1. United States — DS 422 Anti-Dumping Measures on Shrimp and Diamond Sawblades from China Rosemary Siqueira Justin Van Buren

2. History The United States Department of Commerce (USDOC) applied a “zeroing” methodology to calculate dumping margins for individual exporters. From January 2004 to February 2005, USDOC investigated and calculated dumping margins for the four shrimp exporters selected for individual examination: – Allied: 80.19% – Yelin: 82.27% – Red Garden: 27.89% – Zhanjiang Guolian: 0.07%.

3. History The USDOC applied a “separate rate” of 53.68%, calculated as the weighted average of the margins of dumping calculated for Allied, Yelin, and Red Garden, to 35 exporters/producers who were not selected for individual examination but had established their independence from the government. The USDOC applied a “PRC-wide rate” of 112.81% to exporters/producers not selected for individual examination who did not establish their independence from the government. In August 2006, USDOC applied to separate rate to an additional 11 Chinese exporters.

4. History In May 2006, USDOC calculated anti-dumping margins on diamond sawblades: – AT&M: 2.82% – BOSUN: 35.51% – Hebei Jikai: 48.5% – a separate rate of 21.43%; – a PRC-wide rate of 164.09%.

5. History China challenged the shrimp anti-dumping order and the USDOC’s final determinations. – Specifically, China challenged: the use of the zeroing methodology by USDOC in determining dumping margins the calculation of the separate rate through use of the contested zeroing-calculated margins China also challenged the final sawblade determination and anti-dumping order. – Specifically, China again challenges the zeroing methodology used by USDOC in determining AT&M’s dumping margin.

6. Dates On February 28, 2011, China requested consultations On March 11, 2011, Japan requested to join the consultations. On July 22, 2011, China requested complementary consultations with the United States with regard to the zeroing practice by the USDOC in its anti-dumping measures on diamond sawblades and parts thereof from China. On October 13, 2011, China requested the establishment of panel. On the same day, China and the United States informed the DSB of an Agreement on Procedures.

7. Prior Proceedings

9. WT/DS404/R – United States – Anti-Dumping Measures on Certain Shrimp from Vietnam (Adopted September 2, 2011) – Vietnam contested that USDOC zeroing methodologies inconsistent with article 2.4.2 – Several anti-dumping measures on certain frozen warm-water shrimp from Vietnam. – zeroing practice to calculate anti-dumping measures by the United States. – upheld by the DSB.

10. Prior Proceedings WT/DS264/AB/R - US – Softwood Lumber V dispute (Adopted August 31, 2004) – Canada contested that the zeroing practice used in the same manner by the USDOC – Appellate Body found to be inconsistent with Article 2.4.2 of the Anti-Dumping Agreement (WT/DS422/R Report of the panel -pg. 7).

11. Political Context The United States and China relied on DSB to settle trade disputes Rule-oriented system operating as a mechanism for enforcing previously agreed upon rules between the various states Helps promote stability and consistency within the international order especially within the international economic system

12. Political Context Pre-established rules: – Help mitigate political power struggles – Settle disputes on a level playing field Complainant/respondent/third parties benefit – From dispute settlement process – From fair assessment of the particulars of the case Helps to strengthen international relations between parties involved

13. Business Context Anti-dumping duties are important as a deterrent to prevent foreign firms from selling products at prices far lower than production costs, and to protect domestic industry from unfair foreign competition Does this result in higher prices to consumers? What does it do to competitiveness?

14. Business Context The impact resulting from USDOC’s use of zeroing is reflected on the Anti-dumping duty order imposed on the Chinese shrimp and sawblade companies

15. Contested issue Both of the most recent proceedings, DS404 and DS264, contested USDOC’s use of its zeroing methodology to calculate anti- dumping measures. DS404 was upheld by the DSB, and in DS264 the Appellate Body found USDOC’s zeroing methodologies to be inconsistent with article 2.4.2 of the Anti- Dumping Agreement.

16. So… What is zeroing? Remember when I mentioned taking an average while excluding negative values? That’s zeroing.

17. So… What is zeroing? On May 24, 2011 (three months after China had requested consultations) the US Court of International Trade issued a remand order to USDOC, and USDOC revised production input and labor hours used in margin calculations.

