within this practice: (i) the USDOC's presumption, in anti-dumping proceedings - including original investigations and administrative reviews - involving imports from NMEs, that all companies within the designated NME country are essentially operating units of a single, government-wide entity and the assignment of a single anti-dumping duty rate to that entity; and (ii) the manner in which this anti-dumping rate is determined, distinct from the separate rate, on the basis of facts available.
 
Viet Nam also challenges the application of this NME-wide entity rate practice in the fourth, fifth, and sixth administrative reviews.
 
On whether Viet Nam has established the existence of the NME-wide entity rate practice as a measure which may be challenged "as such", the panel first concluded that Viet Nam has established that, in anti-dumping proceedings involving NME countries, the USDOC starts with a rebuttable presumption that all companies within that NME country belong to a single, NME-wide entity and that a single rate is assigned to that entity, and, thus, to companies deemed to belong to that entity.
 
On the second element of Viet Nam's challenge to the NME-wide entity rate practice relating to the determination of the rate assigned to the NME-wide entity, overall, taking into account the evidence cited by the United States, and Viet Nam's admission that the USDOC retains broad discretion concerning the method used to determine the NME-wide rate, the panel concluded that, while the evidence on the record does suggest that the USDOC often determines the rate for the NME-wide entity based on facts available, it does not establish that the USDOC consistently uses a certain defined methodology to determine the NME-wide entity rate or systematically bases that rate on facts available.
 
The panel therefore concluded that, in relation to the second element of the alleged measure, Viet Nam has failed to establish the existence of any practice amounting to a rule or norm of general and prospective application.
 
In sum, the panel concluded that Viet Nam has established that the USDOC's policy or practice whereby, in anti-dumping proceedings involving NMEs, it presumes that all companies belong to a single, NME-wide entity, and assigns a single rate to that entity amounts to a measure of general and prospective application which can be challenged "as such".
 
However, it found that Viet Nam did not establish the existence of a USDOC practice with respect to the manner in which it determines the NME-wide entity rate, in particular concerning the use of facts available, amounting to a measure of general and prospective application, and which can therefore be challenged "as such".
 
On whether the NME-wide entity rate practice is inconsistent with Articles 6.10 and 9.2 of the Anti-Dumping Agreement, the panel cited Viet Nam as arguing that the plain language of Articles 6.10 and 9.2, read in context, precludes application of a single anti-dumping margin to multiple entities where those companies have not been found by the authority to constitute a single entity.
 
The panel said that the issue that it needs to resolve is whether, under Articles 6.10 and 9.2 of the Anti-Dumping Agreement, the United States is entitled to presume that all exporters within an NME belong to a single, NME- wide entity under the control of the government, and assign a single rate to that entity.
 
Following its analysis, the panel found that the USDOC's policy or practice whereby it presumes, in antidumping investigations involving NMEs, that all companies belong to a single, NME-wide entity, and assigns a single rate to that entity is inconsistent with the obligations contained in Articles 6.10 and 9.2 of the Anti-Dumping Agreement.
 
After some further analysis, the panel maintained its conclusion that the policy or practice whereby in anti- dumping proceedings involving NME countries, the USDOC applies a rebuttable presumption that, in such countries, all companies belong to a single, NME-wide entity and assigns a single rate to that entity is inconsistent with the obligations contained in Articles 6.10 and 9.2 of the Anti-Dumping Agreement.
 
Before concluding its analysis of the consistency of the measure at issue with Articles 6.10 and 9.2 of the Anti-Dumping Agreement, the panel turned to the question of whether Viet Nam's Accession Protocol provides a legal basis for the rebuttable presumption that, in Viet Nam, all companies are part of a single, Viet Nam-wide entity and should be assigned a single rate.
 
The panel found that, in anti-dumping proceedings involving imports from Viet Nam, paragraph 255 of Viet Nam's Working Party Report, as incorporated in Viet Nam's Accession Protocol, authorizes WTO Members to treat Viet Nam differently from other Members with respect to the determination of price comparability in respect of domestic prices and costs in Viet Nam, that is, the determination of normal value.
 
However, said the panel, this provision does not provide for a general exception permitting different treatment of Vietnamese exporters for other purposes, such as the application of a presumption that, in Viet Nam, all companies belong to a single, Viet Nam-wide entity, and should receive a single rate.
 
The panel found that the evidence submitted by the United States regarding the economic characteristics of NMEs in general and Viet Nam in particular cannot justify a general presumption that, in NME countries (including in Viet Nam), all exporters belong to a single, government-wide entity, where no legal basis for such a presumption is provided for in the covered agreements.
 
"We conclude therefore, that the evidence submitted to the Panel regarding the operation of NMEs in general and Viet Nam in particular is not relevant to the legal question of whether the United States is entitled to presume the existence of an NME-wide entity and assign a single rate to that entity."
 
The panel also disagreed with the United States that paragraph 255 "modifies" the obligations contained in Articles 6.10 and 9.2 of the Anti-Dumping Agreement.
 
