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WORLD TRADE
ORGANIZATION

WT/DS294/R
31 October 2005

(05-4933)

Original: English

UNITED STATES – LAWS, REGULATIONS AND
METHODOLOGY FOR CALCULATING
DUMPING MARGINS ("ZEROING")

Report of the Panel


TABLE OF CONTENTS

I. INTRODUCTION

A. COMPLAINT OF THE EUROPEAN COMMUNITIES

B. ESTABLISHMENT AND COMPOSITION OF THE PANEL

C. PANEL PROCEEDINGS

II. FACTUAL ASPECTS

III. REQUESTS FOR FINDINGS AND RECOMMENDATIONS

A. THE EUROPEAN COMMUNITIES

B. UNITED STATES

IV. ARGUMENTS OF THE PARTIES

A. BURDEN OF PROOF AND STANDARD OF REVIEW

B. "AS APPLIED" CLAIMS

C. "AS SUCH" CLAIMS

V. ARGUMENTS OF THE THIRD PARTIES

A. ARGENTINA

B. BRAZIL

C. CHINA

D. HONG KONG, CHINA

E. INDIA

F. JAPAN

G. REPUBLIC OF KOREA

H. MEXICO

I. NORWAY

J. TURKEY

VI. INTERIM REVIEW

A. COMMENTS BY THE EUROPEAN COMMUNITIES

B. COMMENTS BY THE UNITED STATES

VII. FINDINGS

A. INTRODUCTION

B. RELEVANT PRINCIPLES REGARDING STANDARD OF REVIEW, TREATY INTERPRETATION AND BURDEN OF PROOF

C. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF CERTAIN ORIGINAL INVESTIGATIONS

D. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF "STANDARD ZEROING PROCEDURES" AND CERTAIN PROVISIONS OF THE TARIFF ACT IN RELATION TO ORIGINAL INVESTIGATIONS

E. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF CERTAIN ADMINISTRATIVE REVIEWS

F. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF THE STANDARD ZEROING PROCEDURES, THE TARIFF ACT AND THE USDOC'S REGULATIONS IN RELATION TO PERIODIC ADMINISTRATIVE REVIEWS

G. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF THE STANDARD ZEROING PROCEDURES, THE TARIFF ACT AND THE USDOC'S REGULATIONS IN RELATION TO NEW SHIPPER REVIEWS, CHANGED CIRCUMSTANCES REVIEWS AND SUNSET REVIEWS

VIII. CONCLUSIONS AND RECOMMENDATION

IX. DISSENTING OPINION BY ONE MEMBER OF THE PANEL WITH RESPECT TO CERTAIN CLAIMS OF THE EUROPEAN COMMUNITIES RELATING TO ZEROING


LIST OF ANNEXES

ANNEX A

REQUEST FOR CONSULTATIONS AND REQUEST FOR THE
ESTABLISHMENT OF A PANEL

Contents

Page

Annex A-1      Request for Consultations by the European Communities

A-2

Annex A-2     Request for the Establishment of a Panel by the European
                    Communities

A-29

TABLE OF CASES CITED IN THIS REPORT

Short Title

Full Case Title and Citation

Argentina – Poultry Anti-Dumping Duties Panel Report, Argentina – Definitive Anti-Dumping Duties on Poultry from Brazil, WT/DS241/R, adopted 19 May 2003.
Argentina – Textiles and Apparel Panel Report, Argentina – Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items, WT/DS56/R, adopted 22 April 1998, as modified by the Appellate Body Report, WT/DS56/AB/R, DSR 1998:III, 1033.
Canada – Aircraft (Article 21.5 – Brazil) Panel Report, Canada – Measures Affecting the Export of Civilian Aircraft, Recourse by Brazil to Article 21.5 of the DSU, WT/DS70/RW, adopted 4 August 2000, as modified by the Appellate Body Report, WT/DS70/AB/RW, DSR 2000:IX, 4315.
Canada – Aircraft Credits and Guarantees Panel Report, Canada – Export Credits and Loan Guarantees for Regional Aircraft, WT/DS222/R and Corr.1, adopted 19 February 2002.
Canada – Wheat Exports and Grain Imports Appellate Body Report, Canada – Measures Relating to Exports of Wheat and Treatment of Imported Grain, WT/DS276/AB/R, adopted 27 September 2004.
Canada– Aircraft Panel Report, Canada– Measures Affecting the Export of Civilian Aircraft, WT/DS70/R, adopted 20 August 1999, as upheld by the Appellate Body Report, WT/DS70/AB/R, DSR 1999:IV, 1443.
Dominican Republic – Import and Sale of Cigarettes Appellate Body Report, Dominican Republic – Measures Affecting the Importation and Sale of Cigarettes, WT/DS302/AB/R, adopted 19 May 2005.
EC – Asbestos Panel Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/R and Add.1, adopted 5 April 2001, as modified by the Appellate Body Report, WT/DS135/AB/R, DSR 2001:VIII, 3305.
EC – Bed Linen Appellate Body Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India, WT/DS141/AB/R, adopted 12 March 2001, DSR 2001:V, 2049.
EC – Bed Linen
(Article 21.5 – India)
Panel Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the DSU by India, WT/DS141/RW, adopted 24 April 2003, as modified by the Appellate Body Report, WT/DS141/AB/RW
EC – Tube or Pipe Fittings Panel Report, European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/R, adopted 18 August 2003, as modified by the Appellate Body Report, WT/DS219/AB/R.
Egypt – Steel Rebar Panel Report, Egypt – Definitive Anti-Dumping Measures on Steel Rebar from Turkey, WT/DS211/R, adopted 1 October 2002
Guatemala – Cement I Appellate Body Report, Guatemala – Anti-Dumping Investigation Regarding Portland Cement from Mexico, WT/DS60/AB/R, adopted 25 November 1998, DSR 1998:IX, 3767.
India – Patents (US) Appellate Body Report, India – Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, adopted 16 January 1998, DSR 1998:I, 9.
Japan – Agricultural Products I GATT Panel Report, Japan – Restrictions on Imports of Certain Agricultural Products, adopted 2 March 1988, BISD 35S/163.
Japan – Film Panel Report, Japan – Measures Affecting Consumer Photographic Film and Paper, WT/DS44/R, adopted 22 April 1998, DSR 1998:IV, 1179.
Japan – Semi-Conductors GATT Panel Report, Japan – Trade in Semi-Conductors, adopted 4 May 1988, BISD 35S/116.
Korea – Commercial Vessels Panel Report, Korea – Measures Affecting Trade in Commercial Vessels, WT/DS273/R, adopted 11 April 2005.
Mexico – Anti-Dumping Measures on Rice Panel Report, Mexico – Definitive Anti-Dumping Measures on Beef and Rice, Complaint with respect to Rice, WT/DS295/R, 6 June 2005.
Turkey – Textiles Panel Report, Turkey – Restrictions on Imports of Textile and Clothing Products, WT/DS34/R, adopted 19 November 1999, as modified by the Appellate Body Report, WT/DS34/AB/R, DSR 1999:VI, 2363.
United States – Anti-Dumping Measures on Oil Country Tubular Goods Panel Report, United States – Anti-dumping Measures on Oil Tubular Goods (OCTG) from Mexico, WT/DS282/R, 20 June 2005.
US – 1916 Act Appellate Body Report, United States – Anti-Dumping Act of 1916, WT/DS136/AB/R, WT/DS162/AB/R, adopted 26 September 2000, DSR 2000:X, 4793.
US – 1916 Act (Japan) Panel Report, United States – Anti-Dumping Act of 1916, Complaint by Japan, WT/DS162/R and Add.1, adopted 26 September 2000, as upheld by the Appellate Body Report, WT/DS136/AB/R, WT/DS162/AB/R, DSR 2000:X, 4831.
US – 1916 Act (EC) Panel Report, United States – Anti-Dumping Act of 1916, Complaint by the European Communities, WT/DS136/R and Corr.1, adopted 26 September 2000, as upheld by the Appellate Body Report, WT/DS136/AB/R, WT/DS162/AB/R, DSR 2000:X, 4593.
US – Carbon Steel Appellate Body Report, United States – Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany, WT/DS213/AB/R and Corr.1, adopted 19 December 2002.
US – Carbon Steel Panel Report, United States – Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany, WT/DS213/R and Corr.1, adopted 19 December 2002, as modified by the Appellate Body Report, WT/DS213/AB/R.
US – Corrosion-Resistant Steel Sunset Review Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan, WT/DS244/AB/R, adopted 9 January 2004.
US – Countervailing Measures on Certain EC Products Appellate Body Report, United States – Countervailing Measures Concerning Certain Products from the European Communities, WT/DS212/AB/R, adopted 8 January 2003.
US – Countervailing Measures on Certain EC Products Panel Report, United States – Countervailing Measures Concerning Certain Products from the European Communities, WT/DS212/R, adopted 8 January 2003, as modified by the Appellate Body Report, WT/DS212/AB/R.
US – DRAMS Panel Report, United States – Anti-Dumping Duty on Dynamic Random Access Memory Semiconductors (DRAMS) of One Megabit or Above from Korea, WT/DS99/R, adopted 19 March 1999, DSR 1999:II, 521.
US – Export Restraints Panel Report, United States – Measures Treating Exports Restraints as Subsidies, WT/DS194/R and Corr.2, adopted 23 August 2001, DSR 2001:XI, 5767.
US – Gambling Appellate Body Report, United States – Measures affecting cross-border supply of gambling and betting services, WT/DS285/AB/R, adopted 20 April 2005.
US – Gasoline Appellate Body Report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3
US – Hot-Rolled Steel Panel Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/R, adopted 23 August 2001 as modified by the Appellate Body Report, WT/DS184/AB/R.
US – Offset Act
(Byrd Amendment )
Appellate Body Report, United States – Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, adopted 27 January 2003.
US – Oil Country Tubular Goods Sunset Reviews Appellate Body Report, United States – Sunset Reviews of Anti-Dumping Measures on Oil Country Tubular Goods from Argentina, WT/DS268/AB/R, adopted 17 December 2004.
US – Section 129(c)(1) URAA Panel Report, United States – Section 129(c)(1) of the Uruguay Round Agreements Act, WT/DS221/R, adopted 30 August 2002.
US – Section 211 Appropriations Act Panel Report, United States – Section 211 Omnibus Appropriations Act of 1998, WT/DS176/R, adopted 1 February 2002, as modified by the Appellate Body Report, WT/DS176/AB/R.
US – Shrimp Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, 2755.
US – Shrimp (Article 21.5 – Malaysia) Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to Article 21.5 of the DSU by Malaysia, WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, 6481.
US – Softwood Lumber III Panel Report, United States – Preliminary Determinations with Respect to Certain Softwood Lumber from Canada, WT/DS236/R, adopted 1 November 2002.
US – Softwood Lumber IV Panel Report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, WT/DS257/R and Corr.1, adopted 17 February 2004, as modified by the Appellate Body Report, WT/DS257/AB/R.
US – Softwood Lumber V Panel Report, United States – Final Dumping Determination on Softwood Lumber from Canada, WT/DS264/R, adopted 31 August 2004, as modified by the Appellate Body Report, WT/DS264/AB/R.
US – Softwood Lumber V Appellate Body Report, United States – Final Dumping Determination on Softwood Lumber from Canada, WT/DS264/AB/R, adopted 31 August 2004.
US – Softwood Lumber VI Panel Report, United States – Investigation of the International Trade Commission in Softwood Lumber from Canada, WT/DS277/R, adopted 26 April 2004.
US – Stainless Steel Panel Report, United States – Anti-Dumping Measures on Stainless Steel Plate in Coils and Stainless Steel Sheet and Strip from Korea, WT/DS179/R, adopted 1 February 2001, DSR 2001:IV, 1295.
US – Steel Plate Panel Report, United States – Anti-Dumping and Countervailing Measures on Steel Plate from India, WT/DS206/R and Corr.1, adopted 29 July 2002.
US – Superfund GATT Panel Report, United States – Taxes on Petroleum and Certain Imported Substances, adopted 17 June 1987, BISD 34S/136.
US – Tobacco GATT Panel Report, United States Measures Affecting the Importation, Internal Sale and Use of Tobacco, adopted 4 October 1994, BISD 41S/I/131.
US – Upland Cotton Panel Report, United States – Subsidies on Upland Cotton, WT/DS267/R, Add.1-3, and Corr.1, adopted 21 March 2005, as modified by Appellate Body Report, WT/DS267/AB/R.
US – Wool Shirts and Blouses Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R and Corr.1, adopted 23 May 1997, DSR 1997:I, 323.

I. INTRODUCTION

A. COMPLAINT OF THE EUROPEAN COMMUNITIES

1.1 On 12 June 2003 and 8 September 2003, the European Communities requested consultations with the United States of America (the "United States") under Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU"); Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994"); and Articles 17.2 and 17.3 of the Agreement on implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the "AD Agreement") with regard to certain laws, regulations and methodologies for calculating dumping margins including so-called zeroing.1 Consultations were held on 17 July 2003 and 6 October 2003, but failed to result in a mutually satisfactory resolution of the matter.

1.2 On 5 February 2004, the European Communities requested the establishment of a Panel to examine the matter.2 This request was revised on 16 February 2004.3

B. ESTABLISHMENT AND COMPOSITION OF THE PANEL

1.3 At its meeting on 19 March 2004, the Dispute Settlement Body ("DSB") established a Panel pursuant to the request of the European Communities in document WT/DS294/7/Rev.1, in accordance with Article 6 of the DSU.

1.4 At that meeting, the parties to the dispute also agreed that the Panel should have standard terms of reference. The terms of reference are, therefore, the following:

"To examine, in the light of the relevant provisions of the covered agreements cited by the European Communities in document WT/DS294/7/Rev.1, the matter referred to the DSB by the European Communities in that document, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."

1.5 On 27 October 2004, the parties agreed to the following composition of the Panel:

Chairman: Mr. Crawford Falconer
Members: Mr. Hans-Friedrich Beseler
Mr. William Davey

1.6 Argentina; Brazil; China; Hong Kong, China; India; Japan; Korea, Rep. of; Mexico; Norway; Chinese Taipei; and Turkey reserved their third-party rights.

C. PANEL PROCEEDINGS

1.7 On 7 February 2005, the Panel received an amicus curiae brief from the Committee to Support US Trade Laws ("CSUSTL"). Recalling the statement of the Appellate Body that a panel has "the discretionary authority either to accept and consider or to reject information and advice submitted to it, whether requested by a panel or not",4 the Panel invited the parties and third parties to express their views on how it should handle CSUSTL's brief. After reviewing the comments of the parties and third parties, the Panel decided that it would not further consider the arguments in the CSUSTL brief except to the extent that the parties reflected those arguments in their written submissions and/or oral statements.5

1.8 The Panel met with the parties on 16-17 March 2005 and on 26-27 April 2005. The Panel met with the third parties on 17 March 2005.

1.9 The Panel submitted the Interim Report to the parties on 4 August 2005. The Panel submitted the Final Report to the parties on 28 September 2005.

II. FACTUAL ASPECTS

2.1 This dispute concerns the application by the United States of the so-called zeroing methodology when determining dumping margins in anti-dumping proceedings, including proceedings resulting in the imposition of anti-dumping measures and proceedings relating to the collection of anti-dumping duties.

2.2 The imposition and collection of anti-dumping duties in the United States can be broadly described in the following terms. In order to determine whether the imposition of anti-dumping measures on known exporters of a product under consideration may be justified, the United States examines whether dumping existed during a given period of investigation. This determination is made by the United States Department of Commerce ("USDOC") and is published in a Notice of Final Determination of Sales at Less Than Fair Value. The Notice of Final Determination of Sales at Less Than Fair Value sets out USDOC's assessment of the existence and level of dumping. The United States International Trade Commission ("USITC") will then determine whether the relevant United States industry was injured by reason of the dumped imports. When USDOC finds dumping and USITC finds that such dumping caused injury to the domestic industry, USDOC issues a Notice of Antidumping Duty Order imposing final measures, including a cash-deposit rate equivalent to the margin of dumping found to exist for each known exporter.

2.3 When calculating the magnitude of any margin of dumping in order to determine whether the imposition of anti-dumping measures on known exporters of a product under consideration may be justified, the United States uses a method that the European Communities refers to as model zeroing. The investigating authority, as well as determining the overall product scope of the proceeding (also referred to as subject product or subject merchandise)6, will, in applying the weighted average-to-weighted average comparison method, identify those sales of sub-products in the United States considered "comparable", and will include such sales in an "averaging group".7 An averaging group consists of merchandise that is identical or virtually identical in all physical characteristics.8 Each category of sub-product within the subject merchandise is assigned a control number, or CONNUM.9 The weighted-average-to-weighted-average comparison between normal value and export price is made within each averaging group.10 The amount by which normal value exceeds export price is considered by the United States to be a "dumping margin"11 or dumped amount – referred to by the United States as the Potential Uncollectible Dumping Duties, or PUDD.12 If export price exceeds normal value (the margin is negative), the "dumping margin" or dumped amount or PUDD for that averaging group is considered to be zero. The margin of dumping for the overall product is calculated by combining the averaging group results. The total of the dumped amounts or PUDDs (excluding the negative amounts or treating them as zero) is expressed as a percentage of the total export prices (including all averaging groups). An averaging group, as well as consisting of merchandise that is identical or virtually identical in all physical characteristics, also consists of merchandise that is sold at the same level of trade. In identifying sales to be included in an averaging group, the United States also takes into account, where appropriate, the region of the United States in which the merchandise is sold, and such other factors as are considered relevant.13

2.4 Subsequently, the United States will assess the liability for anti-dumping duties on specific entries of the subject product by individual importers. The United States system of duty assessment operates on a retrospective basis. Under this system, an anti-dumping duty liability attaches at the time of entry, but duties are not actually assessed at that time. Rather, the United States collects security in the form of a cash deposit at the time of entry, and determines the amount of duties due on the entry at a later date. Specifically, once a year (during the anniversary month of the orders) interested parties may request a review to determine the amount of duties owed on entries made during the previous year.14 The amount of anti-dumping duties owed by each individual importer (the assessment rate) is calculated on the basis of a comparison of each individual import to a contemporaneous average normal value. The total amount of dumping associated with each importer is then aggregated and expressed as a percentage of that importer's United States imports. This assessment rate is then applied to imports during the period reviewed. The amount of dumping found on all imports from a given exporter (regardless of the importer) is also used to derive a cash-deposit rate that will apply on future entries from that exporter. If no review is requested, the cash deposits made on the entries during the previous year are automatically assessed as the final duties. The final anti-dumping duty liability for past entries and the new cash-deposit rate for future entries is calculated by USDOC and published in a Notice of Final Results of Antidumping Duty Administrative Reviews.

