1. China vs United States DS422 Anti-Dumping: Shrimp and Diamond Saw Blades
By: Kenia Torres, Philip Thompson, Sheri Streicker, Maria Tatarska
ITRN-603
Dr. Malawer
Maria

2. Overview History Defining Terms WTO Issues Involved Positions
Decision and Implementation
Interests at Stake
Observations
Maria

3. History
In 2004 and 2007, the EU launched WTO disputes against the US for the use of a method called "zeroing" in calculating anti-dumping duty rates.
Brazil, China, Ecuador, Japan, Korea, Mexico, Thailand and Vietnam lodged similar cases.
Over the past decade, the WTO Appellate Body has consistently condemned the practice of zeroing as unfair.

4. Defining Terms… Dumping, Anti-Dumping, and ‘Zeroing’

5. Dumping
When a foreign producer sells a product in the United States at a price that is below that producer's sales price in the country of origin ("home market"), or at a price that is lower than the cost of production.
The difference between the price (or cost) in the foreign market and the price in the U.S. market is called the dumping margin.

6. Anti-Dumping Measures
WTO agreement allows governments to act against dumping where there is genuine injury to the competing domestic industry.
To do that, the government must show that:
Dumping is taking place,
Calculate the extent of dumping (how much lower the export price is compared to the exporter’s home market price), and
Show that the dumping is causing injury or threatening to do so.

7. Zeroing
Idiosyncratic method of calculation used by the U.S. Department of Commerce to establish antidumping duty.
When applying zeroing, the U.S. compares the price of the product on the home market with the price of the product on the U.S. market, but disregards, by setting at zero, all transactions in which the price of the product in the home market is smaller than the price on the U.S. market.
(Otherwise all prices would be averaged; USDOC method introduces a zero value that changes average)
WTO rulings have confirmed that this method increases the exporter's margin of dumping (often substantially) and thus, the amount of anti-dumping duty that the exporter has to pay.
Why did the US stick with zeroing? act changed the disposition of funds raised from duties on imports that the US government has determined to be subsidized or otherwise unfairly priced. Prior to the act, those funds were incorporated into the US budget. The Act specifies that the funds be distributed to the US companies that file pricing complaints. In short, this meant that non-US firms which sell below cost price in the US can be fined, and the money given to the US companies who made the complaint in the first place.
Congress enacted the Byrd Amendment on October 28, 2000, and repealed it on December 21, 2005.

8. Zeroing
Article VI and 5.8 how to compare prices to determine margin between dumping price and world price
When comparing weighted averages of Export price (Ep) and world price (Wp)- marking as Zero cases where Wp is less than Ep- only counting when Ep is less than Wp.
Sale
World Price
Export Price
Difference
Difference as % 1 5 2 4 -1
20% 3 +1
Weighted average
4.75
With Zeroing
5-4.75= .25
.25= 5% of Wp. Margin is > 2% = Dumping

9. Timeline Leading up to DS422
2004: USDOC starts anti-dumping investigation on frozen and canned shrimp; final determination calculating dumping margins regarding shrimp on responsible parties published
2005: Anti-dumping duty order on shrimp goes into effect, USDOC began an anti-dumping investigation on sawblades
2006: Final determination of injury in relation to sawblade released; December 2006, USDOC ceases zeroing in original investigations [does not recalculate A/D margins already in place (Prusa)]
2007: [prior zeroing case] DS344 over-ruled Appellate Body in favor of Mexico
2009: [prior zeroing case] DS350 ruled in favor of European Communities. Anti-dumping measure goes into effect for sawblades
2010: [prior zeroing case] DS402 ruled in favor of Korea, DS383 ruled in favor of Thailand
2011: July: China requested additional consultations on zeroing practice related to anti-dumping measures on diamond sawblades and parts.October: China requested establishment of panel. EU, Japan, Honduras, Korea, Thailand and Vietnam reserved third party rights. December: Panel established
2012: April: USDOC discontinues “zeroing” in calculating dumping margins in administrative reviews. June 2012: Panel report distributed

10. WTO Issues Involved
Are the U.S. methods of implementing anti-dumping measures on shrimp and sawblades from China in violation of:
Article VI of the GATT (1947):
“2. In order to offset or prevent dumping, a contracting party may levy on any dumped product an anti-dumping duty not greater than the margin of dumping in respect of such product.”
Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade GATT (1994):
§ Article 2.4: “A fair comparison shall be made between the export price and the normal value…”
§ Article 2.4.2: “…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…”

11. Specific Provisions Involved
Anti-dumping agreement article VI of GATT 1994:
1- Following provisions govern application of anti-dumping legislation or regulations
2.1- Definition
Dumping is when exported product is less than normal value or less than comparable product
2.4 - Allowable differences in price- terms of sale, transport, taxes, etc
Determine dumping through:
Comparing weighted average of normal value to weighted average of all comparable exports weighted average of exports OR
Compare normal value of export prices to individual transactions
No dumping if- de minimis
Margin in price is less than 2%
Volume is less than 3% of total imports of comparable item

12. Specific Provisions, Cont.
9.2- The anti-dumping duty should be specific to supplier if possible
9.3- Anti-dumping duty not to exceed margin of dumping- determinations based on if it happened, still going on, timeframes for reimbursement
9.4- anti-dumping duty should not affect producers or exports not named- more than the de minimis
11.3- Anti-dumping duty, remains in force if dumping and injury still going on after 5 years- reviews
GATT 1994: Art.
VI:1 - Similar definition of antidumping as Article VI
VI:2(a)- does not require elimination of preferences for Annex A countries
VI:2(b)- Countries with agreements before 1939 in Annex B,C,D are subject to Article VI of GATT

