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DISPUTE SETTLEMENT: DISPUTE DS322

United States — Measures Relating to Zeroing and Sunset Reviews

This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

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Appellate Body and Panel Reports Adopted

Complaint by Japan.

On 24 November 2004, Japan requested consultations with the United States concerning (1) the USDOC’s “zeroing” practice in anti-dumping investigations, administrative reviews, sunset reviews, and also in assessing the final anti-dumping duty liability on entries upon liquidation; (2) the USDOC’s “irrefutable presumption” in sunset reviews; and (3) the waiver provisions of US law, which, in sunset reviews, oblige the USDOC, in certain situations, to find a likelihood of continuation or recurrence of dumping without performing a substantive review.

According to the request for consultations from Japan, the US violates its WTO obligations with respect to the following measures:

• the Tariff Act of 1930, in particular, sections 731, 751, 752, 771(7), 771(35)(A), 771(35)(B) and 777A(d);
    
• the Statement of Administrative Action that accompanied the Uruguay Round Agreements Act;
    
• the USDOC implementing regulations, 19 C.F.R. section 351, in particular sections 351.218 and 351.414;
    
• the Import Administration Antidumping Manual, including the computer program(s) to which it refers; — the USDOC's Policy Bulletin 98.3 (“Sunset Policy Bulletin”);
    
• the methodology of the United States for determining dumping margins and material injury in anti dumping investigations;
    
• the methodology of the United States for determining dumping margins in administrative reviews; and
    
• the methodology of the United States, in sunset reviews, for determining whether revocation of anti-dumping orders would be likely to lead to continuation or recurrence of dumping, and continuation or recurrence of material injury within a reasonably foreseeable time.

Japan wishes to consult with the United States not only on the above-mentioned measures “as such”, but also on the applications of these measures in 16 specific instances.

Japan considers that these US measures are inconsistent with, inter alia, Articles 1, 2.1, 2.4, 2.4.2, 3, 5.8, 6.1, 6.2, 9, 11, 18.3 and 18.4 of the Anti-Dumping Agreement; Articles VI:1 and VI:2 of the GATT; and Article XVI:4 of the WTO Agreement.

On 3 December 2004, India requested to join the consultations. On 8 December 2004, Norway, Argentina, Chinese Taipei, the European Communities and Mexico requested to join the consultations.

On 4 February 2005, Japan requested the establishment of a panel. At its meeting on 17 February 2005, the DSB deferred the establishment of a panel. At its meeting on 28 February 2005, the DSB established the panel. The European Communities; Hong Kong, China; India; Korea and Mexico reserved their third party rights. On 2 March 2005, China reserved its third party rights. On 4 March 2005, Argentina reserved its third party rights. On 7 March 2005, Norway reserved its third party rights. On 8 March 2005, Thailand reserved its third party rights. On 10 March 2005, New Zealand reserved its third party rights. On 7 April 2005, Japan requested the Director General to compose the panel. On 15 April 2005, the Director-General composed the panel.

On 15 November 2005, the Panel informed the DSB that it would not be possible for the Panel to complete its work within six months of the date of composition, inter alia, due to the complexity of the issues and other unavoidable postponements in the timetable for the work of the Panel, and that the Panel hoped to complete its work by March 2006. On 10 May 2006, the Panel informed the DSB that it would not be possible for the Panel to complete its work within six months due to the complexity of the issues and that the Panel hoped to complete its work by end August/early September 2006.

On 20 September 2006, the panel report was circulated to Members. The Panel upheld Japan's claim relating to the use of zeroing when used by the USDOC 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 Anti-Dumping Agreement. The Panel also agreed with Japan that the US zeroing methodology is a “norm” capable of being challenged in WTO dispute settlement proceedings. The Panel rejected Japan's claims that zeroing was prohibited in proceedings other than original investigations, i.e. periodic reviews, new shipper reviews, changed circumstances reviews and sunset reviews.

