Antidumping Zeroing Practice

ZEROING PRACTICE IN THE
CALCULATION OF DUMPING
MARGINS IN THE UNITED
STATE OF AMERICA
Bao Anh Thai *

May 2003
* Bao Anh Thai, managing partner of the Hanoi-based consulting firm of

Bao&Partners, specializes in international trade and contract laws and public policy,
http://www.baolawfirm.com.vn
Antidumping zeroing practice Trang 1 / 41

TABLE OF CONTENTS
INTRODUCTION.......................................................................................................................................3
CHAPTER I: AN OVERVIEW ABOUT ANTIDUMPING LAW .........................................................5
Economic critiques of antidumping law:..................................................................................................5
Conditions for the existence of international dumping........................................................................6
Reasons for dumping ...........................................................................................................................6
Critiques of the legal background of antidumping laws ...........................................................................7
Antidumping law as contagion:................................................................................................................9
CHAPTER II: U.S. ANTIDUMPING LAW AND ZEROING PRACTICE........................................12
A brief history of antidumping law in the u.s.........................................................................................12
Antidumping investigation proceeding: .................................................................................................13
How to calculate antidumping margin: ..................................................................................................16
Basic formula: ...................................................................................................................................17
Identifying and adjusting the EP or CEP: .........................................................................................17
Identifying and adjusting the NV:......................................................................................................18
Zeroing Practice:...............................................................................................................................21
CHAPTER 3: THREE ANTIDUMPING CASES..................................................................................24
EU-Bed Linen ........................................................................................................................................24
Facts:.................................................................................................................................................24
India’s claims: ...................................................................................................................................25
EC’s arguments: ................................................................................................................................26
Panel’s holdings:...............................................................................................................................26
United States’ arguments: .................................................................................................................28
Timken Co. v. United States...................................................................................................................29
United States – Softwood Lumber from Canada (WT/DS264/R) ..........................................................31
Facts:.................................................................................................................................................31
Canada’s arguments..........................................................................................................................31
United States’ arguments...................................................................................................................32
Panel’s holding: ................................................................................................................................33
CHAPTER 4: THE NECESSITY TO AMEND THE ANTIDUMPING AGREEMENT...................36
Timken Co. v. United States...................................................................................................................36
EC-Bed Linen and US-Softwood Lumber..............................................................................................37
Conclusion..............................................................................................................................................39
Zeroing practice in antidumping Page 2 / 41

INTRODUCTION
Chemical weapons in the World War I was one of the most horrifying and inhuman
weapons ever seen in the human history showing nothing other than the desperation of
the exhausted sides in the war when they could not find any new type of warfare to
overcome the trench war deadlock. The painful experience of chemical weapon was so
strong that in the World War II, Adolph Hitler, who himself was hospitalized due to tear
gas of the French during the Great War, in order to delay the final collapse of his Reich,
resorted to all available “wonder weapons” but chemical warfare. Seventy years later, in
1988, the Economist argued that "anti-dumping suits are emerging as the chemical
weapons of the world's trade wars." 1 This exclamation clearly showed the new
deadlock in the negotiation to create a new free-trade-world.
On the one hand, antidumping is considered by many free-trade-supporters as a weapon
of choice for and abused by protectionists. 2 On the other hand, the antidumping
supporters argue that this practice is necessary as it creates a level playing field for
domestic industries that face unfair import competition.3 Lindsey and Ikenson in a book
about antidumping have commented that the arguments for and against antidumping law
are not based on the same ground 4 . On the one hand, the critique of antidumping is
mostly based on an economic approach which focuses on consumer welfare. This
approach considers that the importing country suffers no harm if the dumped price
would not lead to a monopoly or unreasonable higher prices in the long term. 5 On the
other hand, the supporters of antidumping law argue that the antidumping remedies
address pricing practices that reflect artificial competitive advantages created by market
distortion. They argue that it is unfair competition for the domestic industries although
the dumping may benefit consumers in the short term. 6 Because the objectives of
antidumping policy are differently defined by the supporters and critics of antidumping
law, they have often talked past each other. 7
Bearing in mind the above situation about the discussion of antidumping policy, this
paper discusses one technical aspect of the antidumping law in the United States:
zeroing practice in calculating dumping margins. Commented by a leading scholar in
international trade law as a “core issue of antidumping law” 8 , zeroing is “one of the
antidumping law’s most egregious distortions” 9 that has been condemned by the WTO
recently. In this paper, we do not try to support or challenge antidumping policy but we
support the WTO condemnation of zeroing practice.
1
The Anti-Dumping Dodge, Economist, Sept. 10, 1988, at 77.
2
See generally Raj Bhala, Rethinking Antidumping Law, 29 GW J. Int'l L. & Econ. 1 (1995).
3
Brink Lindsey & Daniel J. Ikenson, Antidumping Exposed The Devilish Details of Unfair Trade Law, vii
(CATO Institute, 2003).
4
Id. at viii – ix.
5
Id. at xi.
6
Id. at xi.
7
Id.
8
David A. Gantz, professor of law, the University of Arizona, in an interview on March 10th, 2004.
9
Lindsey & Ikenson, supra n. 3 at 70.

The paper is divided into four chapters. Chapter 1 is an over view about antidumping
laws with the economic and legal backgrounds of these laws. Chapter 2 is about the US
antidumping law and the zeroing practice. In Chapter 3, we discuss three cases in which
the zeroing practice has been discussed by the WTO and the United States Court of
Appeals. Chapter 4 is an analysis of the arguments in those three cases. In this Chapter
we have a conclusion that while the WTO’s condemnation of the zeroing practice should
be applauded, the reasoning of the Panels is not flawless. The flaws in the Panels’
reasoning have roots in the ambiguousness of Article 2.4.2 of the AD Agreement which
should be amended to be clear.

CHAPTER I: AN OVERVIEW ABOUT ANTIDUMPING LAW
If the antidumping law is considered as widely abused by the protectionists to create a
new non-tariff trade barrier, the zeroing practice could be an example for such
consideration as it is frequently used in the United States at present time and in Europe
until EC-Bed Linen case was concluded. 10 While the purpose of the antidumping law in
the United States is literally read as “the restoration of conditions of fair trade” 11 , still
there are many critiques that the law does not serve a such purpose. Hence, it is
necessary to have an overview of the grounds of those critiques.
Economic critiques of antidumping law:
As already mentioned earlier 12 , most of the critiques saying that antidumping is a new
measure for protectionism is based on the economic efficiency of the policy. Many
economists consider dumping is "basically harmless for the importing country" 13 which
low prices can be tough for the domestic producers who have to compete with but it is a
benefit for general consumers. By putting the consumer's benefit above that of the
domestic producers, the supporters of this approach prove that the net gain for the
country upon accepting dumping outweighs the cost for the producers to change into
new business when they cannot compete with the dumped goods. An investigation
carried out by the U.S. Trade Commission in 1995 showed that in 1991, antidumping
orders cost the U.S. economy a collective net cost of $1.59 billion. This investigation
also pointed out that this cost outweighed the benefits derived by having the
antidumping orders in place. 14
Another analysis of an economist explained this issue furthermore. According to this
analysis, the antidumping duties are an extremely costly way to improve the profitability
of U.S. producers or employment in U.S. industries. In the analyzed cases, the
antidumping duties cost the consumer a range from $2.40 to $25.10 for each dollar of
increased profits of U.S. industries. In terms of the U.S. economy, it costs from $0.20 to
$10.80 per each dollar of increased profits. More dramatically, the analysis found that
to create a job in industries competed by dumping, the minimum cost for the consumer
was $113,000, while a new job can be created with a minimum cost for the economy
much more cheaply: $14,000. 15 The figures tell the story itself – by maintaining the
antidumping duties, it costs the importing country more than repealing it. So, one can
ask a question “if it benefits the consumer in the importing country, how can the
10
European Communities – Anti-dumping Duties on Imports of Cotton-Type Bed Linen from India
(complaint by India, WT/DS141/AB/R) (available at http://www.wto.org).
11
Continued Dumping and Subsidy Offset Act of 2000, Pub. L. No. 106-387, sec. 1002(2), 1(a), 114 Stat.
1549A-72 (2000).
12
Lindsey & Ikenson, supra n. 3 at xi.
13
Bhala, supra n. 2 at 10.
14
U.S. International Trade Commission, The Economic Effects of Antidumping and Countervailing Duty
Orders and Suspension Agreements, Pub. 2900, 4-13, (1995).
15

exporters maintain such dumping?” The different answers lead to different opinions on
whether the antidumping law is necessary or not.
Conditions for the existence of international dumping
It is generally agreed that, from economic perspective, the exporter can sustain dumping
only upon the existence of three necessary and sufficient conditions. First, the
exporter’s home market and the importing country’s market must be segregated so that
merchandise does not flow between them 16 . Second, the exporter must have sufficient
market power to influence the price of merchandise in its home market. 17 Third, the
exporter must face a relatively more elastic demand curve for merchandise in the
importing country’s market, and a relatively less elastic demand curve for like
merchandise in its home market. 18 In brief, the benefit to the consumer in the importing
country is paid not by the exporter but by the consumer in its home country where the
consumer has to pay higher prices due to the exporter’s market power.
Reasons for dumping
There are several reasons for an exporter to dump in a foreign market. Predatory
intention might be the one 19 , but in many cases it seems unlikely for foreign exporters to
establish a monopoly in the importing country. If one exporter wants to have monopoly
in the importing market, it has to drive not only domestic producers but also other
foreign competitors out of the market. In a closed market, one company can drain out
the financial resource of competitors by a low-price race. However, in a non-closed
market, the predator will face a new wave of foreign competitors who would fill in the
vacuum left by the driven out domestic competitors 20 . In this case, it’s unlikely that the
predator could launch such a competition on an international scale.
Unexpected surplus of produce or a decline of demand could force producers to sell
goods below cost. As long as the producer prices its goods above the variable costs, the
revenue in excess of its variable costs will defray a portion of its fixed costs. Thus, the
producer suffers lower losses than it would by halting production (in which case it
would suffer losses equal to its full fixed costs). 21
The fluctuation of foreign exchange rates or changed market conditions can also be the
reason for dumping. For example, if the currency of the importing country is devaluated
and the devaluation leads to the actual market price turns out to be lower than estimated,
the exporter will have no choice but to sell its merchandise at the best available price.
Although this price may lead to losses to the exporter, but still, it helps the exporter to
16
If not, the dumped merchandise may be re-exported back to its home country.
17
18
Id. at 10.
19
U.S. antidumping laws were initially enacted out of a concern for predatory pricing by foreign
competitors. Michael J. Trebilcock & Robert Howse, The Regulation of International Trade, 180 (2nd ed.
Routledge 1999).
20
Id. at 181.
21
Id.