13. Position of China
Claims that the U.S. used the zeroing methodolgy to calculate the dumping margins in its final determinations and orders of Shrimp and Diamond Sawblades.
Claims that the U.S. relied on dumping margins calculated with the use of zeroing in establishing the separate rate of Shrimp orders.
- U.S. acted inconsistently with Article , first sentence, of the Anti-Dumping Agreement

14. Position of the United States
USTR Statement (Feb 2011):
“The United States is deeply disappointed in China’s decision to request consultations. Members have called for the United States to come into compliance with the WTO rulings on zeroing. In December, the Department of Commerce issued a proposal to end zeroing in administrative reviews, the core issue on which the Government of China has today requested consultations,” said spokeswoman Nefeterius McPherson. “Nonetheless, China has determined to pursue consultations even as the United States is in the midst of its domestic legal and administrative compliance process, including consultations with Congress. The decision now by China to pursue new claims against the United States on zeroing only complicates resolution of this issue.”
The U.S. did not oppose China’s claims and allegations.

15. Third Parties The European Union Honduras Japan Korea Thailand Vietnam
Sided with China
Panel decided not to hold any substantive meetings with the third parties
Only EU, Japan and Thailand submitted third-party submissions

16. Decision of the Panel
ADA Art (dumping determination - zeroing): U.S. acted inconsistently with its obligations under this provision. China’s claim was upheld.
ADA Art (dumping determination - separate rate calculation): USDOC averaged the dumping margins, which were calculated with zeroing. Provision inconsistent dumping margins do not necessarily equal provision inconsistent separate rate calculations. China’s claim was rejected.

17. Implementation Panel Report Adopted 23 Jul 2012
“Reasonable period of time for the U.S. to implement the DSB recommendations and rulings shall be 8 months”
Expiration: 23 Mar 2013
26 Mar 2013, the U.S. told the Dispute Settlement Body (DSB) that it had implemented the recommendations
China said the U.S. failed to revoke the anti-dumping duty on sawblades
China urged the U.S. to comply
The Dispute Settlement Body (DSB) adopted the panel report on the day of their meeting 23 Jul 12
China and the US informed the DSB that they had come to an agreement on the “reasonable period of time for the US to implement the DSB recommendations and rulings shall be 8 months.” Expiration: 23 Mar 13
On 26 Mar 13, the US told the DSB that they had implemented the DSB recommendations and rulings w/in the reasonable period of time agreed on, but China said that the US had yet to revoke the anti-dumping duty on sawblades. As a result, China urged the US to fully implement the DSD recommendations

18. Interests Affects the global trading system:
Skews dumping margins for countries involved
Finding a solution for this sort of dispute is necessary because it interferes with national and international interest
China: Inflated anti-dumping duties
International Community: Many countries trade with the U.S. and has been found ‘zeroing’ in many instances
This sort of dispute affects the global trading system a great deal because it skews the dumping margins for the countries involved
Finding a solution for this type of dispute is important because it interferes with national and international interests
China’s best interest that the U.S. does not use ‘zeroing’ as their methodology to calculate anti-dumping duties against their disputed products because it results in anti-dumping duty in excess of the actual dumping practiced by China
It’s in the international’s best interest that ‘zeroing’ is dealt w/, as the U.S. has been found ‘zeroing’ other countries

19. U.S. Dumping Margins for Shrimp Exporters
China
Over 90%
Brazil
68%
Ecuador
2-4%
India
13%
Thailand
5-6%
Vietnam
25%
China – over 90% for major Chinese exporters % PRC-wide margin

20. Observations U.S. lack of response speaks for itself
Failure to respond implies responsibility in illegal action
Encourages other nations to take disputes to the WTO
Highlights how the lack of specificity in international agreements can impact countries
Doha Round Rules negotiations need to adopt clear and precise rules in the Anti-dumping Agreement on the use of zeroing
Significant to other countries exporting or considering to export with the U.S.
The U.S. failure to comply with WTO rulings undermines the legitimacy of the dispute settlement system and its notion of fairness.
Since the US is a major and leading WTO member, the problem has become systemic.

21. ‘Zeroing’ Cases
Since 1998, over 20 disputes have involved zeroing and there have been at least 22 separate decisions finding the practice of zeroing to be inconsistent with the Anti-Dumping Agreement.

22. References
Ahn, Dukgeun. Oct. 16, “US - Anti-Dumping Measures on Certain Shrimp and Diamond Sawblades from China: Never Ending Zeroing in the WTO?” [
Ikenson, Daniel J. April 27, “Zeroing In: Antidumping’s Flawed Methodology under Fire.” CATO Institute. [
Marsh, C. U.S. Department of Commerce, International Trade Administration. (2013). Final results of the
proceeding under section 129 of the uruguay round agreements act: Antidumping measures on
certain frozen and canned warmwater shrimp from the people's republic of china. [
memo pdf]
USTR Statement Regarding China’s Decision to Request WTO Consultations on Shrimp Anti-dumping
Measures. Feb Office of the United Staes Trade Representative. [
about-us/press/office/press-releases/2011/february/ustr-statement-regarding-Chinas-decisions-
request]
World Trade Organization, (2012). Index of Disputes. [ dispu_subjects_index_e.htm#selected_subject]
World Trade Organization, (2012). United States — Anti-dumping Measures on Shrimp and Diamond
Sawblades from China. [ CatalogueIdList=115575,114958,42815,43639,63758,6323,70177,99615,109777, &CurrentCatalogueIdIndex=5&FullTextSearch=]
WTO Dispute Settlement: One-Page Case Summaries. US – Shrimp and Sawblades (China). [