WTO Appellate Body Finds U.S. Use of "Zeroing" is Impermissible in AD Administrative Reviews, New Shipper Reviews, Etc.
On January 9, 2007, the World Trade Organization (WTO) Appellate Body issued a report to WTO Members stating that U.S. use of "zeroing" procedures in calculating dumping margins in certain antidumping (AD) proceedings is inconsistent with the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the Antidumping Agreement).
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WTO Appellate Body Finds "Zeroing" is Impermissible in Transaction-to-Transaction AD Investigations, Reviews, Etc.
According to the WTO Appellate Body, "zeroing" procedures are inconsistent with the Antidumping Agreement in (1) transaction-to-transaction and average-to-transaction comparisons in AD investigations; (2) administrative reviews; (3) new shipper reviews; and (4) certain sunset reviews when relying on previous proceedings where dumping margins were calculated through the use of "zeroing".
(Note that the International Trade Administration (ITA) is ending its practice of "zeroing" (denial of offsets) in average-to-average comparisons in AD investigations effective February 22, 2007. See ITT's Online Archives or 01/29/07 news, 07012930, for BP summary of ITA's recent extension of this effective date. See ITT's Online Archives or 01/08/07 news, 07010825, for BP summary of the ITA's end of "zeroing" in average-to-average comparisons in AD investigations.)
(This dispute (DS322) began on November 24, 2004 when Japan requested consultations with the U.S. concerning (1) the Department of Commerce's (DOC's) "zeroing" practice in AD investigations, administrative reviews, sunset reviews, and also in assessing the final AD duty liability on entries upon liquidation; (2) the DOC's "irrefutable presumption" in sunset reviews; and (3) the waiver provisions of U.S. law, which, in sunset reviews, oblige the DOC, in certain situations, to find a likelihood of continuation or recurrence of dumping without performing a substantive review.
On September 20, 2006, the dispute settlement panel circulated its report, which upheld Japan's claim relating to the use of "zeroing" when used by the DOC in the context of multiple averaging in original investigations when calculating the margin of dumping by finding that it is inconsistent with Article 2.42 of the Antidumping Agreement. The panel also agreed with Japan that the U.S. "zeroing" methodology is a "norm" capable of being challenged in WTO dispute settlement proceedings, which the WTO Appellate Body upholds.
Japan's claims that "zeroing" is prohibited in proceedings other than original investigations, i.e. administrative reviews, new shipper reviews, changed circumstances reviews and sunset reviews, were rejected by the panel, but the WTO Appellate Body reverses the panel's findings and finds that "zeroing" is prohibited in these proceedings.
In October 2006, the U.S. and Japan each appealed certain issues of law covered in the panel report and certain legal interpretations developed by the panel.)
WTO Appellate Body report (findings and conclusions), circulated 01/09/07, available at http://www.wto.org/english/tratop_e/dispu_e/322abr_conc_e.pdf
WTO summary of DS322, updated 01/05/07, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds322_e.htm