recoup a portion of its sunk cost. 22 This situation is more clearly seen in the case where
the merchandise is specifically customized for the importing market (i.e. products with
packages and brands specifically made for the importing market).
So, as discussed above, it is not easy for a producer to dump its goods in a foreign
market, and in many case, the dumping occurs due to many reasons other than an unfair
intention of the producer to oust its competitors from the market. In addition, in 29
countries, the same products were subjected to antidumping duty order both at home
(against imports) and abroad (against exports). This fact raises a question about the real
reason of antidumping: How can an industry being injured by unfairly priced imports
cause injury to the same industry in other country at the same time by unfairly priced
exports? 23
Critiques of the legal background of antidumping laws
With respect to the question about what type of dumping should be subject to
antidumping law, it is noteworthy to mention the ways in which dumping can be
characterized. Generally, merchandise is considered dumped when it is sold in the
United States at “less than fair value”. 24 Dumping can be international price
discrimination (sales at a lower price in the United States than in the home country of
the exporter) or sales below cost. 25 If the purpose of dumping is to knock the exporter’s
competitors in the importing country out of business and then recover the dumped cost
by higher prices once a monopoly is established, it would be called as predatory
pricing. 26 If the dumping is a result of an unexpected surplus of produce and in an
intermittent period, it is called intermittent dumping. 27
Antidumping law in the U.S. does not primarily acts against the predatory pricing. It
acts against international price discrimination and sales below cost, regardless of
whether the sales are predatory. 28 In other words, the scope of target of antidumping
law is wider than that of antitrust law. For this reason, on the contrary to argument of
22
Id. at 182.
23
24
David A. Gantz, A Post-Uruguay Round Introduction To International Trade Law In The United States,
12 Ariz. J. Int’l & Comp. Law 7, 35 (1995) (hereinafter Gantz, “Post-Uruguay Round”).
25
26
Lindsey & Ikenson, supra n. 3 at xi.
27
Trebilcock and Howse found that in Canada, the intermittent dumping occurred in agricultural cases.
Due to the cyclical nature of supply in agricultural markets, the agricultural producers often find they have
excess produce and rather than allowing it to rot they sell at low prices. In international trade context, the
intermittent dumping cannot occur without the existence of three conditions. First, exporters must be
unable to compete with domestic producers under normal market conditions. Otherwise exporters would
provide a permanent source of supply instead of an intermittent one. Second, intermittent dumping must
be so extensive that it substantially disrupts domestic production. The losses incurred by selling below-
cost products into export market make it unlikely that the dumping will last long enough to disrupt
domestic production. Trebilcock & Howse, supra n. 19 at 185.
28

some scholars that antidumping law is redundant to domestic antitrust laws 29 , supporters
of antidumping law believe that it is still “a practical and political necessity in a world in
which cross-border price discrimination is possible because of protection in home
markets.” 30 Citing a recent strong argument of the U.S. Government on this matter 31 ,
some scholars go further to say that the likelihood antidumping laws and antitrust laws
“will meet in any foreseeable future is virtually nil”. 32
Another critique of antidumping law is the law cannot address the source of the
problem of the alleged unfair pricing - the closed foreign market. 33 As discussed in §
1.1.1, the closed foreign market is one of three conditions for dumping practices.
Without this condition, the dumped merchandise – in theory – could be re-exported back
to the exporting country. 34 The antidumping duty imposed upon dumpers can cut back
the imports but it could not directly help to open the market of exporting country –
which is normally the matter of government policy.
Antidumping law could also create one of two perverse incentives for an exporter.
First, facing high antidumping duties, an exporter might reduce its exports and increase
its home-market sales. Consequently, the price of its merchandise in the importing
country rises, reducing competitive pressure on producers in that country, while the
price of its merchandise in its home country falls. Alternatively, instead of withdrawing
from the importing country, the exporter may relocate its production facilities in that
country if it is a significant market. 35
Besides the critiques on the legal background of antidumping laws, there are also
critiques on technical issues in applying the law (e.g. accounting techniques in
calculating cost of production, the matter of comparing U.S. wholesale and foreign retail
prices and zeroing practice). 36 Those critiques do not aim at the necessity of
29
Id. at 16.
30
Id. at 17.
31
A paper from the U.S. Government to the WTO Working Group on the Interaction of Trade and
Competitive Policy stated: “In the view of the United States, this Group cannot gain from any inquiry into
the alleged ‘anti-competitive effects’ of the antidumping rules. As many Members have acknowledged,
there is no reasonable foundation for replacing the antidumping rules with competition laws or modifying
them in a way that would make them reflect competition policy principles. Stated simply, the antidumping
rules and competition laws have different objectives and are founded on different principles, and they seek
to remedy different problems. If the antidumping rules were eliminated in favor of competition laws or
modified to be consistent with competition policy principles, the problems which the antidumping rules
seek to remedy would go unaddressed.” Peter D. Ehrenhaft, Is Interface of Antidumping and Antitrust
Laws Possible? 34 Geo. Wash. Int'l L. Rev. 363, 401 n. 130 (2002).
32
Id. at 400.
33
Bernard M. Hoekman & Michael P. Leidy, Antidumping and Market Disruption: The Incentive Effects
of Antidumping Laws, in The Multilateral Trading System: Analysis and Options for Change 155, 163
(Robert M. Stern ed., 1993)
34
This theoretical assumption may be right in the case where dumping reflects predatory pricing. In this
case, it’s unlikely that the dumping producers could have capable financial resources for maintaining the
dumping both in its country and in the importing country. However, in the case the dumping is a result of
unexpected surplus of production or the instability of the economy (i.e. currency devaluation), the closed
market is not necessary condition for the dumping in the importing country.
35
Bhala, supra n. 2 at 18-19.
36
See generally Robert W. McGee, The Case to Repeal The Antidumping Laws, 13 NW. J. INT'L L. &
BUS. 491 (1993).

antidumping laws but the accuracy in applied methodologies and the fairness for
involved parties.
Although there are still disputes on whether antidumping laws are necessary or how
to improve them, it is undisputable that recently the use of antidumping laws has been
becoming very popular in international trade wars. The following section illustrates the
recent popularity of antidumping.
Antidumping law as contagion:
Although the existence of antidumping laws in the United States 37 and Canada 38 could
be traced back to the early 20th Century and even earlier in Europe 39 , those laws were
sparingly invoked and even more stingily applied 40 . However, since the 1970s, the
number of antidumping cases started rising and became an explosion during 1980s. The
last two decades have seen dramatic changes in terms of (i) the number of antidumping
cases and antidumping measures in force, (ii) the number of antidumping users, and (iii)
the increase of countries and industries become targets of antidumping. The facts
hereunder might help one to understand why antidumping is becoming considered a
contagion.
In 1974, the United States amended its antidumping law to provide for the use of the
cost test, the exclusion of below-cost sales in the comparison market, and the use of
constructed value. With these changes, the number of antidumping cases increased
dramatically and it is much easier to find dumping and produce substantially high
dumping margins 41 . From January 1980 to June 1989, 398 investigations were initiated
in the United States 42 (about 40 per year – nearly five times in comparison with 15 cases
per year of the 1921-1967 period.) As other countries followed the United States to
amend their antidumping laws, the number of antidumping investigations in those
countries increased too. Over the same period, Australia, the European Community, and
Canada combined initiated 1,091 new cases. 43 In the 1990-1999 period, the number of
antidumping cases skyrocketed to 2,483 in the world – more than 50 percent increase
over that of 1980s. 44
New faces in the antidumping club are one of the reasons for the increase of
antidumping cases. If there were only 28 countries had adopted antidumping laws by
the end of 1989 45 , this number increased to 71 as of October 2002 (with 15 members of
37
The U.S antidumping laws date back to 1921.
38
In Canada, antidumping laws date back to 1904 with the amendment of the Customs Tariff to provide
for antidumping duties. Trebilcock & Howse, supra n. 19 at 172.
39
J. Michael Finger, Antidumping: How It Works and Who Gets Hurt 16 (Ann Arbor: University of
Michigan Press, 1993).
40
There was a total of 706 antidumping investigations between 1921 and 1967 in the United States (about
15 per year), and 75 of them resulted in relief for the petitioning industries. Id. at 26.
41
42
Id.
43
Id. Footnote omitted.
44
Id. at 105.
45
Trebilcock & Howse, supra n. 19 at 166.

the European Union counted as one). 46 Until very recently antidumping was a weapon
of choice for a small number of highly developed countries. In the July 1980 – June
1988 period, 97.5 percent of all antidumping actions brought by four countries (the
antidumping cases initiated by United States, Australia, Canada and the European Union
were respectively 30, 27, 22 and 19 percent of the total antidumping cases). 47 However,
from the end of 1980s, developing countries have been increasingly using antidumping
as weapon of choice when other traditional protection tools (i.e. tariff, quotas and
restrictive import-license schemes) had been abandoned as a part of their engagement to
trade liberalization. 48 From negligible number before 1980s the percentage of
antidumping initiated by new users increased to 37 percent and then to 59 percent in the
1990 – 1994 and 1995 – 1999 periods respectively. 49 The rising stars among the new
faces are Mexico, South Africa, India, Brazil, Argentina and Egypt.
Unsurprisingly, as the number of antidumping cases and antidumping users increase, the
industries and countries being targets for antidumping investigations escalate. In 1995-
2000 the victims of new antidumping users increased significantly: South Africa from
13 to 33, India from 7 to 30, and Brazil from 12 to 23. 50 It’s also interesting to see that
four of the top 10 antidumping users (the United States, Brazil, Germany, and France)
also fell victim to the protectionism of other countries and appear in the top 10 targets in
the same period. Other top 10 users like India, Canada, Mexico and the United
Kingdom are among the top 20 targets. 51
Few industries still remain insulated from antidumping. Nineteen of 21 broad industry
groups were the subject of antidumping measures during 1995-2000. 52 While the
European Union maintained measures against 16 industry groups, the United States and
Mexico followed with 15 apiece. 53 The case of India is noteworthy with the targeted
industries increased from 2 in 1995 to 8 in 2000. 54
In brief, in the last two decades antidumping has gone global. 55 From a protectionist
weapon used by a small number of developed countries, now it becomes the weapon of
choice for many other developing countries. The number of antidumping actions
dramatically increased and few industries are still kept intact from it. Antidumping has
become contagious.
Although there are still a lot of arguments on the legal background of antidumping law,
the critiques are absolutely convincing regarding in the economic inefficiency of the
law. Therefore, Kenneth Dam is getting more and more supporters for his comment:
“The fact that governments act against dumping only when the low price is charged in their own
territory reveals that governments are concerned with the welfare of their own enterprises rather than
46
47
48
Lindsey & Ikenson, supra n. 3 at 104-105.
49
Id. at 106.
50
Id. at 107.
51
Id.
52
Industry groups correspond to the “section” level of the Harmonized Tariff Schedule. Id.
53
Id. at 108.
54
Id.
55
Id. at 111.

with the protection of their citizens from extremely high prices charged by monopoly sellers. If the
problem were really the discrimination itself, then presumably governments would be more
concerned to attack high prices than low prices. Where an exporter sold at home at higher prices than
he sold abroad, it would be the exporter's government, not the importer's government, that would take
coercive action. The General Agreement [on Tariffs and Trade], like the governments themselves,
views the impact in the low-price country as the harmful aspect of dumping...
...
The concern with dumping is therefore a concern with the protection of domestic industry from
international competition.” 56
Despite all critiques, antidumping laws survive. Four times the supporters of free trade
have tried to ban the law and four times the use of antidumping actions have been
affirmed by the negotiators in: (1) the negotiation of the GATT in 1947, (2) between
1964 and 1967 when the Kennedy Round Antidumping Code was produced, (3) between
1974 and 1979 when the Tokyo Round Antidumping Code was produced, and (4)
between 1986 and 1994 when the Uruguay Round Antidumping Code (officially called
the Agreement on Implementation of Article VI of the General Agreement on Tariffs
and Trade 1994, hereinafter the “AD Agreement”) was produced. 57
However, in some instances, such efforts have been successful. The members of the
European Union, for instance, no longer engages in anti-dumping actions against each
other, and limits any investigations of unfair trade through dumping to instances where
predatory pricing is at issue. Canada has succeeded in phasing out the use of anti-
dumping remedies in the recently concluded Canada-Chile Free Trade Agreement. 58
56
Quoted by Bhala, supra n. 2 at 12. Another author even goes further in condemning antidumping laws:
“The antidumping laws must be repealed, the sooner the better. They serve no public interest, but merely
protect producers at the expense of everyone else. They result in a deadweight loss to the economy,
destroy more jobs than they create and lower living standards. Reform is not called for because the goal of
antidumping - protecting domestic industry at the expense of everyone else - is not a worthy goal.”
McGee, supra n. 36 at 561.
57
Bhala, supra n. 2 at 29. Another scholar thinks that the efforts in the Kenedy, Tokyo and Uruguay
Rounds more less to ban antidumping actions than to regulate the abuse by national administrating
agencies. Gantz, supra n. 8 comments on this thesis.
58
Jean-Marc Leclerc, Reforming Anti-Dumping Law: Balancing the Interests of Consumers and Domestic
Industries, 44 McGill L.J. 111, 139 (1999).

