1. DS422: U.S.— Anti-Dumping Measures on Shrimp and Diamond Sawblades
Tyler J. Stone
Gula Tang
(Zeroing)

2. Background- Zeroing
Calculation on if a nation is dumping products into U.S.
The foreign domestic price (FDP) of the product is compared with its U.S. import price (USIP) adjusted for transportation and handling costs.
If the product is below ‘zero’ in the calculation then the U.S. can put a duty on the product to bring it up to zero.

3. Example of Zeroing Home Market U.S. Market Zero Difference $100 $110
$110
-10
$90
+10
According to U.S. Zeroing the second example would be charged with a duty equal to $10.

4. U.S. Zeroing Policy
By 2008, six countries had brought cases against the U.S. based on zeroing policy.
Canada, Japan, E.U., Ecuador, Thailand, and Mexico.
A report by the Department of Justice Antitrust Division estimated that the cost to the U.S. of around $150 million per year when all existing U.S. antidumping orders were determined by zeroing.

5. DS141
1998
European Communities — Anti-Dumping Duties on Imports of Cotton-type Bed Linen from India
DS179
1999
United States — Anti-Dumping measures on Stainless Steel Plate in Coils and Steel Product from Korea
DS219
2000
European Communities — Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil
DS264
2002
United States — Final Dumping Determination on Softwood Lumber from Canada
DS294
2003
United States — Laws, Regulations and Methodology for Calculating Dumping Margins (Zeroing)
DS332
2004
United States — Measures Relating to Zeroing and Sunset Reviews
DS335
2005
United States — Anti-Dumping Measure on Shrimp from Ecuador
DS343
2006
United States — Measures Relating to Shrimp from Thailand
DS344
United States — Final Anti-Dumping Measures on Stainless Steel from Mexico
DS350
United States — Continued Existence and Application of Zeroing Methodology
DS382
2008
United States — Anti-Dumping Administrative Reviews Related to Imports of Certain Orange Juice from Brazil
DS383
United States — Anti-Dumping Measures on Polyethylene Retail Carrier Bags from Thailand
DS402
2009
United States — Use of Zeroing in Anti-Dumping Measures Involving Products from Korea
DS404
2010
United States — Anti-dumping Measures on Certain Shrimp from Viet Nam
DS420
2011
United States — Anti-dumping measures on corrosion-resistant carbon steel flat products from Korea
DS422
United States — Anti-Dumping Measures on Shrimp and Diamond Sawblades from China
DS429
2012
United States — Anti-Dumping Measures on Certain Shrimp from Viet Nam
DS471
2013
United States — Certain Methodologies and their Application to Anti-Dumping Proceedings Involving China

6. US – Softwood Lumber V
Canada Challenging U.S. Zeroing Policy ( )
U.S. and Canada informed the DSB that they had reached a mutually agreed solution under Article of the DSU.  This solution was in the form of a comprehensive agreement (Softwood Lumber Agreement) between the United States and Canada, dated 12 September 2006. 

7. Dispute with the E.U.
The E.U. brought a case forward against U.S. zeroing policy. The WTO ruled in favor of the E.U. due to Section 123 of the Uruguay Round.
The Appellate Body agreed with the Panel that, conceptually, zeroing is not “an allowance or adjustment” falling within the scope of Art. 2.4, third to fifth sentences, which covers allowances or adjustments that are made to take into account the differences relating to characteristics of the export and domestic transactions, such as differences in conditions and terms of sale, taxation, levels of trade, etc. Thus, the Appellate Body upheld the Panel’s finding that zeroing is not an impermissible allowance or adjustment under Art. 2.4, third to fifth sentences.

8. Agreement on Implementation of Article VI Article 2.4
2.4    ‘A fair comparison shall be made between the export price and the normal value.  This comparison shall be made at the same level of trade, normally at the ex-factory level, and in respect of sales made at as nearly as possible the same time.  Due allowance shall be made in each case, on its merits, for  differences which affect price comparability, including differences in conditions and terms of sale, taxation, levels of trade, quantities, physical characteristics, and any other differences which are also demonstrated to affect price comparability… If in these cases price comparability has been affected, the authorities shall establish the normal value at a level of trade equivalent to the level of trade of the constructed export price, or shall make due allowance as warranted under this paragraph.  The authorities shall indicate to the parties in question what information is necessary to ensure a fair comparison and shall not impose an unreasonable burden of proof on those parties.’

9. Dispute with the E.U.
The United States discontinued the use of zeroing in original investigations in which the weighted average-to-weighted average comparison methodology was used. The United States Department of Commerce issued Section  129 determinations in which it recalculated, without zeroing, the margins of dumping for the orders covered in the original proceedings.
The E.U. was satisfied that this change in policy by the U.S. in 2012 abandoned the zeroing policy.

