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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Current status  back to top

 

Key facts  back to top

Short title:
Complainant:
Respondent:
Third Parties:
Agreements cited:
(as cited in request for consultations)
Request for Consultations received:
Panel Report circulated: 20 September 2006
Appellate Body Report circulated: 9 January 2007
Article 21.3(c) Arbitration Report circulated: 11 May 2007
Article 21.5 Panel Report circulated: 24 April 2009
Article 21.5 Appellate Body Report circulated: 18 August 2009

 

Summary of the dispute to date  back to top

The summary below was up-to-date at
See also: One-page summary of key findings of this dispute

Consultations

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.

 

Panel and Appellate Body proceedings

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 certain 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 procedures, 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 of adopted reports

At the DSB meeting on 20 February 2007, the United States stated that it intended to comply with 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.

 

Compliance proceedings

On 10 March 2008, the United States and Japan informed the DSB of confirmed procedures under Articles 21 and 22 of the DSU. On 7 April 2008, Japan requested the establishment of a compliance panel. At its meeting on 18 April 2008, the DSB agreed to refer to the original panel, if possible, the question whether the United States had complied with the DSB recommendations and rulings. China;  the European Communities;  Hong Kong, China;  Norway and Chinese Taipei reserved their third party rights. Subsequently, Korea, Mexico and Thailand reserved their third party rights. On 23 May 2008, the compliance panel was composed.

On 1 August 2008, the Chairman of the compliance panel informed the DSB that it would not be possible to complete its work in 90 days in light of scheduling conflicts.  The compliance panel expected to complete its work in April 2009. On 24 April 2009, the report of the compliance panel was circulated to Members.  The compliance panel found that the United States had failed to comply with the DSB's recommendations and rulings regarding the importer-specific assessment rates determined in Reviews 1, 2, 3, 7 and 8 that apply to entries covered by those Reviews that were, or would be, liquidated after the expiry of the RPT.  Accordingly, the compliance panel found that the United States is in continued violation of its obligations under Articles 2.4 and 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994.  The compliance panel declined to rule on Japan's claim that this failure to comply is inconsistent with the United States' obligations under Articles 17.14, 21.1 and 21.3 of the DSU.

The compliance panel further found that the United States has 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 in the context of Reviews 4, 5, 6 and 9.  The compliance panel found that the United States had failed to comply with the recommendations and rulings of the DSB regarding the United States' maintenance of zeroing procedures challenged “as such” in the original proceedings.  In particular, the compliance panel found that the United States had failed to implement the DSB's recommendations and rulings in the context of transaction-to-transaction comparisons in original investigations and under any comparison methodology in periodic and new shipper reviews. Accordingly, the compliance panel found that the United States remains in violation of Articles 2.4, 2.4.2, 9.3 and 9.5 of the Anti-Dumpng Agreement and Article VI:2 of the GATT 1994.  The compliance panel declined to rule on Japan's claim that this failure to comply is inconsistent with the United States' obligations under Articles 17.14, 21.1 and 21.3 of the DSU.

The compliance panel also found that the United States was in violation of Article II:1(a) and II:1(b) of the GATT 1994 with respect to certain liquidation actions taken after the expiry of the RPT, namely with respect to certain USDOC liquidation instructions and USCBP liquidation notices.  The compliance panel further found that the United States had failed to comply with the DSB's recommendations and rulings with respect to the 1999 sunset review and that it therefore remained in violation of Article 11.3 of the Anti-Dumping Agreement.  The compliance panel declined to rule on Japan's claim that this failure to implement is inconsistent with the United States' obligations under Articles 17.14, 21.1 and 21.3 of the DSU.