Ch. 2 US Antidumping Law and Zeroing Practice
CHAPTER II: U.S. ANTIDUMPING LAW AND ZEROING

PRACTICE
A brief history of antidumping law in the u.s.
Perhaps the first major antidumping law of the United States was the Revenue Act of
1916 59 which is also known as the Antidumping Duty Act of 1916 and still be in force. 60
Some scholars also think that the Sherman Antitrust Act (1890) and section 73 of the
Wilson Tariff Act of 1894 are applicable to dumping situations 61 . The Antidumping
Duty Act of 1916 was passed in response to alleged German predatory dumping during
the First World War, and made it a crime to import foreign products for prices that were
less than wholesale or actual market value.62 As it was a criminal statute, the
perpetrators could be found guilty only upon finding of the intent to harm or destroy an
industry in the United States or to prevent such an industry from being formed. 63 This
requirement seems not easy to satisfy as there has never been either a successful
prosecution or a civil judgment under this Act.64 To lower the level of required proof
for a complaint to seek for an antidumping relief, the U.S. Congress enacted the
Antidumping Act of 1921. 65 The Antidumping Act of 1921 is conceptually and
institutionally similar to present-day antidumping law. 66 For example, it established a
two-pronged legal process whereby one government agency decided whether a product
was being dumped and another government agency decided whether the dumping
caused injury. 67
The Trade Act of 1974 68 amended the Antidumping Act of 1921 and then was replaced
by the Trade Agreements Act of 1979 69 . This act added sections 731-740 to the Tariff
Act of 1930. The Trade Agreement Act of 1979 contained major substantive and
procedural changes, and transferred responsibility for administering the antidumping
law from the Department of the Treasury to the Department of Commerce. 70 Most
59
Revenue Act of 1916, ch. 463, 800-801, 39 Stat. 798 (codified at 15 U.S.C. 72).
60
Michael S. Knoll, United States Antidumping Law: The Case for Reconsideration, 22 Tex. Int'l L. J.
265, 268 (1987).
61
McGee, supra n. 36, at 492 n. 1.
62
Id. at 492.
63
Id.
64
65
Antidumping Act of 1921, Pub. L. No. 67-10, 42 Stat. 11 (codified as amended at 19 U.S.C. § 160-171).
66
Knoll, supra n. 60 at 269.
67
Id.
68
Trade Act of 1974, 19 USC§ 160 (1976).
69
Trade Agreements Act of 1979, Pub. L. No. 96-39, tit. I, 106(a), 93 Stat. 193. (codified at 19 U.S.C.
1673-1673i, 19 U.S.C.A. 1673-1673i (1980 & 1992 Supp.)).
70
United States International Trade Commission, “Antidumping and Countervailing Duty Handbook”,
10th ed., Pub. 3566, IV-4 (Dec 2002) (hereinafter “AD Handbook”)

provisions of the Antidumping Act of 1921 were later merged into the Tariff Act of
1930 as well. 71
Other amendments to the antidumping law were Title VI of the Trade and Tariff Act of
1984, and Title I, Subtitle C, Part 2 of the Omnibus Trade and Competitiveness Act of
1988. 72 The most important modifications of the 1984 Act were provisions relating to
cumulation of imports from subject countries and threat of material injury. 73 The 1988
Act addressed the issues of the prevention of circumvention of antidumping orders, and
amended provisions of the law relating to critical circumstances, material injury, and
threat of material injury. 74
The most recently amendment of antidumping law is the Uruguay Round Agreements
Act (URAA) of 1995. To be in consistent with the AD Agreement of the WTO, this act
modified provisions of the law relating to issues such as material injury, threat of
material injury, critical circumstances, regional industry, related parties, and cumulation.
New provisions in this Act were about captive production, negligible imports, and
sunset reviews, among others. 75
Antidumping investigation proceeding:
This section summarizes a typical antidumping investigation process carried out by the
International Trade Commission (ITC) and U.S. Department of Commerce (DOC). In
fact, International Trade Administration (ITA), an agency of the DOC is the organ to
carry out the works of the DOC. According to the U.S. law, antidumping duties are
imposed upon the finding that “a class or kind of foreign merchandise is being, or is
likely to be, sold in the United States at less than its fair value” and a U.S. industry is
“materially injured” or “threatened with material injury” or “the establishment of an
industry in the United States is materially retarded”. 76 An investigation could be
divided into five stages: (i) initiation of the investigation by the DOC, (ii) the
preliminary phase of the ITC’s investigation, (iii) the preliminary phase of DOC’s
investigation, (iv) the final phase of DOC’s investigation, and (v) the final phase of the
ITC’s investigation.
The antidumping investigation process is triggered by a petition of an industry or by the
DOC (although in almost every case the petitioner is an industry) to the ITC and DOC
simultaneously. 77 Petitioners are required to provide some evidence of dumping and
injury in order to initiate an investigation though these requirements are quite modest. 78
Petition determination and initiation of the investigation by DOC: within 20 days after
the date on which the petition is filed, the DOC determines whether it is necessary and
71
McGee, supra n. 36 at.494 and n.17.
72
AD Handbook, supra n. 70 at IV-4.
73
Id.
74
Id.
75
Id.
76
19 USC § 1673.
77
19 USC § 1673a.
78

reasonable to open an antidumping investigation as requested by petitioners. 79 If the
determination is affirmative, the investigation is initiated. If not, the DOC dismisses the
petition and terminates the proceeding. 80
Preliminary phase of the ITC’s investigation: within 45 days after the date on which the
petition is filed, the ITC determines whether an American industry is (i) materially
injured or (ii) threatened with material injury or (iii) the establishment of an industry in
the U.S. is materially retarded by reason of imports of the subject merchandise and that
imports of the subject merchandise are not negligible. 81
The preliminary phase of the ITC’s investigation can be broken into 6 stages: 82
1. Institution of the investigation and scheduling of the preliminary phase;
2. Questionnaires;
3. Staff conference and briefs;
4. Staff report and memoranda;
5. Brief and vote; and
6. Determination and view of DOC.
In the first stage, a six-person team consisting of an investigator, economist,

accountant/auditor, industry analyst, attorney, and supervisory investigator is set up to
make a schedule for the preliminary phase of investigation. This team also prepares a
notice of institution of investigation for publishing in the Federal Register to provide
information for anyone concerning the subject matter.83 In the second stage,
questionnaires are sent to U.S. importers, U.S. producers, and foreign producers for
information and data that the ITC needs for its determination. Before preliminary
determination, a conference between the ITC and the attendance of concerned parties is
held. In this conference, the concerned parties have a chance to present their legal and
factual arguments and testimony by witnesses in support of their position. 84 After the
conference, a staff report – prepared by the team addressing the factual issues, analysis
of collected data and issues raised by the parties in the conference – is submitted to the
ITC. A memorandum about the legal issues is also submitted by the attorney through
the ITC General Counsel. In the fourth stage, the ITC convenes a public meeting
between the ITC Commissioners and the investigation staff for questioning issues
related to the staff report and memoranda. Then, the Commissioners vote for the
determination. In the sixth stage, the ITC informs the Secretary of Commerce its
79
19 USC § 1673a (c) (1).
80
19 USC § 1673b (a) (2) and (3).
81
19 USC § 1673b (a) (1).
82
AD Handbook, supra n. 70 at II-5.
83
Id.
84
Id.

preliminary determination and publishes it in the Federal Register. If the determination
is negative or imports are found negligible the proceeding is terminated. If not, the
DOC starts the preliminary phase of its investigation. 85
Preliminary phase of DOC’s investigation: within 160 days after the date on which the
petition is filed, the DOC determines “whether there is a reasonable basis to believe or
suspect that the merchandise is being sold, or is likely to be sold, at less than fair value
[LTFV]”. 86 If it finds affirmative, an order to suspend liquidation of all entries of the
subject imports is issued to the U.S. Customs Service. Importers are then required to
post a cash deposit or bond for each entry of the subject merchandise in an amount
based on the estimated weighted average dumping margin. 87
Final phase of DOC’s investigation: within 235 days after the date on which the
petition is filed, the DOC makes final determination of whether the subject merchandise
is being sold, or is likely to be sold at LTFV. 88
Final phase of the ITC’s investigation: within 280 days after the date on which the
petition is filed, the ITC makes final determination of an American industry is materially
injured or threatened with material injury or the establishment of an industry in the U.S.
is materially retarded by reason of imports of subject merchandise. Similarly to the
preliminary phase, this phase can be divided into eight stages with the contents of each
stage are similar to the stage in the preliminary phase:
1. Scheduling the final phase;
2. Questionnaires;
3. Pre-hearing staff report;
4. Hearing and briefs;
5. Final staff report and memoranda;
6. Closing of the record and final comments by parties;
7. Briefing and vote; and
8. Determination and views of the ITC.
If the ITC’s determination is affirmative, the DOC issues an antidumping order within 7
days of the ITC’s determination. 89
85
Id.
86
19 USC § 1673b (b) (1).
87
AD Handbook, supra n. 70 at II-13.
88
19 USC § 1673d (a) (1).
89
19 USC § 1673e (a).