18. WTO Agreement Agreements cited in this case: Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (“DSU”) Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (GATT 1994) Article 17 of the Agreement on implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (“Anti-Dumping Agreement”)

19. WTO Agreement China alleged that use of zeroing methodology was inconsistent with agreement (under Article VI: 1, VI: 2 of the GATT 1994 and Articles 1, 2.1, 2.4,2.4.2, 5.8, 9.2, 9.3, and 9.4 of the Anti- Dumping Agreement) China also asserted dumping margins calculated in the original investigation and administrative reviews were inconsistent (under United State’s obligations under Article 11.3 of the Anti- Dumping Agreement)

20. WTO Agreement Provision - Anti-Dumping Agreement (ADA) Art. 2.4.2 (Dumping Determination – Zeroing) Margins of dumping established on Comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions or By comparison of normal value and export prices on a transaction-to- transaction basis. Normal value established on weighted average basis may be compared to prices of individual export transactions if… 1)authorities find pattern where export prices differed significantly among different purchasers, regions or time periods and; 2)an explanation is provided on why such differences cannot be taken into account by the use of a weighted average-to-weighted average or transaction-to-transaction comparison

21. Panel Conclusions – Consistency Inconsistent with first sentence of Article 2.4.2 of the Agreement on implementation of Article VI of the GATT and Trade 1994 (“Anti- Dumping Agreement”) – Using zeroing in calculation of certain margins of dumping – Three investigations involving PRC products

22. Panel Conclusions – Consistency (cont.) “Zeroing” methodology constantly used by USDOC By using this methodology, the USDOC: – Identified different models (Types) – Calculated weighted average prices – Compared the weighted average normal value of each model to the weighted average U.S. price – Calculated the dumping margins for an exporter for each merchandise model – Set all negative margins on individual models to zero

23. Implementation and Sanctions United States informed the DSB meeting on March 26, 2013 that it had implemented the DSB recommendation and rulings within the time frame agreed upon China disagreed with the United States’ statement that the measures were brought into conformity with its obligations under this Agreement – Anti-dumping duty on sawblades not removed – China advised that the United States fulfill its obligation Today: – Lack of further proceedings suggests that U.S. has fulfilled this obligation – U.S. has complied with its obligations under this agreement – We uncovered no further proceeding has been reported – So, it would appear that there is no need for sanctions

24. Observations China provided evidence and support documentation to show violation of the Anti- Dumping Agreement under the Article 2.4.2 Third party written submissions Disagreement between parties on compliance (Diamond Sawblades) Revisions of panel report by China and U.S.

25. Future Zeroing? On February 14, 2012 the USDOC declared that it would no longer use zeroing methods in calculating anti-dumping margins However, in USDOC’s Final Rule of April 22, 2014, it codified the use of zeroing in targeted dumping. Yet on March 11, 2016, the panel in DS464 issued a report stating that zeroing methodologies were inconsistent with article 2.4.2 of the AD agreement

26. Questions? No? Good. Thank You. Bye.

27. Bibliography “DS422 --Antidumping Measures on Certain Frozen and Canned Warmwater Shrimp from the PRC - Prc-Shrimp-Ad- Wto-129-Final-Memo-20130304.pdf.” 2016. Accessed March 21. http://enforcement.trade.gov/download/section129/prc-shrimp-ad-wto-129-final-memo-20130304.pdf. Hartigan, James C. 2015. “It’s Baaaack — Zeroing, the US Department of Commerce, and US — Shrimp II (Viet Nam).” SSRN Scholarly Paper ID 2669961. Rochester, NY: Social Science Research Network. http://papers.ssrn.com/abstract=2669961. “No More Zeroing?: The United States Changes Its Antidumping Policy to Comply with the WTO | ASIL.” 2016. Accessed March 21. https://www.asil.org/insights/volume/16/issue/8/no-more-zeroing-united-states-changes-its- antidumping-policy-comply-wto. “WT/DS422/R.” 2016. Accessed March 21. https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009- DP.aspx?language=E&CatalogueIdList=115575,114958,42815,43639,63758,6323,70177,99615,109777,98644&Cur rentCatalogueIdIndex=5&FullTextHash=. “WT/DS422/R/Add.1.” 2016. Accessed March 21. https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009- DP.aspx?language=E&CatalogueIdList=115575,114958,42815,43639,63758,6323,70177,99615,109777,98644&Cur rentCatalogueIdIndex=6&FullTextHash=. “WTO | Dispute Settlement - the Disputes - DS264.” 2016. Accessed March 21. https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds264_e.htm. “WTO | Dispute Settlement - the Disputes - DS404.” 2016. Accessed March 21. https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds404_e.htm. “WTO | Dispute Settlement - the Disputes - DS422.” 2016. Accessed March 21. https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds422_e.htm.