The compliance panel concluded that, to the extent that the United States has failed to comply with the recommendations and rulings of the DSB in the original dispute, the recommendations and rulings remained operative, and recommended that the DSB request the United States to bring Reviews 4, 5, 6 and 9, and the liquidation actions into conformity with the AD Agreement and the GATT 1994.On 20 May 2009, the United States notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the report of the compliance panel and certain legal interpretations developed by the compliance panel.  On 14 July 2009, the Chairman of the Appellate Body notified the DSB that due to the time required for completion and translation of the report, the Appellate Body would not be able to circulate its report within 60 days.  It was estimated that the report would be circulated no later than 18 August 2009.

On 18 August 2009, the Appellate Body report was circulated to Members.  The Appellate Body upheld the compliance panel's findings that Review 9 was properly within the panel's terms of reference and that the United States has failed to comply with the DSB's recommendations and rulings regarding the importer-specific assessment rates determined in Reviews 1, 2, 3, 7, and 8 that apply to entries covered by those Reviews that were, or will be, liquidated after the expiry of the reasonable period of time.  The Appellate Body also upheld the following findings of the compliance panel:

  • that the United States is in continued violation of its obligations under Articles 2.4 and 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994;
      
  • that the United States has 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 in the context of Reviews 4, 5, 6, and 9;  and
      
  • that the United States is in violation of Article II:1(a) and II:1(b) of the GATT 1994 with respect to certain liquidation actions taken after the expiry of the reasonable period of time with respect to certain USDOC liquidation instructions and Customs liquidation notices.

To the extent that the United States has failed to comply with the recommendations and rulings of the DSB in the original dispute, the Appellate Body found that the recommendations and rulings remain operative.  The Appellate Body recommends that the DSB request the United States to bring into conformity with its obligations under the Anti-Dumping Agreement and the GATT 1994 the measures found to be inconsistent with those Agreements.

On 31 August 2009, the DSB adopted the Appellate Body report and the compliance panel report, as upheld by the Appellate Body report.

 

Proceedings under Article 22 of the DSU (remedies)

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.  On 6 June 2008, the United States and Japan requested the Arbitrator to suspend its work.  Accordingly, the arbitration proceedings were suspended from 9 June 2008 until either party requests their resumption.

On 23 April 2010, Japan requested the Arbitrator to resume the arbitration proceedings.  One of the members of the Arbitrator indicated that he was no longer available.  On 25 May 2010, Japan requested the Director-General to appoint a replacement arbitrator.  The constitution of the arbitrator was notified to the DSB on 3 June 2010.

On 15 December 2010, Japan and the United States jointly requested the Arbitrator to suspend its work in the context of informal discussions with respect to implementation.  On 12 September 2011, 7 November 2011, 30 November 2011, 12 January 2012, 1 February 2012, Japan and the United States jointed requested the Arbitrator to continue the suspension of its work. On the basis of these requests, the Arbitrator decided to suspend its work.  As requested by the parties, the suspension will be automatically terminated and the work of the Arbitrator will resume on21 August 2012, unless Japan submits a written communication to the contrary to the Arbitrator by 20 August 2012.

On 6 February 2012, the United States and Japan informed the DSB of a Memorandum of Understanding regarding this dispute.

On 3 August 2012, Japan withdrew its request for authorization from the DSB to suspend the application of concessions or other obligations under the covered agreements pursuant to Article 22.2 of the DSU.  The withdrawal followed the completion by the United States of the steps undertaken pursuant to the Memorandum of Understanding notified to the DSB in February 2012.

On 14 August 2012, the Chairman of the Arbitrator informed the DSB that the Arbitrator had received a joint communication dated 3 August 2012 from Japan and the United States in which they stated that as Japan had withdrawn is request under Article 22.2 of the DSU, the United States accordingly no longer made objections under Article 22.6 of the DSU.  Therefore, the United States and Japan requested the Arbitrator to notify the DSB that it was not necessary for the Arbitrator to issue an award in this dispute. Pursuant to this joint communication, the Arbitrator considered that it was not necessary for it to issue a decision on the matter referred to it. The Arbitrator therefore considered that it had completed its work.

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