According to the panel, paragraph 255 of Viet Nam's Working Party Report only allows importing Members to derogate from the disciplines of the Anti-Dumping Agreement with respect to the methodology used to calculate normal value.
 
However, nothing in paragraph 255 indicates that this provision provides for a derogation from the obligations to assign an individual dumping margin pursuant to Article 6.10 and an individual anti-dumping duty rate pursuant to Article 9.2 of the Anti-Dumping Agreement.
 
It therefore concluded that the USDOC's policy or practice whereby, in anti-dumping proceedings involving NMEs, it presumes that all companies belong to a single, NME-wide entity, and assigns a single rate to that entity is inconsistent "as such" with Article 6.10 and Article 9.2 of the Anti-Dumping Agreement.
 
On whether the NME-wide entity rate practice is inconsistent with Articles 9.4, 6.8 and Annex II of the Anti- Dumping Agreement, the panel recalled its finding that, while the evidence on the record indicates that the USDOC often calculates the rate for the NME-wide entity based on facts available, it does not establish that the USDOC consistently uses a defined methodology to calculate the NME-wide entity rate or systematically bases that rate on facts available.
 
Therefore, the panel had concluded that Viet Nam had failed to establish that the USDOC's methodology used to calculate the NME-wide entity rate, in particular as it refers to the use of facts available, is a rule or norm that constitutes a measure of general and prospective application which can be challenged as such.
 
This being the case, it found that Viet Nam did not establish that the alleged measure is "as such" inconsistent with Articles 6.8 and 9.4, and Annex II of the Anti-Dumping Agreement.
 
The panel next examined claims with respect to the application of the NME-wide entity rate practice in the administrative reviews at issue, where Viet Nam had claimed that the Viet Nam-wide rate applied in the fourth, fifth and sixth administrative reviews under the shrimp order is inconsistent with Articles 6.10, 9.2, 9.4, 6.8 and Annex II of the Anti-Dumping Agreement.
 
In each of the reviews at issue, the USDOC began with a rebuttable presumption that all shrimp exporters and producers in Viet Nam are operating units of a single, Viet Nam-wide entity.
 
Exporters and producers that established sufficient independence from government control with respect to their export activities qualified for "separate rate status".
 
Vietnamese companies which did not successfully establish independence from the Vietnamese Government, or which did not apply for separate rate status, were assigned the Viet Nam-wide rate of 25.76% in each review.
 
On whether the Viet Nam-wide entity rate applied in the administrative reviews at issue is inconsistent with Articles 6.10 and 9.2 of the Anti-Dumping Agreement, the panel recalled its finding that, pursuant to Article 6.10, investigating authorities have an obligation to determine individual margins of dumping for each known producer/exporter.
 
This obligation is subject to the exception contained in the second sentence of Article 6.10 and may be subject to other exceptions as well, as long as these exceptions are provided for in the covered agreements. It also found that, pursuant to Article 9.2, individual anti-dumping duties must be specified for each supplier, except where this is impracticable.
 
The panel further recalled its factual finding that, in each administrative review at issue in the present dispute, the USDOC began with a rebuttable presumption that all shrimp exporters and producers in Viet Nam are part of a single, Viet Nam-wide entity, and determined a single dumping margin for and applied a single anti-dumping rate to that entity.
 
The panel also found that, in order to be eligible for an individual rate, Vietnamese exporters and producers were required to pass the "separate rate test" by demonstrating independence from the Government of Viet Nam.
 
Having concluded that the USDOC's policy or practice whereby, in anti-dumping proceedings involving NMEs, it presumes that all companies belong to a single, NME-wide entity, and assigns a single rate to that entity is inconsistent "as such" with Articles 6.10 and 9.2, the panel did not see how the application of that practice in the three administrative reviews at issue could be found consistent with those same two provisions.
 
It also recalled its finding that nothing in paragraph 255 of Viet Nam's Working Party Report, as incorporated into Viet Nam's Protocol of Accession, indicates that this provision provides for a derogation from the obligations to assign an individual dumping margin pursuant to Article 6.10 and an individual anti-dumping duty rate pursuant to Article 9.2 of the Anti-Dumping Agreement.
 
These conclusions are applicable mutatis mutandis to its consideration of Viet Nam's "as applied" claims.
 
Therefore, the panel concluded that the application by the USDOC, in the fourth, fifth and sixth administrative reviews, of a presumption of the existence of a Viet Nam-wide entity and application of a single rate to that entity is inconsistent Articles 6.10 and 9.2 of the Anti-Dumping Agreement.
 
On whether the Viet Nam-wide entity rate applied in the administrative reviews at issue is inconsistent with Article 9.4 of the Anti-Dumping Agreement, the panel said that the main question it must address in order to resolve Viet Nam's claims under Article 9.4 is whether, in the three administrative reviews at issue, the United States was required by Article 9.4 to ensure that the duty rate applied to the Viet Nam-wide entity, and to any individual companies deemed to be part of that entity, did not exceed the ceiling calculated pursuant to that provision.
 
The panel said that the facts before it show that, in the fourth, fifth and sixth administrative reviews, the Viet Nam-wide entity and the companies deemed to constitute it were not individually examined and individual margins were not determined for them.
 
