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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

(Continued)


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

(a) The European Communities82

4.170 The European Communities considers that Sections 771(35)(A) and (B), 731 and 777A(d) of the Tariff Act, as they operate in original investigations and periodic, new shipper, changed circumstance and sunset reviews, are "as such" inconsistent with Articles 2.4 and 2.4.2 of the AD Agreement. In setting out these claims, the European Communities emphasises that the relevant standard in an "as such" case is not whether the municipal measure in all cases leads to a WTO inconsistent result, but whether or not the municipal measure is in conformity with the AD Agreement – that is, whether or not it is a sound implementation. If a municipal law provision contributes forcefully to the adoption of a series of "as applied" measures that are inconsistent with the AD Agreement, then there is every reason to suppose that the root of the problem lies, at least in part, with the relevant provision of municipal law.

(i) Section 771(35)(A) and (B)

4.171 The European Communities argues that 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. Nor is it possible to conclude that, 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. It is not possible to use in an analysis in progress a premise that, by definition, cannot yet have been substantiated, being one of the possible conclusions of that analysis in progress. The first sentence of Article 2.4.2 of the AD Agreement and particularly the word "margin", requires a simple and complete comparison between normal value and export price, being one that does not prejudge how the two elements to be compared are juxtaposed, nor, thus, whether each one of a series of margins is expressed as positive or negative. According to the European Communities, Section 771(35)(A) of the Tariff Act prejudges these matters, for three reasons.

4.172 First, instead of providing for a simple or complete comparison, as it should, it expressly provides only for the measurement of the amount by which normal value exceeds export price. It does not provide for the measurement of the amount by which export price exceeds normal value. Thus, it provides only for a limited or modified or conditional comparison. The European Communities contends that this is the interpretation that has been adopted by USDOC, and defended by USDOC before the United States municipal courts.

4.173 Second, the use of the word "amount" in the text of Section 771(35)(A), which does not appear in the first sentence of Article 2.4.2 of the AD Agreement, requires or at the very least strongly suggests a positive result.

4.174 Third, Section 771(35)(A) defines the amount resulting from this limited or modified or conditional comparison as a "dumping margin" – a term almost indistinguishable from the term used in Article 2.4.2 AD Agreement ("margins of dumping") – but, according to USDOC, with a different meaning ascribed to it – obfuscating the proper application of the AD Agreement to such an extent as to render Section 771(35)(A) of the Tariff Act not in conformity with Article 2.4.2. Thus, according to the European Communities, the action of the United States in maintaining in force Section 771(35)(A) of the Tariff Act is not consistent with its obligations under Articles 2.4 and 2.4.2.

4.175 With respect to Section 771(35)(B), the European Communities focuses on the "aggregate dumping margin", which is defined therein. Article 2.4.2 of the AD Agreement uses the word average, rather than the word aggregate. The word "average" essentially has the mathematical sense of an arithmetic mean: the result obtained by adding the numbers in a set (whether negative or positive) and dividing the total by the number of members in the set. The word "aggregate" has a different, less mathematical nuance. It rather suggests the grouping together of separate "units", each being an "undivided whole". That suggests something that is positive, rather than negative.

4.176 Furthermore, the use of the plural "dumping margins" in Section 771(35)(B) in relation to a specific exporter is also inconsistent with Article 2.4.2. According to the European Communities, the Appellate Body has made it clear that intermediate calculation results are not "margins of dumping", and 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.83 Thus, the European Communities considers that the action of the United States in maintaining in force Section 771(35)(B) of the Tariff Act is also not consistent with its obligations under Articles 2.4 and 2.4.2.

4.177 In response to the evidence submitted by the United States showing that its municipal courts have found that Section 771(35)(A) and (B) does not require USDOC to "zero", the European Communities argues that it is not asking the Panel to substitute its judgment on matters of fact for that of the United States Court of Appeals. However, the European Communities argues that in order to properly understand these judgements, it may be relevant for the Panel to consider: (a) whether United States municipal law requires authorities to interpret municipal law in conformity with international law; and (b) whether United States municipal law requires municipal courts to show deference to determinations by investigating authorities. It is a fact that, in the United States, under the so-called Chevron doctrine, United States courts show considerable deference to USDOC's interpretations; and that the so-called Charming Betsey doctrine does not, apparently, operate, in such a way as to cause USDOC to make its determinations in conformity with the international obligations of the United States.

4.178 Thus, the European Communities argues that all it is asking the Panel to determine is whether or not the relevant provisions of the Tariff Act are in conformity with the AD Agreement. The European Communities contends that the United States is relying solely on a "mechanistic" application of the so-called "mandatory/discretionary" doctrine – an approach that the Appellate Body has made clear is incapable, in itself, of resolving the matter.

(ii) Section 731

4.179 Section 731 of the Tariff Act provides that, "if the administering authority determines that a class or kind of foreign merchandise is being, or is likely to be, sold in the United States at less than its fair value" and if there is injury, "then there shall be imposed upon such merchandise an antidumping duty … in an amount equal to the amount by which the normal value exceeds the export price …". Insofar as this provision is vitiated by the same language as Section 771(35)(A) and (B), the European Communities submits that it is also, "as such", inconsistent with the AD Agreement for the same reasons.

(iii) Section 777A(d)

4.180 The European Communities contends that Section 777A(d) of the Tariff Act refers only to the possibility of determining that the subject merchandise is being sold in the United States at less than fair value, instead of providing for a simple comparison, as in Article 2.4 of the AD Agreement. Second, it uses the word "comparable", when it should use the words "all comparable", as in Article 2.4 of the AD Agreement.

4.181 Furthermore, the European Communities claims that that Section 777A(d) of the Tariff Act is inconsistent with Article 9.3 of the AD Agreement because it envisages that the provisions of Section 777A(d)(1) may be abandoned during reviews, including during periodic reviews of the amount of duty. That is, the European Communities argues that Section 777A(d) precludes the investigating authority, in normal circumstances, from establishing the existence of a margin of dumping for the subject product on the basis of a comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions, including throughout the investigation period. The European Communities contends that this provision of the Tariff Act is not in conformity with Article 9.3 of the AD Agreement, which expressly provides that: "[t]he amount of the anti-dumping duty shall not exceed the margin of dumping as established under Article 2".

4.182 To the extent that Sections 771(35)(A) and (B), 731 and 777A(d) of the Tariff Act, as they operate 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, 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.84

4.183 Likewise the European Communities argues that to the extent that Sections 771(35)(A) and (B), 731 and 777A(d) of the Tariff Act, as they operate in periodic reviews, 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.85

4.184 Finally, the European Communities submits that the same conclusions should be reached for new shipper, changed circumstances and sunset reviews. To the extent that Sections 771(35)(A) and (B), 731 and 777A(d) of the Tariff Act are used in order 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.86

(b) The United States87

(i) Sections 771(35)(A) and (B), 731 and 777A(d) of the Tariff Act

4.185 The United States argues that the claims of the European Communities fail because they do not satisfy the "mandatory/discretionary" test. According to the United States, in order for the claims relating to Sections 771(35)(A) and (B) and 731 of the Tariff Act to succeed, the European Communities must demonstrate that these statutory provisions prohibit USDOC from providing an offset for non-dumped transactions. In the US – Corrosion‑Resistant Steel Sunset Review case, the Appellate Body explained, "[t]he party asserting that another party's municipal law, as such, is inconsistent with relevant treaty obligations bears the burden of introducing evidence as to the scope and meaning of such law to substantiate that assertion."88 The United States submits that the relevant evidence must, of necessity, demonstrate the measure's meaning under municipal law if it is to yield an objectively correct result.

4.186 The United States contends that the European Communities cannot make the necessary demonstration, because the United States Court of Appeals for the Federal Circuit has held twice that the Tariff Act – including Section 771(35)(A) and (B) in particular – does not require the use of zeroing. The first case was Timken, which involved a duty assessment proceeding. In Timken Co. v. United States89 USDOC argued that the Tariff Act precluded it from reducing the amount of dumping duties to be assessed based on non‑dumped sales. The Federal Circuit disagreed, finding that "the statute does not directly speak to the issue of negative‑value dumping margins ... ." The court went on to hold that while offsetting was not prohibited by the statute, not offsetting represented one permissible interpretation of the statute.

4.187 The second case was Corus Staal BV v. United States90 which involved an antidumping investigation. In Corus, the Federal Circuit again held that not offsetting reflected a permissible interpretation of the statute, citing its earlier decision in Timken.

4.188 Although in principle the United States Supreme Court can review decisions of the Federal Circuit involving antidumping matters, in practice it does not. Therefore, according to the United States, for practical purposes, Timken and Corus constitute the last word on the interpretation of the Tariff Act insofar this issue is concerned. According to the United States, as a factual matter, the claims of the European Communities must fail.

4.189 Finally, in response to the claims of the European Communities regarding USDOC's own interpretation of the provisions in question, the United States notes that USDOC stopped arguing that the statute required it to "zero" after the Timken decision. In any event, according to the United States, for the purposes of determining what United States law means, greater weight cannot be accorded to the historical views of USDOC – an administrative agency – than to the current holdings of the Federal Circuit, the institution that has the final say as to what the United States antidumping statute means.

4.190 As regards Section 777A(d)(2), the United States argues that the European Communities has failed to make a prima facie case. According to the United States, the European Communities merely asserts that the section is as such inconsistent with various WTO obligations "if it means" that a symmetrical comparison is normally precluded or an asymmetrical comparison is normally required.