Figure 1
ANTIDUMPING INVESTIGATION PROCESS
ITC DOC
1. Institution of the investigation (1) Initiation of

and scheduling of the Investigation
preliminary phase;
2. Questionnaires;
3. Staff conference and briefs;
(2) Preliminary
Investigation 4. Staff report and memoranda;
(Determining INJURY) 5. Brief and vote; and
6. Determination and view of the (3) Preliminary

ITC.
Investigation
1. Scheduling the final phase;
2. Questionnaires;
3. Pre-hearing staff report; (4) Final Investigation
4. Hearing and briefs;
5. Final staff report and

memoranda;
6. Closing of the record and final

(5) Final Investigation comments by parties;
(Verifying INJURY) 7. Briefing and vote; and
8. Determination and views of
the ITC
(6) Final Dumping Liability
How to calculate antidumping margin:
As already mentioned earlier, 90 an antidumping duty is imposed upon the satisfaction of

two conditions: dumping and injury. Within the context of this thesis, we do not discuss
the methodology used by the ITC to determine the material injury or the threatening of
material injury to a U.S. industry. We do not go into details of dumping margin
calculation which is complicated, either. In this section, we limit ourselves in
90
Chapter 2, section 2 of this thesis.

explaining the general rule of dumping margin calculation, the zeroing practice and its
affect to the results of the calculation.
Basic formula:
To determine a dumping, or in other words to determine if the subject merchandise is

being sold at LTFV, the DOC makes a comparison between the “normal value” (NV)
and the “export price” (EP). 91 The normal value is the foreign home market price of a
"foreign like product" sold in the ordinary course of trade for consumption in the
exporter's country. The EP is price at which the subject merchandise is first sold (or
agreed to be sold) before the date of importation by the producer or exporter of the
subject merchandise outside of the United States to an unaffiliated purchaser in the
United States or to an unaffiliated purchaser for exportation to the United States”.92 A
“constructed export price” (CEP) is used where the EP is unavailable or unreliable. The
formula for the dumping margin calculation is: 93
Dumping Margin = NV – EP (or CEP)
NV: Normal Value.

EP: Export Price.
CEP: Constructed Export Price.
Identifying and adjusting the EP or CEP:
The EP is the price at which the subject merchandise is first sold (or agreed to be sold)
before the date of importation by the producer or exporter of the subject merchandise
outside of the United States to an unaffiliated purchaser in the United States or to an
unaffiliated purchaser for exportation to the United States. 94 The CEP is the price at
which the subject merchandise is first sold (or agreed to be sold) in the United States
before or after the date of importation by or for the account of the producer or exporter
of such merchandise or by a seller affiliated with the producer or exporter, to a purchaser
not affiliated with the producer or exporter. 95
In order to make a “fair comparison” between the NV and EP (or CEP), as required by
the Agreement on Implementation of Article VI of the General Agreement on Tariffs
and Trade 1994 96 , the DOC adjusts the EP or CEP under the form of subtractions or
91
Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, § 2.1
codified as 19 USC §1677 (35).
92
19 USC § 1677a (a).
93
94
19 USC § 1677a (a).
95
Id. at (b).
96
Art 2.4.

additions to a starting figure.97 In the case of CEP, three further subtractions are made as
in seen in Figure 2 below.
Figure 2: Adjusting the EP and CEP

Exporter’s expenses to sell the
Shipping cost merchandise in the U.S (see 19
USC 1677a (d) (1))
Subtractions
Export duties
Value added to the goods after its

Only CEP import in the U.S. but before selling
EP and CEP
to unrelated purchasers (see 19
USC 1677a (d) (2))
Cost of container
and pack
Profit allocated to the expenses in
Import duties the above boxes (see 19 USC
rebated or 1677a (d) (3))
Additions uncollected due to
export
Any taxes or duties

rebated or
uncollected due to
export
Identifying and adjusting the NV:
The DOC can determine the NV based on (i) the sales in the home market of the
exporter, or (ii) the sales in a third country, or (iii) a constructed value (CV). Two
factors are taken into account by the DOC to determine if the home market, or the third
country market or the CV to be used: (i) the availability of the foreign like product, and
(ii) the sufficient quantity of the sales of such merchandise in the exporter’s home
market.
The home market is used if the exporter sells “like products” and with a sufficient
quantity. The sufficient quantity in the home market is determined by a test comparing
the volume of home-market sales with the volume sold to the United States. If the
home-market sales are less than 5% of the United States, it is insufficient.98
Considering the case that the merchandise may different from those sold in the United
States due to design, package and other specifications may be customized for the local
market, the DOC may use other like products as the merchandise subject to
investigation. 99
The sales in a third country can be used by the DOC to determine the NV if: (i) the
exporter does not sell the foreign like product in the home market; or (ii) the sales of
such merchandise is not in a sufficient quantity; or (iii) the “particular market situation
in the exporting country does not permit a proper comparison with the export price or
97
19 USC § 1677a (c) and (d).
98
19 C.F.R. § 351.404. (b) (2).
99
For the definition of “foreign like product” see 19 USC § 1677 (16).

constructed export price”. 100 The CV is used when neither home- nor third-country
sales are an adequate basis for the NV. 101
The DOC can disregard certain sales in the NV calculation when it has “reasonable
grounds to believe or suspect” that the sales in the home- or third-country market at
prices below the cost of production. 102 However, to disregard the suspected sales, The
DOC must find that the sales (1) “have been made within an extended period of time in
substantial quantities;” and (2) not "at prices which permit recovery of all costs within a
reasonable period of time”. 103 The Figure 2 summarizes the conditions for excluding a
sale from the NV calculation. 104
Figure 3: Disregard of sales less than cost of production
X < 20% of the volume of sales below cost of production

considered by DOC in calculating the NV
In substantial quantities
OR
The weighted average per unit price of the sales under

AND consideration is less than the weighted average per unit cost
of production for such sales
Over an extended
Disregard of sales less than cost of period of time: normally
production 1 year but not less than
6 months
AND
NOT "at prices which

permit recovery of all
costs within a
reasonable period of
time”
Adjusting the NV:

Like the EP and CEP, the NV is also adjusted under the forms of subtractions and
additions. 105 Figure 4 illustrates the subtractions from and additions to the NV.
100
19 USC § 1677b (a) (1) (C) (iii).
101
19 USC § 1677b (a) (4).
102
19 U.S.C. § 1677b(b) (1) (1994).
103
Id.
104
19 USC § 1677b (b) (2) (B) and (C).
105
19 USC § 1677b (a) (6).

Figure 4: Adjusting the NV
Cost and expenses for placing the merchandise in condition packed ready for
shipment to the place of delivery to the purchaser (19 USC 1677b (a) (6) (B))
Cost and expenses for bringing the merchandise from the original place of
Subtractions shipment to the place of delivery to the purchaser (19 USC 1677b (a) (6) (B))
Taxes imposed directly on the merchandise which have been rebated, or

NV have not been collected (19 USC 1677b (a) (6) (B))
(i) Costs of containers and coverings and (ii) other costs and charges for
Additions placing the merchandise in condition packed ready for shipment to the United
States (19 USC 1677b (a) (6) (A))
Subtraction OR addition of any difference (or lack thereof) between the EP or the CEP and the price at which
the merchandise is first sold (or offered for sale) for consumption in the exporting country (or a third country
or the United States (19 USC 1677b (a) (1) (B) and (6) (C))
The DOC also carries out additional adjustments to the NV which are (1) level of trade,
(2) direct and indirect expenses, and (3) physical differences of merchandise. The
purposes of adjustments could be summarized as follows.
The purpose of the level of trade adjustment is to ensure that retail sales in the home
market are not compared with wholesale sales in the United States (or vice versa). 106
The adjustment of physical characteristics of merchandise is to make sure that the
differences of cost of production is adjusted corresponding to the difference of physical
characteristics of merchandise. The comparison is usually based on manufacturing
costs. 107 For example, a Japanese company sells a version of car in both Japan and the
United States. However, due to a requirement of Japanese authority, the Japanese
market version is equipped with a motor with less power but more economic fuel
consumption than that of the US market version. In this case, an adjustment is carried
out to reflect how the difference of the motors could reflect to the price of the car.
Nevertheless, if the differential is more than twenty percent, The DOC will consider the
merchandise is not a like product and will use the merchandise in a third country or
constructed value. 108
The direct and indirect expenses are conducted to level many varieties of trading
practices in the United States and the home market such as commissions, warranties,
technical services, interest on accounts receivable, guarantees, advertising, warehousing,
general discounts and rebates, free samples of merchandise, and sampling and testing
expenses.
Direct expenses are characterized as expenses incurred to facilitate specific sales (i.e.
advertising cost involving in promoting the merchandise, warranty expenses associated
106
107
Gantz, “Post-Uruguay Round”, supra n. 24 at 42.
108
Id.

with materials and labor to service defective merchandise, commissions paid on
particular sales). 109 Direct expenses are adjusted to both the home and the United States
market. 110
Indirect expenses are costs incurred that are not directly attributable to particular sales.
These expenses include rent, salaries, supplies and general advertising (the advertising
not for promoting a particular product). The indirect expenses are deducted from the
U.S. price under certain situations – CEP transactions – but are not always deducted
from the prices of the home-market products. 111
Zeroing Practice:
It is evident that in an antidumping investigation, the objectives of the parties are in

conflict. The petitioner will make his best efforts to prove that there is a dumping and
upon finding of such dumping he will try to maximize as much as possible the dumping
margin. Because the DOC normally makes an affirmative determination of dumping in
its investigations 112 , the most practical hope for the respondent, therefore, is to minimize
the determined dumping margin to make it as low as possible.
One way to do that is through adjustments of the NV and EP (or CEP). In this manner,
the parties will subtract or add as much as they can to either increase or decrease the NV
and EP. However, there is another way which none of the parties can use except the
DOC. This is the combining of multiple dumping margins to create an overall rate of
dumping. One of the ways to combine multiple dumping margins is called “zeroing”
which is further explained below.
The fact is there are rarely antidumping investigations in which there is only one
respondent involving one model or one type of products that has been sold in one market
and at one period of time. Antidumping investigations in fact almost always involve
more than one respondent, with the subject merchandise of several models or product
types and being sold in various places at different periods of time. This complexity
could lead to numerous dumping margins of which the number would skyrocket if the
numbers of respondents or involved products just slightly increased. To avoid the
complication in the implementation of antidumping orders, antidumping authorities
normally make multiple comparisons of the EP and NV and then aggregate the results of
these individual comparisons to calculate an overall dumping margin.
“Zeroing” refers to a practice that treats all non-dumped sales as having a dumping
margin of zero rather than negative, and thereby preventing non-dumped sales from
offsetting dumped sales. 113 For example, a Chinese company sells lighters in to EU
109
110
Id.
111
Id.
112
Lindsey & Ikenson found out that the affirmative determination of dumping occured in 94 percent of
the time. Lindsey & Ikenson, supra n. 3 at 3.
113
Raj Bhala & David A. Gantz, WTO Case Review 2001, 19 Ariz. J. Int'l & Comp. Law 457, 524 (2002).
(hereinafter Bhala & Gantz, “WTO Case Review”)

market as the follows: in France the price per unit is € 1.50. The unit price in Germany
is € 0.50, in England is € 1.00. The unit price in China is equivalent to € 1.00. The
quantity of each market is 100 units.
Table 1. ZEROING
Country EP NV Unit margin Quantity Total margins Total margins Total

without zeroing with zeroing value
practice practice
France €1.50 €1.00 - €0.50 100 - €50.00 €0 €150.00
England €1.00 €1.00 €0.00 100 €0.00 €0 €100.00
Germany €0.50 €1.00 €0.50 100 €50.00 €50.00 €50.00
Total Margin without zeroing practice €0.00 114
Total Margin with zeroing practice €50.00
Total Value €200.00
Margin Percentage 25.00%
As shown in Table 1, dumping is found in Germany market. In England dumping is

zero, but in France dumping is negative. If the positive dumping margin in Germany is
allowed to be offset by the negative dumping in France, the total dumping margins
would be zero. However, in zeroing practice the antidumping authority sets the negative
dumping margin as zero, and therefore the total dumping margins undoubtedly
“positive”. The zeroing practice is considered as “one of the antidumping law’s most
egregious distortions”. 115 In an examination of 18 actual antidumping determinations
carried out by the DOC recently, Lindsey found that the zeroing practice affected the
outcomes in 17 cases. 116 Moreover, the dumping margins will decrease by 86.41 percent
in these 18 cases if the zeroing practice is eliminated. 117
Zeroing practice has consistently been used by major antidumping users such as the
United States and the European Union. However, in 2000 this practice was found to
114
In this, the margin -€50.00 is offset by €50.00.
115
116
Id. at 71.
117
Id.

