DISPUTE SETTLEMENT

DS: United States — Laws, Regulations and Methodology for Calculating Dumping Margins (Zeroing)

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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Summary of the dispute to date

The summary below was up-to-date at

Consultations

Complaint by the European Communities.

On 12 June 2003, the European Communities requested consultations with the United States concerning a methodology used by the US, among others, in the calculation of dumping margins, known as “zeroing”. The “zeroing” methodology, generally speaking, involves treating specific price comparisons which do not show dumping as zero values in the calculation of a weighted average dumping margin.

The request concerned specific provisions of the US Tariff Act of 1930 and the Department of Commerce implementing regulation as well as US Department of Commerce methodology and its determinations in specific cases involving products imported from the European Communities.

The European Communities indicated specific aspects of the zeroing methodology that it would raise in the consultations, including the way in which it was applied in calculating dumping margins, its impact on determinations of injury, its impact in cases which would otherwise be de minimis, and the level of the dumping margins in 21 specific US anti-dumping cases.

The European Communities attached to its request details of those specific cases, alleging that in each of them the United States used zeroing methodology. Most of the products in these cases were steel. The European Communities asserted that in each case the dumping margin without zeroing would have been lower, de minimis or negative. In the European Communities’ view, the Act, regulation, methodology and these specific determinations appear to be inconsistent with the United States’ obligations under the following WTO provisions:

  • Articles 1, 2.4, 3, 5.8, 9.3, 9.5, 11, 18.3 and 18.4 of the Anti-Dumping Agreement;
     
  • Articles VI:1 and VI:2 of the GATT 1994;
     
  • Article XVI:4 of the WTO Agreement.

On 27 June 2003, India and Korea requested to join the consultations. On 30 June 2003, Japan and Mexico requested to join the consultations.

On 8 September 2003, the European Communities requested further consultations with the United States. The European Communities wished to add ten more cases to the list of specific cases.

The European Communities indicated specific aspects of the zeroing methodology that it will raise in the additional consultations, including the way in which it is applied in calculating dumping margins, its impact on determinations of injury, its impact in cases which would otherwise be de minimis, and the level of the dumping margins in specific US anti-dumping cases.

In the European Communities’ view, these additional specific determinations appear to be inconsistent with the US obligations under the same WTO provisions mentioned above.

On 25 September 2003, Mexico requested to join the consultations.

On 5 February 2004, the European Communities requested the establishment of a panel. On 16 February 2004, the European Communities submitted a revised request for the establishment of a panel. At its meeting on 17 February 2004, the DSB deferred the establishment of a panel.

 

Panel and Appellate Body proceedings

At its meeting on 19 March 2004, the DSB established a panel. Argentina, Brazil, China, India, Japan, Korea, Mexico, Norway and Chinese Taipei reserved their third-party rights. On 23 March 2004, Hong Kong, China reserved its third-party right. On 30 March 2004, Turkey reserved its third-party right. On 27 October 2004, the panel was composed.

On 22 March 2005, the Chairman of the panel informed the DSB that it would not be possible for the panel to complete its work in six months in light of the schedule which had been agreed after consultations with the parties, and that the panel expected to complete its work in July 2005. On 1 July 2005, the panel informed the DSB that due to its continued consideration of the issues in this dispute, it would not be possible for the panel to complete its work by the end of July, and that the panel expected to complete its work in September 2005.

On 31 October 2005, the panel report was circulated to Members.

  • The panel unanimously upheld the claims of the European Communities as they relate to the specific determinations of dumping made by the United States Department of Commerce in the 15 original investigations at issue. The panel also unanimously upheld the claims of the European Communities in respect of what was described by the panel as the United States “methodology” of zeroing in original investigations. In doing so, the panel found that the United States “methodology” of zeroing was a “norm” capable of being challenged in WTO dispute settlement proceedings.
     
  • The panel unanimously rejected the claims of the European Communities with respect to United States law, finding that the provisions in question did not speak to the issue of zeroing.
     