4.191 The United States notes that in US – Carbon Steel, paragraphs 156-157, the Appellate Body explained that the complaining party has the burden of proof with respect to "as such" claims, and that "[t]he party asserting that another party's municipal law, as such, is inconsistent with relevant treaty obligations bears the burden of introducing evidence as to the scope and meaning of such law to substantiate that assertion." Here, the United States argues, while the European Communities has submitted the text of the statutory sections at issue as exhibits, it has not offered any explanation, let alone demonstrated, why or how those sections preclude "symmetry" or require "asymmetry." Instead, through its use of the phrase "if it means," the European Communities simply poses a question as to whether the statutory sections might preclude "symmetry" or compel "asymmetry." According to the United States, the European Communities seems to be unsure of the answer to the question, and apparently hopes that the United States or the Panel will make the European Communities' case for it.

4.192 However, the United States notes, that is not the way WTO dispute settlement works. It is the European Communities' burden to prove that the statutory sections are WTO-inconsistent. It is not the task of the United States to prove that they are WTO-consistent. Likewise, the United States notes, it is well-established that a panel may not 'make the case for a complaining party.'

4.193 The United States notes that in its Question 70, the Panel asked the European Communities to comment on the US argument that the European Communities had failed to make a prima facie case with respect to section 777A(d)(2). The United States observes that while the European Communities denied that it had failed to make a prima facie case, with respect to its challenge to Section 777A(d)(2), the European Communities did modify paragraph 217, line2, of its first submission so that the words "given that" replace the word "if".

4.194 With respect to the European Communities' denial of its failure to make a prima facie case, the United States refers the Panel to the discussion of US – Gambling, in connection with the European Communities' failure to make a prima facie case regarding the Manual. With respect to Section 777A(d)(2), the European Communities has not explained, let alone demonstrated, how the provision operates in a WTO-inconsistent manner.

4.195 With respect to section 777A(d)(2), the United States notes that the European Communities does not even quote the provision, which reads as follows:

"In a review under section 751, when comparing export prices (or constructed export prices) of individual transactions to the weighted average price of sales of the foreign like product, the administering authority shall limit its averaging of prices to a period not exceeding the calendar month that corresponds most closely to the calendar month of the individual export sale."

4.196 On its face, the United States explains, Section 777A(d)(2) provides that "when" the average-to-transaction method is used in reviews under section 751, the USDOC must use monthly weighted average prices to determine normal value. According to the United States, Section 777A(d) does not address the question of whether or when the average-to-transaction method must be used. Thus, the United States argues, the European Communities has failed to explain how the plain text of section 777A(d)(2) mandates WTO-inconsistent action. Put differently, the European Communities has failed to make its prima facie case."

3. Section 751(a)(2)(A)(i) and (ii) of the Tariff Act

(a) The European Communities91

4.197 The European Communities considers that this provision is not in conformity with Articles 2.4, 2.4.2 and 9.3 of the AD Agreement because: (i) it precludes the investigating authority, in normal circumstances, from establishing the existence of a margin of dumping for the subject product on the basis of a comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions; and (ii) it requires an investigating authority, in all cases or normally, to make an asymmetrical comparison.

4.198 To the extent that Section 751(a)(2)(A)(i) and (ii) of the Tariff Act, as it operates in periodic reviews, is found to be "as such" inconsistent with Articles 2.4 and/or 2.4.2, it follows that it 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.92

4.199 Furthermore, the European Communities submits that the same conclusions should be reached for new shipper, changed circumstances and sunset reviews. To the extent that Section 751(a)(2)(A)(i) and (ii) of the Tariff Act is used in these reviews to automatically effect simple zeroing or zeroing with respect to other averaging groups, it must be considered "as such" inconsistent with Articles 2.4 and/or 2.4.2, and consequently, also in violation of 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.93

(b) The United States94

4.200 As regards Section 751(a)(2)(A)(i) and (ii), the United States argues that the European Communities has failed to make a prima facie case. According to the United States, the European Communities merely asserts that the section is "as such" inconsistent with various WTO obligations "if it means" that a symmetrical comparison is normally precluded or an asymmetrical comparison is normally required.

4.201 As the United States noted in connection with Section 777A(d)(2), the Appellate Body has explained that the complaining party has the burden of proof with respect to "as such" claims, and that "[t]he party asserting that another party's municipal law, as such, is inconsistent with relevant treaty obligations bears the burden of introducing evidence as to the scope and meaning of such law to substantiate that assertion." Here, the United States argues, while the European Communities has submitted the text of the statutory sections at issue as exhibits, it has not offered any explanation, let alone demonstrated, why or how those sections preclude "symmetry" or require "asymmetry." Instead, through its use of the phrase "if it means," the European Communities simply poses a question as to whether the statutory sections might preclude "symmetry" or compel "asymmetry." According to the United States, the European Communities seems to be unsure of the answer to the question, and apparently hopes that the United States or the Panel will make the European Communities' case for it.

4.202 Again, the United States notes, that is not the way WTO dispute settlement works. It is the European Communities' burden to prove that the statutory sections are WTO-inconsistent. It is not the task of the United States to prove that they are WTO-consistent. Likewise, the United States notes, it is well-established that a panel may not "make the case for a complaining party."

4.203 The United States notes that in its Question 70, the Panel asked the European Communities to comment on the US argument that the European Communities had failed to make a prima facie case with respect to Section 751(a)(2)(A)(i) and (ii). The United States observes that while the European Communities denied that it had failed to make a prima facie case, with respect to its challenge to Section 751(a)(2)(A)(i) and (ii), the European Communities continued to use the phrase "if it means".

4.204 With respect to the European Communities' denial of its failure to make a prima facie case, the United States again refers the Panel to the discussion of US – Gambling, in connection with the European Communities' failure to make a prima facie case regarding the Manual. With respect to sections 751(a)(2)(A)(i) and (ii), the United States emphasizes that the European Communities continues to assert that these provision are WTO-inconsistent "if they mean" that asymmetry is required, so the original problem noted by the United States remains. However, the United States argues, even if the European Communities substituted "given that", this would not suffice to make its case. According to the United States, the European Communities has to explain why the statute that it quotes mandates the outcome to which it objects. The United States asserts that it has not done so, notwithstanding that the European Communities, as the complaining party, bears the burden of proof. The European Communities has not explained, let alone demonstrated, how the provision operates in a WTO-inconsistent manner.

4. Section 351.414(c)(2) of the Regulations

(a) The European Communities95

4.205 The European Communities submits that Section 351.414(c)(2) of the Regulations is "as such" inconsistent with Articles 2.4 and 2.4.2 of the AD Agreement because it is inconsistent with the fair comparison requirement established by the Appellate Body. According to the European Communities, the fair comparison requirement precludes a national measure providing that the average-to-transaction method is the norm. Section 351.414(c)(2) does not conform with this standard. First, it permits the use of an asymmetrical method of comparison without any of the cumulative conditions set out in Article 2.4.2 having been met. Second, it provides that the normal rule is asymmetry, when Article 2.4.2 of the AD Agreement recalls that the normal rule is symmetry. The provision also fails to provide for a fair comparison within the meaning of Article 2.4 of the AD Agreement.

(b) The United States96

4.206 The United States argues that Section 351.414(c)(2) of the Regulations does not mandate any WTO-inconsistent conduct nor does it preclude WTO-consistent action. The heading to paragraph (c) of section 351.414 is entitled "Preferences." Subparagraph (c)(2) provides as follows: "In a review, the Secretary will normally use the average-to-transaction method." According to the United State, as previously recognized by the Appellate Body, the word "normally" is an indicator of discretion. Thus, section 351.414(c)(2), on its face, provides discretion to use something other than the average-to-transaction method. Given that the European Communities relies solely on the text of the regulation, there is no basis for finding that the regulation mandates asymmetry or precludes symmetry. Accordingly, there is no basis for finding that the regulation is inconsistent "as such" with United States WTO obligations.

V. ARGUMENTS OF THE THIRD PARTIES

A. ARGENTINA

5.1 Argentina argues that the question for the Panel in this dispute is whether zeroing is a practice consistent with the obligations set out in Articles 2.4 and 2.4.2 of the AD Agreement. If it is not, then Argentina shares the view of the European Communities that, since calculation of the dumping margin is central and fundamental to an anti‑dumping proceeding, any defect in the determination of the margin of dumping will inevitably adversely affect the consistency of the investigation as a whole by generating inconsistencies with other provisions of the AD Agreement.

1. Arguments with respect to Articles 2.4 of the AD Agreement

5.2 Argentina contends that Article 2.4 lays down a general obligation requiring Members to ensure a fair comparison between export price and the normal value when establishing the existence of dumping. Such a comparison is the only means provided for in the AD Agreement for determining the existence of dumping. Argentina argues that the Appellate Body has stated that this general obligation informs all of Article 2.97

5.3 Although the AD Agreement makes no reference to zeroing, it does mention that certain types of adjustments may be made to prices in order to facilitate comparison. Argentina asserts that it would be difficult to find justification for zeroing in such adjustments. Since any comparison between products not ordinarily comparable is deemed to be unfair and adjustments are provided for to remedy such a situation, there is no doubt that zeroing, because it inflates dumping margins, is inconsistent with the obligation to conduct a fair comparison between normal value and export price laid down in Article 2.4. Thus, zeroing breaches Article 2.4 of the AD Agreement.

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

5.4 Argentina argues that previous Panels and the Appellate Body have found zeroing to be inconsistent with Article 2.4.2 of the AD Agreement.98 Argentina asserts that Article 2.4.2 requires that once the transactions that are to serve as the basis for the determination of dumping are identified, they must all be taken into account. Under the AD Agreement, it is not possible to select the transactions that can be used for the final determination of dumping precisely on the basis of what one is seeking to determine, namely whether or not dumping exists, and in what amount.