violate the WTO Antidumping Agreement in the EC-Bed Linen case. 118 In January
2002, the United States Court of International Trade in Timken Co. v. United States, 119
held that the DOC’s zeroing methodology as a reasonable interpretation of the U.S.
antidumping statute and the United States was not bound by the EU-Bed Linen. In 2004,
the US Court of Appeals upheld the holding of the Court of International Trade.
However, in 2004 the Panel of United States – Final Dumping Determination on
Softwood Lumber from Canada, 120 (hereinafter the “US-Softwood Lumber”) held that
the zeroing practice of the DOC was inconsistent with the AD Agreement. In the next
chapter we discuss the three mentioned cases with the arguments of involved parties.
118
European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India
(complaint by India, WT/DS141/AB/R) (available at http://www.wto.org)
119
Codified as 240 F. Supp. 2d 1228 (Ct. Int’l Trade 2002).
120
WT/DS264 (available at http://www.wto.org).

CHAPTER 3: THREE ANTIDUMPING CASES
EU-Bed Linen 121
Facts:
On 7 September 1999, India requested the establishment of a panel to examine the

decision of the European Communities (EC) in Commission Regulation No.2398/97 of
28 November 1997 imposing antidumping duties on imports of cotton-type bed linen
from India after the failures in two consultations with the EC in September 1998 and
April 1999. India made thirty one claims among which one was about the legality of
the “zeroing” practice that the EC applied in calculating an overall antidumping margin
for the bed linen product. 122
The antidumping case was brought at the request of “Eurocoton”, a federation of
associations of European producers of cotton textile products. The period of
investigation was July 1, 1995 to June 30, 1996. 123
Because there were so many Indian producers and exporters of the subject
merchandise, the EC elected to conduct its analysis of dumping on the basis of a
sample of Indian companies. The EC used the Constructed Value (CV) as a proxy for
Normal Value (NV) as not all five types of the subject merchandise were also sold in
India in the ordinary course of trade.124 The EC established the Export Price (EP) from
prices actually paid or payable for cotton-type bed linen in the EC market and
compared CV with this EP. The zeroing methodology was used in the calculation of
the weighted average dumping margin and described by the Appellate Body as
follows 125 :
“[F]irst, the European Communities identified with respect to the product under investigation –
cotton-type bed linen – a certain number of different "models" or "types" of that product. Next,
the European Communities calculated, for each of these models, a weighted average normal
value and a weighted average export price. Then, the European Communities compared the
weighted average normal value with the weighted average export price for each model. For
some models, normal value was higher than export price; by subtracting export price from
normal value for these models, the European Communities established a "positive dumping
margin" for each model. For other models, normal value was lower than export price; by
subtracting export price from normal value for these other models, the European Communities
established a "negative dumping margin" for each model. Thus, there is a "positive dumping
margin" where there is dumping, and a "negative dumping margin" where there is not. The
121
Within the context of this thesis, only the facts related to the zeroing practice in EC-Bed Linen case
are discussed in this section.
122
Report of the Panel of EC-Bed Linen, WT/DS141/R, 10 (2000) (hereinafter the “Bed Linen Panel’s
report”).
123
Bhala & Gantz, WTO Cases Review, supra n. 113 at 518-519.
124
Id. at 519.
125
The Report of EC-Bed Linen Appellate Body report para. 47. (Hereinafter Bed-Linen Appellate Body
Report).

"positives" and "negatives" of the amounts in this calculation are an indication of precisely how
much the export price is above or below the normal value. Having made this calculation, the
European Communities then added up the amounts it had calculated as "dumping margins" for
each model of the product in order to determine an overall dumping margin for the product as a
whole. However, in doing so, the European Communities treated any "negative dumping
margin" as zero – hence the use of the word "zeroing". Then, finally, having added up the
"positive dumping margins" and the zeroes, the European Communities divided this sum by the
cumulative total value of all the export transactions involving all types and models of that
product. In this way, the European Communities obtained an overall margin of dumping for the
product under investigation.” [footnotes omitted]
India’s claims:
India claimed that the EC acted inconsistently with Article 2.4.2 of the AD Agreement
by zeroing “negative dumping” amounts for certain types of bed linen in calculating
the overall weighted average dumping margin for the like product bed linen. 126
Article 2.4.2 is read as follows:
“Subject to the provisions governing fair comparison in [Article 2.4], 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. 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.” 127
According to India, in dumping calculations, the EC averaged only within a model, not
between models. Thus it did not compare “a weighted average normal value with a
weighted average of prices of all comparable export transactions” by excluding
“negative dumping”. 128 India resorted to the language of Article 2.4.2 for supports of
its argument. First, it said that given the words “weighted average” in Article 2.4.2 and
the definition of the word “average”, there was “clearly no justification for excluding
certain amounts in establishing an average”.129 Second, the use of the word “all” in the
same sentence supports this meaning. 130 Third, India claimed that, by attributing zero
value to negative dumping, the practice was in contrary to the concept of weighting and
in fact distorted the process of actually weighting dumping margins. 131 This practice,
according to India, inflated the dumping margins of four companies and created
dumping for one company where dumping actually did not exist.
126
Bed-Linen Panel Report, supra n. 122 at para. 6.103.
127
Emphasis by the writer.
128
129
Id. at para 6.104.
130
Id.
131
Id.

EC’s arguments:
The EC’s arguments are based on its interpretation of the language of Article 2.4.2 and
the scope of governing of this Article. First, the EC argued that Article 2.4.2 required a
comparison with a "weighted average of prices of all comparable export transactions"
(emphasis added), which is not the same as requiring a comparison with a weighted
average of all export transactions. 132 Emphasizing the word "comparable", the
European Communities argued that, where the subject merchandise consists of various
"non-comparable" types or models, the investigating authorities should first calculate
"margins of dumping" for each of the "non-comparable" types or models, and, then, at
a subsequent stage, combine those "margins" in order to calculate an overall margin of
dumping for the product under investigation. 133 This two-stage process in calculating
dumping margin is very important because the EC then will base on this view to
discuss whether the zeroing practice is inconsistent with Article 2.4.2.
According to the EC, zeroing is not inconsistent with Article 2.4.2 simply because this
Article provides no guidance as to how the "margins of dumping" for each of the types
or models should be combined in the second stage. 134 Article 2.4.2, the EC argued,
referred to “the existence of margins of dumping” marking clear that the process of
comparing weighted averages normally concludes with more than one dumping
margin. 135 However, how these margins can be combined into one overall margin (the
second stage) is not provided in this Article and should be left to the discretion of the
AD Agreement Members. 136 The EC maintained that it had consistently followed
Article 2.4.2 in the first stage by determining dumping margin of each model of the
product.
Panel’s holdings:
The Panel held that the EC’s zeroing practice was inconsistent with Article 2.4.2. The
holdings are based on the Panel’s analysis of the parties’ arguments and the AD
Agreement.
First, it disagreed with the EC’s view of the two-stage process in calculating an overall
margin. To determine the meaning of the phase “margins of dumping” in Article 2.4.2
– or in other words to determine the purpose of dumping margin calculating in this
Article, the Panel looked to Article 2.1. In Article 2.1, it found a definition that “a
product is to be considered as being dumped i.e. introduced into the commerce of
another country at less than its normal value,…” 137 Based on this definition of a
dumped product the Panel reasoned that the determination of a dumping in Article
2.4.2 “can only be established for the product at issue, and not for individual
132
Bed-Linen Appellate Body report, supra n. 125 at para. 49.
133
Id. at para. 49.
134
Id.
135
Bed-Linen Panel Report, supra n. 122 at para. 6.106. Emphasized by the writer.
136
Id.
137
AD Agreement, Art 2.1. Emphasized by the writer.

transactions concerning that product, or discrete models of that product.” 138 This
reasoning means that the dumping determination is considered as a whole, not as a
two-separated-stage process as in the EC’s view, and therefore, there is no room for the
EC to decide by itself how to combine the dumping margins. Regarding the EC’s
argument on the plural of the word margin in the phrase “the existence of margins of
dumping”, the Panel explained that the “margins of dumping” is “a general statement”
and refers to individual dumping margins determined for each producer or exporter
under investigation as set forth in Article 6.10 and 9 of the AD Agreement. 139 Thus,
there is no conflict between the purpose of Article 2.4.2 to determining a single
dumping margin for a product and the “margins” in the plural in the Article.
The Panel then considered whether the zeroing is in consistent with Article 2.4.2. By
zeroing the negative margins, the Panel argued, the EC’s calculation did not “rest on a
comparison with the prices of all comparable export transactions” which is required by
Article 2.4.2. 140 The zeroing, in fact, changed the prices of export transactions in
comparisons. 141 The zeroing, the Panel said, “is the equivalent of manipulating the
individual export prices counted in calculating the weighted average, in order to arrive
at a weighted average equal to the weighted average normal value”. 142 The Panel,
therefore, held that the zeroing practice is not “based on comparisons which fully
reflect all comparable export prices, and is therefore calculated inconsistently with the
requirements of Article 2.4.2.” 143
None of the EC’s appeals were successful in the hearing of the Appellate Body. The
Appellate Body upheld the Panel’s finding on the inconsistency with Article 2.4.2 of
the EC’s zeroing practice. In addition, the Appellate Body asserted that “Article 2.4
sets forth a general obligation to make a ‘fair comparison’ between export price and
normal value” 144 and the zeroing practice “is not a ‘fair comparison’ between export
price and normal value, as required by Article 2.4 and Article 2.4.2.” 145
Regarding the word “comparable” emphasized by the EC and its argument that “export
transactions involving different types or models of cotton-type bed linen are not
‘comparable’ because different types or models of cotton-type bed linen have very
different physical characteristics”, the Appellate Body quoted a definition set forth the
EC itself in which "the different possible product types … constitute a single product
for the purpose of this proceeding because they have the same physical characteristics
and essentially the same use". 146
The Appellate Body also explained its view about the word “comparable” as follows:
138
139
Id. at para. 6.118.
140
Id. at para 6.115. Emphasized by the writer.
141
Id.
142
Id.
143
Id.
144
Bed-Linen Appellate Body Report at para. 59.
145
Id. at para.55.
146
Id. at para. 57.