10. Total Export Volume (Ton)
Dispute Origins (I)
In 2003, the US Department of Commerce initiated an anti-dumping investigation against warm water shrimp originating in China, Brazil, Ecuador, India, Vietnam and Thailand.
On January 6, 2005, the USITC issued a final ruling on industrial injury, a series of anti-dumping duties, from 27.89% to 82.27%, are levied on 36 Chinese companies.
Influence: PRC’s shrimp export routes to the US are almost closed. 33,000 shrimp farming families quickly went bankrupt.
Year
Total Export Volume (Ton)
Gross Amount (US$)
2003
51827
383.7 million
2005
4937
50.5 million
Decrease % %
*Data comes from the Ministry of Agriculture of PRC:

11. Dispute Origins (II)
In May 2005, The United States filed an anti-dumping investigation against diamond sawblades and the accessories from China and South Korea, implementing the “Zeroing” measurement.
Before that, a single Chinese company, “AnTai Tech Inc.”, had already occupied 40% of the US diamond sawblade market. The investigation determined that its dumping margin was %. In 2006, a revised investigation fixed it as 2.82%.
For the companies involved, U.S. anti-dumping measures have not only raised the cost of selling their products, but the frequent administrative review process has also put them in a tough spot of prolonged passive litigation

12. Consultation Phase
On February 28, 2011, China asked to enter into consultation with the United States for the shrimp issue.
Japan requested to join consultation on March 11, 2011.
On July 22, China requested a supplementary consultation to include the "zeroing" in the US anti-dumping measures against their exporting diamond sawblades.
China requested the establishment of panel on October 13, 2011.
At its meeting on 25 October 2011, the DSB established a panel.  The European Union, Honduras, Japan, Korea, Thailand and Viet Nam reserved their third party rights.  creation of a panel on October 13, 2011.

13. Focus of the Disputes
The core issue in this case is whether the use of "zeroing“ measurement exaggerated Chinese exports.
What China requested the panel to decide is very simple: the use of "zeroing" by the US calculating the dumping margins and the separate tax rates does not conform to the Anti-Dumping Agreement Act 2.4.2, the first sentence.
The United States had no objection to China's request.

14. Claims From China
The use by the US Department of Commerce of the “Five-step Zeroing” methodology in these original investigations exaggerate the certain dumping margins, thus the relevant taxes rates are overvalued.
China cited 4 previous WTO cases to prove this mistake: The use of "zeroing" in this case is the same as in the previous cases.
The panel shall cite the decision of the panel or appellate body that the United States' conduct does not conform to the agreement

15. United States Response
The US did not contest the factual assertions made by China regarding the USDOC's use of zeroing in the investigations at issue and the USDOC's reliance upon dumping margins calculated with zeroing to establish the separate rate.
In its written comments, US acknowledged that the reasoning behind the Canadian softwood lumber case also applies to China’s argument in this case.
At the DSB meeting on 26 March 2013, the United States informed the DSB that it had implemented the DSB recommendations and rulings within the reasonable period of time. 

16. Views of the Third Parties
Only the European Union, Japan and Thailand have submitted written propositions. They are basically all support China’s argument.
EU pointed out that, China failed to explain the legal basis for ruling US's separate tax rates violate the Act They believes that the nonconformity margin does not necessarily mean that a separate rate based on such margin does not qualify.

17. Panel Decision and Accordance
Panel reviewed importance of the unopposed claims by the accused:
- In 4 different previous cases, every panel were actually facing the “similar situation”
- In fact, the unopposed claims reviewed by each panel are “Virtually Identical” to the legal claims of China in this case
For the burden of proof and procedure, panel gradually examined whether China has proved the following three issues
- The USDOC used the “zeroing" approach in the controversial ruling;
- The USDOC used the same approach in its controversial measures as it did in the Canadian lumber case;
- Based on the reasoning in this case, the U.S. behavior did not comply with the Article VI.

18. Panel Decision and Accordance
China submitted 3 key evidence to prove the employing of “Zeoring” in the disputed ruling:
- A computer program template from the USDOC: the program contains a "standard normalization line," which causes the calculation of dumping totals to ignore negative dumping numbers and count only as positive. The reserved data includes records of all involved Chinese companies.
- The USDOC’s attached files to the final investigation reports of shrimp and sawblades: in both documents, DOC claims it did not calculate the negative dumping amount to reduce the total dumping amount.
- Financial statements: the financial statements use a four-step analysis of each of the totals, they prove that the “zeroing” is a part of USDOC’s method to calculate the margin of dumping at each ruling of the investigation

19. Panel Decision and Accordance
On the basis of the evidences and the previous determination, the panel concluded that the calculation of dumping margins did reflects the practice of "zeroing".
Meanwhile, since the dumping margin calculation is already in breach of the agreement, a separate tax rate based on these margin must include a "zeroing" approach that does violate WTO regulations. Although China failed to explain the legal basis for the US's illegal separate tax rates.

20. Aftermath: Future of “Zeroing”
Three possible future route: - Legalization. - Keeping in the status quo. - Illegalization.

21. Unresolved Issues and lessons
China did not share the United States' view that it had fully implemented the DSB recommendations as it had failed to revoke the anti-dumping duty on sawblades. China urged the United States to honor its obligation.
The United States policy although rejected by the WTO, does highlight the ability of a nation’s sovereignty when it comes to trade policy and protection within the WTO.

22. References:
1. Panel Report, United States-Anti-Dumping Measures on Certain Shrimp and Diamond Sawblades from China (Complainant:China), WT/DS422/R, 8 June 2012,paras
2. Appellate Body Report, United States of America-Laws, Regulations and Methodology for Calculating Dumping Margins (Zeroing)(Complainant:European Communities), WT/DS294/AB/R, 18 April ,para.V.B.1.8.
3. US Compliance with WTO Rulings on Zeroing in Anti-Dumping:
core/content/view/BBF293550CA0D2E792852CDAD5E2FBB4/S a.pdf/us_compliance_wi th_wto_rulings_on_zeroing_in_antidumping.pdf
4. 陈欣，刘和平，“期待多哈回合终结归零法”，《 WTO 贸易摩擦备忘》，2013年第 4 期，第 90 页
5. What is Zeroing? Brussels, 6 February
6. The Implications of Zeroing on Enforcement of U.S. Antidumping Law, William W. Nye, EAG August