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United States Wins WTO 'Zeroing' Dispute with Mexico

by Mary Swire, for, Hong Kong

24 December 2007

US Trade Representative Susan C. Schwab announced on Thursday that a World Trade Organization (WTO) panel has again found in favor of the United States in a case involving the "zeroing" method for calculating ani-dumping duties.

This case concerned a challenge by Mexico on the use of zeroing by the US Department of Commerce.

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, Commerce assigns a zero to that comparison, rather than a negative number equal to the amount by which the U.S. price exceeds the home market price.

This practice is commonly referred to as “zeroing.”

In this dispute, Mexico challenged the use of “zeroing” in both the investigation phase and in assessment proceedings (the proceedings in which authorities determine the actual amount of anti-dumping duties owed).

“This is further proof of what the United States has been saying all along – that WTO rules do not prohibit ‘zeroing’ and that WTO Appellate Body reports to the contrary have overreached,” argued Ambassador Schwab, adding that:

“We commend the WTO panel for conducting a very thorough analysis and applying the WTO agreements as written.”

Commenting further on the WTO verdict, the Office of the USTR observed that:

"This marks the third time a WTO panel has found that “zeroing” in assessment proceedings is not prohibited by the WTO Antidumping Agreement. It is the second time a WTO panel has considered and rejected Appellate Body findings to the contrary."

"This unprecedented situation reflects that those Appellate Body findings are not settled law."

In its report, the panel stated that it was “troubled by the fact that the principal basis of the Appellate Body’s reasoning in the zeroing cases seems to be premised on an interpretation that does not have a solid textual basis in the relevant treaty provisions”.

The Office of the USTR concluded:

"This underscores the US view that WTO Members need to address this issue in the Doha Round Rules negotiations and adopt clear, precise rules in the Antidumping Agreement expressly permitting the use of zeroing."

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