Following-up on this post, here's the question presented to the U.S. Supreme Court in a cert. petition filed by steel company Nucor last week:
Whether the Tariff Act of 1930—which defines “dumping” as “the sale or likely sale of goods at less than fair value” and “dumping margin” as “the amount by which the normal value exceeds the export price or constructed export price of the subject merchandise”—unambiguously excludes above-fair-value sales (i.e., those sales that do not constitute “dumping”) from the statutory formula for “weighted average dumping margin.
The basic issue: Under the relevant statute, is the Department of Commerce permitted to calculate dumping margins without using zeroing? Here's more from the petition.
First, here's how Commerce changed its position on the use of zeroing, from saying that zeroing was required to saying that zeroing was not required:
2. Commerce Previously Construed The Act To Exclude Above-Fair-Value Sales From The Calculation Of “Weighted Average Dumping Margin”
For decades, Commerce excluded above-fair-value sales from its calculation of “weighted average dumping margin” under Section 1677(35). Its change of course and recalculation of “weighted average dumping margin” in this case marks the first time that Commerce has offset dumping with above-fair-value sales in calculating an antidumping duty margin.
The exclusion of these sales—sales that do not constitute “dumping”—from the calculation of “weighted average dumping margin” is sometimes referred to as “zeroing.” See Timken Co. v. United States, 354 F.3d 1334, 1338-39 (Fed. Cir. 2004). The Court of International Trade first considered the exclusion of above-fair-value sales in Serampore Industries Pvt. Ltd. v. United States Department of Commerce, 675 F. Supp. 1354 (Ct. Int’l Trade 1987). That court upheld Commerce’s construction of the Act, emphasizing that “[a] plain reading of the statute discloses no provision for Commerce to offset sales made at [less than fair value] with sales made at [or above] fair value.” Id. at 1360.
Commerce employed this construction of the Act in the initial investigation underlying this case. ... Consistent with its longstanding practice, Commerce excluded Tata Steel’s above-fair-value sales when calculating the weighted average dumping margin, which resulted in a duty margin of 2.59%. See Certain Hot-Rolled Carbon Steel Flat Products from the Netherlands, 66 Fed. Reg. 55,637 (Nov. 2, 2001) (amended final determination of sales at less than fair value).
Notably, Commerce had taken the position that its construction of “weighted average dumping margin” was compelled by the unambiguous terms of the Act. ... Before the Federal Circuit, the United States argued that “[t]he antidumping statute unambiguously requires Commerce to consider only transactions where the price falls below [normal value] in calculating dumping margins.” Brief for United States, Timken Co. v. United States, No. 03-1098, -1238, 2003 WL 24305310, at *18 (Fed. Cir. filed May 19, 2003) (emphasis added). Expanding on this point, the United States argued that, “[c]onsidering the[] definitions [of “dumping margin” and “weighted-average dumping margin”] together, the statute plainly directs Commerce to aggregate the entries where NV exceeds U.S. price in determining the ‘weighted average dumping margin.’ The statute neither provides nor suggests that this amount may be reduced or offset by other EP or CEP transactions that exceed NV.” Id. at *19 (emphasis in original). The Timkencourt considered this a “close question,” ultimately ruling that Commerce’s construction of the Act was a permissible one. Timken, 354 F.3d at 1341.
Second, here's why Commerce changed its view:
3. The World Trade Organization And Commerce’s Change In Position
...
In 2003, the European Communities instituted an action before the WTO’s Dispute Settlement Body (“DSB”) to challenge Commerce’s exclusion of above-fair-value sales in fifteen antidumping investigations, including the investigation that resulted in the imposition of a 2.59% antidumping duty upon Tata Steel’s sales of hot-rolled carbon steel flat products. ...
In response to the WTO’s ruling that the exclusion of above-fair-value sales did not comply with the WTO Antidumping Agreement, Commerce initiated Section 123 and 129 proceedings. In the Section 123 proceeding, Commerce elected to abandon its practice of zeroing in future less-than-fair-value investigations. ... In other words, Commerce abandoned its position that exclusion of above-fair-value sales from the calculation of “weighted average dumping margin” was mandated by the unambiguous terms of the Tariff Act. In addition, in the Section 129 proceeding, Commerce recalculated the antidumping margin relating to its order on hot-rolled carbon steel f lat products from the Netherlands. Its recalculation resulted in a reduction of the margin from 2.59% to zero. See Implementation of the Findings of the WTO Panel in U.S.-Zeroing (EC), 72 Fed. Reg. 25,261, 25,262 (May 4, 2007). Accordingly, Commerce revoked the antidumping duty order on hot-rolled carbon steel fl at products from the Netherlands. Id
Third, here's how the U.S. courts upheld Commerce's new position:
4. Proceedings In The Courts Below
Nucor and U.S. Steel, as well as other members of the domestic industry, filed suit in the Court of International Trade (“CIT”) to challenge Commerce’s rulings in both the Section 123 proceeding and the Section 129 proceeding. The CIT upheld Commerce’s rulings, relying on Timken for the proposition “that Congress’s definition of ‘dumping margin’ is unclear as to whether positive and negative value dumping margins fit within the description of that term.” ...
Nucor appealed to the Federal Circuit. Like the CIT, the Federal Circuit held that the Tariff Act was not “‘so clear as to compel a finding that Congress expressly intended to require zeroing.’” U.S. Steel Corp., 621 F.3d at 1361 (quoting Timken, 354 F.3d at 1341). The court thus concluded that it was bound by circuit precedent and, in any event, the court agreed with Timken. Id.
And finally, here's the argument as to why the lower courts are wrong:
But antidumping protections are decimated by the decision below. By upholding Commerce’s determination that the Tariff Act permits offsetting, importers found to have engaged in dumping will be permitted to engage in dumping that far outpaces any duty that might be imposed upon the dumped merchandise. Indeed, as here, they may avoid duties altogether. ...
Worse, offsetting allows dumpers to go undetected by allowing foreign manufacturers to “mask” their dumped sales. ...
...
After having previously advanced the position that the definition of “weighted average dumping margin” “unambiguously requires [it] to consider only transactions where the price falls below [fair value] in calculating dumping margins,” Brief for United States, Timken Co. v. United States, No. 03-1098, at 16 (Fed Cir. fi led May 19, 2003), Commerce adopted the position that the statute permits above-fair-value sales to offset dumped sales in determining the “weighted average dumping margin.” ...
However, Commerce’s construction of the Act is an impossible one. No deference to Commerce is warranted because the Tariff Act is clear on this point. See Chevron U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837, 842-43 (1984). ...
The text and purpose of the Tariff Act conclusively demonstrate that the statute unambiguously precludes offsetting. ...
The text of the Tariff Act is clear. Reading the term “weighted average dumping margin” in pari materia with the statutory definitions of “dumping” and “dumping margin” makes plain that the Act unambiguously requires the exclusion of above-fair-value sales from the calculation of “weighted average dumping margin.” ...
To begin, the entire antidumping statutory scheme is premised upon Congress’s unambiguous decision to limit “dumping”—the conduct that the statute was designed to address—to a defi nedclass of impermissible trade practices; that is, “the sale or likely sale of goods at less than fair value.” 19 U.S.C. § 1677(34). In other words, there is no permissible interpretation of the Tariff Act under which the “dumping margin” can be derived from domestic sales that do not themselves meet the definition of “dumping.” There can only be a “dumping margin”—weighted average or otherwise—when there is “dumping.” And the statute makes clear that domestic sales of imported goods at more than fair value do not constitute dumping. As a consequence, the “weighted average dumping margin” cannot be derived from sales that fall outside of Congress’s chosen defi nition of the statute’s key term. ....
Likewise, the statutory def inition of the term “dumping margin”—which is defined as “the amount by which the normal value exceeds the export price or constructed export price of the subject merchandise,” 19 U.S.C. § 1673—unambiguously precludes offsetting. By using the word “exceeds” in defining “dumping margin,” Congress made clear its intent that there would be a “dumping margin” (and a “weighted average dumping margin”) only where normal value is “greater than” export price, i.e., only where there is dumping. This is because the plain meaning of “exceed” is “to be or go beyond” or “to be greater than.” ...
...
The Federal Circuit’s fundamental error was confusing the question of whether dumping is occurring with the question of how much dumping is occurring. Whether dumping is occurring is determined by answering a straightforward question: is a particular imported good being sold in the United States for less than it is being sold in the importer’s home market? If it is, Commerce is then charged with identifying how much dumping is occurring—i.e., evaluating a broader set of importation data to determine by how much the “normal value exceeds the export price or constructed export price.” 19 U.S.C. § 1677(35)(A). Per the text of the statute, Commerce may not use a formula for calculating the “dumping margin” that negates its determination that imported merchandise has been “dumped” in the United States. Once Commerce has determined that “dumping” is occurring, by definition the answer to how much dumping is occurring cannot be “none” under this statutory scheme.
This all makes me think of the core underlying issue here: What is dumping? Here's how a dissenting WTO panelist in the Lumber (DS264) case put it:
9.19 ... One school of thought is that "dumping" relates to the average pricing behaviour of an exporter/producer over time. For those who hold this view, the fact that a particular export transaction is made at a price that is below the price of a comparable transaction in the home market of the exporting country (or is below cost) does not necessarily mean that dumping has occurred, if another export transaction is made at a price which is higher than the home market price. They believe that exporters should be given "credit" for selling above normal value, and consider zeroing to be illogical. Others consider that any time a particular export transaction occurs at a price that is below the price of a comparable transaction in the home market of the exporting country (or is below cost), dumping has occurred. From this perspective, overall margins of dumping are calculated simply because it is impractical to calculate and impose anti-dumping duties with respect to each export transaction, and the idea that such a transaction should not be viewed as dumped merely because another export transaction occurs at a higher price makes no sense.
9.20 The difference between these two approaches can be understood on the basis of a simple example. Assume there are two home market sales and two export sales of a product during the period of investigation. Both home market sales are made at a price of 100. One of the export sales is made at a price of 50, the other at a price of 150. Under one school of thought, what is relevant is average pricing behaviour. Since the average normal value and average export price are both 100, there is no dumping and no duties should be imposed. Under the second school of thought, one of the two sales was at a dumped price while the other was not. Duties should therefore be collected on the dumped sale. However, a dumping margin should be calculated that would reflect that only some sales were dumped. Using zeroing, the total amount of dumping (50) would be divided by total export sales (200), resulting in a 25 per cent margin. Imposition of a 25 per cent duty on the two export transactions would result in the collection of duties in the amount of 50, the same amount of duties as would have been collected had dumping been determined and duties assessed for each transaction.
9.21 Arguments may be advanced for each of the conceptual approaches identified above. For the "average pricing behaviour" advocates, it is simply not consistent with commercial reality to expect that exporters will be able to fine-tune their pricing on a transaction by transaction basis to avoid dumping. Advocates of the alternative approach argue that the harm caused to domestic producers by a dumped transaction – e.g., the loss of a sale or sale at a lower price than would have otherwise occurred – is not undone simply because another export transaction is made at greater than normal value, nor is the damage caused by dumping of a particular type or model undone simply because another model is sold at greater than normal value. Both approaches have strengths and weaknesses.
Applied here, note that the U.S. statute says:
(34) Dumped; dumping
The terms “dumped” and “dumping” refer to the sale or likely sale of goods at less than fair value.
So what is "dumping" under U.S. law? Can the existence of dumping be established based on an individual "sale or likely sale" of a particular good at a certain price? Or must all the sales or likely sales of all the "goods" at issue be taken into account to determine whether there is dumping?