“In our view, the word "comparable" in Article 2.4.2 relates back to both the general and the
specific obligations of the investigating authorities when comparing the export price with the
normal value…
… here again we fail to see how the European Communities can be permitted to see the physical
characteristics of cotton-type bed linen in one way for one purpose and in another way for
another.”
A scholar commented that if EU had been concerned about product types it would have
done a DIFMER 147 adjustment to Normal Value – the adjustment that required by
Article 2.4 of the AD Agreement. 148 “The Appellate Body very nearly seemed to be
saying that the EC ought to be ashamed for failing to consider more thoughtfully the
technical rules set forth in the AD Agreement on dumping margin adjustments. After
all, India – a developing country – seemed to have mastered the relevant technical
rules.” 149
United States’ arguments:
The United States participated in this case as a third party. As in the next two cases we
will discuss the zeroing practice of the United States, it is noteworthy to have an
overview on the United States’ arguments in this case. Among other arguments, three
are interesting as they will appear in the next two cases.
First, in the United States’ view, the zeroing practice applied by the EC is not covered
by Articles 2.4 and 2.4.2 because it arises at a step subsequent to the comparison of
export price and normal value, when the individual, model-specific margins were
combined into an overall average rate of dumping. 150
Second, the United States said that a positive dumping margin representing the
aggregate amount of dumping duties that the importing country is permitted to collect
for that product or group of transactions. 151 The negative difference between normal
value and export price – as the United States argued – simply means there is no
dumping and the dumping duty that the importing country permitted to collect
therefore is zero. 152
Final, the United States resorted to the negotiating history of the AD Agreement and
pointed out that Article 2.4.2 was included in the Agreement to provide that – except in
the case of targeted dumping – the margin calculation is an investigation that would be
made on a consistent basis, i.e., weighted average to weighted average or transaction to
transaction. Thus, the United States asserted that the intent of Article 2.4.2 was to
eliminate transaction-to-average comparisons, not to alter the manner in which
authorities calculated overall margins after all appropriate comparisons were made. 153
147
Bhala & Gantz, WTO Case Review, supra n. 113 at 538.
148
Id.
149
Id. at 539.
150
151
Id.
152
Id.
153
Id.

Timken Co. v. United States
After EC-Bed Linen case and the EC’s abandonment of the zeroing practice, many
hoped that the United States would do the same. However, in 2002 the United States
Court of International Trade in Timken Co. v. United States, 154 held that the DOC
properly “zeroed” any negative dumping margins in calculating the weighted-average
dumping margin applied to imports of Kyoko Seiko., Ltd. and Kyoko Corporation of
U.S.A, (hereinafter “Kyoko”) the respondents in an antidumping case. Kyoko then
appealed to the U.S. Court of Appeals for the Federal Circuit. In January 2004, the
United States Court of Appeals upheld the judgment of the Court of International Trade
on zeroing practice.
The Court of Appeals described the zeroing methodology of the DOC as follows: 155
“After calculating the dumping margins on the individual U.S. transactions subject to review,
Commerce calculates the weighted-average dumping margin “by dividing the aggregate
dumping margins determined for a specific exporter or producer by the aggregate . . .
constructed export prices of such exporter or producer.” Id. § 1677(35) (B); see also Koyo
Seiko, 258 F.3d at 1342-43. When calculating the weighted-average dumping margin,
Commerce treats transactions that generate “negative” dumping margins (i.e., a dumping
margin with a value less than zero) as if they were zero. See, e.g., Serampore Indus. Pvt. Ltd. v.
Dep’t of Commerce, 675 F. Supp. 1354, 1360-61 (Ct. Int’l Trade 1987). This practice is
referred to as “zeroing.” Finally, Commerce uses this weighted-average dumping margin to
calculate the duties owed on an entry-by-entry basis. 19 U.S.C. § 1675(a) (2).”
On appeal, Kyoko argued that the DOC had acted unreasonably in zeroing negative-
margin transactions. First, Kyoko contended that 19 U.S.C. § 1677b (a) required a
“fair comparison” of EP or CEP and NV. 156 Kyoko then argued that § 1677b (a)
specifically implemented the “fair comparison” requirements of Article 2.4 of the AD
Agreement. Finally, Kyoko said that EC-Bed Linen held that the zeroing practice in
calculating dumping margins was not a “fair comparison” between EP or CEP and NV.
The DOC, therefore, had refused to interpret US antidumping law in a manner
consistent with U.S. international obligation by ignoring EC-Bed Linen. 157
Explaining its holding, the Court of Appeals first considered whether DOC’s zeroing
practice was based on a reasonable interpretation of antidumping statute. First, the
Court asserted that while the law did not unambiguously preclude the existence of
negative dumping margins, it did at a minimum allow for the DOC’s construction. 158
The Court then analyzed the language of the US antidumping law. According to the
Court, one number “exceeds” 159 another if it is “greater than” the other, meaning it
154
Timken Co. v. United states, 240 F. Supp. 2d 1228 (Ct. Int’l Trade 2002) (hereinafter Timken)
155
Timken Co. v. United States, 354 F.3d 1334; 1338-39 (U.S. App. 2004) LEXIS 627.
156
Id. at 1140.
157
Id. at 1340.
158
Id. at 1342.
159
19 USC § 1677 (35) (A): “Dumping margin. The term ‘dumping margin’ means the amount by
which the normal value exceeds the export price or constructed export price of the subject merchandise.”
Emphasized by the writer.

falls to the right of it on the number line. 160 This means that the dumping margin exists
only when the value of NV falls to the right of the value of EP on the number line (for
example, if NV is 5 and EP is 7, NV is on the left of EP on the number line – and
therefore, it cannot “exceed” EP.) In other words, dumping margin, which is a result of
the exceeding of NV to EP 161 , should be always positive.
Not only finding the DOC’s methodology was reasonable in mathematic way, the
Court also found it made practical sense. 162 The Court explained this as follows: 163
“[DOC] calculates dumping duties on an entry-by-entry basis. 19 U.S.C. § 1675(a) (2). Its
practice of zeroing negative dumping margins comports with this approach. Borrowing
Timken’s example, suppose a foreign exporter sells the same product to two U.S. customers.
The product has a normal value of $0.90, and is sold to the first customer for $1.00 and the
second customer for $0.70. Calculated in accordance with § 1677(35) (A), the dumping margin
for the first customer is zeroed (0.90 - 1.00 = -0.10) and for the second customer is 0.20 (0.90 -
0.70 = 0.20). Assuming sales of 1000 units to each customer, the first customer would not have
to pay any dumping duties because it paid a price above normal value, and the second customer
would have to pay $200 (1000 transactions x 0.20 dumping margin/transaction = 200) because
it paid a price below normal value. This approach makes sense; it neutralizes dumped sales and
has no effect on fair-value sales. On the other hand, the approach urged by Koyo, whereby
Commerce could not zero negative transactions, would essentially require Commerce to grant
the first customer a credit. In the absence of offsetting sales below fair market value, however,
Commerce could potentially owe the first customer a payment—a result clearly not
contemplated by the statutory scheme.”
It is interesting to see this reasoning of the Court. In EC-Bed Linen case the United
State argued that the dumping margin representing the aggregate amount of dumping
duties that the importing country is permitted to collect and the negative difference
between normal value and export price means there is no dumping. 164 This argument
of the United States in fact was quite natural in terms of the purpose of imposing
dumping duties. However, in this case, the Court boldly considered the dumping not as
a measure to create a level playing field for competing products but as a punishment
imposed on consumers who bought the dumped products. A classical statement of
protectionism!
Regarding Kyoko’s argument on “fair comparison”, the Court reasoned that the “fair
comparison” requirement of § 1677b (a) is simply applied to the calculation of normal
value and “does not impose any requirements for calculating normal value beyond
those explicitly established in the statute and does not carry over to create additional
limitations on the calculation of dumping margins.” 165
With respect to the persuasive value of EC-Bed Linen holding on the zeroing practice,
the Court held that EC-Bed Linen was not binding on the United States and did not
find the decision was sufficiently persuasive to find the DOC’s practice
160
Timken, supra n. 155 at 1342.
161
US Antidumping law defines “dumping margin” as “the amount by which the normal value exceeds
the export price or constructed export price of the subject merchandise.” 19 U.S.C. § 1677(35)(A).
162
163
Id. at 1342-43.
164
Bed-Linen Panel Report, supra n. 122 at para.6.109.
165

unreasonable. 166 The Court found that the DOC’s zeroing practice to be a reasonable
interpretation of the statute, even in light of the decision in EC – Bed Linen. 167
United States – Softwood Lumber from Canada (WT/DS264/R)
Just three months after the Court in Timken wrote that EC-Bed Linen decision was not
binding on the United States, the WTO, in United States – Final Dumping
Determination on Softwood Lumber from Canada (WT/DS264/R) (herein US-
Softwood Lumber) held that zeroing practice of the United States was inconsistent with
Article 2.4.2 of the AD Agreement.
Facts:
On March 3, 2003 a Panel was established by the request of Canada to examine the
United States’ final determination of sales at LTFV with respect to certain softwood
lumber products from Canada published in the Federal Register on 2 April 2002, and
amended on 22 May 2002. The European Communities, India and Japan reserved their
third-party rights. Among many claims of Canada, there was a request for the Panel to
find that the DOC had “illegally ‘zeroed’ negative margins of dumping”. 168
The DOC’s zeroing practice in this case was described by the Panel as follows: 169
“In the anti-dumping investigation underlying this dispute, DOC divided the product under
investigation into groups of identical, or broadly similar, product types. After making certain
adjustments within each product type, DOC calculated a weighted average normal value and
export price for each product type, and then compared the weighted averages for each product
type. This process resulted in multiple values, one for each product type. In some instances
this comparison showed that the weighted average export price for a specific product type was
less that the weighted average normal value, while in other instances, the comparison showed
that the weighted average export price was greater than the weighted average normal value.
These values were then aggregated to produce one single value, the margin of dumping for the
product under investigation for each investigated exporter. In the aggregation process, a value
of "zero" was attributed to those product comparisons where the weighted average export price
was greater than the weighted average normal value. DOC then aggregated the positive values
from the individual product type comparisons, that is, those instances where the weighted
average export price was lower than the weighted normal value, and divided the result by the
total value of exports, to arrive at a weighted average margin of dumping.”
Canada’s arguments
As in EC-Bed Linen, the arguments of parties were mostly about (i) whether Article
2.4.2 covered the combining of multiple dumping margins or, in other words, if Article
2.4.2 covered only the first in the two-stage process of calculating multiple dumping
166
Id.
167
Id.
168
Report of the Panel of US-Softwood Lumber, WT/DS264/R, 3 (WTO, 2004) (available at
http://www.wto.org) (hereinafter US-Softwood Lumber Panel Report).
169
Id. at para. 7.185.

