WTO Supports EU In Fight Against US 'Zeroing' Practices

by Ulrika Lomas, Tax-News.com, Brussels

03 October 2008

EU Trade Commissioner Peter Mandelson has welcomed a report by the World Trade Organisation which he says backs up the EU's claims that the practice of 'zeroing' by the US as part of anti-dumping measures breaches world trade rules.

"We welcome the judgment of the panel, and are pleased that the panel has condemned the continued use of zeroing by the US in a large number of measures taken against EU exporters (including original investigations, sunset reviews and administrative reviews). These are measures taken by the US since the start of the first EC zeroing case in 2004," Mandelson commented in Brussels on Wednesday.

When the US Department of Commerce calculates a weighted average dumping margin for a given company, it typically takes into account numerous comparisons between sales in the United States and sales in the home market or third-country market (or costs in the home market).

It is not uncommon for the Commerce Department to find that some comparisons reveal dumping (e.g., the price in the United States is lower than the home market price), while others reveal no dumping (e.g., the price in the United States is higher than the home market price). Where a comparison reveals no dumping, the US government assigns a zero to that comparison, rather than a negative number equal to the amount by which the US price exceeds the home market price.

This practice is commonly referred to as “zeroing.”

"The EU position has for many years been that the use of zeroing when performing dumping calculations runs foul of fundamental obligations of the Anti-Dumping Agreement, which are to establish dumping in respect of an exporter and a certain product, and to conduct a fair comparison between the export prices and normal value. This is so both in original anti-dumping investigations and in reviews (administrative and sunset reviews)," Mandelson went on to argue, adding that:

"This position has been confirmed several times by previous WTO Panel and Appellate Body decisions. In fact, since the first case brought against the EU in 1998 (Bed Linen, following which the EC eliminated zeroing at all stages of anti-dumping proceedings), 12 disputes have been brought against the use of zeroing by the United States, whether as the unique subject of the dispute or as part of a wider dispute. So the US should not be surprised by today's report.

"In view of the multiple Appellate Body decisions that have already considered this issue and the numerous ongoing dispute settlement proceedings on the same issue, the EU would have expected compliance from the United States by eliminating the use of zeroing in all types of anti-dumping proceedings. However, since this is not the case, the EU regrets to have been compelled to bring yet another case to the WTO."

Mandelson concluded: "We now expect the US to comply with the ruling and put an end to all remaining illegal practices of zeroing."

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