5.5 Argentina does not share the view of the European Communities on the applicability of Article 2.4.2 to the imposition phase and review phase of an anti-dumping proceeding. According to Argentina, the interpretation of the European Communities is contrived and has no basis in the text of the AD Agreement or in interpretations given in earlier cases. However, Argentina argues that if the United States calculates a new dumping margin in periodic reviews or sunset reviews, that margin must meet the requirements of Article 2.4 of the AD Agreement.

3. Arguments with respect to Articles 3.1, 3.3, 3.4 and 3.5 of the AD Agreement

5.6 Argentina asserts that zeroing results in inconsistencies with Articles 3.1, 3.3, 3.4 and 3.5 of the AD Agreement. According to Argentina, the Appellate Body has ruled that both dumping and margins of dumping can be established only on the basis of all the transactions involved, once the product under investigation has been defined, in order to maintain the necessary consistency in the treatment of that product for the purpose of determining the volume of dumped imports, causal link between dumped imports and injury to domestic industry, and calculation of the margin of dumping.

5.7 It is precisely for the sake of this consistency, which should prevail from beginning to end of anti-dumping investigations, that the consequence of zeroing cannot be ignored. In Argentina's view, the use of zeroing gives rise to artificially inflated margins of dumping, which according to Article 3.4 should then be taken into account as one of the relevant factors for determining injury to the domestic industry. An artificially inflated margin of dumping cannot be a proper basis for an analysis of this kind, as it generates inconsistency with Article 3.1 (by tainting the determination of injury, which must be based on positive evidence and an objective examination of the evidence), Article 3.3 (because of the presumption that the de minimis threshold could have been violated) and Article 3.5 (because it is not a proper basis for establishing the causal relationship required by the AD Agreement).

4. Arguments with respect to Articles 9.3 of the AD Agreement

5.8 Argentina argues that to impose anti-dumping duties on the basis of a determination of dumping that fails to meet the fair comparison requirement of Article 2.4 and is based on a margin of dumping calculated without taking all the transactions into account, cannot be consistent with Article 9.3. This is so because the duties imposed are inconsistent with Article 2. Thus, zeroing leads to the imposition of duties at a higher level than the margin of dumping that would have prevailed had the calculation not been made with this methodology, in violation of Article 9.3.

B. BRASIL

5.9 Brazil argues that it sees no reason for this Panel to depart from the well established understanding that zeroing is impermissible under the AD Agreement. In view of the findings of the Appellate Body in previous disputes involving the same subject matter, namely EC – Bed Linen and US – Softwood Lumber, Brazil argues that the United States should avoid protracted litigation and agree to change its zeroing practice in all future anti-dumping proceedings, including investigations and reviews, regardless of the type of comparison that is used.

1. Zeroing is WTO-Inconsistent in all Contexts

5.10 According to Brazil, the fundamental issue before the Panel in this dispute is whether zeroing distorts the calculation of a dumping margin. The Appellate Body in US – Softwood Lumber V made clear that such a distortion exists. Yet, the United States would have the Panel believe that as long as an administering authority uses a comparison methodology other than the average-to-average methodology normally applied in United States investigations, then the prohibition against zeroing does not apply. This cannot be permitted, not merely under Article 2.4.2 of the AD Agreement, but also under Article 2.1 of the AD Agreement.

5.11 Based on the Appellate Body's understanding of the meaning of the term "dumping" in US – Softwood Lumber V, it does not matter how comparisons are made. All comparisons must ensure that all products are taken into account. The overriding rule is that an administering authority cannot simply ignore some transactions, but must instead incorporate the results of the comparison of all transactions into its dumping calculation conducted under Article 2.1. It is with this in mind that the Appellate Body concluded in EC – Bed Linen that zeroing was not merely a violation of Article 2.4.2, but also of the "fair comparison" requirement in Article 2.4. Although it agrees with the positions taken by the European Communities in the present dispute, Brazil believes it is largely academic to discuss whether Article 2.4.2 applies to reviews, or whether "reviews" are considered part of "investigations", or whether transaction-to-transaction average comparisons are permitted. The fact is that zeroing reflects an unfair comparison. The fair comparison requirement in Article 2.4 is not limited to certain types of proceedings or certain types of comparisons; it applies whenever dumping margins are calculated. Therefore, zeroing should be deemed to violate Article 2.4 of the AD Agreement in all contexts.

5.12 Brazil asserts that the Panel should pay careful attention to the intrinsically interlocking nature of provisions and concepts governing the calculation of dumping margins, both in the so-called "original investigations" and "reviews". Referring to the definition of "dumping" contained in Article 2.1 of the AD Agreement, it is undisputable that such definition is the only one applicable throughout the Agreement, regardless of the stage of any antidumping proceedings where "dumping" is examined. Article 2.1 determines that a comparison between export prices and normal values of the product concerned is inherent to the definition of dumping. Article 2.4, in turn, stipulates that the comparison between the very same terms incorporated into the comparison required by Article 2.1 – "export prices" and "normal value" – must be "fair". In reading both provisions harmoniously, a treaty interpreter must necessarily arrive at the conclusion that, whenever a calculation of a dumping margin is called for, a fair comparison between export prices and normal values is obligatory.

2. United States' Policy of Zeroing

5.13 As the United States admits, the Appellate Body indicated in the US – Corrosion Resistant Steel Sunset Review case that instruments or actions setting out rules or norms can be challenged "as such" in a WTO dispute. In the present dispute, the measure at issue is USDOC's policy of zeroing, which clearly falls within the scope of rules, norms or standards to which the Appellate Body referred in the US – Corrosion Resistant Steel Sunset Review case. The question of whether or not these measures mandate application of zeroing could be deemed irrelevant in this instance, where the practice of zeroing is applied consistently from case to case.

5.14 Brazil argues that zeroing is no different from the kinds of tests or methodologies the United States has agreed to change in the past as a result of dispute settlement, such as the USDOC's 99.5 per cent "arm's length test" in issue in the US – Hot Rolled Steel case and the "same person" methodology used by USDOC in countervailing duty cases involving privatization, for example, in the US – Countervailing Measures on Certain EC Products  case. According to Brazil, zeroing is a policy that USDOC uses in every case. This policy is reflected in a combination of, at least: (a) the consistent application of the policy in every case in which there is negative dumping; and (b) the USDOC Antidumping Manual. These, in combination, set forth a rule/norm/standard for applying the zeroing methodology in United States anti-dumping proceedings, which the Appellate Body has determined may be challenged in accordance with Article 18.4 of the AD Agreement, and should be found to violate Article 2.4 of that Agreement.

5.15 Whether these measures mandate application of the zeroing methodology could be deemed irrelevant in this instance, where the practice of zeroing is applied consistently from case to case. Brazil submits that repeated use of the zeroing methodology is a measure that the Panel should find inconsistent with the AD Agreement, and that its report should ensure that the United States eliminate the zeroing policy in all future cases.

5.16 Brazil submits that, if the Panel and, if necessary, the Appellate Body do not take action that prevents the United States from continuing its disregard of basic fairness in the application of its anti-dumping laws, the WTO and its Members will suffer. Brazil encourages the Panel to find that the use of zeroing, whether in investigations or reviews, and regardless of the type of comparison employed, is inconsistent with Article 2.4 of the AD Agreement and should be eliminated once and for all.

C. CHINA

1. Measures that can be Challenged "As Such"

5.17 China contends that whether a measure can be challenged for the purpose of WTO dispute settlement is governed by the substance of the measure at issue, not its form. According to China, any kind of measures taken by a Member, no matter whether legislative or executive, may be the subject of dispute settlement under the DSU or other applicable covered agreements, as long as another Member considers that benefits accruing to it under the covered agreements are being impaired by such "measures". To this end, China contends that four elements must be present in order to challenge measures "as such" under the AD Agreement: (i) the measure must be of general application; (ii) the measure must be a rule, norm or a standard; (iii) the measure must be adopted by a Member, no matter by whether by its legislative or executive branches; and (iv) the measure must be connected with the conduct of anti-dumping proceedings.

5.18 China also argues that the "mandatory/discretionary" distinction is not decisive as to whether a measure is WTO-inconsistent. In China's view, discretionary legislation can also be WTO-inconsistent.

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

5.19 China submits that the obligations in Article 2.4.2 are not limited to original investigations. China notes that the AD Agreement does not define the word "investigation", and that within WTO jurisprudence, there are no precedents distinguishing assessment proceedings from original investigation.

5.20 China considers that duty assessment proceedings must be based on the calculation of a dumping margin according to Article 2 of the AD Agreement. If duty assessment proceedings were independent of any dumping margin, the chapeau of Article 9.3 would be redundant. It follows that, when calculating a dumping margin, investigating authorities must abide by Article 2, which naturally includes Article 2.4 and Article 2.4.2.

5.21 Finally, China submits that Article 2.4.2 expressly restricts the use of the third comparison methodology in Article 2.4.2 to situations of "targeted dumping". China considers that recourse to an asymmetrical methodology pursuant to Article 9.4 does not absolve Members of this obligation.

D. HONG KONG, CHINA

1. Arguments with respect to Articles 2.4 and 2.4.2 of the AD Agreement

5.22 Hong Kong, China argues that insofar as the Panel finds that the United States applies zeroing in effecting a "weighted-average-to-weighted-average" comparison, it must find such practice inconsistent with Articles 2.4 and 2.4.2 of the AD Agreement for the same reasons given by the Appellate Body in EC – Bed Linen99 and US – Softwood Lumber V100 cases.