2.5 When calculating the magnitude of any margin of dumping for the purpose of assessing an importer's final liability for paying anti-dumping duties and any future cash-deposit rate, the United States normally uses the average-to-transaction method15 and applies, what the European Communities refers to as, simple zeroing. When comparing a weighted-average normal value with an individual export transaction, the amount by which normal value exceeds export price is considered to be the "dumping margin"16 or "dumped" amount for that export transaction.17 If export price exceeds normal value (the margin is negative), the "dumping margin" or "dumped" amount for that export transaction is considered to be zero. The overall margin of dumping is calculated by combining the results of each comparison. The total dumping amount (excluding the negative amounts or treating them as zero) is expressed as a percentage of the total export price (including all export transactions). The importer is liable to pay the final anti-dumping duty. USDOC sends appraisement instructions to the US Bureau of Customs and Border Protection ("USCBP"), determining "an assessment rate" and thus the final anti-dumping duty to be paid.18 When USDOC gives percentage instructions, it calculates an assessment rate, to be applied by USCBP to all entries during the relevant period.19 For the purpose of calculating an assessment rate, USDOC divides the total margin or amount of dumping calculated during the period of review, by the entered values of the products sold.20

2.6 The European Communities challenges certain United States legal instruments, procedures, methodologies and practice, "as such" and "as applied". In the 15 "as applied" cases, referred to by the European Communities as "original investigations", the challenged measures are: the 15 Notices of Final Determinations of Sales at Less Than Fair Value, including any amendments, and including all the Issues and Decision Memoranda to which they refer, and all the Final Margin Program Logs and Outputs to which they in turn refer, for all the firms investigated; each of the 15 Anti-dumping Duty Orders; each of the assessment instructions issued pursuant to any of the 15 Anti-dumping Duty Orders; and each of the USITC final injury determinations.21 In the 16 "as applied" cases, referred to by the European Communities as "periodic reviews", the challenged measures are: the 16 Notices of Final Results of Antidumping Duty Administrative Reviews, including any amendments, and including all the Issues and Decision Memoranda to which they refer, and all the Final Margin Program Logs and Outputs to which they in turn refer, for all the firms investigated; and each of the assessment instructions issued pursuant to any of the 16 Notices of Final Results.22 The legal instruments, procedures, methodologies and practice challenged by the European Communities "as such" are the following:

(a) Sections 731, 751(a)(2)(A)(i) and (ii), 771(35)(A) and (B), and 777A(d) of the Tariff Act of 1930, as amended;

(b) Section 351.414(c)(2) of the United States Department of Commerce Regulations;

(c) certain provisions of the "1997 edition of the Import Administration Anti-Dumping Manual";

(d) the "Standard AD Margin Program", which includes the "Standard Zeroing Procedures"; and

(e) the United States practice or methodology of zeroing.23

2.7 The European Communities considers the above legal instruments, procedures, methodologies and practice, as well as each of the identified measures at issue in the 31 "as applied" cases, to be inconsistent with the United States' obligations under the AD Agreement, the GATT 1994 and the WTO Agreement.

2.8 The European Communities sets out its claims and arguments with respect to the 31 "as applied" cases by first presenting certain general facts and evidence of relevance to each case. Secondly, the European Communities presents its claims and arguments with respect to the specific facts of two sample "as applied" cases. It then alleges that the same claims and arguments apply, mutatis mutandis, with respect to the measures at issue in the 29 other determinations it is challenging.

2.9 The first sample case presented by the European Communities is with respect to the Notice of Final Determination of Sales at Less Than Fair Value regarding stainless steel bar from Italy, issued by the USDOC on 23 January 200224, including the related Notice of Antidumping Duty Order issued by USDOC on 7 March 2002.25 The rates of ad valorem anti‑dumping duty applied in this case were 2.50 per cent for Acciaierie Valbruna Srl/Acciaierie Bolzano D.p.A, 7.07 per cent for Acciaiera Foroni SpA, 3.83 per cent for Rodacciai S.p.A, 33 per cent for Cogne Acciai Speciali Srl and 3.81 per cent for all others.26

2.10 In calculating the dumping margins applied in this case, the USDOC identified sub-groups of products within the product under investigation ("averaging groups") on a per model basis. Within each of the averaging groups, a weighted average export price was established and compared to the corresponding weighted average normal value. The results of these comparisons on an "averaging group" basis were added up to establish the dumping margin of the product under investigation as a whole for each individual exporter. In this process, any negative margins or negative amounts of "dumping" resulting from the comparison of weighted average normal values with weighted average export prices on an "averaging group" basis were, through application of the "Standard Zeroing Procedures", equated with zero. The European Communities describes this methodology as model zeroing.27 Exhibits EC-2 to EC-15 include the final determinations and facts with respect to 14 other Notices of Final Determinations of Sales at Less Than Fair Value and Notices of Antidumping Duty Orders made between 24 July 1996 and 24 April 2003 where the same methodology described above, including the "Standard Zeroing Procedures", was applied.28

2.11 The second sample case presented by the European Communities is with respect to the Notice of Final Results of Antidumping Duty Administrative Reviews regarding ball bearings from Italy, issued by the USDOC on 30 August 2002.29 The dumping margin calculated by USDOC in these proceedings was 3.70 per cent for SKF Industrie SpA and 1.42 per cent for FAG Italia SpA.

2.12 In calculating the relevant dumping margins in this case, the USDOC identified sub-groups of products of normal vale sales based on physical characteristics and level of trade. Within each of the sub-groups, a weighted average normal value was compared to individual export prices. When adding up the results of the comparisons to determine the total amount or margin of dumping of the product under investigation, any negative amounts of "dumping" were, through application of the "Standard Zeroing Procedures", counted as zero. The European Communities describes this methodology as simple zeroing.30 Exhibits EC-17 to EC-31 include the final determinations and facts with respect to 15 other Notices of Final Results of Antidumping Duty Administrative Reviews issued between 26 October 2001 and 24 March 2003 where the same methodology described above, including the "Standard Zeroing Procedures", was applied.31

III. REQUESTS FOR FINDINGS AND RECOMMENDATIONS

A. THE EUROPEAN COMMUNITIES

3.1 The European Communities requests the Panel to make the following findings:32

(a) As a consequence of the use of model zeroing in the original investigations identified in Exhibits EC-1 to EC-15, the United States acted inconsistently with Articles 2.4 and 2.4.2 of the AD Agreement and Articles 3.1, 3.2, 3.5 and 5.8 and Articles 9.3, 1 and 18.4 of the AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement. The European Communities states that the Panel need make no findings with regard to Articles 3.1, 3.2 and 3.5 of the AD Agreement where the corrected margin of dumping for individual exporters is not less than 2 per cent; and Article 5.8 of the AD Agreement in cases where the corrected margin of dumping for the exporting country is not less than 2 per cent.

(b) The "Standard Zeroing Procedures" used in original investigations (or the United States practice or methodology of zeroing) and Sections 771(35)(A) and (B), 731 and 777A(d) of the Tariff Act are "as such" inconsistent with Articles 2.4 and 2.4.2 of the AD Agreement and Articles 5.8, 9.3, 1 and 18.4 of the AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement.

(c) As a consequence of comparing a weighted average normal value with individual export transactions, without explanation or justification, and the use of simple zeroing in the periodic reviews listed in Exhibits EC-16 to EC-31, the United States acted inconsistently with Articles 2.4, 2.4.2 and 9.3 of the AD Agreement and Articles 11.1, 11.2, 1 and 18.4 of the AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement.

(d) The "Standard Zeroing Procedures" used in periodic reviews (or the United States practice or methodology of zeroing) and Sections 771(35)(A) and (B), 731, 777A(d) and 751(a)(2)(A)(i) and (ii) of the Tariff Act and Section 351.414(c)(2) of the Regulations are "as such" inconsistent with Articles 2.4, 2.4.2 and 9.3 of the AD Agreement and Articles 11.1, 11.2, 1 and 18.4 of the AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement.

(e) The "Standard Zeroing Procedures" used or relied upon in new shipper, changed circumstances reviews and sunset reviews (or the United States practice or methodology of zeroing) and Sections 771(35)(A) and (B), 731, 777A(d) and 751(a) (2)(A)(i) and (ii) of the Tariff Act and Section 351.414(c)(2) of the Regulations are "as such" inconsistent with Articles 2.4, 2.4.2, 9.3, 9.5, 11.1, 11.2 and 11.3 of the AD Agreement and Articles 1 and 18.4 of the AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement.

B. UNITED STATES

3.2 The United States requests that the Panel reject the claims of the European Communities in their entirety.33

IV. ARGUMENTS OF THE PARTIES

A. BURDEN OF PROOF AND STANDARD OF REVIEW

1. Burden of Proof

(a) The United States34

4.1 The United States submits that the AD Agreement imposes obligations on investigating authorities that they must satisfy, but the burden of proving that those obligations have not been satisfied is on the complaining party. Accordingly, in this dispute, the burden is on the European Communities to prove that the United States acted in a WTO-inconsistent manner with respect to both its "as applied" and its "as such" claims. The burden is not on the United States to prove that it acted in a WTO-consistent manner.

(b) The European Communities35

4.2 The European Communities argues that it has presented facts and evidence more than sufficient to make out a prima facie case, in relation to both its "as applied" and "as such" claims, and has fully explained what specific obligations in the AD Agreement it considers the United States has failed to comply with, and why. In the light of these circumstances, the European Communities argues that it is incumbent on the United States to substantiate its defence, failing which the claims of the European Communities must prevail. In particular, the European Communities submits that, where the United States has not contested the facts and adduced evidence, the Panel must base itself on the facts and evidence presented by the European Communities. The European Communities also notes that the United States' first written submission did not contest claims nor respond to arguments presented by the European Communities in relation to the "as applied" cases in original investigations. The European Communities further argues that the burden of establishing that the phrase "the existence of margins of dumping during the investigation phase" has the special meaning asserted by the United States, as provided for in Article 31(4) of the Vienna Convention, falls on or has been shifted to the United States, and has not been discharged by the United States.

2. Standard of Review

(a) The United States36

4.3 The United States recalls that the standard of review with respect to a panel's task of assessing an investigating authority's establishment and evaluation of facts, and its interpretation of the provisions of the AD Agreement, is set forth in Articles 17.6(i) and 17.6(ii) of the AD Agreement. The United States highlights that the standard of review described in Article 17.6(i) has been interpreted by several panels as prohibiting a panel from engaging in de novo review. As regards the standard of review expressed in Article 17.6(ii), the United States asserts that the question it poses is whether an investigating authority's interpretation of the AD Agreement is a permissible interpretation. According to the United State, Article 17.6(ii) acknowledges that there may be provisions of the AD Agreement that "admit[] of more than one permissible interpretation." Where that is the case, and where the investigating authority has relied upon one such interpretation, a panel is to find that interpretation to be in conformity with the AD Agreement.

4.4 For the reasons discussed elsewhere, interpreting "during the investigation phase" under Article 2.4.2 as referring to an investigation under Article 5 is a permissible interpretation. Likewise, interpreting Article 2.4 as containing no independent and overarching requirements with respect to offsetting and symmetry is a permissible interpretation. Therefore, because the challenged measures rest on permissible interpretations, Article 17.6(ii) of the AD Agreement requires the Panel to find that those measures are in conformity with the AD Agreement. As found by the panel in Argentina – Poultry, "[I]n accordance with Article 17.6(ii) of the AD Agreement, if an interpretation is "permissible", then we are compelled to accept it."37

(b) The European Communities38

4.5 The European Communities argues that the submissions of the United States on the question of the standard of review for facts do not appear to serve any useful purpose. In particular, the European Communities argues that it has presented facts and evidence more than sufficient to make out a prima facie case, which facts and evidence have not for the most part been contested by the United States. Furthermore, the submissions of the United States are irrelevant to the "as such" claims, with respect to which the facts concern United States municipal anti-dumping law "as such", and have not been "established" by an investigating authority.

4.6 Second, on the questions of law, the European Communities argues that it is highly significant that the United States refers, in its first written submission, to "the possibility that customary rules of interpretation would not always yield definitive meanings of particular provisions of the AD Agreement."39 The European Communities agrees with this statement of the United States, and ascribes to it particular relevance in the context of its claims with respect to Article 2.4.2. In particular, the European Communities argues that the statement effectively amounts to an admission from the United States that, after applying customary rules of interpretation of international law to the interpretation of the word "investigation" in Article 2.4.2, the conclusion must be that that word does not have the limited or defined meaning argued for by the United States in these panel proceedings. This being so, for a Member to give that word such a limited or defined meaning, and apply the AD Agreement accordingly, would not be a permissible interpretation of Article 2.4.2.

B. "AS APPLIED" CLAIMS

1. Claims with respect to Article 2.4 of the AD Agreement

(a) The European Communities40

4.7 The European Communities argues that, because of the use of model zeroing, each of the measures at issue in the cases identified in Exhibits EC-1 to EC-15 (described by the European Communities as "original investigations"), violated United States' obligations under Article 2.4 of the AD Agreement; and that because of the use of simple zeroing, each of the measures at issue in the cases identified in Exhibits EC-16 to EC-31 (described by the European Communities as "periodic reviews"), similarly violated United States' obligations under Article 2.4 of the AD Agreement. The European Communities presents essentially the same claims and arguments, mutatis mutandis, with respect to both "original investigations" and "periodic reviews", namely, that, in each of the "as applied" cases, the United States violated (first claim) the first sentence of Article 2.4 because model zeroing and simple zeroing (absent targeted dumping) are unfair; and (second claim) the third to fifth sentences of Article 2.4 because model zeroing and simple zeroing (absent targeted dumping) effectively result in an impermissible adjustment to export price.

4.8 The European Communities contends that Article 2.4 of the AD Agreement establishes an overarching and independent obligation to make a fair comparison between export price and normal value. In contrast with the Tokyo Round Anti-Dumping Code, in the Uruguay Round AD Agreement, the words "fair comparison … between the export price and the normal value" were lifted up and placed on their own in a new first sentence of Article 2.4. According to the European Communities, the drafters would not have done this without a purpose. Thus, the change introduced in the Uruguay Round confirms that Article 2.4 contains an overarching and independent obligation to make a fair comparison that goes beyond the obligations to make due adjustment described in Article 2.4.

4.9 The European Communities does not consider that the meaning of the first sentence of Article 2.4 is limited by the second sentence of Article 2.4. In other words, the European Communities does not consider that the fair comparison referred to in the first sentence of Article 2.4 is only what is contemplated in the second sentence of Article 2.4. Rather, the European Communities considers that the first sentence of Article 2.4 contains an obligation that is overarching – in the sense that it is further elaborated in the other provisions of Article 2.4, including Articles 2.4.1 and 2.4.2; and independent – in the sense that the other provisions of Article 2.4, including Articles 2.4.1 and 2.4.2, do not exhaust the fair comparison requirement in the first sentence of Article 2.4.

4.10 The third sentence of Article 2.4 is a development of the first and second sentences of Article 2.4. Read in isolation, the third sentence would make little sense. The words "price comparability" that appear twice in the third sentence relate to the "fair comparison" between export price and normal value referred to in the first and second sentences. The third sentence, like the second sentence, refers expressly to "level[s] of trade". The word "allowances" in the fourth sentence refers back to "due allowance" in the second sentence. The fifth sentence also refers to "price comparability" and "level of trade" (twice), and to the making of a "due allowance as warranted under this paragraph". The words "this paragraph" refer to all of Article 2.4. The fifth sentence, as well as the third sentence, contain obligations regarding allowances or "adjustments" (to use the vocabulary of footnote 7), whether made to normal value or export price. The final sentence of Article 2.4 expressly refers again to the "fair comparison" obligation in the first sentence of Article 2.4; and the procedural rules it contains regulate all of the substantive obligations set out in the first to final sentences of Article 2.4.

4.11 If the meaning of the first sentence of Article 2.4 would be considered to be limited by the second sentence of Article 2.4, or for that matter the remainder of Article 2.4, or Article 2.4 including Articles 2.4.1 and 2.4.2, then the first sentence would serve no purpose. It could just as well be deleted without changing the obligations of Members. That would be to render the first sentence of Article 2.4 a nullity – which would not be a permissible interpretation.

4.12 The European Communities argues that model zeroing and simple zeroing (absent targeted dumping) fail to fully and duly account for actual prices of export transactions that take place during a period of investigation and thereby result in an inflated dumping margin. To the extent that they inflate the margin of dumping or convert a negative dumping margin into a positive dumping margin, such methodologies are inherently biased and therefore unfair within the meaning of Article 2.4 of the AD Agreement. The European Communities finds support for this conclusion in the findings of the Appellate Body in EC-Bed Linen41, US – Corrosion Resistant Steel Sunset Review42, and US –Softwood Lumber V.43

4.13 Given the common and ordinary meaning of the word "fair", the European Communities argues that the obligation to make a fair comparison under Article 2.4 must necessarily normally involve a fairly balanced comparison, being one based on equivalent methodologies – that is, a symmetrical comparison. A symmetrical comparison for the purposes of calculating a margin of dumping and eventually imposing a duty, in relation to a given product or time, is necessarily one that precludes model zeroing and simple zeroing. Thus, the European Communities contends that the obligation imposed by Article 2.4 to conduct a fair comparison precluded the model zeroing and simple zeroing methodologies applied by the United States in the cases in dispute.

4.14 In this context, the European Communities refers to the language of Article VI of the GATT 1994, the preamble to the AD Agreement, and various provisions of the AD Agreement, such as Articles 2.1, 2.6 and 4, supporting the view that the various parameters by which markets are generally defined, namely, physical characteristics, geography and time, play a central role in the AD Agreement. This also reflects a general requirement that permeates the entire AD Agreement, according to which investigating authorities must apply basic economic concepts in a consistent manner. The method used by the United States is actually incapable of measuring international price discrimination, because it is internally inconsistent, and thus unfair.

