Trade lawyers Bob LaFrankie and Alicia Winston write (registration required) about a recent DOC decision related to zeroing in the "targeted dumping" context:
Foreign exporters and U.S. importers should take note of a recent antidumping decision that represents a significant change in the U.S. Government's antidumping duty calculations. The decision, which involved imports of certain retail carrier plastic bags from Taiwan, expands the use of a controversial practice known as "zeroing" through the use of a "targeted dumping" analysis. Polyethylene Retail Carrier Bags from Taiwan: Final Determination of Sales at Less than Fair Value, 75 Fed. Reg. 14569 (Mar. 26, 2010) ("Taiwan Bags"). We discuss this below.
...
... if Commerce uses its targeted dumping methodology, it calculates dumping rates with zeroing; this calculation typically increases the dumping margins. Commerce used its targeted dumping methodology in Taiwan Bags, thereby enabling it to use zeroing to increase the exporter's amount of dumping. In Taiwan Bags, however, Commerce went a step further. In that decision, Commerce revised its targeted dumping methodology to use zeroing on virtually every sale, regardless of the extent of any actual targeted dumping. This is in contrast to its past practice of zeroing only the identified targeted sales. Through its expanded zeroing practices, Commerce appears to have essentially resumed its use of zeroing in dumping calculations without regard to WTO decisions declaring the practice unlawful.
While Commerce has used targeted dumping previously, it has never used it as broadly as was done in Taiwan Bags. This is a sharp departure from Commerce's past practice and it remains to be seen whether this new targeted dumping methodology survives any legal challenges.
Here's the Federal Register Notice for the decision: http://ia.ita.doc.gov/frn/2010/1003frn/2010-6807.txt And here's the Issues and Decision Memorandum (targeted dumping is discussed on pages 2-6): http://ia.ita.doc.gov/frn/summary/TAIWAN/2010-6807-1.pdf
(For the sake of full disclosure, I worked with Bob in my law firm days many years ago. I have not talked to him about this issue, though.)
In WTO terms, this is all about the second sentence of Article 2.4.2 of the AD Agreement, which states:
A normal value established on a weighted average basis may be compared to prices of individual export transactions if the authorities find a pattern of export prices which differ significantly among different purchasers, regions or time periods, and if an explanation is provided as to why such differences cannot be taken into account appropriately by the use of a weighted average-to-weighted average or transaction-to-transaction comparison.
How would this kind of zeroing be considered under Article 2.4.2, second sentence? There has been no direct WTO claim related to the issue, but it has come up as context as part of WTO zeroing litigation. In terms of the obligations of the second sentence itself, here's what the Appellate Body said in one of the Lumber cases:
The permissibility of zeroing under the weighted average-to-transaction comparison methodology provided in the second sentence of Article 2.4.2 is not before us in this appeal, nor have we examined it in previous cases.
That's from para. 98. And similarly, from para. 127 of U.S. - Stainless Steel (Mexico):
The Appellate Body has so far not ruled on the question of whether or not zeroing is permissible under the comparison methodology in the second sentence of Article 2.4.2. Nor is it an issue before us in this appeal.
Thus, it appears that the Appellate Body has been careful to leave open its options for the consideration of zeroing under this provision. With decisions like the Taiwan Bags one, though, its hand may soon be forced.