5.23 Hong Kong, China further submits that the use of zeroing in effecting the other two types of price comparison in Article 2.4.2 (namely, "transaction-to-transaction" and "weighted-average-to-transaction" comparisons), is also inconsistent with Article 2.4 of the AD Agreement. Noting the difference between the current wording of Article 2.4 and the earlier version (Article 2.6) contained in the Tokyo Round Anti-dumping Code, Hong Kong, China asserts that Article 2.6 of the Tokyo Round Code was specifically re-cast so that the current Article 2.4 of the AD Agreement contains a new, separate sentence on fair comparison at the beginning of the Article. This new drafting highlights the overarching nature of the obligation to make fair comparison, and the fact that it constitutes a substantive obligation in itself independent of the substantive obligations set out in other parts of Article 2.4, including Article 2.4.2.

5.24 Hong Kong, China submits that "fair comparison" requires that the way the comparison is conducted must be objectively "fair" in the sense of being equitable and balanced. The use of zeroing when establishing an overall level of dumping is, per se, unfair, regardless of which method of price comparison under Article 2.4.2 is used. By disregarding some of the transactions used in the intermediate comparisons, the resultant overall margin of dumping is established based on incomplete price information and as such, the calculation of the overall margin of dumping is inherently unreliable. Moreover, zeroing has an inherent bias which may inflate and distort not only the magnitude of the margin of dumping, but also a finding of the very existence of dumping. A price comparison which uses zeroing is therefore inherently inequitable and unfair, and inconsistent with the requirement to make "fair comparison" in Article 2.4.

5.25 Hong Kong, China further submits that, even though the words "all comparable export transactions" in Article 2.4.2 are not expressly stated in relation to the "transaction-to-transaction" comparison methodology, by its nature, such methodology requires an overall margin of dumping for the product under investigation to be calculated based on a comparison of each export transaction with a corresponding domestic transaction sales transaction, and the zeroing is therefore inherently inconsistent with the "transaction-to-transaction" comparison methodology in Article 2.4.2.

5.26 Hong Kong, China further asserts that the term "investigation" as used in the AD Agreement is not necessarily limited to an "original" or "initial" investigation. The term has been used in other parts of the AD Agreement in a general sense to refer to other anti-dumping proceedings. With respect to the contention of the United States that Article 18.3 explicitly recognises the difference between "investigations" that may lead to the imposition of a measure, and "reviews" of existing measures, Hong Kong, China submits that while Article 18.3 covers all types of anti-dumping proceedings between the two terms "investigation" and "reviews of existing measures", the purpose of Article 18.3 is not to, nor does Article 18.3, clearly define which proceedings fall within the meaning of "investigations" and "reviews" as used in the AD Agreement or draw a clear distinction between the two. Article 18.3 does not provide specific guidance on how the word "investigation" is to be interpreted elsewhere in the AD Agreement. In Hong Kong, China's view, the meaning of "investigation" in the AD Agreement should be read and construed in the specific context in which it appears.

5.27 With respect to the contention of the United States that Article 2.4.2 does not apply to retrospective assessment of anti-dumping duty under Article 9.3.1, Hong Kong, China states that Article 2.4.2 refers to the establishment of the existence of margins of dumping "during the investigation phase", but draws no apparent distinction between different types of "investigation", nor does it ascribe any special meaning to the term "investigation". Consistent with the customary rules of treaty interpretation under public international law, Hong Kong, China submits that in the context of Article 2.4.2, "investigation" should be construed as referring to any procedure undertaken by an investigating authority which conforms to the ordinary meaning of an "investigation" and which leads to the establishment of the existence of margins of dumping for the subject product. "Investigation phase" should be construed accordingly.

5.28 Referring to dictionary definition of "investigation", Hong Kong, China notes that in a retrospective assessment, an investigating authority has to examine or inquire into transactions that actually took place in the relevant period in order to verify the existence of dumping and the margin of dumping for the subject product during that period, so as to determine the final liability for payment of anti-dumping duties. These procedural steps carried out by an investigating authority conform objectively to the ordinary meaning of the word "investigation", and lead to the establishment of margins of dumping as referred to in Article 2.4.2. Therefore, they constitute an "investigation" for the purpose of Article 2.4.2.

5.29 With respect to the contention of the United States that Article 9 does not incorporate the requirements of Article 2.4.2, Hong Kong, China submits, with specific reference to paragraphs 7.357 and 7.361 of the Panel report of Argentina – Poultry Anti-Dumping Duties, that "margin of dumping" in Article 9.3 refers in the case of retrospective assessment to the margin of dumping established for the purpose of final duty assessment, that Article 2 sets forth a definition of dumping "for the purpose of this Agreement", that it would not be possible to establish a margin of dumping without reference to the various elements of Article 2, and that had the Panel in Argentina – Poultry Anti-Dumping Duties been specifically asked to consider the true meaning and scope of "investigation phase" in Article 2.4.2, the natural conclusion would have been that the provisions of Article 2.4.2 apply to Article 9.3 assessments.

2. Arguments with respect to Whether the Practice of Zeroing is a Measure which can be Submitted as such to Dispute Settlement

5.30 Hong Kong, China submits that the object and purpose of the WTO Agreement, and in particular, the object and purpose of the DSU, points to a broad interpretation of the term "measure". Any act of a Member, whether or not legally binding, could be submitted "as such" to dispute settlement, including even "non-binding administrative guidance by a government" and "acts setting forth rules and norms that are intended to have general and prospective application". The AD Margin Program (a computer programme designed for margin calculations, which is generally used by the United States Department of Commerce in anti-dumping investigations and through operation of which zeroing is applied), and the computer instructions comprised in it, are of the nature of "norms or rules of general and prospective application" and can be challenged "as such" in dispute settlement proceedings.

5.31 Hong Kong, China further asserts that, in any event, just as instruments "setting forth" rules or norms of general and prospective application may be brought "as such" to dispute settlement, unwritten rules or norms may also be submitted "as such" to dispute settlement: if a particular act (e.g. zeroing) is repeated to such consistency as to give rise to a "repeated pattern of similar responses to a set of circumstances", then such "repeated pattern of similar responses", or "practice", must be regarded as clear evidence as to the existence of rules or norms which are of general and prospective application.

5.32 Were this not the case, a Member would be free to formulate "unwritten" or vague rules or norms and apply them consistently in a particular manner so as to impair the benefits accruing to another Member under the covered agreements, severely reducing transparency in the rules and norms adopted by a Member to implement the covered agreement, crippling the protection of the security and predictability of trade and seriously undermining the purpose of the WTO dispute settlement system.

E. INDIA

1. Model Zeroing and Simple Zeroing are "as such" Measures

5.33 India submits that one of the key issues in this dispute is whether model zeroing and simple zeroing, are "as such" measures that may be challenged. According to India, in both the US – Corrosion-Resistant Steel Sunset Review and US – Oil Country Tubular Goods Sunset Reviews cases, the Appellate Body emphasized that the scope of Article 18.4 of the AD Agreement is broad, covering "the entire body of generally applicable rules, norms and standards adopted by Members in connection with the conduct of anti-dumping proceedings." This interpretation of Article 18.4 of the AD Agreement indicates that the scope of dispute settlement under the AD Agreement for an "as such" claim is not meaningfully different from the general scope of dispute settlement under Article 6.2 of the DSU. In each case, the dispute may concern any rules, norms or standards with general and prospective application.

5.34 India asserts that the United States zeroing methodology is incorporated in the United States' standard anti-dumping computer programs. Certain procedures in these programs result in zeroing through model zeroing or simple zeroing. The standard programs, inclusive of the zeroing procedures, "have been designed to cover as many situations as possible". Each and every program that is applied by the United States in a particular anti-dumping proceeding must use "the same standard calculation methodology," and that methodology must "conform" to the Administration's current methodological requirements. In other words, the standard programs constitute a pre-determined set of procedural rules and are relied upon by the United States for calculating the dumping margins in all anti-dumping proceedings. Thus, the United States' standard anti-dumping computer programs, including the procedures that result in zeroing through model zeroing or simple zeroing, can be characterized as being norms or rules that are applied on a generalized and prospective basis in anti-dumping proceedings. Consequently, model zeroing or simple zeroing are measures that may be challenged "as such" within the WTO system.

2. "Mandatory – Discretionary" Distinction

5.35 India argues that on the basis of the mandatory – discretionary doctrine, the United States has urged the Panel to reject the "as such" claims of the European Communities. According to India, this position is contrary to the findings of the Appellate Body in U.S. – Corrosion-Resistant Steel Sunset Review, where the Appellate Body saw no reason for concluding that "in principle, non-mandatory measures cannot be challenged "as such". It is India's position that in order to determine whether model zeroing and simple zeroing are "as such" WTO-inconsistent, the nature and character of these procedures must be examined.

3. Model Zeroing and Simple Zeroing are as such inconsistent with the AD Agreement

5.36 India asserts that existing case law on the issue of zeroing confirms that model zeroing and simple zeroing are "as such" inconsistent with Article 2.4 and 2.4.2 of the AD Agreement. According to the Appellate Body, "when investigating authorities use a zeroing methodology … to calculate a dumping margin, whether in an original investigation or otherwise, that methodology will tend to inflate the margins calculated. Apart from inflating the margins, such a methodology could, in some instances, turn a negative margin of dumping into a positive margin of dumping. … The inherent bias in a zeroing methodology … may distort not only the magnitude of a dumping margin, but also a finding of the very existence of dumping."101 Furthermore, in the EC – Bed Linen case, the Appellate Body was of the view that "a comparison between export price and normal value that does not fully take into account the prices of all comparable export transactions – such as the practice of zeroing at issue in this dispute – is not a "fair comparison" between export price and normal value, as required by Article 2.4 and by Article 2.4.2."102 According to India, these findings on zeroing are applicable with equal force to model zeroing and simple zeroing resorted to by the United States in its anti-dumping investigation procedures.