On 11 October 2006, Japan notified its decision to appeal certain issues of law covered in the panel report and certain legal interpretations developed by the Panel. On 23 October 2006, the United States notified its decision to appeal certains issues of law covered in the panel report and certain legal interpretations developed by the Panel.

On 9 January 2007, the Appellate Body report was circulated to Members. The Appellate Body:

• upheld the Panel's finding that the United States' zeroing procedures constitute a measure which can be challenged, as such, and therefore dismissed the United States' claim that the Panel acted inconsistently with Article 11 of the DSU by concluding that the zeroing procedues, as the relate to original investigations based on transaction-to-transaction an weighted average normal value-to-prices of individual export transactions comparisons, constitute a measure that can be challenged, as such, in WTO dispute settlement.
    
• reversed the Panel's finding that the United States does not act inconsistently with Articles 2.1, 2.4 and 2.4.2 of the Anti-Dumping Agreement and Articles VI:1 and VI:2 of the GATT 1994, and found instead that the United Sates acts inconsistently with Articles 2.4 and 2.4.2 of the Anti-Dumping Agreement by maintaining zeroing procedures when calculating margins of dumping on the basis of transaction-to-transaction comparisons in original investigations.
    
• reversed the Panel's findings that the United States does not act inconsistently with Articles 2.1, 2.4 and 9.1-9.3 of the Anti-Dumping Agreement and Articles VI:1 and VI:2 of the GATT 1994, and found instead that the United States acts inconsistently with Articles 2.4 and 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994 by maintaining zeroing procedures in periodic reviews.
    
• reversed the Panel's findings that the United States does not act inconsistently with Articles 2.1, 2.4 and 9.5 of the Anti-Dumping Agreement and Articles VI:1 and VI:2 of the GATT 1994, and found instead that the United States acts inconsistently with Articles 2.4 and 9.5 of the Anti-Dumping Agreement by maintaining zeroing procedures in new shipper reviews.
    
• reversed the Panel's findings that the United States does not act inconsistently with Articles 2.1, 2.4 and 9.1-9.3 of the Anti-Dumping Agreement and Articles VI:1 and VI:2 of the GATT 1994, and found instead that the United States acted inconsistently with Articles 2.4 and 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994 by applying zeroing procedures in the 11 periodic reviews at issue in this appeal.
    
• reversed the Panel's finding that the United States did not act inconsistently with Articles 2 and 11 of the Anti-Dumping Agreement in the sunset reviews at issue in this appeal, when it relied on margins of dumping calculated in previous proceedings through the use of zeroing, and found instead that the United States acted inconsistently with Article 11.3 of the Anti-Dumping Agreement.

At its meeting on 23 January 2007, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report.

Implementation Status of Adopted Reports

At the DSB meeting on 20 February 2007, the United States stated that it intended to comply with the its WTO obligations and that it would need a reasonable period of time to do so. On 29 March 2007, Japan requested that the reasonable period of time be determined through binding arbitration pursuant to Article 21.3(c) of the DSU. On 27 April 2007, the Director-General appointed Mr Florentino Feliciano to act as arbitrator. On 4 May 2007, the United States and Japan informed the DSB that they had mutually agreed that the reasonable period of time for the United States to implement the DSB recommendations and rulings shall be 11 months, expiring on 24 December 2007. The United States and Japan also wished to inform the DSB that they no longer sought to have the reasonable period of time determined through binding arbitration.

On 10 January 2008, on the grounds that the United States had failed to implement the DSB recommendations and rulings, Japan requested the DSB authorization to suspend concessions pursuant to Article 22.2 of the DSU. On 18 January 2008, the United States objected to the level of suspension and accordingly requested the matter to be referred to arbitration under Article 22.6 of the DSU. At its meeting on 21 January 2008, the DSB agreed that the matter had been referred to arbitration as required under Article 22.6 of the DSU.

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