4.15 In addition, the European Communities also argues that the practice of zeroing involves effectively making an adjustment to export price that is impermissible under Article 2.4, third to fifth sentences, and thus also Article 2.4, first sentence. Such an adjustment is not allowed because it is based on a factor which does not affect price comparability. Indeed, the fact that the "export price" is above the comparable "normal value" is not a difference which affects price comparability. It is actually part of the very price difference that the investigating authorities have to establish. The practice of zeroing involves an adjustment for "non-dumping", which Article 2.4 does not, in general, permit.

4.16 The European Communities does not consider that it is possible to read the second to fifth sentences of Article 2.4 as only imposing obligations on Members to make allowance or adjustment for differences that affect price comparability. These provisions also impose an obligation not to make an allowance or adjustment when there is no such difference. Otherwise, faced with differences affecting price comparability, a Member would first be required to make a series of due allowances or adjustments, in order to render normal value and export price comparable; but having done that, the Member would then be free to make further allowances or adjustments, even if not for differences affecting price comparability, and even if reversing the effects of the first set of allowances or adjustments – without acting inconsistently with Article 2.4. That would introduce a distortion or inherent bias in the comparison and would be to render the provisions of Article 2.4 a nullity.

4.17 This is exactly what the United States practice of zeroing at issue in these proceedings does. After making adjustments for differences affecting price comparability, the investigating authority makes certain intermediate comparisons between export transactions and a "normal value"; and then makes further adjustments if the value of the export transaction exceeds that of the normal value. Thus, to the extent that the United States applied model zeroing or simple zeroing in the cases in dispute, the United States effectively made an improper adjustment to export price and violated its obligations under Article 2.4.

4.18 In response to the United States invocation of the second sentence of Article 2.4.2 as context – a provision that, in the view of the European Communities, the United States has never claimed that it was applying in the cases before the Panel – the European Communities considers that an adjustment or allowance in the context of targeted dumping might be "due", within the meaning of the third sentence of Article 2.4, if it is made under the conditions laid out in the second sentence of Article 2.4.2. According to the European Communities, if two distinct patterns of export prices are identified, in accordance with the second sentence of Article 2.4.2, then there is a difference. Article 2.4.2 refers expressly to "a pattern of export prices which differ"; and to "differences" that cannot otherwise be taken into account. Such differences may affect price comparability. It is self-evident that prices in what has been identified as distinct market A cannot – without some further consideration and explanation - necessarily simply be directly compared with prices in what has been identified as distinct market B; and that an investigating authority would be justified if it decided that the data from markets A and B could not be simply lumped together and compared with market C. An adjustment in such circumstances would be made for a difference (between markets A and B) that affected price comparability (between markets A and B; and between A, B and C). This is also clear from Article 2.4.2, which uses the words "compared" and "comparison". Thus, according to the European Communities, to the extent that the United States applied simple zeroing in the cases at issue, without justifying resort to an asymmetrical comparison methodology, the United States effectively made an improper adjustment to export price and violated Article 2.4, third to fifth sentences, and thus also Article 2.4, first sentence.

4.19 The European Communities does not agree that its interpretation of the AD Agreement renders the words: "Subject to the provisions governing fair comparison in paragraph 4" in Article 2.4.2 redundant. The "provisions governing fair comparison" are sentences 2 to 6 of paragraph 4 of Article 2. The first sentence of Article 2.4 sets forth the fair comparison obligation itself – it does not contain provisions governing that comparison. The words "subject to" simply indicate that the rules in Article 2.4.2 are subject to sentences 2 to 6 of Article 2.4. In other words, in case of conflict, the provisions of sentences 2 to 6 of Article 2.4 prevail over those of Article 2.4.2. To put matters another way, the rules in Article 2.4.2 cannot be applied in such a way as to frustrate or compromise the fair comparison required by Article 2.4.

4.20 In addition, the European Communities argues that Articles 2.4 and 9.3 require that the total amount of duty collected with respect to exports made by one specific exporter during the assessment period must not exceed the relevant margin of dumping of the same exporter. The only relevant margin of dumping permitted to be calculated under the AD Agreement, whether in an original investigation or a periodic review, is that pertaining to the exporter, not that pertaining to individual importers.

4.21 The European Communities rejects the contention of the United States that importer-specific final assessment on a transaction by transaction basis involving zeroing is contemplated under the AD Agreement by virtue of Article 9.4(ii). First, the European Communities notes that the prospective normal value or variable duty methodology recognised in Article 9.4(ii) is not in fact what was applied in any of the periodic reviews at issue. Secondly, Article 9.4 is not concerned directly with the concept of "a prospective normal value and variable duty". Rather, it sets out specific obligations concerning imposition and collection where the authorities have limited their examination in accordance with the second sentence of paragraph 10 of Article 6 – that is, when sampling has been used. Article 9.4(ii) mentions in passing the situation where the liability for payment of anti‑dumping duties has been calculated on the basis of a prospective normal value – but that is not what the provision is directly concerned with. As such, all that Article 9.4(ii) does is to confirm that a prospective normal value and variable duty is possible.

4.22 In any event, the collection of anti-dumping duties on the basis of prospective normal values is only one possible intermediate stage of the prospective system since it is subject to "a prompt refund, upon request" under Article 9.3.2 of the AD Agreement, which is itself subject to the full disciplines of Article 2. Thus, it is legally erroneous to rely on one possible intermediate stage of the prospective system, to justify the final result reached by the United States in the application of its retrospective system. There is nothing in Article 9.4 that releases authorities from the obligations in Article 9.3, including Articles 9.3.1 or 9.3.2. Thus, Members must ensure that the obligations in Article 9.3.2 are complied with whenever the "amount of the anti-dumping duty is assessed on a prospective basis". Provision must be made for a prompt refund; and in any re-calculation of the exporter specific margin of dumping the authorities must ensure that the amount of the anti-dumping duty does not exceed the margin of dumping as established under Article 2, including Article 2.4.2.

4.23 The reason why Article 9.3.2 provides for the possibility of refund in a prospective system is simply that the initial anti-dumping duty is based on the margin of dumping or normal value established during the original investigation. Therefore, there will be excess collection whenever the amount of duty collected exceeds the actual margin of dumping. The possibility of excess collection arises for all forms of duty (ad valorem, variable or other) and for a number of reasons. This is why Article 9.3.2 obliges Members applying the prospective system to put in place a mechanism of prompt refund. The mechanism is available irrespective of the form of the duty (ad valorem, variable or other). If the amount of duty collected is higher than the new dumping margin, the difference will be repaid.

4.24 Viewed in this light, the prospective system is no different from the retrospective system. The retrospective system also requires the calculation of a new margin of dumping in order to establish the final duty liability on the basis of current data.

4.25 There are, however, some important differences between the prospective system and the retrospective system operated by the United States. The prospective refund system can only result in a reduction of the total duty paid. On the other hand, the retrospective system, at least as applied by the United States, may lead to either a decrease or an increase in the margin of dumping, resulting in a decrease or increase of the total duty payable. Another difference is that a request for refund in the prospective system will, as a matter of logic, only ever be made by the exporter/importers, whereas, in the United States retrospective system, a revised determination of the dumping margin may also be requested by the domestic industry.

4.26 The type of duty has no bearing on the requirement to provide for a prompt refund mechanism. As a previous Panel stated: "(…), a properly designed variable duty system would include a refund mechanism consistent with Article 9.3.2, (…)".44 The European Communities agrees. The European Communities does not see how the choice of a specific form of duty could in any way alter a Member's obligation under Article 9.3 of the AD Agreement not to collect in excess of the actual exporter specific margin of dumping. Thus, the obligation applies with equal force to variable duties. To decide otherwise would imply that the choice of a particular form of duty entitles Members to collect anti-dumping duties irrespective of the actual margin of dumping and even in cases where the exporter has eliminated its margin of dumping.

4.27 Finally, the European Communities argues that if simple zeroing is allowed in periodic reviews conducted under Article 9.3.1, it would effectively open up a gross distortion between prospective and retrospective systems of duty assessment. The position being advocated by the European Communities, on the other hand, would maintain the situation in which the two systems lead to an equal amount of duty collected in identical situations. The European Communities does not agree with the United States that it would be possible for the European Communities to achieve the same result as the United States in an assessment proceeding by conducting a changed circumstances review where, according to the United States, the prohibition of zeroing would not apply. The European Communities disagrees, first, with the assertion that the prohibition of zeroing does not apply in a changed circumstances review – the entire discipline of Article 2 is applicable in all margin of dumping calculations. Second, the European Communities notes that, in any event, a changed circumstances review would only cover future shipments whereas an assessment proceeding covers past sales.

(b) The United States45

4.28 The United States argues that the "fair comparison" language of Article 2.4 refers to price adjustments and does not create an "overarching and independent" obligation that applies beyond the content of Article 2.4 itself. The text of Article 2.4 establishes the obligation that a fair comparison be made between normal value and export price and provides detailed guidance as to how that fair comparison is to be made. The focus of Article 2.4 is on how the authorities are to select transactions for comparison and make the appropriate adjustments for differences that affect price comparability. As the panel in Egypt – Steel Rebar explained: "[A]rticle 2.4 in its entirety, including its burden of proof requirement, has to do with ensuring a fair comparison, through various adjustments as appropriate, of export price and normal value."46 Thus, the United States contests the suggestion of the European Communities that the first sentence of Article 2.4 creates an obligation – the extent of which is unstated in the AD Agreement– that is independent of the remainder of Article 2.4, that applies after the comparisons between normal value and export price are made, and that is results-oriented.

4.29 The United States argues that the "fair comparison" referred to in Article 2.4, first sentence, is informed by the second sentence of Article 2.4, which provides that "[t]his comparison shall be made ...". In this way, the second sentence of Article 2.4 describes the basic framework by which fair comparisons between export price and normal value must be made. However, the remaining sentences of Article 2.4 also inform the meaning of the first sentence of Article 2.4. Those remaining sentences of Article 2.4 (dealing, inter alia, with terms of sale, taxation, and physical characteristics) provide additional, relevant discussion of allowances that may be due in order that the comparison to be made between export price and normal value will be fair. Thus, the second sentence, along with the remaining sentences, "limit" the first sentence.

4.30 The United States argues that its interpretation of Article 2.4 is supported by the rationale underlying the introduction of the provision following the Uruguay Round. Article 2.6 of the Tokyo Round Antidumping Code ("AD Code") stated, "In order to effect a fair comparison ... ." While the United States agrees that Article 2.6 of the AD Code addressed how to make a fair comparison, according to the United States, the language was ambiguous as to whether a fair comparison was required. Thus, all of Article 2.6 of the AD Code could have been read as non-mandatory.

4.31 The ambiguity contained in Article 2.6 of the AD Code was eliminated in the AD Agreement by separating and revising the first sentence of Article 2.4 of the AD Agreement so as to make explicit the requirement to make a fair comparison. However, the remainder of Article 2.4 of the AD Agreement, like its predecessor, defines the elements of a fair comparison. Thus, Article 2.4 of the AD Agreement is clearly mandatory – it requires Members to make a fair comparison and instructs them how to do so.

4.32 This interpretation of Article 2.4 is consistent with its drafting history. In what is known as the "Dunkel Draft", Article 2.4 read as follows:

"A fair comparison shall be made between the export price and the normal value. The two prices shall be compared at the same level of trade ... ."

Arguably, that formulation was ambiguous as to the elements that make up a fair comparison. That ambiguity was eliminated in the final draft, however, by revising the text to read as follows:

"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 ... ." (Emphasis added).

Substitution of the phrase "this comparison" establishes a reference back to the subject of the prior sentence – i.e., a fair comparison – which is what is being defined.

4.33 Further support for this reading of Article 2.4 is found in the first sentence of Article 2.4.2 of the AD Agreement which refers to "the provisions governing fair comparison in paragraph 4." The plural term "provisions," as well as the reference to "paragraph 4," rather than a particular portion of paragraph 4, clarify that the entirety of Article 2.4 constitutes the provisions "governing fair comparison."

4.34 To the extent that the European Communities argues that a requirement to make "symmetrical" comparisons between normal values and export prices can be found in the fair comparison language of Article 2.4, the United States contends that such an argument cannot be reconciled with the text of Article 2.4.2. The first sentence of Article 2.4.2 provides that those "symmetrical" comparisons are "subject to" the provisions governing "fair comparison." In the view of the United States, the drafters never intended "fair comparison" to cover symmetrical comparisons, because such coverage would have rendered this language superfluous. Furthermore, according to the United States, the AD Agreement explicitly provides for the use of asymmetrical comparisons in at least two places, neither of which is identified as an exception to the "fair comparison" requirement of Article 2.4. First, asymmetrical comparisons are expressly provided for in the targeted dumping provision – the second sentence of Article 2.4.2. While this provision is an express exception to the symmetry requirements of the first sentence of Article 2.4.2, there is no basis for interpreting it to be an exception to the fair comparison requirements of Article 2.4. Second, in the application of antidumping duties to imports from producers for which an individual dumping margin has not been separately calculated, Article 9.4(ii) of the AD Agreement expressly provides for the use of asymmetric comparisons by Members with prospective normal value systems. Nothing in Article 9.4 suggests that this methodology was provided as an exception to the fair comparison requirement of Article 2.4 or the criteria for using the targeted dumping methodology of Article 2.4.2.

4.35 The United States argues that the European Communities' claim that zeroing is permissible, when the conditions under Article 2.4.2 for conducting a targeted dumping analysis are fulfilled, cannot be squared with the European Communities' contention that zeroing is prohibited under Article 2.4 because it amounts to "an arbitrary and artificial reduction" of the export price and that "an adjustment to export price, normal value or otherwise for differences that do not affect price comparability is inconsistent with Article 2.4." The United States contends that the targeted dumping methodology is not an exception to the "fair comparison" requirement of Article 2.4; it is an exception to the symmetrical comparison requirements for investigations set forth in the first sentence of Article 2.4.2. According to the United States, having asserted that zeroing is an "impermissible adjustment to export price" not related to a difference that affects price comparability as provided in Article 2.4, the European Communities has failed to explain how this "adjustment" becomes "permissible" when the targeted dumping methodology is used. In any case, the United States is of the view that the so-called zeroing does not constitute an adjustment to price within the meaning of Article 2.4.

2. Claims with respect to Article 2.4.2 of the AD Agreement

(a) The European Communities47

4.36 The European Communities argues that, because of the use of model zeroing, each of the measures at issue in the cases identified in Exhibits EC-1 to EC-15 (described by the European Communities as "original investigations"), violated United States' obligations under Article 2.4.2 of the AD Agreement; and that because of the use of simple zeroing, each of the measures at issue in the cases identified in Exhibits EC-16 to EC-31 (described by the European Communities as "periodic reviews"), similarly violated United States' obligations under Article 2.4.2 of the AD Agreement.

(i) Article 2.4.2 prohibits model zeroing

4.37 The European Communities argues that the wording of Article 2.1 of the AD Agreement implies that an anti-dumping proceeding concerns a product (the subject product), and that, therefore, the margin of dumping to which Article 2.4.2 refers must be the margin of dumping for the subject product. According to the European Communities, this means that "dumping" for the purposes of the AD Agreement can be found to exist only for the product under investigation as a whole, and cannot be found to exist only for a type, model or category of that product.

4.38 In the original investigations at issue, the United States established "averaging groups" and made a separate calculation of "dumping" for each one. While the use of averaging groups is permissible under Article 2.4.2 of the AD Agreement, it is not a requirement. Article 2.4 of the AD Agreement requires only that due allowance and a fair comparison be made. Due allowance could have been made by adjusting the relevant prices to take account of differences in physical characteristics affecting price comparability, before making the (single) comparison referred to in Article 2.4 of the AD Agreement, and thus before calculating a (single) margin of dumping.

4.39 Having decided to establish averaging groups in the original investigations at issue, the United States considered itself under an obligation to compare weighted-average "normal value" with a weighted-average of prices of all comparable export transactions, for each averaging group. For this purpose, the United States considered that the weighted-average "normal value" was that for the relevant averaging group. The "comparable export transactions" were those relating to the same averaging group, country and exporter. The "weighted-average of prices of all comparable export transactions" was calculated in respect of all export transactions, including export transactions that exceeded the "normal value" used for that averaging group. There was no zeroing within an averaging group. Export prices in excess of normal value were fully incorporated, before the comparison between "normal value" and export price, mathematically, in the calculation of the weighted-average export price.

4.40 The United States then combined the margins calculated for each averaging group, in order to calculate the margin of dumping for the subject product. In this second stage of the calculation the weighted-average normal value was that for the subject product. The comparable export transactions must, by definition, necessarily have been those that related to the same subject product, country and exporter. The "prices" of those export transactions were reflected in the total value of exports, which total value was incorporated, mathematically, in the margins calculated for each averaging group, whether positive or negative. Just as in the first stage, in the second stage "negative margins" for averaging groups should have been incorporated, mathematically, in the calculation of the weighted-average of prices of all comparable export transactions for the subject product before the comparison between normal value and export price.

4.41 Further support for this view may be found in a consideration of the ordinary meanings of the words "comparison" and "margin" in Article 2.4.2 of the AD Agreement – at least to the extent that the United States asserts that the results of intermediate comparisons are "margins" within the meaning of that provision. Article 2.4.2 requires a simple comparison between normal value and export price. If there is a difference, according to the text, that difference is a margin. A margin is the amount by which one thing differs from another. Normal value may exceed export price. Or export price may exceed normal value. In both cases there is a margin. It is not possible to conclude in either case that there is no margin, or that the margin is zero. That would only be the case if normal value and export price were equal. Article 2.4.2 does not prejudge how the two elements to be compared are juxtaposed, nor, thus, whether each one of a series of intermediate "margins" is expressed as positive or negative.

4.42 Nor is it possible to prematurely conclude, before the final calculation is complete, that, in relation to some discrete model or type or category of exports, when "export price" exceeds "normal value", there is no or a zero margin of dumping, because Article 2.4.2 of the AD Agreement is precisely concerned with determining whether or not there is a margin of dumping for the subject product.

4.43 In summary, the European Communities submits that, in the second stage of the calculation, the United States was bound by the obligations contained in Article 2.4.2 of the AD Agreement, and particularly the obligation to make a fair comparison between a weighted-average normal value and a weighted-average of prices of all comparable export transactions. The European Communities argues that in the EC – Bed Linen48 and US – Softwood Lumber V49 cases, the Appellate Body rejected the notion that, in circumstances where there is more than one averaging group based on differences in physical characteristics, and two stages to the calculation, the second stage falls outside Article 2 of the AD Agreement and indeed outside the AD Agreement altogether. The precise and detailed rules set out in the AD Agreement would be pointless if, in the final step of the calculation, the importing Member would be free to make an unfair comparison.

4.44 The European Communities considers that the use of the plural "margins of dumping" in Article 2.4.2 reflects the possibility of different margins for different countries and exporters. The European Communities further considers that an investigating authority is not entitled to consider certain transactions to have become "non-comparable" simply because the results of certain intermediate comparisons are negative. There are other types of non-comparable transactions, such as : transactions in relation to merchandise outside the scope of the proceedings; transactions made at a time outside the investigation period; transactions in relation to another geographical region; transactions that relate to another exporting country; etc.

4.45 The European Communities considers that the view that "dumping" and "margins of dumping" can only be established for the product under investigation as a whole is in consonance with the need for consistent treatment of a product in an anti-dumping investigation. Thus, having defined the product under investigation, the investigating authority must treat that product as a whole for, inter alia, the following purposes: determination of the volume of dumped imports, injury determination, causal link between dumped imports and injury to domestic industry, and calculation of the margin of dumping. Furthermore, according to Article VI:2 of the GATT 1994 and Articles 9.2 and 9.3 of the AD Agreement, an anti-dumping duty can be levied only on a dumped product. For all these purposes, the product under investigation is treated as a whole, and so-called "non-dumped" export transactions should not be excluded. There is no basis in the AD Agreement for treating a transaction as "non-dumped" for one purpose and "dumped" for other purposes, as the United States did in the cases subject to this dispute.

4.46 The European Communities considers that, unlike other provisions of the AD Agreement that are explicit regarding the permissibility of disregarding certain matters (such as Article 2.2.1; Article 9.4; Article 2.7 and Annex II, paragraph 5) Article 2.4.2 contains no express language permitting an investigating authority to disregard certain results of multiple comparisons at the aggregation stage.

4.47 For all of these reasons, the European Communities concludes that, having defined the subject product in the original investigations at issue, the United States was not entitled to set at zero the negative margins calculated for certain averaging groups based on differences in physical characteristics. The United States had become bound by its own logic. The use of such a method by the United States in this case was not in conformity with obligations imposed on the United States by Article 2.4.2 of the AD Agreement.

(ii) Article 2.4.2 is not limited to original investigations

4.48 The European Communities argues that Article 2.4.2 applies to all types of investigations undertaken pursuant to Article VI of the GATT 1994 and the AD Agreement in which margins of dumping are calculated or relied upon, including, original investigations, periodic reviews, new shipper reviews, changed circumstances reviews and sunset reviews. The European Communities argues that the United States has failed to establish that the word "investigation" or the phrase "existence of margins of dumping during the investigation phase" in Article 2.4.2 is limited to original investigations.

4.49 The European Communities observes that the term "margin of dumping" is defined in Article VI:2 of the GATT 1994, which definition is implemented and further elaborated in Article 2. The same defined term, "margin of dumping", is also used in Article 9.3, which cross-refers to all of Article 2. It also appears in Articles 9.1 and 9.5.

4.50 Article 2.4.2 states what it applies to, not what it does not apply to. Unlike the United States Statement of Administrative Action ("SAA"), it does not contain the words "(not reviews)". The United States is therefore using a contrario reasoning in an attempt to defeat the definition of "margin of dumping" and the cross-reference in Article 9.3. If the Members had really wanted to achieve what the United States asserts, it would have been a simple matter for them to have used express exclusionary language, such as that in Article 2.2.1; Article 2.7; Article 9.4(ii); or Annex II, paragraph 5. The Members did not do that.

4.51 The GATT 1994 and the AD Agreement define eight terms, but do not define the word "investigation". Its meaning in Article 2.4.2 must be determined in accordance with the rules of treaty interpretation found in customary international law. According to the European Communities, the ordinary meaning of the word "investigation", referring to The New Shorter Oxford English Dictionary, indicates a systematic examination or inquiry or a careful study of or research into a particular subject. The European Communities believes that what makes an "investigation" an "investigation" is the nature of the activity carried out by the investigating authority, not the material scope of what is examined. For example, a cursory glance is not an investigation. The random or capricious fabrication of a margin of dumping would not be based on an investigation. On the other hand, an "objective examination" of "positive evidence", involving the "considerations", "assessments", "evaluations", "demonstrations", "determinations" and "special care", as for example, expressly referred to and required by Article 3 of the AD Agreement, does involve an "investigation". The European Communities is of the view that this type of activity takes place not only during an original investigation, but also in a periodic review, a new shipper review, a changed circumstances review and a sunset review.

4.52 The European Communities contests the United States assertion that the term "investigation" has a particular meaning – namely original investigation - throughout the AD Agreement.50 Rather, the European Communities considers that the word "investigation" is used in different senses (such as: review investigation; injury investigation; country specific investigation; company specific investigation; on-the-spot investigation; preliminary investigation; etc.) in the AD Agreement and in past panel, Appellate Body and GATT panel reports, as well as by USDOC, the ITC and in United States municipal anti-dumping law.

4.53 The European Communities contests the United States assertion that the meaning of the word "investigation" or the phrase "existence of margins of dumping during the investigation phase" in Article 2.4.2 is limited by the context of Article 5.1. To this end, the European Communities argues that the obligations set out in Article 5.1 of the AD Agreement apply only to an investigation to determine the existence, degree and effect of any alleged dumping – that is, an original investigation. The European Communities is of the view that it is precisely the presence of the words "to determine the existence, degree and effect of any alleged dumping" that limit the meaning of the word "investigation" in Article 5.1 of the AD Agreement and in the other paragraphs of that article. The absence of these words in Article 2.4.2 confirms that the word "investigation" or the phrase "existence of margins of dumping during the investigation phase" in Article 2.4.2 does not have the limited or defined meaning that the United States asserts. The European Communities contends that if the United States would be correct in its assertions, the words "to determine the existence, degree and effect of any alleged dumping" in Article 5.1 would be redundant and without meaning.

4.54 The European Communities considers that Article 2.2, which is also part of Article 2, and thus also part of the implementation of the definition of "margin of dumping", is more immediate and relevant context. It points to the use – eight times – of the word "investigation" in Article 2.2. It notes that these are provisions in respect of which implementation in the United States also for retrospective assessments was, according to the SAA, "required or appropriate". It particularly notes the use of the phrases "in the course of the investigation" in Article 2.2.1.1 and "during the investigation" in footnote 6. The European Communities also cites as relevant context the repeated use of the word "investigation" in Article 6.

4.55 Similarly, the European Communities contests the United States assertion that Article 1 of the AD Agreement means that the word "investigation" in Article 2.4.2 refers to an "original investigation" only. First, according to the European Communities Article 1 does not exhibit the characteristics of a definition. Secondly, the word "original" does not appear in Article 1. Likewise, the European Communities also contests that footnote 1 of Article 1 defines the term "investigation" for the purpose of the entire AD Agreement, including Article 2.4.2. Rather, it defines the word "initiated" – other types of investigation, such as sunset reviews, changed circumstances reviews, new shipper reviews and periodic reviews also being "initiated". Footnote 1 refers to Article 5.1 only for the purposes of determining what is "the procedural action by which a Member formally commences an investigation".

4.56 With respect to the word "phase" in Article 2.4.2, and considering its ordinary meaning, especially in conjunction with the word "during", referring to the New Shorter Oxford English Dictionary, as indicating a stage in the passage of time, the European Communities argues that it has no incidence on the meaning of the word "investigation" in Article 2.4.2. The European Communities points to several other words that are used only once in the AD Agreement without that having any legal significance. It also points to several other concepts that are referred to in the AD Agreement in different ways (as in "period" and "phase") without that having any legal significance. Thus, according to the European Communities, the word "phase" cannot, as a matter of law, lead to the conclusion that the term "investigation" is defined in Article 5.1 or elsewhere for the purposes of the entire AD Agreement, including Article 2.4.2. Finally, the European Communities points out that the word "phase" does not appear in Article 2.4.1 – which is treated the same way by the United States, simply on the basis of an erroneous assumption that "investigation" always means "not reviews".

4.57 The European Communities makes similar arguments with respect to the word "existence". The European Communities contends that it is simply not possible to entirely dissociate the "existence" of dumping and the "degree" of dumping. The ordinary meaning of "exist" being "having objective reality", it does not, when used in conjunction with the phrase "dumping margin", encompass the concept of an amount or margin somewhere between zero and infinity. In this respect, the European Communities points to the references in Article 7 to the "amount" of dumping; and in Article 9.1 to the "amount" and "full margin of dumping"; and in Article 3.4 to the "magnitude of the margin of dumping". The AD Agreement uses the word "existence" in other provisions, without that being of any legal consequence, as does the SCM Agreement, including in the provisions relating to imposition and collection. The proposition that this one word in Article 2.4.2 could have as a consequence that the basic principles for calculating a margin of dumping should be rendered entirely worthless in a system applying retrospective assessment is tenuous and implausible. In any event, the European Communities argues that the United State is wrong to assert that the only time that the "existence" of a margin of dumping is determined is in an original investigation. Issues relating to the "existence" of dumping may also arise, for example, in the context of a changed circumstances review, or in a sunset review. The European Communities requests the Panel not to base itself on the esoteric mathematical and philosophical combination dictionary meanings referred to by the United States. The European Communities also invites the Panel to pay due regard to the French and Spanish texts of the AD Agreement, the titles of which make it clear that all of the provisions of Article 2 – including those that the United States admits apply in a retrospective assessment – are concerned with the "existence" of dumping. Finally, the European Communities points out that the word "existence" does not appear in Article 2.4.1 – which is treated the same way by the United States, simply on the basis of an erroneous assumption that "investigation" always means "not reviews".

4.58 The European Communities points to the object and purpose of retrospective assessment, as it appears from the AD Agreement, and as set out in the Manual and confirmed by the United States in these proceedings: it is just a temporal up-date. The European Communities also points to the object and purpose of the AD Agreement, which at the very least requires basic consistency in the application of economic concepts. The European Communities considers that the United States has failed to articulate any alleged object or purpose to explain why, at the moment of final payment, the basic method for calculating a margin of dumping should suddenly change, and be substantially unregulated by the AD Agreement.

4.59 The European Communities considers that since the United States has failed to establish that the word "investigation" or the phrase "existence of margins of dumping during the investigation phase" has the limited meaning argued for by the United States – and that since a consideration of the ordinary meaning, context, and object and purpose confirms that there is no such limited meaning – there is no need to have recourse to the preparatory work. In these circumstances, the preparatory work could only ever be used to confirm the meaning resulting from Article 31 of the Vienna Convention. That is precisely what it does. The negotiators were acutely aware of and sensitive to the issue of definitions: it really matters whether or not something is defined; and the fact that some terms are defined and others not must be given meaning. There was general consensus on the need for a consistent, balanced and fair application of anti-dumping measures. There was broad consensus on both sides of the debate that international markets and business had evolved, and that the AD Agreement should be up-dated accordingly. At no point in the debate was it ever suggested that there should be different treatment for original investigations and retrospective assessments on the fundamental question of how to calculate a margin of dumping. This is so notwithstanding the fact that assessment and refund issues were repeatedly discussed in detail and at length, with regard to the "duty as a cost" and "lesser duty" issues. There is a clear and strong indication of consensus that the interests of both parties in the asymmetry and zeroing debate could be accommodated in the targeted dumping provisions that eventually became the second sentence of Article 2.4.2 of the AD Agreement. There is an overwhelming indication of consensus that the presence of the word "investigation", used repeatedly in what was to become Article 2.2 of the AD Agreement, did not mean that those provisions were to be irrelevant when a margin of dumping was calculated in retrospective assessments. Right from the start, there was a "strong convergence of views" on the need to strengthen the rules applicable to the pre-investigation phase, without, however, placing an unreasonable burden on complainants or authorities.

4.60 The European Communities considers that the negotiating history of Article 2.4.2 does not record which Member or Members – if any – proposed the particular form of words "during the investigation phase" or why. However, had the United States actually put to the other Members, during the negotiations, an express provision excluding the disciplines of Article 2.4.2 from retrospective assessments – the European Communities contends that there is no doubt at all, based on a fair consideration of the negotiations, that the other Members would never have agreed to it. This was confirmed by each of the 11 third parties in response to a question posed by the European Communities during the meeting with the third parties: none of them thought that the AD Agreement means that investigating authorities are free to calculate margins of dumping in all reviews and all retrospective assessments as they wish, and free from the disciplines of Article 2, including Article 2.4.2. Furthermore, the European Communities argues that subsequent practice of the Members with respect to the implementation of Article 2.4.2 is supportive of its case. In this regard, the European Communities notes that its review of the notifications of the anti-dumping legislation of 105 Members indicates that no Members take the view being advocated by the United States in the present dispute. The European Communities cites this in support of its case as "subsequent practice" within the meaning of Article 31(3)(b) of the Vienna Convention on the Law of Treaties; and also as evidence of the intention of the Members, within the meaning of Article 31(4) of the Vienna Convention.

4.61 The European Communities does not consider that its interpretation of the word "investigation" in Article 2.4.2 renders the words "during the investigation phase" in Article 2.4.2 meaningless. In this regard, the European Communities suggests four different alternative, but not necessarily mutually exclusive, possible meanings of these terms: during the investigation period; during the period in which the particular type of investigation must be concluded; not during the pre-investigation phase; or that the words are merely descriptive, in the sense that the United States considers the words "to determine the existence, degree and effect of any alleged dumping" in Article 5.1 to be merely descriptive.

4.62 With regard to the first meaning, if, referring to a dictionary, "phase" indicates a distinct period in a process of change or development, and "during" indicates a temporal connotation, then an investigation phase is something that spans a period of time, such as the "investigation period". The word "phase" and the word "period" have very similar meanings, especially when the word "phase" is associated with the word "during", giving it a temporal connotation. The two words may be considered synonymous in the context of Article 2 of the AD Agreement, referring to a "stage" in the passage of time.

4.63 The most natural reading of Article 2.4.2, and the reading that is grammatically correct, is that the words "during the investigation phase" are associated with the word "existence" rather than with the word "established". In other words, the provision does not refer to something that has to happen (the "establishment" of the margins of dumping) during the period of time in which an investigating authority must normally make its determination (generally 12 to 18 months). Rather, it refers to something that has to be established (whether or not there is dumping, and if so, what the margin of dumping is) by reference to a certain period of time: the investigation period. If the drafters had intended to associate the phrase "during the investigation phase" with the word "established", the provision could have been drafted differently. For example, it could have read "… the existence of margins of dumping shall normally be established during the investigation phase …".

4.64 Contextual support for such an approach may be found in various other provisions of Article 2 of the AD Agreement. Article 2 provides valuable and persuasive context, because Article 2.4.2 is part of Article 2, and because Article 2 implements the definitions of dumping and margin of dumping set out in Article VI of the GATT 1994. Article 2.2.1 imposes obligations on investigating authorities concerning the circumstances in which sales of the like product in the domestic market "may be disregarded" as below cost. As such, it is of double interest as context, given that the practice of zeroing with which these proceedings are concerned also involves the investigating authority disregarding or adjusting, at least in part, certain export sales or other data. The object and purpose of this rule is clear. By requiring an investigating authority to consistently use data arising during the investigation period, the AD Agreement is imposing basic obligations of consistency, objectivity and fairness. Precisely the same is true of Article 2.4.2 of the AD Agreement. If the data used to establish normal value arose during the investigation period, but, in the final step of comparison, the existence of margins of dumping were permitted to be established by reference to another period, there would clearly be a rupture in the basic structure and continuity of the method for establishing whether or not there is dumping, and if so what the margin of dumping is, in conformity with the definitions set out in Article VI of the GATT 1994, as implemented in Article 2 of the AD Agreement. It is thus entirely consistent with the object and purpose of Article 2.4.2 of the AD Agreement that it should continue to require at the comparison stage, just as at the normal value stage, that the margins of dumping must be established by reference to data arising during the investigation period (or phase). Precisely the same observations may be made with respect to the references to the investigation period in Article 2.2.1.1, final sentence; footnote 6, second phrase; and Article 2.4.1, final phrase of the AD Agreement.

4.65 Other references in Article 2 to the investigation period are references to the methodology for establishing normal value. The provision that primarily relates to export price – Article 2.3 of the AD Agreement – contains no reference to data arising during the investigation period. Thus, aside from Article 2.4.2 of the AD Agreement, there is no other express textual provision that would oblige an investigating authority to use export price data arising during the investigation period (or phase). The phrase "at as nearly as possible the same time" in Article 2.4 is qualified, and in any event does not relate to the exclusion of transactions outside the chosen period. Thus, absent the words "during the investigation phase" in Article 2.4.2, an investigating authority might, for one reason or another, seek to draw on export price data arising outside the investigation period. Viewed in this light, the phrase during the investigation phase (or period) in Article 2.4.2 of the AD Agreement has an important – even vital – role to play.

4.66 Further contextual support for this view may be found in the reference to "the period of investigation" in Article 9.5 of the AD Agreement. What happens in a new shipper review is that an unrelated exporter that did not export during the original investigation period can, on request, obtain "a determination of dumping". In the opinion of the European Communities, that "determination of dumping" must be consistent with all of the disciplines set out in Article 2 of the AD Agreement – including Article 2.4.2. What makes an unrelated "new shipper" new is precisely the fact that, during the original investigation period (or phase) it did not export. That is why, in the original investigation, no specific margin of dumping could have been calculated in relation to such new shipper. Viewed in this light, it is clear that the phrase "during the period of investigation" in Article 9.5 refers back to the phrase "during the investigation phase" in Article 2.4.2, and confirms that the word "phase" in Article 2.4.2 is in fact synonymous with the word "period".

4.67 The European Communities does not consider it remarkable that, in some instances, different language is used to refer to concepts that are the same, such as a stage in the passage of time (that is, in this case, "period" and "phase"). Where the drafters sought a particularly high level of consistency, they defined the relevant terms (there are eight such definitions in the GATT 1994 and the AD Agreement). There are many other examples in the AD Agreement of different words or phrases being used to refer to the same thing. All of these terms fall to be interpreted according to the Vienna Convention, being given their ordinary meaning and having regard to context and object and purpose. There is nothing in the Vienna Convention that excludes the possibility that such different terms in fact have the same meaning. In such circumstances, the mere fact that the terms are different is of no further legal consequence.

4.68 The European Communities observes that, if the drafters had intended to take a step of such great importance as jettisoning, in retrospective assessments, the basic principles governing the determination of dumping margins, as defined in Article VI of the GATT 1994 and elaborated in Article 2 and particularly Article 2.4.2, thus rendering the results of original investigations worthless, they would not have chosen to: a) rely on an over subtle distinction between the words "during … period" and the words "during … phase", neither the word "period" nor "phase" being defined, and those phrases bearing the same ordinary meaning, if reference is made to a dictionary; b) in circumstances where the use of one word or the other logically had no incidence whatsoever on the meaning of the word "investigation" in Article 2.4.2 – investigation itself not being a defined term: c) by associating the phrase with the word "existence" as opposed to "established", in a manner that is grammatically incorrect given their alleged objective; and d) whilst at the same time including the directly contradictory cross-reference in Article 9.3 to the whole of Article 2. Rather, given the importance of the step the drafters were allegedly taking, they would rather have simply expressly stated that the rules in Article 2.4.2 could be disregarded in retrospective assessments. Just as they did in Article 2.2.1 with regard to sales not in the ordinary course of trade. Just as they did in Article 9.4 with regard to zero, de minimis and facts available margins. Just as they did in Article 2.7 with regard to non-market economies. That, at least, is what the third parties in this case seem to think.

4.69 A second possible meaning of the words "during the investigation phase" in Article 2.4.2 is that the investigating authority must make the determination within the 12 to 18 month period during which investigations must generally be concluded.

4.70 In the context of an original investigation, Article 5.10 of the AD Agreement contains the procedural rule that: "Investigations shall, except in special circumstances, be concluded within one year, and in no case more than 18 months, after their initiation." Article 2.4.2 takes this procedural rule one step further, and makes it a substantive rule, clearly of application to investigations of all types. It provides that the "margins of dumping" must be established during the 12 to 18 month original investigation phase. Thus, if a margin of dumping resulting from an original investigation were determined 2 years after the initiation of the original investigation, the Member responsible would act inconsistently with the AD Agreement. The same would be true if a Member purported to alter the margin of dumping determined during the original investigation, after the end of the 18 month period, without conducting a new investigation. It should not be forgotten that, with a new investigation, there comes, in principle, a new investigation period (or review period) – that is, fresh data (see further below) – and a new obligation to make any necessary margin of dumping determinations required by Article 2 within the new investigation phase.

4.71 The reasons for this rule are self-evident. First, it would be Kafkaesque if a producer or exporter were to find itself forever "under investigation" without ever being subject to a measure (or having the investigation terminated). That would be inconsistent with the basic requirements of certainty and predictability in international trade, which the Appellate Body has so clearly stated lie at the heart of the WTO Agreements. Second, although the AD Agreement contains no rule concerning the establishment of periods of investigation, it is well established that an investigating authority is not entirely unfettered in this matter. In principle, the period of investigation must end as close as reasonably possible to the date on which the investigation is initiated. There are very good reasons for this. Anti-dumping measures can only reasonably be imposed on the basis of sufficiently fresh data. Absent some special justification, it would not be reasonable or acceptable under the AD Agreement for an investigating authority to impose anti-dumping measures today, based on data from 10 years ago. Requiring the dumping margin determination to be made within the investigation phase is an essential part of this "fresh data" rule: there would be no point in requiring the investigation to be initiated shortly after the end of the investigation period, if the dumping margin determination could be delayed until several years later. Third, given the importance of this rule, it is entirely appropriate that it should be expressed not only in the essentially procedural terms of Article 5.10 of the AD Agreement, which relates to original investigations, but that it should also be recalled, or expressed in more substantive terms, in the context of Article 2.4.2 of the AD Agreement, and in relation to all types of investigation. This makes it clear that failure to respect the rule would result not merely in a procedural inconsistency with the AD Agreement, but would vitiate the very core of the determination – the establishment of the margin of dumping. And it makes it clear that the rule applies in all types of investigation.

4.72 In the context of changed circumstances reviews, Article 11.4 of the AD Agreement provides that the review should be carried out expeditiously and normally concluded within 12 months of the date of initiation. The reasoning is analogous. If the review involves reliance on or determination of a new "margin of dumping", that determination must comply with the requirements of Article 2 of the AD Agreement, and must be made during the 12 month review investigation phase. The same reasoning applies, mutatis mutandis, to sunset reviews under Article 11.3. Similarly, Article 9.5 of the AD Agreement provides that new shipper reviews must be initiated and carried out on an accelerated basis, compared to normal duty assessment and review proceedings. In the same vein, both Articles 9.3.1 and 9.3.2 of the AD Agreement expressly provide for an investigation phase of normally 12 months and in no case less than 18 months. Thus, this is the period or phase during which the investigating authority must make any "margin of dumping" calculations required by Article 2 of the AD Agreement. That is what the words "during the investigation phase" in Article 2.4.2 of the AD Agreement mean.

4.73 A third meaning is that Article 2.4.2 does not apply in the pre-investigation phase. The first step in anti-dumping proceedings is not the initiation of an original investigation. The first step is normally the written application by the domestic industry, pursuant to Article 5.1 of the AD Agreement. There are several provisions of the AD Agreement regulating the period prior to the initiation of an original investigation. These provisions impose obligations on Members. For example, Article 5.2 sets out the minimum content of an application. If an application does not meet these requirements, a Member cannot initiate an original investigation without acting inconsistently with the AD Agreement. According to Article 5.3 of the AD Agreement, the authorities must examine the accuracy and adequacy of the evidence provided in the application to determine whether there is sufficient evidence to justify the initiation of an investigation. Article 5.4 of the AD Agreement requires the authorities to determine that the application is supported by a sufficient proportion of the domestic industry – otherwise "An investigation shall not be initiated …". Article 5.5 of the AD Agreement prohibits the authorities from publicising the application prior to initiation of an investigation, and requires pre-notification to the government of the exporting Member. Article 5.7 of the AD Agreement contains rules regarding the consideration of dumping and injury, both in the pre-investigation phase, and "thereafter". Article 5.8 of the AD Agreement sets out circumstances in which an application must be rejected, and de minimis rules.

4.74 There is therefore, incontestably, a period of time before a decision is taken on whether or not to initiate an original investigation during which: (1) facts material to a possible final determination arise or are placed on the record; (2) procedural steps are taken both by "interested parties" (the domestic industry) and by the authorities; and (3) AD Agreement rules apply and impose obligations on Members. This period of time may be termed the pre-investigation phase.

4.75 Thus, the rule in Article 2.4.2 of the AD Agreement would not apply, for example, during the pre-investigation phase. That is common sense and consistent with the other provisions of the AD Agreement. Article 5.2 of the AD Agreement requires the applicant to provide "such information as is reasonably available to the applicant". Article 5.2 (iii) of the AD Agreement refers to "information on prices" in the domestic market and "information on export prices". That might, for example, include published price lists. In the opinion of the European Communities, the threshold established by Article 5.2(iii) can be met by information that falls short, very far short, of the information necessary to make a full anti-dumping determination. In fact, this will normally be the case. That is because the very detailed and complete information concerning like product, model types, costs of production, domestic export transactions and export transactions, and all information necessary to make a fair comparison pursuant to Article 2.4 of the AD Agreement, will simply not be available, or reasonably available, to the applicant. Complaints are not required to contain precise and accurate dumping margin calculations. So the AD Agreement provides that the rules of Article 2.4.2 apply in the investigation phase, and thus not in the pre-investigation phase.

4.76 In the opinion of the European Communities, Article 5.2(iii) of the AD Agreement, viewed in isolation, would not achieve this result. It simply requires information about prices in the domestic and export markets. That is not in itself enough. Article 5.2 requires that the application must contain sufficient evidence of "dumping" and Article 5.3 requires an authority to determine whether or not there is sufficient evidence to justify initiation. Quite apart from Article 5.2(iii), the authority will therefore have to make some kind of rudimentary comparison. And that is the point at which the rule in Article 2.4.2, on the basis of this interpretation, would have value added, because it would release the authority from the unreasonable burden of applying the rules set out in Article 2.4.2, which essentially pre-suppose that the questionnaire responses, with all the detailed data on domestic and export prices, have already been filed.

4.77 Furthermore, the European Communities emphasizes that its view is consistent with the position that there is a clear distinction between each type of investigation conducted under the AD Agreement. Original investigations, new shipper reviews, changed circumstances reviews, sunset reviews and duty assessment proceedings each have a different purpose and are subject to a different set of provisions under the AD Agreement – although they are all subject to Article VI of the GATT 1994 and must be conducted in a manner consistent with the object and purpose of anti-dumping measures. On the other hand, some provisions of the AD Agreement apply to more than one or all such investigations, and Article 2.4.2 is one such provision.

(iii) Article 2.4.2 prohibits simple zeroing

4.78 The European Communities argues that the reasoning of the Appellate Body in the EC – Bed Linen51 and US – Softwood Lumber V52 cases in relation to model zeroing applies equally whenever an investigating authority decides to fix the parameters of its investigation, whether in relation to a subject product, time period, level of trade, region, or any other parameter. Once such parameters are defined, an investigating authority becomes bound by its own logic, and must complete its analysis on the basis of the same logic.

4.79 The European Communities finds contextual support for this position in the second sentence of Article 2.4.2 of the AD Agreement, which refers expressly to certain parameters of relevance to a determination of the existence of dumping, including "time periods". In the light of the periodic reviews at issue, the European Communities argues that these words imply that, having fixed the temporal parameters of the relevant proceeding, the United States had become bound by its own logic, unless the exceptional situation described in the second sentence of Article 2.4.2 of the AD Agreement were present (which was not the case).

4.80 More generally, the same is true with respect to any other parameters of an investigation that are fixed by an investigating authority, notably the purchasers and regions concerned, these also being matters referred to in the second sentence of Article 2.4.2. According to the European Communities, the simple zeroing method used by the United States is, at least potentially, offensive to any one of these parameters, because it is performed at the most disaggregated level, that is, at the level of individual transactions. In other words, instead of treating all the relevant export transactions as a whole, the United States methodology results in treating each export transaction individually in the same manner as model zeroing results in treating each model separately. Thus, the European Communities challenges the United States practice, in each of the periodic reviews at issue, of considering each export transaction in isolation.

4.81 In addition, the European Communities argues that Articles 2.4, 2.4.2 and 9.3 require that the total amount of duty collected with respect to exports made by one specific exporter during the assessment period must not exceed the relevant margin of dumping of the same exporter. The only relevant margin of dumping permitted to be calculated under the AD Agreement, whether in an original investigation or a periodic review, is that pertaining to the exporter, not one or more entries made by individual importers.

4.82 As explained above in the section concerning Article 2.4, the European Communities rejects the contention of the United States that importer-specific final assessment on a transaction-by-transaction basis involving zeroing is contemplated under the AD Agreement by virtue of Article 9.4(ii). The arguments presented by the European Communities on this issue are detailed in paragraphs 4.21 to 4.26 above.

(iv) Conditions for the Application of the Asymmetrical Comparison Methodology

4.83 The European Communities considers that the main purpose of Article 2.4.2 of the AD Agreement is to provide for an exception (asymmetrical comparison in the case of targeted dumping) to the normal methods of comparison (symmetrical comparison) in order to ensure a fair comparison within the meaning of Article 2.4. An asymmetrical comparison can only be used if the circumstances defined in the second sentence of Article 2.4.2 of the AD Agreement are met. Thus, it transformed a comparison method (weighted-average-to-transaction) commonly used before the Uruguay Round AD Agreement was adopted into an exception subject to strict conditions.

4.84 In the periodic reviews at issue in the present dispute, in order to establish the existence of a margin of dumping for the subject product during the period of review, the United States did not use either of the normal methods of comparison provided for in the first sentence of Article 2.4.2 of the AD Agreement (weighted-average-to-weighted-average or transaction-to-transaction). Rather, the United States compared a normal value established on a weighted-average basis to prices of individual export transactions. That corresponds to the asymmetrical method described in the second sentence of Article 2.4.2.

4.85 Further to the second sentence of Article 2.4.2, the asymmetrical method may only be used if the authorities find a pattern of export prices which differ significantly among different purchasers, regions or time periods, and if an explanation is provided as to why such differences cannot be taken into account appropriately by the use of a weighted-average-to-weighted-average or transaction-to-transaction comparison. Thus, in order for the United States to use the asymmetrical method, the conditions laid out in Article 2.4.2 of the AD Agreement should have been met. Furthermore, to the extent that the asymmetrical method was not available, the United States was under an obligation to use one of the normally applicable methods provided for in the first sentence of Article 2.4.2 of the AD Agreement. Thus, in this case, on this point, the United States acted inconsistently with the AD Agreement because it used the asymmetrical method when none of the conditions were fulfilled; and failed to use a symmetrical method when that was the only lawful option.

4.86 As explained above in the section concerning Article 2.4, the European Communities rejects the contention of the United States that importer-specific final assessment on a transaction by transaction basis involving zeroing is contemplated under the AD Agreement by virtue of Article 9.4(ii). The arguments presented by the European Communities on this issue are detailed in paragraphs 4.21 to 4.26 above.

(b) The United States53

(i) Article 2.4.2 does not prohibit model zeroing

4.87 The United States submits that in US – Softwood Lumber V, the Appellate Body erred in finding that the AD Agreement requires Members, in the investigation phase, to give credit for weighted average comparisons when the export price exceeds the normal value.

4.88 With respect to the investigation phase, the "as applied" and "as such" claims of the European Communities are based on its assertion that the AD Agreement requires an offset for non-dumped sales. However, according to the United States, neither the text of the AD Agreement nor its negotiating history recognizes the concept of "negative dumping margins," and the AD Agreement does not contain any obligations with respect to them. An offset requirement – if one existed – would apply to the results of comparisons, and would not pertain to the comparisons themselves. Article 2.4.2 limits the use of average-to-transaction comparisons in the investigation phase, a common practice before the Uruguay Round. Neither the text of the AD Agreement nor its negotiating history suggest that the drafters agreed to require a credit for sales made at above normal value. Because such a requirement is antithetical to the historic manner in which antidumping investigations have been conducted by many Members, both before and after the completion of the Uruguay Round, and there is no indication in the text of an agreement to change this historic approach, such an obligation should not be created through the dispute settlement process on the basis of tenuous inferences.

4.89 The United States contests the assertion of the European Communities that it "excludes" non-dumped transactions from its calculation of an overall margin of dumping in the investigation phase and that such exclusions are "unfair." When applying the average-to-average method, the United States calculates multiple weighted average normal values, and compares each to a distinct set of weighted average export prices. Each average-to-average pairing is distinguished by a common set of variables establishing their comparability (e.g., model, level of trade). Taken together, these groups of export transactions contain "all comparable export transactions." No export transaction is excluded.

4.90 For each comparison group, the United States compares the weighted average of all the normal values to the weighted average of all the export prices. However, the United States does not determine whether dumping "exists" so as to warrant the imposition of an anti-dumping measure. It simply calculates an amount of dumping for each comparison group. Consistent with the language in Article VI, paragraphs 1 and 2, of GATT 1994, when the weighted average export price for a group of transactions is less than its weighted average normal value, this difference is an amount of dumping. The summation of these dumping amounts occurs subsequently, in order to determine whether the dumping margin for the product is above or below the de minimis standard. In this exercise, all export transactions are considered, because they are included in the figure by which the aggregate of the dumping amounts is divided. The result of this calculation is the percentage dumping margin against which the de minimis standard is applied.

4.91 The Appellate Body's ultimate finding in US – Softwood Lumber V turned on a subsidiary finding that the United States practice of calculating intermediate "margins of dumping", while setting the results of those intermediate comparisons that resulted in "negative margins" to zero, was contrary to the requirements of Article 2.4.2. However, it is inaccurate to state that USDOC's intermediate stage calculations constitute a determination of whether dumping margins "exist" within the meaning of the AD Agreement. The calculation of an overall percentage dumping margin (i.e. expressing the overall amount of dumping found during the investigation phase as a percentage of overall export sales), and using this percentage to determine whether dumping "exists" such that the imposition of an antidumping measure is justified, is only done in a separate step in order to satisfy the requirements of Article 5.8 of the AD Agreement.

4.92 The Appellate Body's understanding of the facts may have resulted from the use of terminology in United States law that has been interpreted as having a different meaning in the context of the AD Agreement. The Appellate Body effectively interpreted the term "margin of dumping" for AD Agreement purposes as applying only to the percentage margin for the product as a whole, against which the de minimis standard is measured. In the context of this dispute, the "margin of dumping" for AD Agreement purposes is equivalent to the "weighted average dumping margin" defined in Section 771(35)(B) of the Act. United States law separately defines "dumping margin" in Section 771(35)(A) as "the amount by which the normal value exceeds the export price or constructed export price of the subject merchandise." Nevertheless, the reference in United States law to the intermediate dumping amounts as "dumping margins" does not alter the fact that those intermediate dumping amounts were treated in a manner consistent with the AD Agreement and Article VI:1 and 2 of GATT 1994.

4.93 The United States disagrees with the position of the European Communities on the meaning of the word "margin" in Article 2.4.2. In the AD Agreement, the word "margin" is modified by the word "dumping," giving it a special meaning. Paragraph 2 of Article VI of GATT 1994 provides that "[f]or the purposes of this Article, the margin of dumping is the price difference determined in accordance with the provisions of paragraph 1." When read with the provisions of paragraph 1, the "margin of dumping" is the price difference when a product has been "introduced into the commerce of an importing country at less than its normal value"; i.e., the price difference when the product has been dumped.

4.94 The provisions of the AD Agreement must be read in conjunction with Article VI of GATT 1994. While the AD Agreement does not provide a definition of "margin of dumping," Article 2.1 does define "dumping" in a manner consistent with the definition provided in Article VI. The express terms of Article VI provide that the margin of dumping is the amount by which normal value "exceeds" export price, or alternatively the amount by which export price "falls short" of normal value. Consequently, there is no textual support in Article VI of the GATT or the AD Agreement for the concept of "negative dumping."

4.95 Similarly, there is nothing in the text to suggest that the prevailing meaning of the term "dumping" is suspended for purposes of Article 2.4.2. Article 2.4.2 sets forth three comparison methods for establishing "the existence of margins of dumping" in an investigation. There is no reference in Article 2.4.2 to "negative margins," "negative dumping," or any other modification to the term "margin of dumping." Article 2.4.2 establishes an obligation for the administering authority to determine whether dumping "exists" based on certain methodological constraints. Nothing in Article 2.4.2 requires the expression of the margin of dumping as a percentage. Article 5.8 is the only place in the AD Agreement where the amount of dumping must be expressed as a percentage margin so that it may be measured against the de minimis standard.

4.96 In the absence of any obligation in Article 2.4.2 to calculate an overall margin of dumping, let alone any obligations detailing the manner in which such a calculation must be performed, Article 2.4.2 cannot serve as the basis for finding a requirement to offset negative dumping.

4.97 According to the United States, the negotiating history confirms that Article 2.4.2 does not require an offset for negative dumping. Prior to the entry into force of the WTO Agreement, many users of the antidumping remedy, including the United States and the European Communities, determined the existence of dumping margins by using the average-to-transaction comparison method. Several delegations sought to negotiate a change in this practice in the Uruguay Round negotiations. The negotiations over this "asymmetry" issue were protracted and difficult. Article 2.4.2 of the AD Agreement was ultimately agreed upon specifically to address this "asymmetry" issue.

4.98 Separately, a number of signatories to the Tokyo Round Anti-Dumping Code, including the United States and the European Communities, utilized a methodology whereby they calculated the final overall margin of dumping for a company by aggregating the positive dumping amounts for comparisons where normal value exceeded export price and dividing that number by the aggregate of all export prices. So-called "negative margins" were not taken into account in aggregating the overall amount of dumping. This practice was well-known by the Uruguay Round negotiators and was referred to as "zeroing." Concurrent with the negotiations, the practice of zeroing was reviewed by two dispute settlement panels and was found to be consistent with the Anti-dumping Code. In the Uruguay Round negotiations, several delegations sought to prohibit zeroing and to require an offset for "negative dumping." No provision to require such offsetting was agreed to by the negotiators. While agreement was reached to address the "asymmetry" issue through, and to the extent provided for in, the language of Article 2.4.2 of the AD Agreement, the Agreement ultimately did not address the zeroing issue.

(ii) Scope of Article 2.4.2 is Limited to Original Investigations

4.99 The United States argues that the express terms of Article 2.4.2 limit its application to the original investigation phase of an antidumping proceeding. Moreover, nothing in the text of Article 9 contradicts or invalidates the express limitation found in Article 2.4.2. On this basis, the claims of the European Communities with respect to Article 2.4.2 and phases of an anti-dumping proceeding other than the original investigation, must fail.

4.100 The express terms of Article 2.4.2 limit its application to the "investigation phase" of a proceeding. The United States asserts that to require the application of Article 2.4.2 to Article 9 assessment proceedings would read out of the AD Agreement Article 2.4.2's express limitation to investigations, and would be inconsistent with the principle of effectiveness.

4.101 Other provisions of the AD Agreement also expressly limit their application to the investigation phase of an antidumping proceeding, and do not apply elsewhere. For instance, panels have consistently found that the references to "investigation" in Article 5 only refer to the original investigation and not to subsequent phases of an antidumping proceeding.

4.102 According to the United States, the limited applicability of Article 2.4.2 could not be plainer. The text leaves no doubt that the Members did not intend to extend these obligations to any phase beyond the investigation phase. As the panel in Argentina – Poultry Anti-Dumping Duties found: "Article 2.4.2, uniquely among the provisions of Article 2, relates to the establishment of the margin of dumping "during the investigation phase."54

4.103 The limited application of Article 2.4.2 to the investigation phase is consistent with the divergent functions of investigations and other proceedings under the AD Agreement. The United States asserts that in arguing that Article 2.4.2 applies to phases of an anti-dumping proceeding beyond original investigations, the European Communities has argued that the AD Agreement does not distinguish between the rules governing investigations, assessment proceedings, and the various proceedings that constitute Article 11 reviews. However, according to the United States, investigations and assessment proceedings constitute distinct phases of an anti-dumping proceeding and have different purposes.

4.104 Article 18.3 of the AD Agreement explicitly recognizes the difference between investigations, which may lead to the imposition of a measure, and "reviews" of existing measures. The consistency with which the Appellate Body and panels have recognized the distinctions between investigations and other segments of an antidumping proceeding is consistent with the distinct purpose of the investigation phase, which is to establish as a threshold matter whether the imposition of an antidumping measure is warranted. Other phases (such as Article 9 assessment proceedings or Article 11 sunset reviews) have different purposes. Whereas the purpose of an investigation is to determine whether a remedy against dumping should be provided, the purpose of an assessment proceeding is to determine the precise amount of that remedy. As mentioned above, the Appellate Body has already recognized that investigations and other proceedings serve different purposes and have different functions, and therefore are subject to different obligations under the Agreement. The AD Agreement does not require Members to examine whether margins of dumping "exist" in the assessment phase. Article 9 assessment proceedings are not concerned with the existential question of whether injurious dumping "exists" above a de minimis level such that the imposition of antidumping measures is warranted. Instead, Article 9 focuses on the amount of duty to be assessed on particular entries, an exercise that is separate and apart from the calculation of an overall dumping margin during the threshold investigation phase.

4.105 The express limitation in Article 2.4.2 to the investigation phase is also consistent with the fact that the antidumping systems of Members are different for purposes of the assessment phase. The different methods used by Members pursuant to Article 9 include the use of prospective normal values, retrospective normal values, and prospective ad valorem assessment. If the requirements of Article 2.4.2 regarding comparison methods applied to the assessment of antidumping duties, this divergence of assessment systems would not be possible. For example, it is not possible to reconcile the prospective normal value system used by some Members with a requirement to use either the average-to-average or transaction-to-transaction method, because such systems compare weighted average normal values to individual export prices to assess dumping duties on individual transactions. Furthermore, anti-dumping duties, like other duties, are levied on individual imports, consistent with the circumstances associated with each particular import transaction. Individual importers pay such duties. To the extent that an authority may use weighted average to weighted average comparisons in an investigation to determine whether margins of dumping exist sufficient to justify the imposition of an antidumping measure, once that measure is imposed, it is the importers that will incur liability for duties. Consequently, it is appropriate to determine that liability on an importer- and transaction-specific basis. Thus, to retain the flexibility in assessment systems reflected in Article 9, it was not only appropriate, but necessary, to limit the requirements of Article 2.4.2 to the investigation phase.

4.106 The United States contends that Article 9 does not incorporate the requirements of Article 2.4.2. The general reference to Article 2 in Article 9.3 necessarily includes any limitations found in the text of Article 2. As discussed above, Article 2.4.2 by its own terms is explicitly limited to the investigation phase. The reference in Article 9.3 to Article 2 means that the amount of antidumping duty assessed may not exceed the amount of antidumping duty calculated in accordance with the general requirements of Article 2, such as making the various adjustments set forth in Article 2.4 necessary to provide a fair comparison. Furthermore, Article 9 contains certain procedural obligations applicable in assessment reviews. However, Article 9 does not prescribe methodologies for assessment proceedings such as those established in Article 2.4.2 for the investigation phase. Instead, Article 9 establishes time limits for conducting assessment proceedings, ensuring that respondent companies may obtain timely refund of any excess antidumping duties collected by a Member. The United States finds support for its interpretation of Article 9 in the panel's findings in Argentina – Poultry Anti-Dumping Duties.55

4.107 The United States argues that the phrase "the existence of margins of dumping during the investigation phase", when considered in its entirety, makes it clear that the obligations in Article 2.4.2 do not extend beyond an investigation within the meaning of Article 5. The use of the terms "investigation," "existence," and "initiated" creates a linkage that ties Articles 1, 2.4.2 and 5 together in such a way that confirms that the drafters were referring to Article 5 investigations when they provided that the Article 2.4.2 comparison methodologies are to be used to establish "the existence of margins of dumping during the investigation phase."

4.108 Thus, Article 1 defines the "initiation" of the investigation phase that leads to an anti-dumping measure as "the procedural action by which a Member formally commences an investigation as provided in Article 5." Article 5.1, in turn, provides that investigations are initiated upon a written application, or pursuant to other specified conditions, to determine the "existence, degree and effect" of alleged dumping. Consequently, there is no ambiguity as to the nature of the "investigations initiated and conducted" pursuant to Article 1. Because there is only one type of investigation provided for in Article 5, and footnote 1 to Article 1 explicitly links Article 1 to "an investigation as provided in Article 5," Article 1 can only be referring to Article 5 investigations.

4.109 To complete the linkage between Articles 1, 2.4.2, and 5, the term "existence" as it is used in Article 5.1 of the AD Agreement must be considered. The word existence is used in connection with the term dumping in only one other place in the AD Agreement besides Article 5.1: Article 2.4.2. The ordinary meaning of the word "existence" according to The New Shorter Oxford English Dictionary is "the fact or state of existing; actual possession of being; a mode or kind of existing; dealing with the existence of a mathematical or philosophical entity." The word "existence" before the phrase "of margins of dumping" indicates that Members are to determine the "existence of [the] mathematical or philosophical entity" referred to as "margins of dumping." This "existence" is a necessary part of an Article 5 investigation which may lead to applying an antidumping measure consistent with Article 1.

4.110 The drafters' intent to limit Article 2.4.2 exclusively to Article 5 investigations is further demonstrated by the use of the definite article "the" before the term "investigation phase", rather than the indefinite article "an". According to The New Shorter Oxford English Dictionary, the ordinary meaning of the article "the" is "designating one or more persons or things already mentioned or known, particularized by context, or circumstances, inherently unique, familiar or otherwise sufficiently identified." If, as the European Communities contends, the term "investigation" in the context of Article 2.4.2 may be interpreted in generic terms, rather than as a term of art referring to the Article 5 phase, then the use of the indefinite article "an" would have been much more appropriate. However, according to the United States, that is not what the AD Agreement states.

(iii) Conditions for the Application of the Asymmetrical Comparison Methodology

4.111 According to the United States, not only are the Article 2.4.2 restrictions on the investigation phase irrelevant in assessment proceedings, but Article 9 expressly provides for comparisons between weighted average normal values and individual export transactions in assessment proceedings. Article 9.4(ii) explicitly provides for the calculation of antidumping duties, in the assessment phase, on the basis of a comparison of weighted average normal values and individual export prices. This provision plainly indicates that there is nothing exceptional about assessing antidumping duties on the basis of comparisons of weighted average normal values with individual export prices.

4.112 A panel recently found the calculation of transaction-specific antidumping duties in assessment reviews to be entirely consistent with the AD Agreement. In Argentina – Poultry Anti-Dumping Duties, the panel found the Argentine prospective normal value assessment system to be fully consistent with the AD Agreement.

4.113 Thus, the United States contends that the claim of the European Communities that, with respect to the assessment proceedings at issue in this dispute, USDOC erred in not applying either the average-to-average or transaction-to-transaction methods must fail. There is no textual basis in the AD Agreement for the assertion that Article 9.3 requires the application of Article 2.4.2 in assessment proceedings. On the contrary, as the panel in Argentina – Poultry correctly found, the reference in Article 9.3 to Article 2 does not overcome the limiting language in Article 2.4.2 which, by its own terms, limits its obligations to "the investigation phase."

3. Consequential Claims with respect to Articles 3.1, 3.2 and 3.5 of the AD Agreement

(a) The European Communities56

4.114 The European Communities considers that, as a consequence of the unlawful zeroing methods applied by USDOC in the original investigations identified in Exhibits EC-1 to EC-15, the United States acted in a manner inconsistent with obligations imposed on it by Articles 3.1, 3.2 and 3.5 of the AD Agreement. The European Communities argues, inter alia, that because investigating authorities used the unlawful zeroing method in the original investigations at issue, the volume of imports determined to be dumped in each case was inflated. Accordingly, it is the European Communities' position that the United States therefore acted inconsistently with Article 3.1 of the AD Agreement because it did not base its injury determination on an objective examination of the volume of dumped imports.

4.115 The United States also acted inconsistently with Article 3.2 of the AD Agreement, because it failed to properly consider whether or not there had been a significant increase in dumped imports; and because when considering whether or not there was significant price undercutting or price depression it based its assessment also on non-dumped imports, when it was only entitled to take into account dumped imports.

4.116 The United States similarly acted inconsistently with Articles 3.1, 3.2 and 3.5 of the AD Agreement, because it examined the impact of non-dumped imports on domestic producers, when it was only entitled to examine the impact of dumped imports; and because it established a causal relationship between injury and non-dumped imports, when it was only entitled to do so in relation to dumped imports. The United States thus unlawfully attributed injury to a factor other than dumped imports, in particular a volume of imports not sold at dumping prices.

4.117 The European Communities does not claim any consequential inconsistency with Article 3 where the correction for unlawful zeroing does not take the margin of dumping below 2 per cent for individual exporters. However, it notes that it necessarily follows, from the fact that it has demonstrated that a determination is inconsistent with the AD Agreement, that all subsequent determinations that depend on that earlier determination are similarly vitiated or unsound, necessarily requiring re-consideration, and thus necessarily being inconsistent with the relevant provision(s) of the AD Agreement.

(b) The United States57

4.118 The United States asserts that the Panel should dismiss the claims of the European Communities concerning injury because even if the methodology used by USDOC in the cited investigations were inconsistent with the AD Agreement, the assertion that the margins calculated pursuant to that methodology caused the USITC to act in a manner inconsistent with Articles 3.1, 3.2 and 3.5 is speculative and unfounded.

4.119 The European Communities cannot establish that USDOC necessarily would have calculated zero or de minimis dumping margins in the cited cases, or that the USITC treated certain non-dumped imports as dumped. In the absence of such showings, the United States contends that the European Communities has failed to meet its burden to demonstrate that any of the cited determinations by the USITC is inconsistent with Articles 3.1, 3.2, and 3.5.

4.120 The United States notes that the European Communities, in response to the Panel's Question 32, does not deny that its claims as to such measures are merely speculative, given that the European Communities cannot presume the results of an alternative margin calculation methodology permitted by the AD Agreement. According to the United States, the European Communities instead adopts the new position that the use of so‑called zeroing somehow renders the injury determinations necessarily "unsound".58 The European Communities does not explain, however, how the use of zeroing necessarily caused the volume of dumped imports to be inflated, or how zeroing otherwise gives rise to an Article 3 claim.

4. Consequential Claim with respect to Article 5.8 of the AD Agreement

(a) The European Communities59

4.121 The European Communities considers that, as a consequence of the unlawful zeroing methods applied by USDOC in the original investigations identified in Exhibits EC-1 to EC-15, the United States acted in a manner inconsistent with Article 5.8 of the AD Agreement. The European Communities argues that there is a breach of Article 5.8 where the correction for unlawful zeroing would take the margin of dumping below 2 per cent for the exporting country.60 The European Communities does not claim any consequential inconsistency with Article 5.8 where the correction for unlawful zeroing does not take the margin of dumping below 2 per cent for the exporting country.

5. Consequential Claims with respect to Articles 11.1 and 11.2 of the AD Agreement

(a) The European Communities61

4.122 The European Communities argues that, as a consequence of the unlawful zeroing methods applied by USDOC in the periodic reviews identified in Exhibits EC-16 to EC-31, the United States acted in a manner inconsistent with Articles 11.1 and 11.2 of the AD Agreement. However, these claims are conditional, and may be considered withdrawn if the European Communities' claims relating to the periodic reviews at issue succeed under Articles 2.4, 2.4.2 and 9.3.

4.123 The Article 11 claim is based on the assumption that part of the measures at issue (the decision in each of the periodic reviews to apply a revised estimated anti-dumping duty deposit rate for the future) constituted a "review" within the meaning of Article 11.2 of the AD Agreement. The dumping determination made by the United States in each such review was used as the basis for determining whether or not the continued imposition of the duty was "necessary to offset dumping", within the meaning of Article 11.2 of the AD Agreement. That determination was made pursuant to the right expressly conferred on interested parties by Article 11.2 of the AD Agreement, second sentence.

4.124 The European Communities considers that if an investigating authority makes or relies on a dumping determination for the purposes of Article 11.2 of the AD Agreement, it is bound to establish any such dumping margin in conformity with the provisions of Article 2.4, including Article 2.4.2 of the AD Agreement. Article 11.2 must be read in conjunction with the other provisions of the AD Agreement, including, necessarily, those that contain relevant definitions, such as Article 2, which defines dumping.

(b) The United States62

4.125 The United States asserts that in its response to the Panel regarding the basis for its claim under Articles 11.1 and 11.2, the European Communities provided a non-response. According to the United States, the European Communities simply asserts that "the conduct of retrospective assessments in the United States must be consistent both with the provisions of Articles 2.4, 2.4.2 and 9.3, and with the provisions of Article 11." The European Communities fails, however, to provide the requested explanation, despite the latter's own recognition that "United States 'periodic reviews' of the amount of duty correspond to and fit within Article 9.3 of the AD Agreement".

6. Other Consequential Claims

(a) The European Communities63

4.126 The European Communities considers that, as a consequence of applying unlawful zeroing in the original investigations and periodic reviews in question, the United States acted in a manner inconsistent with the obligations imposed on it by Articles 9.3, 1 and 18.4 of the AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and Article XVI.4 of the WTO Agreement.

4.127 Article 9.3 of the AD Agreement provides, inter alia that the amount of the anti-dumping duty shall not exceed the margin of dumping as established under Article 2. The European Communities does not agree with the United States suggestion that Article 9 contains only "procedural obligations". Nor does the European Communities agree with the United States suggestion that Article 9 contains only "time limits". According to the European Communities, there is nothing in Article 9 to support such views. Article 9 contains substantive obligations, as does Article 2, to which Article 9 expressly refers. Thus, to the extent that the dumping duties imposed and assessed in the original investigations and periodic reviews at issue were greater than they should have been because of zeroing, the United States violated its obligations under Article 9.3.

4.128 The European Communities considers that the United States acted in this case in a manner inconsistent with the obligations imposed on it by Article 1 of the AD Agreement and Articles VI:1 and VI:2 of GATT 1994. As a result of the unlawful zeroing method applied in the original investigations and periodic reviews at issue, the United States applied an anti-dumping measure under circumstances other than those provided for in Article VI of GATT 1994 and other than pursuant to investigations initiated and conducted in accordance with the provisions of the AD Agreement. In taking action under its domestic anti-dumping legislation, the United States failed to respect the provisions of the AD Agreement, which provisions govern such action, and which provisions the United States should have respected. Accordingly, the United States acted in a manner inconsistent with the obligations imposed on it by Article 1 of the AD Agreement.

4.129 The United States condemned the sales of the products subject to investigation in circumstances where such products were not introduced into the commerce of the United States at less than the normal value of those products. The United States levied anti-dumping duties on products that were not dumped. The United States levied anti-dumping duties, allegedly in order to offset or prevent dumping, but in an amount greater than the margin of dumping. The United States thus also acted in a manner inconsistent with the obligations imposed on it by Articles VI:1 and VI:2 of GATT 1994.

4.130 As a consequence of applying unlawful zeroing in the original investigations and periodic reviews at issue, the United States also failed to ensure the conformity of its laws, regulations and administrative procedures with the provisions of the AD Agreement, and has thus acted in a manner inconsistent with obligations imposed on it by Article 18.4 of the AD Agreement and Article XVI:4 of the WTO Agreement.

(b) The United States64

4.131 As regards the European Communities' consequential claims with respect to Article 9.3, the United States asserts that Article 2.4.2 does not apply to assessment proceedings pursuant to Article 9.3. According to the United States, the general reference to Article 2 in Article 9.3 necessarily includes any limitations found in the text of Article 2. Article 2.4.2 by its own terms is explicitly limited to the investigation phase.

4.132 Citing to the Panel report in Argentina – Poultry Anti-Dumping Duties65, the United States argues that the reference in Article 9.3 to Article 2 means that the amount of antidumping duty assessed may not exceed the amount of antidumping duty calculated in accordance with the general requirements of Article 2, such as making the various adjustments set forth in Article 2.4 necessary to provide a fair comparison. There is no basis in Article 9 to overcome the explicit language in Article 2.4.2, limiting its reach to investigations.

4.133 In other words, the United States argues, Article 9 contains certain procedural obligations applicable in assessment reviews, but does not prescribe methodologies for assessment proceedings, such as those established in Article2.4.2 for the investigation phase. Instead, the United States asserts, Article 9 establishes time limits for conducting assessment proceedings, ensuring that respondent companies may obtain timely refund of any excess antidumping duties collected by a Member.

4.134 With respect to the European Communities' "as applied" claims under Article 18.4 of the AD Agreement and Article XVI:4 of the WTO Agreement, the United States asserts that, assuming for purposes of argument that the European Communities' positions regarding "symmetry" and offsets for "negative dumping" are valid, the European Communities fails to explain how the obligations of these provisions relate to determinations made in specific antidumping proceedings. Accordingly, the Panel should reject the European Communities' claims.

C. "AS SUCH" CLAIMS

1. The "Standard Zeroing Procedures" (or The United States Practice or Methodology of Zeroing) Used in Original Investigations and Periodic, New Shipper, Changed Circumstance and Sunset Reviews

4.135 The European Communities characterises this complaint as being comprised of two possible challenges: First, to the "Standard AD Margin Program", to the extent that it contains the "Standard Zeroing Procedures"; and secondly, to the extent necessary, the "Import Administration Anti-Dumping Manual" ("the Manual") and the United States practice or methodology of zeroing.

(i) The "Standard Zeroing Procedures" (or the United States practice or methodology of zeroing) are a "measure" or part of a "measure" that can be subject to WTO challenge

(a) The European Communities66

4.136 The European Communities contends that the "Standard Zeroing Procedures" and the Manual to the extent the latter refers to the "Standard Computer Programs", or the United States practice or methodology of zeroing, are a "measure" or are part of a "measure" that can be challenged "as such".

4.137 Referring particularly to the Appellate Body Reports in US-Corrosion Resistant Steel Sunset Review, paragraphs 73 to 101 and US – Oil Country Tubular Goods Sunset Reviews, paragraphs 177 to 189, the European Communities argues that there are no limitations on the type of "measures" that may, "as such", be the subject of dispute settlement under the DSU or the AD Agreement. According to the European Communities, this is consistent with the comprehensive nature of the right of Members to resort to dispute settlement to "preserve [their] rights and obligations … under the covered agreements, and to clarify the existing provisions of those agreements."67 Furthermore, it is compatible with the line of reasoning developed by the Appellate Body based on the GATT acquis and the language of the AD Agreement, in particular Articles 17.3 and 18.4.68 Thus, provided Members respect the principles set forth in Articles 3.7 and 3.10 of the DSU, namely, to exercise their "judgment as to whether action under these procedures would be fruitful" and to engage in dispute settlement in good faith, then those Members are entitled to request a panel to examine measures that the Member considers nullify or impair its benefits. In keeping with this view, the European Communities argues that if, as in the present case, it can find language to adequately explain and delineate its concerns in abstract terms, particularly if that language is contained in a document or documents drawn up by the United States itself; and if the European Communities is prepared to expend the time and resources required for a dispute settlement procedure on the point, that is enough.

4.138 The European Communities argues that instruments of a Member containing rules or norms may constitute a "measure", irrespective of how or whether those rules or norms are applied in a particular instance. This is so because the disciplines of the GATT and the WTO, as well as the dispute settlement system, are intended to protect not only existing trade but also the security and predictability needed to conduct future trade. This objective would be frustrated if instruments setting out rules or norms inconsistent with a Member's obligations could not be brought before a panel once they have been adopted, irrespective of any particular instance of application of such rules or norms.

4.139 The European Communities identifies the "Standard Zeroing Procedures" as the lines of computer code in the United States' "Standard AD Margin Program". According to the European Communities, the "Standard AD Margin Program" is a part of the United States current and standard anti-dumping margin calculation methodology. The code used as the "Standard Zeroing Procedures" varies depending upon whether it is applied in original investigations or periodic reviews. The European Communities describes it as a code that is the same or has substantially the same structure or effect as the following:
 

(for original investigations)

PROC MEANS NOPRINT DATA = MARGIN;
WHERE EMARGIN GT 0;

VAR EMARGIN &MUSQTY USVALUE;
OUTPUT OUT = ALLPUDD (DROP =
 _FREQ_ _TYPE_ )
SUM = TOTPUDD MARGQTY MARGVAL

(for periodic reviews)

PROC MEANS NOPRINT DATA = MARGIN;
BY &USCLASS

WHERE EMARGIN GT 0;

VAR WTDMRG WTDQTY WTDVAL;
OUTPUT OUT = ALLPUDD (DROP =
_FREQ_ _TYPE_ )
SUM = TOTPUDD MARGQTY MARGVAL


4.140 The European Communities argues that the "Standard Zeroing Procedures" are part of the overall framework within which anti-dumping investigations are conducted in the United States. This framework includes the "Standard AD Margin Program" and the Manual. Both the "Standard Zeroing Procedures" and the "Standard AD Margin Program" are referred to and described in the Manual and are part of the "Standard Computer Programs" applied by the USDOC in anti-dumping proceedings. The "Standard Computer Programs" are also referred to in the Regulations. Furthermore, USDOC has disclosed these programs to hundreds and thousands of companies in the context of the very large number of determinations that USDOC makes. Thus, according to the European Communities, the "Standard Zeroing Procedures" are a matter of public knowledge. They cannot fall into some kind of "loophole" or "twilight zone" or "no-man's land", outside the law merely because their content is not published like a notice of findings and reasons in an anti-dumping proceeding. It is not by placing such findings and reasoning in the Manual and "Standard Computer Programs", rather than in the Final Determinations or Orders or Results or the Tariff Act or Regulations, that the United States can escape the scrutiny of the panel in the present dispute. According to the European Communities, such a result would not constitute a good faith interpretation of the WTO Agreement, the AD Agreement and the DSU.

4.141 Moreover, the European Communities believes it is not because the "Standard Zeroing Procedures" may be abstract; or because they are not published in the Federal Register or at all; or because they do not bear the title "law" or "regulation"; or because they are adopted by USDOC rather than Congress; or because USDOC is entitled, subject to certain procedures, to change or withdraw them for the purposes of future determinations, that they may escape the panel's scrutiny. In this regard, the European Communities notes that the Manual and "Standard Computer Programs" can only be correctly described as having, at least potentially, some legal effects. Indeed, like United States anti-dumping laws, regulations and administrative procedures, including Policy Bulletins, which the European Communities argues are also measures, the Manual is published by the USDOC on the internet. The Manual and the "Standard Computer Programs" might not have the same force of law as the Tariff Act, but to assert that they are worthless in United States courts would be to overstate the point. In reality, USDOC treats the "Standard Zeroing Procedures" as binding, at least until changed.

4.142 The European Communities argues that a computer program and the procedures it contains are perhaps the paradigm example of normative rules that apply mechanistically and automatically to a given set of facts, without further human intervention. There is no room for administrative or judicial interpretation. The effect of the "Standard Zeroing Procedures" in future cases is utterly predictable. The "Standard Zeroing Procedures" provide certainty and security (at least for United States industry) for the conduct of future trade. They represent a degree of purity in normative terms that makes them ideally suited as the vehicle by which the problem or matter can best be apprehended and dealt with at its root. To this end, the European Communities considers that the "Standard AD Margin Program" does "set out … norms". The program is repeatedly referred to as the "standard", which the European Communities contends for the purposes of this dispute equates to the "norm" or what is "normal". The relevant norms are "set out" in the sense that they are expressed in the particular computer language used by the United States, and recorded both electronically and on paper, for all to see. The European Communities further considers that the program "establishes rules", not least because, like the Manual, which refers to it, it is published or issued under the authority of USDOC, and provides guidance for USDOC officials.

4.143 According to the European Communities, there is no reason why a "piece of computer software" should be considered incapable of "setting out rules or norms". Computer programming language is just that – a language, like any other. Understanding it might require special knowledge or translation – that does not mean it is not a measure. A Member might choose to render its entire municipal anti-dumping law in computerised format – even to the exclusion of any other format – that would not mean that it would escape from the disciplines of the AD Agreement. If an investigating authority establishes a rule, especially one such as the "Standard Zeroing Procedures", the purpose and effect of which is that equivalent situations are automatically and consistently treated equally, then that rule must by definition be capable of affecting the operation of the AD Agreement. It therefore necessarily falls within the phrase "any matter affecting the operation of the Agreement"69, and may consequently be referred to this Panel.

4.144 With respect to the claims regarding United States practice or methodology of zeroing, the European Communities describes what it is challenging as consisting of using the particular type of methodology (asymmetry, model zeroing or simple zeroing) repeatedly in a series of specific determinations, in one specific anti-dumping proceeding after another. According to the European Communities, the particular factual circumstances of this case, in which the practice has been lifted up into an abstract document that exists on paper, and applies automatically, are sufficient for the Panel to find that the practice being challenged constitutes a "measure".

(b) The United States70

4.145 The United States rejects the claim that the "Standard AD Margin Program" can be regarded as a "measure" for purposes of WTO dispute settlement. The United States notes that the Appellate Body has indicated that instruments setting out rules or norms can be challenged "as such" in a WTO dispute. However, according to the United States, the "Standard AD Margin Program" does not set out or establish rules or norms. The United States contends that it is a piece of computer software that, at most, implements rules or norms adopted by a decision-maker in some other instrument, such as a regulation or a determination in a specific anti-dumping proceeding. To the extent that the European Communities argues that the legal status of lines of computer code are the same as USDOC's regulations, the United States contends that the European Communities is incorrect. Under United States law, validly promulgated regulations are binding on USDOC, the public, and the courts. USDOC's computer programs are not binding on anyone. Finally, the United States points to footnote 6 of the memorandum of Ms. Owenby, submitted by the European Communities as exhibit EC-46, where according to the United States, Ms. Owenby acknowledges that the variables used in USDOC's "AD Margin Program" depend upon the USDOC programmer. The United States contends that this further undermines the claim that there is a "standard" USDOC computer program, and emphasizes that the computer program used in any particular proceeding reflects policy choices, rather than mandating them.

4.146 The United States does not contest the assertion of the European Communities that the Manual is a "measure" for purposes of this WTO dispute.

4.147 On the question of whether the "practice" identified by the European Communities can amount to a "measure", the United States argues that repeated application of a particular measure – such as a statute – in the same manner, does not somehow create a new and separate "autonomous measure." Rather, it is just what the definition implies – it is a repeated application of a measure. The United States asserts that when panels have been asked to find that a "practice" of the type described by the European Communities constitutes a measure that can be challenged as such, they have uniformly declined. According to the United States, the panel in US – India Steel Plate correctly noted:

"That a particular response to a particular set of circumstances has been repeated, and may be predicted to be repeated in the future, does not, in our view transform it into a measure. Such a conclusion would leave the question of what is a measure vague and subject to dispute itself, which we consider an unacceptable outcome. Moreover, we do not consider that merely by repetition, a Member becomes obligated to follow its past practice."71

4.148 Thus, according to the United States, the European Communities has failed to explain how the repeated application of one measure – such as a statute – in the same manner gives rise to a separate and autonomous "measure." Moreover, the United States notes, when the Panel, in its Question 74, asked the European Communities to distinguish the situation in this dispute from that confronting the panel in US – India Steel Plate, the European Communities gave a non‑answer, referring to its answer to Panel Question 51. However, the United States argues that the European Communities' answer to Question 51 simply contains the European Communities' explanation as to why the "Standard AD Margin Program" is a "measure" distinct from "practice." It does not address the issue of whether "practice" can be considered a measure that can be subject to an "as such" challenge in WTO dispute settlement.

(i) The "Standard Zeroing Procedures" (or the United States practice or methodology of zeroing) are inconsistent with the AD Agreement, the GATT 1994 and the WTO Agreement

(a) The European Communities72

4.149 The European Communities refutes the application of the "mandatory/discretionary" doctrine as a mechanistic rule for determining when "as such" measures can be WTO-inconsistent. According to the European Communities, the relevant standard for determining the consistency of an "as such" measure with the AD Agreement is whether or not the measure is in conformity with the relevant provision of the AD Agreement. The European Communities argues that this is clear from Article 18.4 of the AD Agreement and Article XVI:4 of the WTO Agreement. Thus, the test is not whether the measure is "mandatory" as opposed to "discretionary", or whether or not it is "binding"73, or whether or not it obliges a Member to act in a WTO inconsistent manner in all cases.74 To find an "as such" measure in violation of a WTO obligation, it would suffice that it result in a WTO-inconsistent outcome only in some cases.

4.150 Whether legislation is mandatory or discretionary is one question that must be considered along with a multitude of others – including, importantly, an inquiry into the nature and content of the relevant WTO provision, and whether it permits the kind of discretion that is allowed by the legislation at issue – in assessing the compatibility of a measure with a WTO obligation. One major reason why the "mandatory/discretionary" doctrine cannot be a mechanistic rule is that State measures are always, by definition, mandatory in some sense and very often leave some element of discretion. There are always some exceptions possible to any mandatory rule.

4.151 In any event, whichever test that might be applied in the present case, the "Standard Zeroing Procedures", and the "Standard AD Margin Program", are "as such" inconsistent with the AD Agreement. Article 2.4.2 of the AD Agreement mandates that Members must have a normal or standard rule as described in that provision. The "Standard AD Margin Program" contains a different standard or normal rule. The "Standard AD Margin Program" and its "Standard Zeroing Procedures" are not therefore in conformity with the AD Agreement. As they stand, without any modification of the relevant lines of computer code, the "Standard AD Margin Program" and the "Standard Zeroing Procedures" do preclude consistency with the AD Agreement. The fact that they can in theory be changed, just like the Regulations or the Tariff Act, is irrelevant. Furthermore, the mathematical character of a computer program makes this finding inevitable, once it is established that model zeroing, zeroing with respect to other averaging groups, simple zeroing and zeroing within the context of importer-specific assessment rates, are inconsistent with the AD Agreement75, and that these zeroing methodologies are incorporated into the "Standard Computer Programs", and particularly the "Standard Zeroing Procedures", as expressly stated in the Manual.

4.152 To the extent that the "Standard Zeroing Procedures" used to automatically effect model zeroing or zeroing with respect to other averaging groups in original investigations are considered to be "as such" inconsistent with Articles 2.4 and/or 2.4.2, the European Communities argues that it follows that they must also be "as such" inconsistent with Articles 1, 5.8, 9.3 and 18.4 of the AD Agreement, and Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement.76

4.153 Likewise the European Communities argues that to the extent that the "Standard Zeroing Procedures" used in periodic reviews to unconditionally effect simple zeroing, for the purpose of calculating both an assessment rate and a cash-deposit rate, are as such inconsistent with Articles 2.4 and/or 2.4.2, it follows that they must also be as such inconsistent with Articles 1, 9.3, 11.1, 11.2 and 18.4 of the AD Agreement, and Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement.77 Furthermore, the European Communities argues that to the extent that the zeroing methodology is operative under the "Standard Zeroing Procedures" whenever importer-specific assessment rates are calculated in a periodic review, the "Standard Zeroing Procedures" must also, for this reason, be "as such" inconsistent with Articles 2.4, 2.4.2 and 9.3 of the AD Agreement.

4.154 Finally, the European Communities submits that the same conclusions should be reached for new shipper, changed circumstances and sunset reviews. To the extent that the "Standard Zeroing Procedures" are used in these review proceedings to automatically effect model zeroing, simple zeroing or zeroing with respect to other averaging groups, they must be considered as such inconsistent with Articles 2.4 and/or 2.4.2, and consequently, also Articles 1, 9.3, 9.5, 11.1, 11.2, 11.3 and 18.4 of the AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement.78

(b) The United States79

4.155 The United States asserts that it is well established pursuant to the "mandatory/discretionary" test, that if a measure mandates WTO-inconsistent action or precludes WTO-consistent action, the measure is WTO-inconsistent "as such." According to the United States, the "mandatory/discretionary" test has been consistently applied in GATT and WTO dispute settlement proceedings. The test reflects the fact that, as the Appellate Body has noted, panels may not presume bad faith on the part of Members. Thus, if a measure provides a Member with the discretion to act in a WTO-consistent manner, it may not be presumed that the Member will exercise that discretion in bad faith. The United States submits that in the absence of the "mandatory/discretionary" test, the assessments of Members over many years on how to judge whether their measures are consistent with GATT and then WTO rules would be severely undermined.

4.156 According to the United States, the panel in Korea – Commercial Vessels80 rejected the very interpretation of the "mandatory/discretionary" test advocated by the European Communities in this dispute. In this regard, the United States contends that it is significant that the European Communities has been unable to cite a single panel or Appellate Body report that has followed its interpretation in assessing the WTO-consistency of "as such" measures.

4.157 The United States argues that the European Communities has failed to show that its claims satisfy the "mandatory/discretionary" test. The United States contends that, for some of the "measures" at issue, the European Communities has not demonstrated that the "measures" are mandatory within the meaning of the test. In other cases, the United States alleges that the European Communities has failed to make even a prima facie case that the "measure" in question is mandatory.

4.158 With respect to the Manual, the United States contends that the European Communities has neither demonstrated that it mandates any WTO-inconsistent conduct nor established a prima facie case of WTO-inconsistency.

4.159 According to the United States, the Manual does not preclude the decision-maker in USDOC from offsetting negative margins nor does it mandate that the decision-maker in USDOC ignore negative margins. The United States argues that the Manual does not mandate that the decision-maker in USDOC do anything, nor does it preclude the decision-maker in USDOC from doing anything. This is because the Manual is nothing more than a source of guidance and training for USDOC personnel. As set forth on page one of the "Introduction" section of the Manual: "This manual is for the internal guidance of Import Administration (IA) personnel only, and the practices set out are subject to change without notice."

4.160 The United States contends that the European Communities provides no evidence to support the assertion that the "USDOC" considers itself to be bound by the Manual. Indeed, what little evidence the European Communities does provide on this point contradicts its own assertion. The European Communities cites United States court decisions that expressly state that the Manual is "not a binding legal document ... ." If USDOC were to treat the Manual as binding, it would be in violation of the United States Administrative Procedure Act.

4.161 The United States submits that by referring to the "USDOC", the European Communities obscures the fact that the United States anti-dumping law is administered by human beings, and that in the case of USDOC there are two categories of human beings: (1) the decision-maker; and (2) the staff that implement the decision-maker's decisions. Here, the relevant decision-maker is the Assistant Secretary of Commerce for Import Administration. For purposes of the mandatory/discretionary test, the question is whether the Assistant Secretary is obligated to follow the Manual. Clearly he is not; as indicated above, the Manual states that he can change the practices set out in the Manual "without notice." Thus, if the Assistant Secretary decided in a particular case to offset negative margins, the Manual could not preclude him from doing so.

4.162 An even more fundamental flaw, the United States argues, is that the European Communities has failed to identify the specific portions of the Manual that allegedly mandate the WTO-inconsistent behaviour about which the European Communities complains. By failing to do so, the European Communities has failed to make its prima facie case.

4.163 In US – Gambling, the United States notes, the Appellate Body emphasized the importance of the requirement that a complaining party make its prima facie case. According to the Appellate Body:

"… it is incumbent upon a party to identify in its submissions the relevance of the provisions of legislation – the evidence – on which it relies to support its arguments. It is not sufficient merely to file an entire piece of legislation and expect a panel to discover, on its own, what relevance the various provisions may or may not have for a party's legal position."81

4.164 The United States asserts that the European Communities has failed to demonstrate how or why each portion of the Manual that it is challenging is inconsistent with United States' WTO obligations. According to the United States, in its Question 53, the Panel essentially asked the European Communities to identify the portions of the Manual that it is challenging. The European Communities replied that it "is challenging each part of the Manual referenced in the factual part of its first written submission, considered both in isolation and together, including the instruction to use the Standard AD Margin Program." However, the United States notes, the cited portions of the European Communities' first submission identify the entire Manual as a measure that the European Communities is challenging. Thus, if the European Communities is to be taken at its word, it is challenging the entire Manual because the entire Manual is referenced in its first written submission.

4.165 The United States asserts that the European Communities has not explained how the entire Manual runs afoul of United States' WTO obligations. The United States notes that most of the Manual has nothing to do with the subject of this dispute. Even where the European Communities cites to more specific portions of the Manual in the referenced portion of its first submission, the United States argues, these portions would appear to have nothing to do with this dispute, and the European Communities has failed to explain how these specific portions are WTO-inconsistent.

4.166 In short, the United States argues, to paraphrase the Appellate Body, the European Communities has filed the entire Manual and expects the Panel to discover, on its own, what relevance the various provisions of the Manual may or may not have for the European Communities' legal position. While the European Communities keeps referring to its desire to "cover all the bases," the United States does not see this as any different from Antigua's approach in US – Gambling. As the Appellate Body has indicated, such an approach is neither sufficient nor acceptable.

4.167 With respect to the "Standard AD Margin Program", even assuming that it could be a "measure," the United States argues that it does not preclude the USDOC decision-maker from offsetting negative dumping margins nor does it require the USDOC decision-maker to ignore negative dumping margins. If the USDOC decision-maker decided to offset negative dumping margins in a particular case, his decision would be implemented simply by using a different set of computer instructions.

4.168 As regards the claims of the European Communities with respect to United States' alleged zeroing practice and methodology, the United States argues that even if past instances of not offsetting by USDOC were deemed to constitute a "measure", the European Communities' claims would have to be rejected because this alleged "measure" does not mandate anything, let alone anything inconsistent with a WTO obligation under the "mandatory/discretionary" test. Under United States law, there is no principle of administrative stare decisis, and administrative agencies, such as USDOC, may depart from prior practice as long as they provide a reasoned explanation for doing so. According to the United States, the European Communities has failed to argue, let alone demonstrate, that USDOC "practice" mandates a breach within the meaning of the "mandatory/discretionary" distinction.

4.169 Finally, the United States argues that the claims of the European Communities with respect to new shipper, changed circumstances and sunset reviews, are unfounded. The United States argues that the European Communities does not offer any independent arguments concerning these types of reviews. The United States contends that it has demonstrated that the Panel should reject the European Communities' claims insofar as original investigations and periodic reviews are concerned; and for the same reasons, the Panel should reject the claims of the European Communities with respect to new shipper, changed circumstances and sunset reviews.

To continue with 2. Sections 771(35)(A) and (B), 731 and 777A(d) of The Tariff Act

1 WT/DS294/1 of 19 June 2003 and WT/DS294/1/Add.1 of 15 September 2003.

2 WT/DS294/7.

3 WT/DS294/7/Rev.1.

4 Appellate Body Report, US – Shrimp, para. 108.

5 A similar approach of considering arguments in amicus curiae briefs to the extent that such arguments were adopted by the parties to the dispute was taken by the panels in EC – Asbestos; US – Softwood Lumber IV ; and US – Softwood Lumber VI .

6 Tariff Act, Section 771(25).

7 Regulations, Section 351.414(d)(1).

8 Regulations, Section 351.414(d)(2).

9 Manual, Chapter 4, pp. 8 and 9 ; Chapter 5, page 9, second paragraph; Chapter 9, pp. 23 and 27.

10 Regulations, Section 351.414(d)(1); Manual, Chapter 7, pp. 27 and 28; Chapter 9, pp. 23 and 27.

11 The European Communities considers that this concept does not correspond to the term "margin of dumping" as used in, for example, Articles 2.4.2 and 9.3 of the AD Agreement (see infra.).

12 Manual, Chapter 6, p. 9: "The PUDD is the amount of dumping duties that would have been collected from the U.S. sales under investigated [sic] had an antidumping duty order been in effect during the period investigation [sic] (i.e., before the investigation began). The PUDD is used to establish a dumping margin which will remain in effect until the annual reviews established [sic] rates based upon the entries for which liquidation was suspended pursuant to the preliminary determination and for the year following the Antidumping Duty Order. … The calculation of the PUDD is, in effect, a two-step process. First, PUDD is determined for each U.S. sale by multiplying the per unit dollar margin for that sale by the total number of items sold. Second, the PUDD for each of the U.S. sales are summed to arrive at a total PUDD. The total PUDD is then used to calculate a weighted-average margin for the investigation …"

13 Regulations, Section 351.414 (d)(2).

14 The period of time covered by United States duty assessment proceedings is normally twelve months. However, in the case of the first assessment proceeding following the issuance of the Notice of Antidumping Duty Order, the period of time may extend to a period of up to 18 months in order to cover all entries that may have been subject to provisional measures.

15 Regulations, Section 351.414 (c)(2); Manual, Chapter 6, p. 7.

16 The European Communities considers that this concept does not correspond to the term "margin of dumping" as used in, for example, Articles 2.4.2 and 9.3 of the AD Agreement (see infra.).

17 Tariff Act, Section 751(a)(2)(A); Section 777A(d)(2).

18 Regulations, Section 351.212(b)(1).

19 Manual, Chapter 18, pp. 11 and 12; Regulations, Section 351.212(b)(1).

20 Regulations, Section 351.212(b)(1).

21 Exhibits EC-1 to EC-15; EC-First Written Submission, paras. 48-56, 63 and 102; EC-Rebuttal Submission, para. 55.

22 Exhibits EC-16 to EC-31; EC-First Written Submission, paras. 57-61, 148 and 211.; EC-Rebuttal Submission, para. 91.

23 In response to a question from the Panel, the European Communities indicated that it was not challenging the United States' Statement of Administrative Action as a separate measure. EC-Response to Panel Question 50.

24 Exhibits EC-1.1.1-1.1.2, USDOC case number A-475-829, 67 Fed. Reg. 3159 of 23 January 2002 (amended: 67 Fed. Reg. 8228, 22 February 2002).

25 Exhibits EC-1.2.1-1.2.2, USDOC case number A-475-829, 67 Fed. Reg. 10384 of 7 March 2002 (amended: 68 Fed. Reg. 58660, 10 October 2003).

26 Ibid.

27 EC-First Written Submission, paras. 21-24, 48-55; EC-Request for the Establishment of a Panel, p. 1.

28 EC-First Written Submission, para. 56.

29 Exhibit EC-16, USDOC case number A-475-801, 67 Fed. Reg. 55780, 30 August 2002.

30 EC-First Written Submission, paras. 37-38, 57-60; EC-Request for the Establishment of a Panel, pp. 1-2.

31 EC-First Written Submission, para. 61. The European Communities asserts that this same methodology is systematically applied by the United States "in all reviews including so-called newcomer review investigations, changed circumstances review investigations and sunset review investigations". EC-Request for the Establishment of a Panel, p. 2.

32 EC-First Written Submission, para. 226.

33 US-First Written Submission, paras. 25-28; US-Second Written Submission, para. 97.

34 US-First Written Submission, paras. 16-17.

35 EC-Oral Statement at the First Substantive Meeting of the Panel, paras. 12 to 14; EC-Rebuttal Submission, paras. 11-19, 42-44, 56-63 and 65-66; EC-Oral Statement at the Second Substantive Meeting of the Panel with Parties, paras. 2-5; EC-Response to Panel Question 2.

36 US-First Written Submission, paras. 18-19; US-Second Written Submission, paras. 38-39.

37 Panel Report, Argentina – Poultry Anti-Dumping Duties, para. 7.341, footnote 223.

38 EC-Rebuttal Submission, paras. 45-54.

39 US-First Written Submission, para. 22.

40 EC-First Written Submission, paras. 64-74, 149-160; EC-Rebuttal Submission, paras. 92-106; EC-Oral Statement at the First Substantive Meeting of the Panel, paras. 10-11; EC-Oral Statement at the Second Substantive Meeting of the Panel, paras. 44-47; EC-Responses to Panel Questions 23-25, 27, 33, 35, 37-38, 42 and 47; and EC-Responses to Questions Posed by the Panel at the Second Substantive Meeting paras. 1.27.

41 Appellate Body Report, EC – Bed Linen.

42 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review.

43 Appellate Body Report, US – Softwood Lumber V .

44 Panel Report, Argentina – Poultry Anti-Dumping Duties, para. 7.362.

45 US-First Written Submission, paras. 59-69; US-Second Written Submission, paras. 18-29; US-Opening Statement at the First Substantive Meeting of the Panel, paras. 8-9, 11 and 13; US-Opening Statement at the Second Substantive Meeting of the Panel, paras. 66-7; US-Responses to Panel Questions 22, 26, 29-30, 34, 36-37 and 39-40; US-Responses to Questions Posed by the Panel at the Second Substantive Meeting, paras. 1-4.

46 Panel Report, Egypt – Steel Rebar, para. 7.335.

47 EC-First Written Submission, paras. 75-89, 161-182; EC-Second Written Submission, paras. 112-218; EC-Responses to Panel Questions 4, 6, 9, 11-12, 14-18, 20 and 21; EC-Closing Statement at the First Substantive Meeting of the Panel, paras. 2-7; EC-Opening Oral Statement at the Second Substantive Meeting of the Panel, paras. 1-40; EC-Closing Oral Statement at the Second Substantive Meeting of the Panel, paras. 1-21.

48 Appellate Body Report, EC – Bed Linen.

49 Appellate Body Report, US – Softwood Lumber V.

50 US-First Written Submission, footnote 31.

51 Appellate Body Report, EC – Bed Linen.

52 Appellate Body Report, US – Softwood Lumber V.

53 US-First Written Submission, paras. 29-58; US-Second Written Submission, paras. 5-17 and 79-96; US-Opening Statement at the First Substantive Meeting of the Panel, paras. 10-19, 22-24; US-Closing Statement at the First Substantive Meeting of the Panel, para. 112; US-Opening Statement at the Second Substantive Meeting of the Panel, paras. 4-7; US-Closing Statement at the Second Substantive Meeting of the Panel, para. 18; US-Responses to Panel Questions 5, 8-9, 10-11, 13-14, 16-17 and 19.

54 Panel Report, Argentina – Poultry Anti-Dumping Duties, para. 7.357.

55 Panel Report, Argentina – Poultry Anti-Dumping Duties, para. 7.357.

56 EC-First Written Submission, paras 90-93; EC-Rebuttal Submission, para. 64.

57 US-First Written Submission, paras. 108-110; US-Second Written Submission, footnote 70.

58 EC-Response to Panel Question 32.

59 EC-First Written Submission, para. 102.

60 EC-First Written Submission, para. 102, p. 37.

61 EC-First Written Submission, paras 187-199; EC-Rebuttal Submission, para. 219; EC-Response to Panel Question 69; EC-Closing Oral Statement at the Second Substantive Meeting of the Panel, paras. 48-51.

62 US-Second Written Submission, para. 36.

63 EC-First Written Submission, paras. 94-101, 200-210; EC-Rebuttal Submission, paras. 65 and 222-232.

64 US-First Written Submission, paras. 49-54 and footnote 47.

65 Panel Report, Argentina – Poultry Anti-Dumping Duties, paras. 7.355-7.357.

66 EC-First Written Submission, paras. 103-125 and 212; EC-Rebuttal Submission, paras. 67-79; EC-Responses to Panel Questions 51-53; EC-Opening Statement at the Second Substantive Meeting of the Panel, paras. 40-44; EC-Closing Statement at Second Meeting with the Panel, paras. 55-59.

67 DSU, Article 3.2.

68 In particular, the European Communities refers to: Appellate Body Report, Guatemala – Cement I, para. 69, footnote 47; GATT Panel Report, Japan – Semi-Conductors, para. 107; GATT Panel Report, Japan – Agricultural Products I .

69 Article 17.2 of the AD Agreement.

70 US-First Written Submission, paras. 81-83 and 90-97; US-Second Written Submission, paras. 47-49 and 60-64; US-Closing Statement at the Second Meeting, paras. 3-7; US-Responses to Panel Questions 59-61 and 63.

71 Panel Report, US – Steel Plate, para. 7.22.

72 EC-First Written Submission, paras. 103, 126-129, 146-147, 212-214 and 224-225; EC-Rebuttal Submission, paras. 80-82; EC-Opening Statement at the Second Substantive Meeting of the Panel, paras. 52-59; EC-Responses to Panel Questions 54, 62, 67 and 71.

73 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 187.

74 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 247 and paras. 265-269.

75 The European Communities' arguments with respect to its claim that model zeroing, zeroing with respect to other averaging groups, simple zeroing and zeroing within the context of importer-specific assessment rates are inconsistent with the AD Agreement are summarised above at paragraphs 4.7-4.27 and 4.36-4.86.

76 The European Communities' arguments with respect to the alleged consequential violations of Articles 1, 5.8, 9.3 and 18.4 of the AD Agreement, and Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement are summarised above at paragraphs 4.121, 4.126-4.130.

77 The European Communities' arguments with respect to the alleged consequential violations of Articles 1, 9.3, 11.1, 11.2 and 18.4 of the AD Agreement, and Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement are summarised above at paragraphs 4.122, 4.126-4.130.

78 The European Communities' arguments with respect to the alleged consequential violations of Articles 1, 9.3, 9.5, 11.1, 11.2 and 18.4 of the AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement are summarised above at paragraphs 4.122, 4.126-4.130.

79 US-First Written Submission, Executive Summary, paras. 35-37, 44-46, 48, 51 and 57-58; US-Second Written Submission, paras. 40-64, paras. 51-58.; US-Opening Statement at the First Substantive Meeting of the Panel, paras. 20-21; US-Responses of 7 April 2005 to questions 55-56, 64-65.

80 Panel Report, Korea – Commercial Vessels, paras. 7.60-7.67.

81 Appellate Body Report, US – Gambling, para. 140, footnote 152, quoting from Appellate Body Report, Canada – Wheat Exports, para. 191.