"In light of the above, pursuant to Article 9.4, the Viet Nam-wide entity and the companies deemed to constitute that entity should have been assigned a rate not exceeding the ceiling calculated pursuant to this provision, namely a rate not exceeding the weighted-average margin of dumping established for the selected, individually- examined, exporters, excluding zero, de minimis and facts available margins."
 
However, given that in each case the Viet Nam-wide entity rate exceeds by far the highest of the individual margins determined for mandatory respondents, it follows that it necessarily exceeds a weighted average of those rates, and thus the ceiling calculated pursuant to Article 9.4.
 
In each of the three administrative reviews at issue, the Viet Nam-wide entity (and all of the companies deemed to be part of that entity in each review) was assigned a rate of 25.76%.
 
Thus, in the panel's view, it is undisputable that, in the three reviews at issue, the rate applied to the Viet Nam-wide entity and its constituent companies exceeds the ceiling applicable under Article 9.4.
 
It therefore found that the duty rate applied to the Viet Nam-wide entity and the companies deemed to be part of that entity in the fourth, fifth and sixth administrative reviews is inconsistent with Article 9.4 of the Anti- Dumping Agreement.
 
On whether the Viet Nam-wide entity rate applied in the administrative reviews at issue is inconsistent with Article 6.8 and Annex II of the Anti-Dumping Agreement, the panel found that Viet Nam has failed to establish that the rate applied to the Viet Nam-wide entity in the fourth, fifth and sixth administrative review is inconsistent with Article 6.8 and Annex II of the Anti-Dumping Agreement.
 
On claims regarding Section 129(c)(1) of the US Uruguay Round Agreements Act, the panel concluded that Viet Nam has failed to establish that Section 129(c)(1) precludes, or acts as a legal bar to, "extending the benefits of implementation" to prior unliquidated entries.
 
Having concluded that Viet Nam has failed to establish its factual allegation that Section 129(c)(1) precludes implementation with respect to prior unliquidated entries, the panel said it need not, and does not, consider Viet Nam's arguments regarding the consistency of Section 129(c)(1) with the provisions of the Anti-Dumping Agreement cited by Viet Nam.
 
In light of the foregoing, it found that Viet Nam has not established that Section 129(c)(1) of the URAA is "as such" inconsistent with Articles 1, 9.2, 9.3, 11.1 and 18.1 of the Anti-Dumping Agreement.
 
On claims with respect to the sunset review, the panel found that the USDOC's likelihood-of-dumping determination in the first sunset review is inconsistent with the United States' obligations under Article 11.3 of the Anti-Dumping Agreement.
 
On claims with respect to company-specific revocations, the panel found that in its treatment of the requests for revocation submitted by Vietnamese producers/exporters that were not being individually examined, the USDOC acted inconsistently with the United States' obligations under Article 11.2 of the Anti-Dumping Agreement.
 
This being the case, and in the light of Viet Nam's argument that Article 11.2 operationalises the general principle set forth under Article 11.1, the panel did not consider it necessary to make separate findings under Article 11.1 of the Anti-Dumping Agreement.
 
The panel also found that the United States acted inconsistently with Article 11.2 of the Anti-Dumping Agreement as a result of the USDOC's reliance on WTO-inconsistent margins of dumping in its determination, in the fourth administrative review, not to revoke the shrimp anti-dumping order with respect to Minh Phu, and in its determination, in the fifth administrative review, not to revoke the shrimp anti-dumping order with respect to Camimex.
 
In light of these findings, and in the light of Viet Nam's argument that Article 11.2 operationalises the general principle set forth under Article 11.1, the panel did not consider it necessary to make findings under Article 11.1 of the Anti-Dumping Agreement.
 
In its overall conclusions, the panel, pursuant to Article 19.1 of the DSU, recommended that the United States bring the relevant measures into conformity with its obligations under the GATT 1994 and the Anti-Dumping Agreement.
 
The panel highlighted Viet Nam's request that the panel exercise the discretion granted to WTO dispute settlement panels under Article 19.1 of the DSU to suggest that the United States implement this recommendation by revoking the anti-dumping duty order in its totality, and with respect to Minh Phu and Camimex, the latter as a consequence of eventual findings concerning the USDOC's treatment of these Vietnamese producers/exporters' requests for revocation.
 
"Thus, while a panel must (‘shall') recommend that a Member found to have acted inconsistently with a provision of a covered agreement bring the relevant measure into conformity, it has discretion to (‘may') suggest ways in which the responding Member could implement that recommendation," said the panel.
 
It noted that previous panels have emphasised that Article 21.3 of the DSU gives the authority to decide the means of implementation, in the first instance, to the Member found to be in violation.
 
"Although we have found that certain of the measures challenged by Viet Nam are inconsistent with the GATT 1994 and the Anti-Dumping Agreement, and recommend that the United States bring the relevant measures into conformity with its obligations under these Agreements, we decline to exercise our discretion under the second sentence of Article 19.1 in the manner requested by Viet Nam," said the panel. +