margins, (ii) the words “comparable” and words “all” in the phrase “all comparable
export transactions”.
Canada argued that DOC’s zeroing practice in this case was identical to that used by
the EC in EC-Bed Linen which was found inconsistent with Article 2.4.2. 170 Like
India in EC-Bed Linen, Canada asserted that “the methodology used by the United
States in the underlying investigation did not fully take into account ‘all comparable
export transactions’”. 171 This methodology as claimed by Canada “did not produce a
fair comparison as required by Article 2.4 because it did not in fact average all
values.” 172
Regarding the two-stage process in dumping margin calculation, Canada was of the
view that “Article 2.4.2 establishes a single standard for the calculation of a margin of
dumping which is applicable to all stages of the calculation, whether intermediate or
final”. 173
United States’ arguments
First, the United States focused on the word “comparable” in the phrase "all
comparable export transactions". It contended that Canada deprived the term
"comparable" in Article 2.4.2 of any meaning, instead making it equivalent to the term
"all", which immediately precedes it. 174 Then, like the EC in EC-Bed Linen it argued
that not all export transactions were equally comparable with all transactions used for
normal value purposes. 175 According to the United States, Canada's prescription for
combining particular dumping margins for purposes of developing a single, overall
dumping margin would be contrary to the requirements of Articles 2.4.2 and 2.4. 176
Second, the United States was of a view that Articles 2.4 and 2.4.2 did not address the
manner in which particular model-specific or level-of-trade-specific dumping margins
were to be combined to determine an overall dumping margin. 177 Therefore, like the
EC’s argument in EC-Bed Linen, the combining of multiple dumping margins,
according to the United States, are left to the Member’s discretion. It further argued
that the use of plural term "margins" in Article 2.4.2 operated to limit the scope of that
provision to intermediate stage calculations only, which confirmed its interpretation of
Article 2.4.2. 178
Final, the United States looked into the negotiating history of the AD Agreement to
explain Article 2.4.2. According to the United States, the negotiating history
demonstrated that the question whether to address zeroing was presented to the
negotiators, and that the draft text, as compared to the AD Agreement's predecessor, the
170
Id. at para 7.187.
171
Id.
172
Id.
173
Id.
174
Id. para 7.189.
175
Id.
176
Id.
177
Id.
178
Id.

GATT Anti-Dumping Code, was not modified to prohibit this methodology. 179 Further,
the negotiating history demonstrated that insertion of the word "comparable" into
Article 2.4.2 was intended precisely to ensure that the term "all" not be interpreted to
imply that an average export price is to be established on the basis of sales both within
and outside of the category of comparison. 180
Panel’s holding:
With respect to the Parties’ arguments over the terms “all” and “comparable”, the Panel
expressed its view: “we do not believe that [the AD Agreement drafters] would have
included the word "comparable" in Article 2.4.2, as that word would serve no purpose in
the text. The fact that the word "comparable" was added to the text of Article 2.4.2 ….
confirms our view that it was included for a purpose and should not simply be
disregarded as surplus verbiage.” 181 Therefore, the Panel thought that “there is no need to
choose between the two terms. Rather, the phrase ‘all comparable export transactions’
would in its ordinary meaning appear to signify that Members may only compare those
export transactions which are comparable, but that it must compare all such
transactions.” 182 Consequently, the Panel did not agree with the Appellate Body in EC-
Bed Linen in reducing the importance of the term “comparable”:
“[W]e do not believe that the significance of the reference to "comparable" export prices can
simply be discounted on the grounds that the products/transactions must ‘necessarily be
comparable’”. 183
About non-comparable transactions, the Panel did not explicitly assert that there were
non-comparable transactions. However, it agreed to a limited extent with the United
States that though the differences of transactions could be adjusted by due allowance
and other adjustments, still in some cases, the application of such adjustment was
problematic. 184 However, unlike the United States, the Panel did not conclude that the
such transactions in these cases must be excluded from dumping calculation, instead, it
saw this problem was the reason for the fact that many investigating authorities and
respondent exporters – in order to limit the possible adjustments – chose to perform
their comparisons on the basis of groups of transactions sharing common
characteristics. 185 Those comparisons were called multiple averaging and the
conclusion drawn by the Panel was “the use of multiple averaging is consistent with
the overall objective of Article 2.4”. 186
179
Id. para 7.192.
180
Id.
181
Id. para 7.203.
182
Id. para 7.204.
183
Id. para 7.206. In EC-Bed Linen, the Appellate Body reduced the importance of the term
“comparable” by saying this: “All types or models falling within the scope of a ‘like’ product must
necessarily be ‘comparable’, and export transactions involving those types or models must therefore be
considered ‘comparable export transactions’ within the meaning of Article 2.4.2.” Bed Linen Appellate
Report, supra n. 125 at para 58. Emphasized by the writer.
184
US-Softwood Lumber Panel Report, supra n. 168 at para 7.207.
185
Id. at para 7.207.
186
Id. at para 7.207.

Then the Panel analyzed if an overall dumping margin could be derived from multiple
averaging or not. The Panel noted that the first sentence of Article 2.4.2 as follows:
“Subject to the provisions governing fair comparison in paragraph 4, 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 weight average of prices of all
comparable export transactions or by a comparison of normal value and export prices on a
transaction-to-transaction basis.” 187
The Panel asserted that in both cases (weighted-average-to-weighted-average
comparison and transaction-to-transaction comparison), the word “comparison” was
used in singular (and preceding by the word “a”). However, in both cases, the exports
are referred to as in the plural (“export transactions” and “export prices”). 188 This
meant that, according to the Panel, the comparison could be done by comparison of a
single transaction or by multiple comparisons of individual transactions. 189 This means
that an overall dumping margin could be derived from multiple averaging. 190
After asserting that an overall dumping margin could be derived from multiple
averaging or, in other words, an overall dumping margin could be combined from
multiple individual dumping margins, the Panel examined the questions whether this
combination was covered by Article 2.4.2. However, unlike the Panel in EC-Bed
Linen, the Panel in this case had another approach by reformatting the question as:
“[W]hether an investigating authority is allowed to partially exclude from the aggregation
process those results of comparing types or models for which the weighted-average-normal-
value was determined to be less than the weighted-average-export-price in the aggregation
process[?]” 191
To answer this question, once again, the Panel avoided getting into the point. Instead
of giving a direct answer the Panel explained its conclusion in the way “If they did this,
it means they didn’t want to do that!” In a highly delicate language, it said: 192
“[W]e fail to understand why the negotiators of the AD Agreement would have included an
obligation in the provisions of the AD Agreement (the term "all" in "all comparable export
transactions"), if, in the very next step of the calculation process – through zeroing –
investigating authorities were to be allowed to ignore this very same obligation (certain values
which they were obligated to take into account in the first stage of the process).”
Behind the nice language, the Panel’s reasoning was barely if the negotiators put the
word “all” in to Article 2.4.2 – “they did this” – they implied that the zeroing was not
allowed – “they didn’t want to do that”.
With respect to the United States’ interpretation based on the negotiating history of the
AD Agreement, the Panel simply said that the meaning imparted by the text of Article
2.4.2 was “neither equivocal nor inconclusive” – the requirements of Article 32 of the
187
AD Agreement, Article 2.4.2. Emphasized by the writer.
188
US-Softwood Lumber Panel Report, supra n. 168 at para. 7.209.
189
US-Softwood Lumber Panel Report, supra n. 168 at para 7.209.
190
Id. at para. 7.210.
191
Id. at para. 7. 214.
192
Id. at para. 7.216.

Vienna Convention to resort to negotiating history of a treaty. Therefore, the Panel
said it was not necessary to “have recourse to the negotiating history”. 193
The Panel held the zeroing practice of the United States violated Article 2.4.2. 194
193
Id. at para. 7.221-23.
194
Id. at para. 7.224.

CHAPTER 4: THE NECESSITY TO AMEND THE ANTIDUMPING
AGREEMENT
In Chapters 2 and 3, we have discussed the methodology to determining dumping margins
and three recent important cases in which zeroing practices have been analyzed. In this
Chapter we will explain why the Court’s judgment in Timken Co. v. United States is not
reasonable. We also analyze why the legal grounds for condemnation of the zeroing
practice in EC-Bed Linen and US-Softwood Lumber were not very persuasive though this
practice deserves such condemnation. The conclusion of this Chapter is Article 2.4.2 of
the AD Agreement should be amended to give a firm ground for prohibition of the
zeroing practice.
Before discussing each case, we would like to briefly discuss if the zeroing practice is
reasonable not in legal context but in common sense.
As discussed in Chapter 2, in practice, to determine the dumping margin for a product,
investigating authorities normally go through two steps. First step is to determine the
dumping margin of each models or types of the product. The second is to determine an
overall dumping margin. In the first step, there are at least three parties involved, the
respondent, the claimant and the investigating authority. The parties could affect the
calculation outcomes by adjustment to NV and EP (or CEP). In the second step, only the
investing authority could arbitrarily affect the calculation by excluding certain dumping
margins from the calculation by zeroing it. The outcomes of such zeroing enormously
outweighs the outcome of the first step because zeroing does not affect some elements
constituting the NV or EP, it directly affects the margins. Not only can zeroing be
arbitrarily imposed by the authority195 and unreasonably inflate dumping margins, zeroing
is blind to distinguishing the innocent and the guilty – it helps to create artificial dumping
where such dumping does not exist. These are enough to see that zeroing does not serve
the purpose of “create a level playing field” for competition of merchandise as
antidumping laws supporters say.
In the next section, we discuss about the legal reasoning in the three above-mentioned
cases.
Timken Co. v. United States
As mentioned somewhere else, the Court of Appeals in Timken analyzed the word
“exceeds” 196 in a mathematical way that if one number exceeds another if it falls to the
195
As discussed in Ch.3 § 3.4, the use of zeroing solely depends on the administrating authority. In the EC-
Bed Linen case, the Panel asserted that the EU did not always follow the practice of zeroing. India asserted
that in another case, the EU allowed the “negative” dumping found for certain models was offset against the
dumping found for other models. Bed-Linen Panel Report, supra n. 122 at 111 n.45.
196
According to the Court, one number “exceeds” another if it is “greater than” the other, meaning it falls to
the right of it on the number line. This means that the dumping margin exists only when the value of NV
falls to the right of the value of EP on the number line (for example, if NV is 5 and EP is 7, NV is on the left
of EP on the number line – and therefore, it cannot “exceed” EP.) In other words, dumping margin, which is
a result of the exceeding of NV to EP196, should be always positive.
Trade Agreements and Industry Influence Trang 36 / 41