5.37 Furthermore, India argues that it is also clear from the ruling of the Appellate Body in the US – Corrosion-Resistant Steel Sunset Review case that the requirements of a "fair comparison" in Article 2.4 apply equally to a dumping margin calculated or used for purposes of Article 9.3. Thus, the resort by the United States, to simple zeroing as a normative rule in sunset reviews and reviews for the purpose of Article 9.3 is "as such" inconsistent with the provisions of Article 2.4.

F. JAPAN

1. Model Zeroing and Simple Zeroing are Measures that can be Challenged as such

5.38 Japan argues that nothing in the AD Agreement limits the types of measure that may, as such, be the subject of dispute settlement. To this end, Japan notes that the Appellate Body has clarified that "any act or omission attributable to a WTO Member can be a measure of that Member" and that measures "consisting of acts setting forth rules or norms that are intended to have general and prospective application" or "instruments of a Member containing rules or norms" can be challenged as such.

5.39 The Appellate Body explained that the disciplines and rules of the WTO "are intended to protect not only existing trade but also the security and predictability needed to conduct future trade" and "allowing claims against measures, as such, serves the purpose of preventing future disputes by allowing the root of WTO-inconsistent behaviour to be eliminated" There are a growing number of disputes concerning the United States' use of zeroing procedures and, to avoid "future disputes," the European Communities challenges "as such" the administrative procedures embodying the United States' zeroing norms, as envisaged by the rulings of the Appellate Body.

5.40 According to Japan, the characterization of an act in domestic law is not determinative of its character as a "measure" in WTO law. The issue does not depend on "the label given" to an instrument in domestic law, nor upon its "form or nomenclature," but on the "substance and content of the instrument." Accordingly, the fact that the measures at issue are, in part, in the "form" of a computer program is therefore of no importance to their character in WTO law.

5.41 Contrary to the United States' assertion, the mere possibility of change alone does not deprive the acts in question of their character as measures covered by Article 18.4 of the AD Agreement. Nor does the nature of the domestic procedures by which the measure in question is "changed" affect its character in WTO law. Furthermore, the question whether or not an act is binding under municipal law is also irrelevant to its characterization as a measure in WTO law.

5.42 Contrary to the United States' argument, the ordinary meaning of the word "procedure" in Article 18.4 encompasses a system, method or mode of proceeding, which may include a methodology. Japan also confirms the view of the European Communities that the dictionary meaning of "procedure" includes "computers: a set of instructions for performing a specific task." Thus, an "administrative procedure," in Article 18.4, is a system or method that directs the administering authority's conduct or management of anti-dumping proceedings. It can include computer procedures that provide a set of instructions for executing tasks.

5.43 In determining that the Sunset Policy Bulletin ("SPB") is a "measure" in US – Oil Country Tubular Goods Sunset Reviews, the Appellate Body addressed three separate issues: first, the normative character of the alleged measure; second, the generality of its application; and, third, the prospective quality of its application. Notably, the Appellate Body found that the normative character of the SPB stemmed from the fact that it provides "guidance" to the administrative authority and that this guidance creates "expectations" among users that the authority will act in a particular way.

5.44 Model zeroing and simple zeroing are "as such" measures because they are rules, norms or standards applied by the United States in anti-dumping proceedings on a generalized and prospective basis. In all anti-dumping proceedings, the United States relies on standard computer programs to calculate dumping margins, the nature and purposes of which are described in the publicly available Manual. The Manual sets forth published pre-determined rules and procedures that provide "administrative guidance" to USDOC personnel, public and private users. Accordingly, as long as the rules and procedures in the Manual continue to apply, they can be the subject of WTO dispute settlement proceedings as measures, irrespective of their characterization in United States law. As Chapter 9 of the Manual states explicitly that there are "procedures" to be used for calculating dumping margins and that these are contained in standard computer programs. The Manual indicates that the "standard programs" are "procedures" that direct the administrative authority in executing dumping determinations.

5.45 The United States itself, in its first written submission, accepts that the standard AD Margin Program "implements rules or norms adopted by a decision-maker." The AD Margin Program is, therefore, no different from any other "measure," in that it reflects or "implements rules or norms" adopted by a decision-maker. According to Article 18.4 of the AD Agreement, decisions adopted regarding the administration of anti-dumping proceedings are implemented through "laws, regulations and administrative procedures." That Program is, in and of itself, an "instrument" for purposes of Article 18.4. As stated above, the standard AD Margin Program constitutes an "administrative procedure" because it provides a system or method that directs the Administration's execution of dumping determinations.

5.46 In accordance with the Manual, each and every program that is applied by the United States in a particular proceeding must use "the same standard calculation methodology," and that methodology must "conform" to the Administration's current methodological requirements. This systematized manner of proceeding constitutes a "procedure." The calculation procedures are, therefore, not established on an "ad hoc" basis in particular investigations or reviews; they are pre-determined for application on a generalized and prospective basis.

5.47 The standard program for the calculation process referred to in the Manual relevant to this case is the AD Margin Calculation Program. The key line of this computer program is the code "WHERE EMARGIN GT 0;". Through this line, the standard AD Margin Calculation Program includes, in the calculation of the numerator for the overall dumping margin fraction, only the margins calculated for models (in the case of model zeroing) or for individual export transactions (in the case of simple zeroing) that are greater than zero. Negative (and zero) margins are excluded from the numerator. Such model and simple zeroing rules are to be used prospectively in every specific program, consistent with their normative character.

5.48 In addition, the evidence of copies of computer programs submitted by the European Communities confirms that the zeroing procedures are applied on a normative and generalized basis as indicated by the Manual. They are, in short, administrative procedures. Further, according to the testimony attached with Japan's submission, since 1993, "the procedure for calculating the overall weighted-average percentage dumping margin, including the 'zeroing' procedure, has never changed."

5.49 Japan submits that, in light of: (1) the standard AD Margin Calculation Program: (2) the many specific margin calculation programs provided by the European Communities: (3) the Manual; and (4) the attached testimony by an expert, model zeroing and simple zeroing are norms or rules that are applied by the United States on a generalized and prospective basis. The very purpose of the AD Margin Calculation Program is to establish standard "programming procedures" that operate mechanistically to ensure that a particular – "proper" – calculation methodology is applied universally and predictably.

2. Model Zeroing and Simple Zeroing are as such WTO-Inconsistent

5.50 The Appellate Body has held that the Article 2.1 of the AD Agreement "applies to the entire Anti-Dumping Agreement" and Article 2 sets forth the "agreed disciplines" for determining the existence and amount of the margin of dumping.

5.51 As part of these "agreed disciplines," the first sentence of Article 2.4 of the AD Agreement states "[A] fair comparison shall be made between the export price and the normal value". The Appellate Body ruled that this provision "sets forth a general obligation" that "informs all of Article 2." The ordinary meaning of the word "fair" in Article 2.4 requires a comparison of normal value and export price that is "unbiased," "impartial," and "offer[s] an equal chance of success" to both domestic parties and exporters. This suggests that a "fair comparison" is one that is "even-handed," a meaning that is reminiscent of the Appellate Body's interpretation of Articles 2.1 and 2.2.1 in United States – Hot-Rolled Steel, in which it made an explicit link between "fairness" and "even-handedness" in Article 2. The Appellate Body also held that there was a "lack of even-handedness" because the "combined application of [the measures] operated systematically to raise normal value, through the automatic exclusion of marginally low-priced sales, coupled with the automatic inclusion of all high priced sales, except proved, upon request, to be aberrationally high priced" which "disadvantaged exporters."

5.52 Japan believes that the same interpretive principles guide the "fair comparison" under Article 2.4. Thus, it would not be "fair" under that provision to conduct a comparison between normal value and export price in an arbitrary way which is "more likely" to result in a determination of dumping or is "more likely" to increase the margin of dumping. Any procedure which either excludes high-priced export transactions, reduces export price, or raises normal value, make a dumping determination more likely and improperly inflate any margin that is found to exist. All of these procedures, therefore, create bias because they disadvantage exporters. None of these procedures, therefore, is consistent with the requirements of a "fair comparison" under Article 2.4 of the AD Agreement.

5.53 As the AD Agreement requires, "all comparable export transactions" for "a product" are to be compared in calculating a dumping margin. The Appellate Body indicated, in this regard, that the investigating authority must take fully into account the entirety of the prices of all comparable export transactions of the subject product in the price comparison, and this, in turn, constitutes the fair, even-handed way to compare transactions. The model and simple zeroing, however, result in precisely the types of unfairness outlined above because they operate systematically to disadvantage and prejudice exporters. The operation of the zeroing procedures: (1) excludes from the numerator in the calculation of the weighted-average dumping margin the negative margins for higher-priced comparable export transactions or models; and (2) interferes with the comparison of normal value and export price to generate a "zero" – instead of a negative – outcome by, in effect, improperly reducing the true export price for the excluded export transactions.

5.54 It is noteworthy that, although the United States disregards or interferes with the value of certain "comparable" export transactions, it does not provide any equivalent, counter-balancing compensation for these actions in the overall comparison of normal value and export price. The zeroing procedures are designed and structured to operate entirely and exclusively to the detriment of exporters. Thus, notwithstanding the obligations assumed by the United States under Article 2 to compare fairly all comparable transactions, its zeroing procedure for selecting from among the comparable transactions systematically prejudices exporters.