  • The panel rejected all of the claims of the European Communities in the context of reviews of existing measures. However, one member of the panel dissented from this aspect of the panel’s findings. The dissenting member of the panel would have upheld the claims of the European Communities as they relate to the 16 specific determinations of dumping in reviews as well as the United States “methodology” of zeroing in the context of reviews. The dissenting member of the panel would also have found one provision of a United States regulation to be WTO-inconsistent in respect of reviews.
     
  • The panel recommended that the DSB request the United States to bring its measures into conformity with its obligations under the Anti-Dumping Agreement.

At its meeting of 6 December 2005, following a joint request by the parties, the DSB agreed to extend the time period for the adoption of the panel report until 31 January 2006.  On 17 January 2006, the European Communities notified its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the panel.  On 30 January 2006, the United States notified its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the panel. On 15 March 2006, the Chairman of the Appellate Body informed the DSB that it would not be able to circulate its report within the 60-day period due to the time required for completion and translation of the report, and that it estimated it would be circulated to WTO Members no later than 18 April 2006. 

On 18 April 2006, the Appellate Body report was circulated to Members.

  • The Appellate Body found that the zeroing methodology, as it relates to original investigations in which the weighted-average-to-weighted-average comparison method is used to calculate margins of dumping, can be challenged, as such, in WTO dispute settlement and upheld the panel's conclusion that this methodology is inconsistent, as such, with Article 2.4.2 of the Anti-Dumping Agreement.
     
  • With respect to the administrative reviews at issue, the Appellate Body reversed the panel's finding that the United States did not act inconsistently with Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994, and found, instead, that the United States acted inconsistently with those provisions.  The Appellate Body further found it unnecessary to rule on whether the United States acted inconsistently with the first sentence of Article 2.4 of the  Anti-Dumping Agreement; upheld the panel's finding that zeroing is not an impermissible allowance or adjustment under Article 2.4 of the  Anti-Dumping Agreement, third to fifth sentences; declined to rule on the European Communities' conditional appeal under Article 2.4.2 of the Anti-Dumping Agreement, and upheld the panel's finding that the United States did not act inconsistently with Articles 11.1 and 11.2 of the  Anti-Dumping Agreement.
     
  • The Appellate Body found it unnecessary to rule on whether the zeroing methodology, as applied in the administrative reviews at issue, is inconsistent with Articles 1 and 18 of the Anti-Dumping Agreement and Article XVI:4 of the WTO Agreement, and declared moot the panel's findings that the United States did not act inconsistently with Article VI:1 of the GATT 1994 and the first sentence of Article 2.4 of the Anti-Dumping Agreement.
     
  • The Appellate Body declared moot the panel's finding that the zeroing methodology, as it relates to administrative reviews, is not inconsistent, as such, with Articles 1, 2.4, 2.4.2, 9.3, 11.1, 11.2, and 18.4 of the Anti-Dumping Agreement, Articles VI:1 and VI:2 of the GATT 1994 and Article XVI:4 of the  WTO Agreement.  The Appellate Body further determined that it was unable to complete the analysis to determine whether the zeroing methodology, as it relates to administrative reviews, is inconsistent, as such, with these provisions.
     
  • The Appellate Body further found that the Standard Zeroing Procedures are not a measure than can be challenged, as such, and, accordingly, declared moot the panel's finding that the Standard Zeroing Procedures are not inconsistent, as such, with Articles 1, 2.4, 2.4.2, 9.3, 11.1, 11.2, and 18.4 of the Anti-Dumping Agreement, Articles VI:1 and VI:2 of the GATT 1994 and Article XVI:4 of the WTO Agreement;
     
  • The Appellate Body also found that the panel did not err in exercising judicial economy by not making findings with regard to whether the Anti-Dumping Manual is a measure that is inconsistent, as such, with Articles 1, 2.4, 2.4.2, 5.8, 9.3, 9.5, 11.1, 11.2, 11.3, and 18.4 of the Anti-Dumping Agreement, Articles VI:1 and VI:2 of the GATT 1994, and Article XVI:4 of the WTO Agreement, whether administrative review proceedings based on model zeroing are inconsistent with Article 9.3 of the Anti-Dumping Agreement,and whether zeroing “as applied” in the original investigations at issue is inconsistent with Article 2.4 of the  Anti-Dumping Agreement.  The Appellate Body also declined to rule on the European Communities' conditional appeal regarding the United States' “practice” of zeroing.
       
  • The Appellate Body declared moot the panel's finding that Section 351.414(c)(2) is not inconsistent, as such, with Articles 1, 2.4, 2.4.2, 9.3, 9.5, 11.1, 11.2, 11.3, and 18.4 of the Anti-Dumping Agreement, Articles VI:1 and VI:2 of the GATT 1994, and Article XVI:4 of the WTO Agreement and declined to complete the analysis on these issues.
       
  • Finally, the Appellate Body rejected the European Communities' claim that the panel acted inconsistently with its obligations under Article 11 of the DSU by failing to make an objective assessment of the matter before it, including an objective assessment of the facts of the case.

The Appellate Body recommended that the DSB request the United States to bring its measures into conformity with its obligations under the Anti-Dumping Agreement and the GATT 1994.

On 9 May 2006, the DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body report.

 

Compliance proceedings

The European Communities considered that there was a disagreement as to the existence or consistency with a covered agreement of the measures taken to comply with the rulings and recommendations of the DSB. Therefore, on 9 July 2007, the European Communities requested consultations under Article 21.5. Brazil and Korea requested to join the consultations. On 13 September 2007, the European Communities requested the establishment of a compliance panel. At its meeting on 25 September 2007, the DSB agreed to refer, if possible, the matter raised by the European Communities to the original panel. India, Japan and Mexico reserved their third-party rights. Subsequently, Korea, Norway, Chinese Taipei and Thailand reserved their third-party rights. On 28 November 2007, the European Communities requested the Director-General to compose the compliance panel. On 30 November 2007, the Director-General composed the compliance panel. On 26 May 2008, the Chairman of the compliance panel informed the DSB that it would not be able to circulate its report within 90 days after the date of referral given the delays in the composition of the compliance panel and the schedule adopted after consultations with the parties. The compliance panel expected to complete its work in October 2008.

On 17 December 2008, the compliance panel report was circulated to Members.  The compliance panel first found that it had no authority to make findings with respect to the European Communities' claim that the compliance panel was improperly constituted under Articles 8.3 and 21.5 of the DSU.

With respect to its terms of reference:

  • The compliance panel rejected the argument by the European Communities that subsequent reviews fell within the compliance panel's terms of references as “amendments” to the measures at issue in the original dispute.
     
  • The compliance panel considered that measures not characterized by the implementing Member as measures “taken to comply” may nevertheless fall within a compliance panel's terms of reference when they share a sufficiently close connection with the measures at issue in the original proceedings, or with the DSB's recommendations and rulings. The compliance panel found that a sufficiently close nexus existed, in terms of their nature and effects between subsequent reviews and the measure at issue in the original dispute, and the DSB's recommendations and rulings. The compliance panel ruled that successive determinations made in the context of a single anti-dumping duty order formed part of a continuum of events and are measures that are all inextricably linked.
     
  • The compliance panel found that as a matter of logic, measures taken before the adoption of the DSB's recommendations and rulings could not be found to be measures taken to comply with those recommendations and rulings. Conversely, only the subsequent review determinations made after the adoption of the DSB's recommendations and rulings had a sufficiently close link with those recommendations, and with the steps taken, if any, by the implementing Member to achieve compliance. On this basis, the compliance panel found each of the subsequent reviews decided after the adoption of the DSB's recommendations and rulings but none decided prior to that date, to fall within its terms of reference.

Applying these principles, the compliance panel found that nine specific subsequent administrative reviews and five subsequent sunset reviews fell within its terms of reference.

With respect to the claims by the European Communities that  the United States failed to fully implement the recommendations and rulings of the DSB in the original dispute, the compliance panel found that:

  • The United States failed to comply with the recommendations and rulings of the DSB in the original dispute and acted inconsistently with Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994 by determining, after the end of the reasonable period of time, the amount of anti-dumping duty to be assessed based on zeroing in the 2004-2005 administrative review in case 1 (Hot Rolled Steel from the Netherlands) and issuing assessment instructions pursuant to that determination and by determining, after the end of the reasonable period of time, the amount of anti-dumping duty to be assessed based on zeroing in the 2004-2005 administrative review in case 6 (Stainless Steel Wire Rod from Sweden) and issuing assessment instructions pursuant to that determination.
     
  • The United States failed to comply with the recommendations and rulings of the DSB in the original dispute by continuing to apply to imports of NSK cash deposit rates established in the 2000-2001 administrative review in case 31 (Ball Bearings from the United Kingdom), a measure which was found to be inconsistent with Articles 9.3 of the Anti-Dumping Agreement and VI:2 of the GATT 1994 in the original dispute.
     
  • The United States had not failed to comply with the recommendations and rulings of the DSB in the original dispute by taking actions to liquidate anti-dumping duties calculated with zeroing pursuant to final duty assessment determinations made before the end of the reasonable period of time (including pursuant to subsequent administrative reviews listed in the Annex to the European Communities' Article 21.5 panel request).
     
  • The United States had not failed to comply with the recommendations and rulings of the DSB in the original dispute by determining, prior to the end of the reasonable period of time, the amount of anti-dumping duty to be assessed based on zeroing in the 2005-2006 administrative review determination in case 1 (Hot Rolled Steel from the Netherlands).
     
  • The United States had not failed to comply with the recommendations and rulings of the DSB in the original dispute and has not acted inconsistently with Articles 2.4.2 and 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994 by establishing a new cash deposit rate based on zeroing in the 2004-2005 administrative review determination in case 6 (Stainless Steel Wire Rod from Sweden) because due to the revocation of the measure in question, no cash deposit requirement was actually imposed.
     
  • None of the sunset reviews within the panel's terms of reference and with respect to which the European Communities made claims, had, by the time of the establishment of the panel, resulted in the continuation of the concerned anti-dumping orders. Thus, the panel made no findings in respect of the claims of the European Communities that the United States violated Articles 2.1, 2.4, 2.4.2 and 11.3 of the Anti-Dumping Agreement as a result of having relied on margins of dumping calculated with zeroing in the context of sunset reviews involving measures challenged in the original dispute.
     
  • The panel made no findings with respect to the European Communities' claim that the United States violated Articles 21.3 and 21.3(b) of the DSU by failing to take any measure to comply between 9 April and 23 April/31 August 2007.

With respect to the European Communities' claims that certain US measures taken to comply were inconsistent with the US obligations under the covered agreements, the compliance panel made no finding with respect to Section 129 determination in case 11, which it had found was not properly before it; the European Communities' claims under Article 5.8 of the Anti-Dumping Agreement and Article VI:I of the GATT 1994 in respect of cases 2, 3, 4 and 5; and the European Communities' claims under Article 6.8 and Annex II of the Anti-Dumping Agreement in respect of cases 2, 4 and 5.

The compliance panel further found that, to the extent that the measures taken by the United States to comply with the recommendations and rulings adopted by the DSB in the original proceeding were inconsistent with the obligations of the United States under the covered agreements, and to the extent that the United States had otherwise failed to implement the recommendations and rulings of the DSB in the original dispute, these recommendations and rulings of the DSB remained operative. It therefore made no new recommendation.

On 13 February 2009, the European Communities notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the compliance panel report and certain legal interpretations developed by the compliance panel.  On 25 February 2009, the United States notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the compliance panel report and certain legal interpretations developed by the compliance panel.  On 9 April 2009, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the Appellate Body report, the Appellate Body would not be able to circulate its report within 60 days.  It is estimated that the Appellate Body report would be circulated on 14 May 2009.

On 14 May 2009, the Appellate Body report was circulated to Members.  

The Appellate Body found that the compliance panel did not err in refraining from making a finding on whether it was improperly composed  under Articles 8.3 and 21.5 of the DSU.

With respect to the compliance panel's terms of reference:

  • The Appellate Body upheld the compliance panel's finding that the subsequent reviews identified in the European Communities' panel request did not fall within the terms of reference under Article 21.5 of the DSU as “amendments” to the original measures at issue.
     
  • However the Appellate Body reversed the compliance panel's finding that the subsequent reviews that pre-dated the adoption of the recommendations and rulings of the DSB did not fall within the panel's terms of reference and found instead, that five sunset reviews (in Cases 24, 28, 29, 30 and 31) had a sufficiently close nexus with the declared measures “taken to comply”, and with the recommendations and rulings of the DSB so as to fall within the scope of the Article 21.5 proceedings.
     
  • The Appellate Body upheld the compliance panel's findings that the 2004-2005 administrative reviews in Cases 1 and 6 fell within the panel's terms of reference. In a separate opinion, one Appellate Body Member reached the conclusion that these reviews did not fall within the scope of the Article 21.5 proceedings and considered it inappropriate to make further findings with respect to Cases 1 and 6.

On the appealed issues relating to the claims by the European Communities that the United States failed to fully implement the recommendations and rulings of the DSB in the original dispute:

  • The Appellate Body upheld, with respect to Cases 1 and 6, the compliance panel findings that the United States acted inconsistently with Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994 by issuing, after the end of the reasonable period of time, the 2004-2005 administrative review determinations, consequent assessment instructions, or liquidation instructions reflecting zeroing. As a result, the United States failed to comply with the recommendations and rulings of the DSB to bring these original investigations into conformity.
     
  • Regarding Case 31, the Appellate Body found that the compliance panel erred in refraining from making a finding on an assessment made after the end of the reasonable period of time of duty liability for imports from NSK Bearings Europe Ltd., and that duties assessed after the end of that period on the basis of cash deposit rates reflecting zeroing establish a failure in compliance by the United States. Additionally, given the insufficient undisputed facts on record, the Appellate Body was not in a position to complete the analysis in relation to Cases 18 through 24 and 27 through 30, and declined to rule on whether the compliance panel erred by not making findings in relation to those cases. However, the Appellate Body agreed that the United States fails to comply if it continues to apply cash deposits on the basis of zeroing after the end of the reasonable period of time in respect of those Cases.
     
  • The Appellate Body reversed the compliance panel's finding that the assessment and liquidation instructions consequent to the rescission of the 2005-2006 administrative review in Case 1 did not establish a failure to comply by the United States.
     
  • With respect to the sunset reviews: the Appellate Body upheld the compliance panel's finding that the United States did not fail to comply with the DSB's recommendations and rulings in respect of the subsequent sunset reviews in Cases 2,3, 4 and 5, considering that these sunset reviews resulted in revocation orders, effective as from before the end of the reasonable period of time. The Appellate Body however reversed the compliance panel's findings that the United States did not fail to comply in respect of the sunset review in Case 19, and found instead that, in relation to Case 19, the United States acted inconsistently with Article 11.3 of the Anti-Dumping Agreement and failed to comply with the recommendations and rulings of the DSB.
     
  • The Appellate Body also found that the United States acted inconsistently with Article 11.3 of the Anti-Dumping Agreement and failed to comply in relation to the sunset reviews in Cases 28, 29, 30 and 31.
     
  • The Appellate Body found that the compliance panel did not act inconsistently with Article 11 of the DSU in declining to make findings on the European Communities' claim that the United States violated Articles 21.3 and 21.3(b) of the DSU by not taking measures to comply between 9 April and 23 April/31 August 2007. The Appellate Body underscored however, that the responding Member is expected to comply, at the latest, by the end of the reasonable period of time.

With respect to the Section 129 determination in Case 11, the Appellate Body reversed the compliance panel's finding that the European Communities could not raise claims in the Article 21.5 proceedings with respect to an alleged error in the calculation of dumping margins, because it could have raised them in the original proceedings but failed to do so. The Appellate Body however, was unable to complete the analysis on whether the alleged arithmetic error was separable from, or an integral part of, the measure taken to comply and on whether the European Communities could raise such claims in the Article 21.5 proceedings. The Appellate Body therefore did not rule on whether the United States failed to comply by not correcting such alleged error in the Section 129 determination in Case 11.

The Appellate Body found it unnecessary to make findings on the European Communities' claim that the United States acted inconsistently with Article 9.4 of the Anti-Dumping Agreement in the establishment of the “all others” rates in the Section 129 determinations in Cases 2, 4 and 5. However, the Appellate Body disagreed with the compliance panel's interpretation that Article 9.4 imposes no obligations when all margins of investigated exporters are zero de minimis, or based on “facts available”.

The Appellate Body also found that the compliance panel did not err in making findings in respect of the European Communities' claims under Article 6.8 and Annex II of the Anti-Dumping Agreement.

Finally, the Appellate Body declined the European Communities' request for a suggestion on how the United States could implement the recommendations and rulings of the DSB in this dispute.

At its meeting on 11 June 2009, the DSB adopted the Appellate Body report and the compliance panel report, as modified by the Appellate Body report.

 

Proceedings under Article 22 of the DSU (remedies)

On 29 January 2010, the European Union requested the DSB for authorization to suspend the application of concessions or other obligations under the covered agreements pursuant to Article 22.2 of the DSU. On 12 February 2010, the United States informed the DSB that, pursuant to Article 22.6 of the DSU, it objected to the level of suspension of concessions or other obligations proposed by the European Union and also claimed that the European Union's proposal did not follow the principles and procedures set forth in Article 22.3 of the DSU.  At its meeting on 18 February 2010, the DSB agreed that the matter raised by the United States was referred to arbitration.

On 7 September 2010, the European Union and the United States jointly requested the Arbitrator to suspend its work, in the context of informal discussions with respect to implementation.  On the basis of this request, the Arbitrator decided to suspend its work.  As requested by the parties, the suspension would be limited to 12 months less one day.

On 7 September 2011, the European Union and the United States jointly requested the Arbitrator to suspend its work for a further period of four months and two days, until 6 January 2012.  On 6 January 2012, 13 January 2012 and 6 February 2012, the European Union and the United States jointly requested the Arbitrator to suspend its work for a further periods.  The suspension will be limited to 28 June 2012, and absent any “contrary written communication” from the European Union within that period, the suspension will be automatically terminated and the work of the Arbitrator will resume on 29 June 2012.  The last date at which a “contrary written communication” may be received by the Arbitrator is 28 June 2012.  In the event of no such “contrary written communication” or written request for resumption from either party has been received by the Arbitrator by 28 June 2012, it will resume its work on 29 June 2012 and circulate its Decision on 12 July 2012.

On 6 February 2012, the European Union and the United States informed the DSB of a Memorandum between the United States and the European Commission which envisages a roadmap addressing this dispute.

On 22 June 2012, the European Union withdrew its request for authorization from the Dispute Settlement Body 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 roadmap notified to the DSB in February 2012.

On 2 July 2012, the Chairman of the Arbitrator informed the DSB that the Arbitrator had received a joint communication dated 22 June 2012 from the European Union and the United States in which they stated that as the European Union 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 the European Union requested the Arbitrator to notify the DSB that it was not necessary for it to issue a report/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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