On April 18, 2006, the Appellate Body (AB) released its decision on the U.S. "zeroing" dispute which the EU initiated. (UNITED STATES – LAWS, REGULATIONS AND METHODOLOGY FOR CALCULATING DUMPING MARGINS ("ZEROING"), WT/DS294/AB/R) http://www.wto.org/english/tratop_e/dispu_e/294abr_e.pdf (If anyone wants an edited (10 pages) version of this AB decision, please email me.)
"Zeroing" stands for a specific methodology in calculating a general dumping margin for a product in question under which negative individual dumping margins are treated as zero (thus "zeroed") before aggregating all individual dumping margins. The U.S. court has recently upheld this cherry-picking practice. (Corus Staal B.A. v. United States, 395 F.3d 1343 (Fed. Cir. 2005); Timken Co. v. United States, 354 F.3d 1334, 1343-44 (Fed. Cir. 2004)). However, this practice has been severely criticized by many because it tends to inflate dumping margins and thus make it easier for the Commerce Department (DOC) to find dumping. The AB has already struck down the EU’s zeroing practice (European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India, the Appellate Body Rport circulated on Mar. 1, 2001, WT/DS141/AB/R, paras. 54-55) as well as the U.S. particular, discrete zeroing practices (United States – Anti-Dumping Measures on Stainless Steel Plate in Coils and Stainless Steel Sheet and Strip from Korea, Panel Report circulated on Dec. 22, 2000, WT/DS179/R, para. 6.105; U.S. – Final Dumping Determination on Soft Lumber from Canada, WT/DS264/AB/R, circulated on Aug. 11, 2004, para. 183 (a)). Even a recent NAFTA Chapter 19 panel (Softwood Lumber) invalidated this practice, invoking the celebrated Charming Betsy doctrine and thus viewing that the U.S. should follow the AB decision in Softwood Lumber. (Softwood Lumber Products from Canada, No. USA-CDA-2002-1904-2, Jun. 9, 2005, at 43-44)
Yet, this AB report is a final blow to the U.S. long-held zeroing practice in that the AB upheld the panel’s finding which overthrew the zeroing methodology "as such," at least as far as the "original investigations" under Article 5 of the WTO AD Code are concerned. In other words, the DOC is no longer able to use this zeroing methodology to find dumping margins in its initial investigations. In its appeal, the U.S. challenged the panel’s finding under Article 11 of DSU by arguing that the zeroing methodology itself cannot be a "measure" because it does not "mandate" a WTO violation nor "preclude" a WTO-consistent action. However, the AB rejected this argument, sidestepping the thorny issue of mandatory/discretionary distinction. Worse (to the U.S.), the AB even reversed the panel’s finding on the EU’s "as applied" claims as to the DOC’s zeroing practice under the "administrative review" process (an annual calculation of antidumping duties). The panel had originally ruled that the zeroing in the administrative review was not inconsistent with the AD Code. However, the AB, in a stern tone, viewed that zeroing methodology itself violated Article 9.3 of the AD Code ("The amount of the anti-dumping duty shall not exceed the margin of dumping as established under Article 2") since it results in higher dumping margins and hence higher antidumping duties than otherwise on account of the DOC’s "systematic disregard" of those export prices higher than normal values (para. 133). Therefore, to the AB zeroing is not an acceptable practice throughout the antidumping proceeding.
This ruling is an important development in the WTO jurisprudence. In a sense, the AB made a huge contribution to free trade, which could not be made by negotiations alone. Considering that the U.S., along with the EU, is still a main user of AD measures, this ruling is great news to usual AD targets, especially developing countries. Granted, sovereigntists might not favor such development. To them, this would be an unacceptable judicial activism or judicial legislation, which they had not bargained for under the Uruguay Round negotiations when they drafted the AD Code. The U.S.’ Trojan Horse, i.e., Article 17.6, does not seem to have helped since the AB so effortlessly ruled that its ruling was compatible with the Article (para. 134). (After all, the AB, not the U.S., has a final say on the Article 17.6 issue.)
It remains to be seen whether and how the U.S. will implement this ruling in the election year, or the year after…
Regarding the EU’s reaction, http://www.eurunion.org/News/press/2006/20060028.htm
Regarding a consumer organization’s reaction,
http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=109&STORY=/www/story/04-18-2006/0004342396&EDATE
=