5.55 The Appellate Body has consistently held that model zeroing – which operates in the same manner and produces the same effects as simple zeroing, other than that simple zeroing inflates margins more – is inconsistent with Articles 2.4 and 2.4.2 of the AD Agreement. As observed by the Appellate Body, there is an "inherent bias in a zeroing methodology." This "bias" "could, in some instances, turn a negative margin into a positive margin of dumping" and may, therefore, "distort not only the magnitude of a dumping margin, but also [result in] a finding of the very existence of dumping." In other words, through the zeroing procedures, a finding of dumping becomes "more likely" and the magnitude of any dumping margin is systematically "inflated." The Appellate Body has also highlighted that there is no express language permitting authorities to disregard negative margins and, therefore, no justification for the "inherent bias" and unfairness in a zeroing procedure.

5.56 In light of these observations, the Appellate Body "emphasized that a [zeroing] comparison such as that undertaken by the European Communities [in EC – Bed Linen] is not a 'fair comparison' between export price and normal value as required by Articles 2.4 and 2.4.2." The same reasoning applies to this case. Both model and simple zeroing involve an "inherent bias" against exporters that cannot be regarded as "fair."

3. Arguments with respect to Articles 3 and 5.8 of the AD Agreement

5.57 Japan submits that model zeroing systematically leads to a flawed injury determination under Article 3 of the AD Agreement. In terms of Articles 3.1, 3.2, 3.3, 3.4 and 3.5 of the AD Agreement, authorities must examine the volume of dumped imports, the volume of non-dumped imports, the magnitude of the dumping margin, and the impact of the dumped imports on the domestic industry. However, zeroing overstates the volume of dumped imports, understates the volume of non-dumped imports, systematically inflates the dumping margin and the volume of dumped imports, and also distorts the injury determination. Because the investigating authorities rely on such inaccurate data, zeroing distorts the determination to be made with respect to each of these elements. Furthermore, as a result of relying on such inaccurate data, investigative authorities also fail to terminate investigations in circumstances where, under Article 5.8, they are required to do so.

4. Additional Arguments on Simple Zeroing

5.58 The simple zeroing operates in the context of periodic reviews, conducted pursuant to Article 9.3 of the AD Agreement. The express treaty text states that any dumping margin used for purposes of Article 9.3 must be calculated consistently with Article 2. The Appellate Body has ruled that dumping margins used for purposes of sunset reviews under Article 11.3 must be calculated consistently with Article 2.4 of the AD Agreement, including with the requirement to make a "fair comparison." It added that if dumping margins used for purposes of a sunset review "were legally flawed because they were calculated in manner inconsistent with Article 2.4, this could give rise to an inconsistency not only with Article 2.4, but also with Article 11.3 of the AD Agreement."

5.59 This Appellate Body's ruling must apply a fortiori to dumping margins calculated and used in reviews under Article 9.3. This is particularly so because, unlike Article 11.3, Article 9.3 specifically refers to Article 2. A comparison that does not meet all of the requirements of "fairness" is not consistent with the "general obligation" in Article 2.4. The requirement in Article 2.4.2 for the comparison of normal value and export price to include "all comparable export transactions" is an expression of the "general obligation" in Article 2.4 to ensure a "fair comparison" for the product as a whole. If certain export transactions are excluded from the comparison, the margin ceases to be for the product as a whole and is instead for a particular part or category of that product. Such a comparison does not provide a "fair" basis for concluding that the product as a whole is dumped.

5.60 Furthermore, the disregard of, or interference with, export transactions under the simple zeroing rule operates systematically to the disadvantage and prejudice of exporters, without any compensating set-off for this disadvantage in the comparison. The United States is obliged by Article 2.4 to ensure that any selection that it undertakes among comparable transactions is "fair," treating domestic parties and exporters "even-handedly." The "inherent bias" in zeroing is inconsistent with these requirements and is, therefore, inconsistent with Article 2.4. In consequence, simple zeroing is "as such" inconsistent with Articles 2.4, 2.4.2 and 9.3 of the AD Agreement.

5. "Mandatory – Discretionary" Distinction

5.61 The United States places considerable emphasis throughout its first written submission on the so-called mandatory – discretionary "doctrine." Contrary to the United States' view, the case-law indicates that measures involving discretion may well be WTO-inconsistent. The Appellate Body indicated that there would be no clear dividing line which distinguishes mandatory measures from discretionary measures, and discretion to violate WTO obligations could be WTO-inconsistent.

5.62 As a result, the United States is incorrect to assert that the mere existence of discretion to comply with WTO law precludes a finding of WTO-inconsistency. In this dispute, the Panel must examine the nature and character of the measure at issue, including the evidence of the general application of the zeroing procedure, to determine whether the measures are "as such" WTO-inconsistent. As outlined above, that evidence shows prima facie that the United States generally applies the zeroing procedures, according to their own terms, in a WTO-inconsistent manner and has done so, at least, since 1993. The mere fact that the United States could alter this rule does not eliminate the on-going WTO-inconsistency of the rule.

5.63 Furthermore, even assuming, for the sake of arguments, a mandatory – discretionary analysis were required in this case, the model and simple zeroing at issue, by their own terms, require WTO-inconsistent action. First, the zeroing procedure is included in the USDOC standard AD Margin Calculation Program. The standard "programming procedures" instruct a mechanistic selection and summing of data that, in terms of the procedures, afford no possibility to depart from "zeroing." Second, the evidence submitted by the European Communities of many specific computer programs supports the conclusion that the United States treats the zeroing procedures a mandatory part of its administrative procedure because the zeroing procedure has been included in specific computer programs with the utmost consistency. Third, the expert testimony submitted by Japan demonstrates that the United States has used the zeroing procedures, without change, for at least the past twelve years.

6. Conclusion

5.64 Japan submits that the model zeroing measure, used in original investigations, is "as such" inconsistent with, inter alia, Articles 2.4, 2.4.2, 3.1, 3.2, 3.3, 3.4 and 5.8 of the AD Agreement. The simple zeroing measure, used in periodic reviews and duty assessments, is "as such" inconsistent with, inter alia, Articles 2.4, 2.4.2 and 9.3 of the AD Agreement.

G. REPUBLIC OF KOREA

5.65 Korea agues that as the Appellate Body has consistently found zeroing to be prohibited in all anti-dumping proceedings. Indeed, according to Korea, the Appellate Body has consistently held that zeroing should be condemned as unfair and prohibited in the original investigation well as reviews and consequently has found that zeroing is inconsistent with the "fair comparison" requirements of Articles 2.4 and 2.4.2.103

1. Arguments with respect to Article 2.4

5.66 Korea submits that the "fair comparison" requirement of Article 2.4 is an overarching and independent obligation which applies to all dumping calculations. Korea is of the view that a comparison of the text of the current AD Agreement to the corresponding provision of the Tokyo Round Antidumping Code suggests that the "fair comparison" requirement of the first sentence of Article 2.4 was intended to be independent of the provisions in the subsequent sentences of Article 2.4.

5.67 Contrary to the Tokyo Round Code, which sets out the "fair comparison" requirement as an introductory clause, the Uruguay Round Agreement contains a separate and explicit command that a "fair comparison shall be made," as an independent new first sentence of Article 2.4. In addition, the position that the "fair comparison" requirement is an independent and overarching obligation is clearly supported by the language of Article 2.4 since the "fair comparison" requirement is set forth independently, in the first sentence of Article 2.4, in language that is not conditioned on the requirements of the following sentences.

5.68 For these reasons, Korea submits that the "fair comparison" requirement of Article 2.4 - which applies to all dumping calculations - provides an independent ground for finding zeroing to be inconsistent with the AD Agreement.

2. Article 9.3 Proceedings are Part of "the investigation phase" under Article 2.4.2

5.69 Korea asserts that the periodic review under Article 9.3 is part of "the investigation phase" under Article 2.4.2. According to Korea, in the US – Corrosion-Resistant Steel Sunset Review case, the Appellate Body explained that reviews under Article 11 "envision a process combining both investigatory and adjudicatory aspects."104 Furthermore, the Appellate Body noted that although it was not necessary for investigating authorities to calculate dumping margins in sunset reviews, if they chose to do so, their calculation must be consistent with the requirements of Article 2. Korea submits that the same logic should apply to periodic reviews for duty assessment under Article 9.3. Thus, in a periodic review, where the United States chooses to calculate a new dumping margin for the duty assessment, the calculation should be done without zeroing, consistent with the requirements of Article 2, including the requirements of Articles 2.4 and 2.4.2.

3. Articles 2.4 and 2.4.2 Apply to Article 9.3 Proceedings

5.70 Korea submits that the text of Article 9.3 explicitly indicates that the requirements of Articles 2.4 and 2.4.2 must apply to periodic reviews under Article 9.3. Noting that Article 9.3 explicitly refers to margin of dumping "as established under Article 2," Korea is of the view that in a periodic review, a new dumping margin for the duty assessment should be calculated pursuant to Article 2, including Articles 2.4 and 2.4.2. In addition, Korea argues that Article 9.3 establishes a basic requirement that "the amount of anti-dumping duty shall not exceed the margin of dumping as established under Article 2." If zeroing is permitted in the periodic review for the duty assessment, then duties would be imposed in excess of "the margin of the dumping as established under Article 2" due to the use of a methodology that Article 2.4.2 does not permit.

H. MEXICO

1. Zeroing is Prohibited by Article 2.4

5.71 Mexico argues that Article 2.4 of the AD Agreement establishes the fundamental principle that: "A fair comparison shall be made between the export price and the normal value". This entails an independent obligation to determine the relevant dumping margin by using a fair method of comparison that takes into account sales of all the products under investigation, which necessarily means that "negative margins" should not be zeroed.

5.72 The United States zeroing practice is not objective and impartial and therefore this practice is as such unfair under Article 2.4. Consequently, zeroing is inconsistent with the obligations of the United States established under Article 2.4.

2. Zeroing is Prohibited by Article 2.4.2

5.73 The United States model zeroing and simple zeroing comparison methodologies are inconsistent with Article 2.4.2 because they do not involve a weighted-average comparison of the prices of all comparable export transactions. Pursuant to paragraph 55 of Appellate Body's report in the EC – Bed Linen, case an investigating authority must include in the comparison of prices it undertakes when calculating a dumping margin all comparable export transactions, otherwise it would not be making a "fair comparison", something which would be contrary to the terms of Articles 2.4 and 2.4.2.

3. Article 2.4.2 Applies to Duty Assessment Proceedings

5.74 Article 9 of the AD Agreement provides that the obligations contained in Article 2 apply to the duty assessment proceedings. According to Article 9.3 of the AD Agreement, the amount of the antidumping duty shall not exceed the margin of the dumping as established under Article 2. That is, Article 9 refers to the whole Article 2, without any restrictions. It therefore obliges an investigating authority to apply Article 2.4.2 when determining the amount of anti-dumping duties in the corresponding duty assessment proceedings. In this connection, Mexico is of the view that all the obligations contained in Article 2 are directly applicable in the context of United States duty assessment proceedings, since, as established in Article 9.3, the requirement to determine the amount of an anti-dumping duty (if one is imposed) at a level that does not exceed the margin of dumping as established under Article 2 applies equally to retrospective and prospective systems.

4. Weighted-Average Normal Value to Individual Export Transaction Comparison is Permitted only in Specific Circumstances

5.75 The obligation to make a fair comparison must necessarily and normally be based on equivalent methodologies, that is to say, on a symmetrical comparison, a principle set out in Article 2.4, which establishes that "A fair comparison shall be made between the export price and the normal value". According to this principle, the AD Agreement establishes that the methodology involving a comparison of weighted-average normal values with individual export transactions (i.e. an asymmetrical comparison) is permitted only if particular conditions, set out in Article 2.4.2 (known as "selective dumping"), are present.

5.76 Contrary to the arguments of the United States, the obligation of making a "fair comparison" (that is, a symmetrical comparison) applies to the antidumping duty assessment proceedings, given that as previously described, Article 2 of the AD Agreement is applicable to those proceedings.

5.77 The text of AD Agreement Article 9.4, as in original investigations, expressly restricts the situations in which an asymmetrical comparison can be made – namely when the investigating authority uses samples in its investigations and, particularly significantly, when the amount of anti-dumping duties is determined prospectively, a situation that does not apply in any circumstance to the United States, given its current laws and regulations.

5.78 The main aim of the provisions contained in Articles 2 and 9 is to ensure a "fair comparison" consistent with the AD Agreement, and the exceptions for an asymmetrical comparison methodology are confined to the circumstances specifically enumerated in the Agreement.

5. The "Standard Zeroing Procedures" are a Measure that can be Challenged as such

5.79 Pursuant to a dispute settlement proceeding, every act or omission of a WTO Member can be considered as a "measure". Therefore, there is no limit about the kind of measures of the United States related to the zeroing practice that can be subject to a dispute settlement proceeding under the DSU or the AD Agreement in which its conformity as such with those Agreements is challenged.

5.80 Mexico considers that the United States rules on anti-dumping, specifically sections 771(35)(A) and (B) and 777A(d) of the 1930 Tariff Act and section 351.414(c)(2) of the USDOC regulations, are inconsistent as such with Articles 2.4, 2.4.2, 9.3, 11 and 18.4 of the AD Agreement, with Articles VI:1 and VI:2 of the GATT 1994 and with Article XVI:4 of the WTO Agreement.

5.81 The Import Administration Antidumping Manual, the standard computer programs and the standard anti-dumping margin program are components of standard zeroing procedures and constitute a part of the overall structure in which anti-dumping investigations are conducted by the United States. The United States' investigating authority systematically applies standard zeroing procedures in all calculations of dumping margins in original investigations as well as in anti-dumping duty assessment procedures. Accordingly, the standard zeroing procedures, in practice, are deemed compulsory. In this light, it is appropriate to review the standard zeroing procedures, as part of the "measures" challenged in this dispute.

I. NORWAY

1. Zeroing is Prohibited in "Retrospective Assessment Reviews" under Article 9.3 of the AD Agreement and in "New Shipper Reviews" under Article 9.5

5.82 Norway submits that the pivotal question, in this case, is whether Article 2.4, including Article 2.4.2, of the AD Agreement applies to "retrospective assessment reviews" and "new shipper reviews".

5.83 According to Norway, the Appellate Body has clearly stated that there is only one method of calculating dumping margins in the AD Agreement and that is in accordance with the provisions of Article 2.4 – which includes Article 2.4.2. This was most recently stated in the US – Corrosion Resistant Steel Sunset Review case in connection with the interpretation of Article 11.3 of the Agreement concerning "sunset reviews".105 In this case, the Appellate Body recalled its findings in the EC – Bed Linen case, and stated that:

"When investigating authorities use a zeroing methodology such as that examined in EC – Bed Linen to calculate a dumping margin, whether in an original investigation or otherwise, that methodology will tend to inflate the margins calculated."106

5.84 Norway contends that the word "otherwise" makes it particularly clear that the findings of the Appellate Body in this case are just as valid whenever a margin of dumping is calculated, and not just in original investigations. This is, furthermore, abundantly clear from the chapeau to paragraph 3 of Article 9, which states that "[T]he amount of the anti-dumping duty shall not exceed the margin of dumping as established under Article 2." This creates a clear and unambiguous link between the dumping duty imposed, reassessed or collected and the disciplines in Article 2 governing the calculation of dumping margins.

5.85 Norway rejects the argument of the United States that Article 2.4 applies to periodic reviews, but not to sub-paragraph 4.2, because of the existence of the word "investigation" in Article 2.4.2. First, the United States' arguments fail because there is nothing in paragraph 3 of Article 9 that bars the application of Article 2.4.2. To the contrary, there is a clear reference to calculations of dumping margins, an issue squarely within Article 2.4.2. Secondly, because the Appellate Body in the EC – Bed Linen case has interpreted the prohibition on zeroing based not on Article 2.4.2 as such but on the requirement of a "fair comparison" in Article 2.4. Thirdly, because what the United States is doing in its duty "reassessment reviews" and "new shipper reviews" is similar to what it does in original investigations and in "sunset reviews". For all practical purposes it is a new investigation. If the reach of Article 2.4.2 is excluded from all but original investigations there would be no disciplines left to ensure fairly computed dumping margins. This would be contrary not only to the "fair comparison" requirement, but also to the Appellate Body's explicit findings in the US – Corrosion Resistant Steel Sunset Review case.

2. Measures that can be Challenged "as such"

5.86 Norway argues that there are no limitations on the types of measures that can be challenged as such before a WTO panel. Norway asserts that guidance on the measures, and types of measures, that can be challenged before a WTO panel in a case concerning the AD Agreement can be found in many provisions. For instance, Norway contends that the interpretation of Article 3.3 of the DSU by the Appellate Body in the US – Corrosion Resistant Steel Sunset Review case indicates that, in principle, any act or omission attributable to a WTO Member can be assumed to be a measure by that Member for the purposes of dispute settlement proceedings.

5.87 The wide reach of the notion of "measure" is also evident from Article 18.4 of the AD Agreement, which refers not only to laws or regulations, but also to "administrative procedures" as measures subject to the disciplines of the AD Agreement. Furthermore, Article 17.3 of the AD Agreement, which concerns disputes relating to the Agreement, only makes reference to the "effects" of any action by another Member, and not to specific types of measures. Indeed, the Appellate Body stated in the US – Corrosion Resistant Steel Sunset Review case that there is no threshold requirement in Article 17.3 of the AD Agreement that the measure in question be of a certain type. In the same ruling the Appellate Body also held that the provisions of Article 18.4 of the AD Agreement have a certain relevance in relation to the question of what type of measure may be submitted to dispute settlement under the agreement. The phrase "laws, regulations and administrative procedures" in Article 18.4 has been interpreted very broadly to encompass all generally applicable rules, norms and standards adopted by Members in connection with anti-dumping proceedings.

3. The Anti-Dumping Margin Program is a Challengeable "as such" Measure

5.88 Norway is of the view that the anti-dumping margin program is a norm or standard adopted by the United States in connection with the conduct of anti-dumping proceedings. The fact that the zeroing procedures in the anti-dumping margin program are abstract; that they not published in the Federal Register; that they do not bear the title "law" or "regulation"; that they are not adopted by Congress but by the US Department of Commerce; that the Department is entitled to change or withdraw them for the purposes of future determinations; and that they are not relevant in US courts, cannot be decisive for whether these procedures are a "measure" for the purpose of anti-dumping proceedings.

5.89 Norway believes that the anti-dumping margin program and the procedures it contains may be a set 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" in the anti-dumping margin program provide certainty and security (at least for US industry) for the conduct of future trade. They mandate zeroing in all cases, and continue to do so until changed.

5.90 Even if one were to accept the contention of the United States that the anti-dumping margin program is not a measure in itself but only the implementation of "rules or norms adopted by a decision-maker in some other instrument, such as a regulation or a determination in a specific antidumping proceeding", they would still be challengeable. This is because an implementing measure is as challengeable as the law or regulation from which it is derived.

5.91 For the above reasons, the anti-dumping margin program containing the standard zeroing procedures is a "challengeable" measure under WTO law as such.