right of the other on the number line. It is worth noting that in the US antidumping law
there is no provision which expressly stipulates the equation: Dumping margin = NV –
EP. The most related background for this equation is possibly the definition of dumping
margin in 19 USC § 1677 (35) “… ‘dumping margin’ means the amount by which the
normal value exceeds the export price or constructed export price …”. In this definition
the “normal value” precedes the “export price” so, in the equation, it is presented as (NV
– EP). If we apply this reasoning to the definition of dumping in 19 USC § 1677 (34), we
would know whether there is a dumping when we make a comparison between the sale
and the fair value. This hypothetical equation could be formed as:
Dumping = value of sale – fair value
Following the reasoning of Timken, if the “value of sale” is less than “fair value”, it
means that the “value of sale” falls on the left of the “fair value” in the number line (e.g. 5
– the “value of sale” – is on the left of 7 – the “fair value” – on the number line). Now, if
we apply this into the hypothetical equation in which value of sale (smaller number)
minus fair value (bigger number) – the result, indisputably is a “negative” value. How the
Court in Timken could explain that using its own method we can find dumping
represented by a “negative” value while the dumping margin is “positive”? The answer is
simple. The Court in Timken just ignored the meaning of “negative” value in accounting
principles, which is also applied in the antidumping process 197 . In accounting, the
“negative” or “positive” just indicates in which column of the balance sheet that number
should be entered. For example, if a profit for a product is -$10.00, this means that it is a
+$10.00 loss and the number $10.00 should be entered both under the profit and loss
columns (- $10.00 under the profit and + $10.00 under the loss). It cannot be zeroed
because doing so, the real fact is distorted – the real loss disappears. So, the Court’s
explanation of the word “exceed” erred.
About another explanation of the Court of Timken that why the dumping duty should be
imposed: “the second customer would have to pay …. because it paid a price below
normal value.” As we already discussed earlier 198 , this statement unambiguously showed
that the Court considered the dumping duty as a punishment to the customer who had
enjoyed the benefit of dumped products. It is not a measure to create a “level field” for
the competition of products.
EC-Bed Linen and US-Softwood Lumber
Let’s set aside the extreme argument that zeroing is just merely a measure that
antidumping abusers use blindly to distort the dumping margin calculation, and just focus
on the discussion of the parties in EC-Bed Linen and US-Softwood Lumber. Although
the discussions about zeroing in these cases are lengthy and complex, it could be
summarized into three issues. First, the calculation of dumping margin for a product is
normally a two-step process in which the first step is to calculate the dumping margin of
models or types of the product and the second step is to combine the found dumping
197
Profit is taken into account in calculating “constructed value” in antidumping. It is doubtfully that in
calculating the constructed value any party has ever zeroed such profit when it is presented by a negative
number.
198
Ch.3 at 56.

margins into an overall dumping margin. Second, whether Article 2.4.2 covers the second
step of combining margins. Third, if Article 2.4.2 covers both steps of calculating, is it
possible to exclude some negative margins in the calculation by zeroing it?
Regarding the first issue, both Panels and parties of the two cases agreed that the
calculation of dumping margin in many cases should be taken in two steps. Regarding the
second issue, the Panels in both cases persuasively asserted that although the calculation
can be divided into steps, still it is a continuous process as under Articles 2.4 and 2.4.2 the
ultimate purpose of the calculation is to determine the dumping margin of one product.
And therefore, there is no room for the AD Agreement Member to interpret that the
combination of dumping margins is in its owned discretion.
With respect to the third issue, all discussions were about the interpretation of two terms
“all” and “comparable” in the phrase “all comparable export transactions” in Article 2.4.2.
The respondents in both case, the EC in EC-Bed Linen and the United States in US-
Softwood Lumber, insisted that it would be erred to consider “all comparable export
transactions” to be equal to “all export transactions”.
The Panel in EC-Bed Linen got luck when it found a definition of bed linen product that
the EC had written and then served as the rope that the EC-Bed Linen Appellate Body
used to hang it up while lecturing it should not see one thing “in one way for one purpose
and in another way for another”.199 Having in hand the “smoking gun” of the insincere
intention of the EC, the Panel in this case therefore could put all of its stress on the word
“all” and almost ignored to explain the meaning of the word “comparable”. The Panel
just simply said: “All types or models falling within the scope of a ‘like’ product must
necessarily be ‘comparable’, and export transactions involving those types or models must
therefore be considered ‘comparable export transactions’ within the meaning of
Article 2.4.2” 200
However, in US-Softwood Lumber, the Panel did not find such kind of mistake. In
addition, unlike the EC in EC-Bed Linen, the United States did not try to apply the word
“comparable” in its particular case, 201 Instead, it discussed the purpose of such word in
the phrase “all comparable export transactions” and traced back to the negotiation history
of Article 2.4.2 for supports. The Panel in US-Softwood Lumber therefore, could not use
the argument of EC-Bed Linen. The Panel therefore admitted that the word “comparable”
is not a “surplus verbiage” and “Members may only compare those export transactions
which are comparable, but that it must compare all such transactions.” 202 The Panel
however avoided getting into the core issue: whether exist non-comparable transactions.
With respect this issue, the Panel just limited itself in acknowledging that though the
differences of transactions could be adjusted by due allowance and other adjustments, still
in some cases, the application of such adjustment was problematic. 203 Ambiguously in
199
See Ch. 3 §1.4. of this thesis.
200
Bed Linen Appellate Report, supra n. 168 at para 58. Emphasized by the writer.
201
In EC-Bed Linen, the EC argued that it must exclude several negative margins as the models in the
transactions of such margins were non-comparable because of the difference of physical characteristics. By
saying that, it fell into the trap made by itself when the Appellate Body ironically commented that by the
definition set by the EC, such non-comparable models consisted a single product.
202
US-Softwood Lumber Panel Report, supra n. 168 at para 7.204. Emphasized by the writer.
203
Id. at para 7.207.

describing such “problematic” transactions, the Panel then maneuvered to avoid answer
the direct question of what should be done to such problematic transactions by
acknowledging the fact that many investigating authorities and respondent exporters – in
order to limit the possible adjustments – chose to perform their comparisons on the basis
of groups of transactions sharing common characteristics. 204 Hence, though accepting that
the “Members may only compare those export transactions which are comparable”, by two
consecutive maneuvers, it did not give any clear explanation on the meaning of the word
“comparable” and what difference between “all comparable export transactions” and “all
export transactions”.
Additionally, the Panel simply disregarded the negotiating history by saying that Article
2.4.2 was not unclear and therefore, according to Article 32 of Vienna Convention, it was
not necessary to resort to the negotiating history. We fail to understand how the Panel can
see the context of Article 2.4.2 clearly while it fails to give a clear explanation of the word
“comparable” in this Article.
Again, in answering the question whether an investigating authority is allowed to partially
exclude certain transactions from the calculating process, the Panel – like the German
Panzer Gel. Guderian in the World War II – made another outflank maneuver by guessing
that if the negotiators of the AD Agreement put the term “all” in “all comparable export
transactions” they implied that the zeroing was not allowed. 205
Conclusion
As discussed earlier, 206 zeroing practice is unjust and unreasonable and should be
prohibited. However, it should be noted that in both EC-Bed Linen and US-Softwood
Lumber, the Panels failed to give a persuasive explanation of the word “comparable” and
therefore could not make any distinctions between “all comparable export transactions”
and “all export transactions”. Further, the Panels unreasonably refused to look into the
negotiating history of Article 2.4.2 for some clues of the meaning of these words. The
holdings of the Panels on the zeroing deserve applause, but the reasoning is unsatisfactory
because it contains loopholes.
It seems that the Panels and the Appellate Bodies have made all their best efforts but their
reasoning is still incomprehensive because the phrase “all comparable export
transactions” is problematic since it is written down. It is possibly that the phrase “all
comparable export transactions” is not a clear and firm intention of the negotiators in
prohibiting the zeroing practice, but instead, a result of a concession between the
negotiators who want to eliminate the zeroing (the supports of “all”) and the ones who
want to maintain it (the supports of “comparable”). Both sides in the negotiation of
Article 2.4.2, possibly upon seeing that they are unable to obtain a complete victory, has
accepted a concession in which both words “all” and “comparable” appear together in this
Article.
204
Id.
205
See Chapter 3, § 3.4 of this thesis.
206
Ch. 4, § 1 of this thesis.

Any efforts to interpret a clause that ambiguous by its born cannot be flawless. Article
2.4.2 therefore should be amended to clarify the intention of the negotiators.
- THE END -

ABOUT THE AUTHOR
Bao Anh Thai, managing partner of the Hanoi-based law firm of Bao&Partners,
specializes in international trade and contract laws and public policy. His practice
includes advising state agencies companies with regard to antidumping duty proceedings
and international commercial and banking transactions. Mr. Thai is a 1995 graduate of
Hanoi Law School and a 2004 LL.M. graduate of James E. Rogers College of Law, the
University of Arizona. He was a Fulbright scholar in 2003-2004.
Contact the Author at:
Bao & Partners Law Office
Email: baoanh_thai@baolawfirm.com.vn
Website: http://www.baolawfirm.com.vn
Room A1406, M3M4 Building, Nguyen Chi Thanh Street, Ha Noi, Vietnam.
Tel: (84 4) 2 751 181
Fax: (84 4) 2 751 180

Antidumping Zeroing Practice

Încărcat de

Informații document

Descriere originală:

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Antidumping Zeroing Practice

Încărcat de

Drepturi de autor:

Formate disponibile

ZEROING PRACTICE IN THE

Bao Anh Thai *

* Bao Anh Thai, managing partner of the Hanoi-based consulting firm of

Antidumping zeroing practice Trang 1 / 41

Zeroing practice in antidumping Page 2 / 41

Zeroing practice in antidumping Page 3 / 41

Zeroing practice in antidumping Page 4 / 41

Economic critiques of antidumping law:

Zeroing practice in antidumping Page 5 / 41

Conditions for the existence of international dumping

Reasons for dumping

Zeroing practice in antidumping Page 6 / 41

Critiques of the legal background of antidumping laws

Zeroing practice in antidumping Page 7 / 41

Zeroing practice in antidumping Page 8 / 41

Antidumping law as contagion:

Zeroing practice in antidumping Page 9 / 41

Zeroing practice in antidumping Page 10 / 41

Zeroing practice in antidumping Page 11 / 41

CHAPTER II: U.S. ANTIDUMPING LAW AND ZEROING

Antidumping zeroing practice Trang 12 / 41

Antidumping investigation proceeding:

Zeroing practice in antidumping Page 13 / 41

3. Staff conference and briefs;

4. Staff report and memoranda;

5. Brief and vote; and

6. Determination and view of DOC.

In the first stage, a six-person team consisting of an investigator, economist,

Zeroing practice in antidumping Page 14 / 41

3. Pre-hearing staff report;

4. Hearing and briefs;

5. Final staff report and memoranda;

6. Closing of the record and final comments by parties;

7. Briefing and vote; and

8. Determination and views of the ITC.

Zeroing practice in antidumping Page 15 / 41

1. Institution of the investigation (1) Initiation of

(Determining INJURY) 5. Brief and vote; and

6. Determination and view of the (3) Preliminary

1. Scheduling the final phase;

3. Pre-hearing staff report; (4) Final Investigation

4. Hearing and briefs;

5. Final staff report and

6. Closing of the record and final

How to calculate antidumping margin:

As already mentioned earlier, 90 an antidumping duty is imposed upon the satisfaction of

Zeroing practice in antidumping Page 16 / 41

To determine a dumping, or in other words to determine if the subject merchandise is

Dumping Margin = NV – EP (or CEP)

NV: Normal Value.

Identifying and adjusting the EP or CEP:

Zeroing practice in antidumping Page 17 / 41

Figure 2: Adjusting the EP and CEP

Value added to the goods after its

Any taxes or duties

Identifying and adjusting the NV:

Zeroing practice in antidumping Page 18 / 41

Figure 3: Disregard of sales less than cost of production

X < 20% of the volume of sales below cost of production

The weighted average per unit price of the sales under

NOT "at prices which

Adjusting the NV: