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Why does the U.S. Continue to Engage in ‘Zeroing’?

As recently as October of 2016, China prevailed on the majority of a WTO complaint against certain U.S. methods of determining anti-dumping (“AD”) duties on Chinese products.1 The Panel held that U.S. practices of determining dumping margins in certain cases of “targeted dumping” were faulty because the U.S. Department of Commerce (“DOC”) had engaged in “zeroing.”2 Targeted dumping occurs when foreign exporting firms cut the prices of goods that are aimed at specific U.S. regions, customer groups, or time periods, as well as when authorities “find a pattern of export prices which differ significantly among different purchasers, regions or time periods.”3

Furthermore, zeroing occurs when the complainant counts as zero the dumping margins for those models where the dumping margin was negative and more specifically when the complainant counts the weighted average export price to be equal to the weighted average normal value, despite the fact that, in reality, the weighted average export price was higher than the weighted average normal value.4

This October 2016 case is not the first time the WTO has reprimanded the U.S. for its use of zeroing in AD investigations. In fact, the U.S. was condemned for its questionable anti-dumping duty tactics in US-Zeroing (EC), where the Panel found that the U.S. had acted inconsistently with Article 2.4.2 of the Anti-Dumping Agreement (AD Agreement) because “USDOC [U.S. Department of Commerce] did not include in the numerator used to calculate weighted average dumping margins any amounts by which average export prices in individual averaging groups exceeded the average normal value for such groups.”5 Originally, the EU brought a complaint concerning the U.S.’ use of zeroing when determining dumping margins in anti-dumping proceedings, including proceedings resulting in the imposition of anti-dumping measures as well as proceedings relating to the collection of anti-dumping duties.6

With respect to original investigations, the Panel concluded that zeroing as such, and independent of any specific application, was inconsistent with Article 2.4.2 AD Agreement.7 The Article 2.4.2 AD agreement stipulates that the existence of margins of dumping during the investigation phase shall normally be established on the basis of a comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions or by a comparison of normal value and export prices on a transaction-to-transaction basis.8

However with respect to administrative reviews, the Panel of US-Zeroing (EC) concluded that zeroing was permissible.9 The AB subsequently reversed this Panel holding and determined that by using zeroing in the administrative reviews, the DOC violated Article 9.3 AD Agreement and Article VI:2 GATT.10 Article 9.3 AD agreement states that the amount of the anti-dumping duty shall not exceed the margin of dumping as established under Article 2.11 And Article VI:2 GATT says that in order to offset or prevent dumping, a contracting party may levy on any dumped product, an anti-dumping duty not greater in amount than the margin of dumping in respect of such product.12

Similarly in US-Zeroing (Japan), Japan brought a complaint concerning the calculation of dumping margins by the U.S. based on zeroing which disregards the amounts by which the export prices are above the normal value in certain transactions involving ball bearing products shipped from Japan.13 The Panel concluded that the use of zeroing in the context of weighted-average-to-weighted-average comparisons (“model zeroing”) by the DOC within original investigations is ‘as such’ inconsistent with Article 2.4.2 AD Agreement because the calculated dumping margin fails to take into account all comparisons between the normal value and the export price.14

The Panel allowed zeroing in the context of transaction-to-transaction comparisons, (known as “simple zeroing”).15 The AB, however, subsequently overturned this decision and concluded that: “in establishing ‘margins of dumping’ under the T-T comparison methodology, an investigating authority must aggregate the results of all the transaction-specific comparisons and cannot disregard the results of comparisons in which export prices are above normal value.”16 Furthermore, the Appellate Body reversed the Panel’s findings with respect to the permissibility of zeroing in the context of reviews, ruling that zeroing is not permitted in the context of any type of review.17 After the aforementioned AB decisions and its clear aversion to the use of both model zeroing and simple zeroing, one might wonder why the U.S. continues to engage in the practice of zeroing at all, especially in investigations concerning targeted dumping.

  1. Tom Miles & David Lawder, China Scores WTO Victories Against some U.S. Anti-Dumping Methods, Reuters (Oct. 19, 2016),

  2. Id. 

  3. Anti-Dumping Agreement Art. 2.4.2., 1868 U.N.T.S. 201. 

  4. Appellate Body Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the DSU by India, para. 55, WT/DS141/AB/RW (Apr. 24, 2003). 

  5. Panel Report, United States – Laws, Regulations and Methodology for Calculating Dumping Margins (“Zeroing”), para. 7.32, WT/DS294/R (May 9, 2006) (US-Zeroing (EC)).  

  6. Appellate Body Report, US-Zeroing (EC), para. 1. 

  7. Panel Report, US-Zeroing (EC), para. 7.106. 

  8. Supra note 3. 

  9. Appellate Body Report, US-Zeroing (EC), para. 3. 

  10. Id. at para. 263. 

  11. Anti-Dumping Agreement Art. 9.3, 1868 U.N.T.S. 201. 

  12. GATT Art. VI:2. 

  13. Appellate Body Report, United States – Measures Relating to Zeroing and Sunset Reviews, para. 137, WT/DS322/AB/R (Jan. 23, 2007). 

  14. Panel Report, United States – Measures Relating to Zeroing and Sunset Reviews – Recourse to Article 21.5 of the DSU by Japan, para. 8.1(c)(i), WT/DS322/RW (Apr. 24, 2009). 

  15. Supra note 39, at para. 3. 

  16. Id. at para. 137. 

  17. Id. at para. 190. 

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Lucy Liu

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