4. The Anti-Dumping Margin Program is inconsistent with the AD Agreement

5.92 The Appellate Body has clearly stated that there is only one method of calculating dumping margins in the AD Agreement and that is in accordance with the provisions of Article 2.4 of the Agreement. By virtue of the fact that Article 2 is also applicable to assessment reviews under Article 9.3 and to "new shipper reviews" under Article 9.5, it follows that zeroing is prohibited.

5.93 The anti-dumping margin program is a measure that can be challenged "as such" in a WTO dispute. Thus the anti-dumping margin program containing the standard zeroing procedures is in violation of Article 2.4 of the AD Agreement and in particular Article 2.4.2, as well as all other articles concerning the calculation of dumping margins.

5.94 The calculation of dumping margins has a bearing on the assessment that must be made under a number of the provisions of the AD Agreement, including Articles 3.1, 3.2, 3.5, 11.1, 11.2, 11.3, 9.3, 1, 18.4. When the United States "Standard Zeroing Procedures" in the anti-dumping margin program are in violation of Article 2.4, this will therefore, in turn, lead to a number of consequential inconsistencies.

J. TURKEY

1. Model Zeroing is Inconsistent with Articles 2.4 and 2.4.2 of the AD Agreement

5.95 Turkey asserts that the model zeroing method used by the United States in determining the dumping margin in original investigations leads to an unfair comparison of normal value and export price within the meaning of Articles 2.4 and 2.4.2 of the AD Agreement. This contention is supported by the Panel and Appellate Body decisions in the EC – Bed Linen case. In that dispute, the Panel decided that establishing the existence of margins of dumping on the basis of a methodology, which included zeroing negative price differences, calculated for some models (model zeroing methodology) was inconsistent with Article 2.4.2 of the AD Agreement. Furthermore, the Panel noted that, in arriving at a conclusion whether the product as a whole is being dumped, Article 2.4.2 obligates an investigating authority to make its determination in a way which fully accounts for the export prices on all comparable transactions. Thus, the Panel found the methodology, which focuses on those models that are dumped, and takes less than full account of those models where the comparison results in a negative margin, to be inconsistent with Article 2.4.2 of the Agreement. The Appellate Body in the EC – Bed Linen case, further stated that, regardless of the method used to calculate the margins of dumping, these margins must be, and can only be, established for the product under investigation as a whole.

2. Recourse to Simple Zeroing Should Be an Exception

5.96 The text of Article 2.4.2 recognizes three different methodologies for dumping margin calculations. The comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions and the comparison of normal value and export prices on a transaction-to-transaction basis are both identified as the normal way of calculation, whereas the comparison of weighted average normal value with prices of individual export transactions is identified as an exception. Thus, at the outset, it is clear that simple zeroing is not expressly prohibited in the text of the said Article. Furthermore, if simple zeroing was prohibited then it would render meaningless the inclusion of the exceptional calculation method in the Article since the result of both comparisons, that is the weighted average normal value to weighted average export transactions comparison and the weighted average normal value to prices of individual export transactions comparison, would lead to the same result.

5.97 On the other hand, 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 of the AD Agreement. Yet, the application of this exception is expressly tied to the existence of certain conditions. If the investigating authority is to calculate a dumping margin in a way other than the two normal methods, then, pursuant to Article 2.4.2, it should perform a targeted dumping analysis. Should the authority find such targeting; it should explain why such differences could not be taken into account appropriately by the use of a weighted average-to-weighted average or transaction-to-transaction comparison.

5.98 In this respect, although the AD Agreement does not prohibit simple zeroing, recourse to such application should be an exception, not a standard procedure and the conditions that call for it should be clearly examined and explained. Thus, the standard zeroing methodology as applied in periodic reviews by the United States is inconsistent with the provisions of Articles 1, 2.4, 2.4.2, 9.3, 11.1, 11.2 and 18.4 of the AD Agreement.

3. Dumping Determinations for the Purposes of Article 11.2 of the AD Agreement

5.99 Article 2 defines dumping along with the methodologies to be used in the determination of dumping margin. Turkey contends that the provisions covered by this Article should apply to all types of investigations, including reviews, where a dumping margin is to be calculated. Thus, in view of the fact that there exists no other provision on how to calculate the dumping margin for the purposes of Article 11.2 reviews, the investigating authorities should also abide by the provisions of Article 2.

4. Consistency with Provisions of the AD Agreement

5.100 In Turkey's view, where dumping margin calculation in an investigation or review is established under a methodology that leads to the violation of the relevant provisions of the AD Agreement, the Regulation that establishes the basis for implementing such methodology should also be found to be inconsistent with the AD Agreement.

5.101 It is without doubt that the signatory Members to the Agreement Establishing the WTO commit themselves to abide by the rules and procedures of the WTO Agreements. The presence of such commitment provides security and predictability for the proper functioning of the multilateral trading system. In this respect, domestic laws of the Members that implement the WTO Agreements must be compatible with the requirements of the relevant Agreements. Otherwise, the WTO Agreements and the multilateral trade system would prove unnecessary since Members might adopt legislation with completely different obligations. This would inevitably result in chaos and unpredictability in the international environment. However, this should not be interpreted as to say that Members are precluded of having domestic legislations. On the contrary, the WTO Agreements put forward general principles of application and in most instances they do not describe the procedures to be followed to act consistently with those principles. Thus, domestic legislation is essential in those instances where they help to describe procedures and rules that should be followed in order to be compatible with the Agreements. Yet, the balance should be well established. The provisions of the domestic legislations should not contradict with the provisions of the WTO Agreements nor nullify the benefits accruing to the Members under the WTO Agreements.

VI. INTERIM REVIEW

6.1 The Panel submitted its Interim Report to the parties on 4 August 2005. On 26 August 2005, both parties requested that the Panel revise precise aspects of the Interim Report. Neither party requested an interim review meeting. On 12 September 2005, both parties submitted comments on the other party's request for interim review. The Panel has carefully addressed the arguments made by the parties in their requests for interim review and addresses them below, in accordance with Article 15.3 of the DSU.107

A. COMMENTS BY THE EUROPEAN COMMUNITIES

1. Request for explanation of the legal reasoning of the Appellate Body in EC – Bed Linen and US – Softwood Lumber V

6.2 Regarding the finding of the Panel in paragraph 7.32 of the Report that USDOC acted inconsistently with Article 2.4.2 of the AD Agreement in the anti-dumping investigations at issue, the European Communities considers that the Report should "faithfully explain" the legal reasoning underlying the findings in the two Appellate Body reports referred to by the Panel (EC – Bed Linen and US – Softwood Lumber V). The United States opposes this request.

6.3 Bearing in mind that the precise issue addressed in this part of the Report – the application of model zeroing when using an average-to-average comparison in original investigations- has already been the subject of detailed analysis and findings in two previous dispute settlement proceedings, we remain of the view that paragraphs 7.26-7.31 provide a sufficient explanation of our finding in paragraph 7.32 that USDOC acted inconsistently with Article 2.4.2 of the AD Agreement. We note that footnote 127 of the Report refers to the precise sections of the Appellate Body reports that contain the reasoning of the Appellate Body. The European Communities argues that an explanation by this Panel of the legal reasoning of the Appellate Body in EC – Bed Linen and US – Softwood Lumber V "might... help the reader of the report to properly understand the full implications of those findings". In our view, the kind of explanation suggested by the European Communities would go beyond what is necessary to decide the issue raised by this particular claim of the European Communities regarding the application of model zeroing in certain anti-dumping investigations. We therefore see no reason to amend our Report as suggested by the European Communities.

2. Request for a finding with respect to the claim of the European Communities regarding "automatic assessment"

6.4 The European Communities argues that not all its "as applied" claims relating to original investigations under provisions other than Articles 2.4.2 and 2.4 of the AD Agreement are consequential, and refers in particular to its claim that the "automatic assessment" of liability in the sample case is inconsistent with Article 9.3. The European Communities also considers that the United States has not contested this claim. Thus, in the view of the European Communities, the Panel "has no legal alternative but to find that model zeroing in an assessment is inconsistent with" Article 9.3. The United States opposes this request.

6.5 As we understand it, the issue raised by the European Communities regarding "automatic assessment" pertains to a claim under Article 9.3 of the AD Agreement concerning situations in which, as a result of the absence of a request for administrative review, USDOC assessed the amount of anti-dumping duty in an amount corresponding to the margin of dumping determined in the original investigation.108 As explained in paragraph 7.12 of the Report, we have treated this claim as a dependent claim on the grounds that it alleges a breach of a provision as a consequence of the alleged violations of Articles 2.4 and 2.4.2 of the AD Agreement. This characterization is based on the express language used by the European Communities in paragraph 94 of its First Submission, where it states that the United States acted inconsistently with Article 9.3 "as a consequence of the unlawful zeroing method described in this submission". It is clear from paragraph 95-96 that the key argument in support of this claim is that as a result of the use of an "inflated" margin of dumping as the basis of the assessment of the amount of anti-dumping duty, the amount of anti-dumping duty exceeded the margin of dumping as established under Article 2. There is no argumentation that Article 9.3 is violated other than as a result of a violation of other provisions of the AD Agreement. Against this background, we see nothing in the request by the European Communities for interim review that substantiates the assertion that its "as applied" claim under Article 9.3 is not consequential.

6.6 We consider that paragraph 7.34 of the Report and the accompanying footnote 134 sufficiently explain why we do not consider it necessary to make findings on the dependent claims raised by the European Communities, including its claim under Article 9.3 of the AD Agreement. The key consideration, as stated in that paragraph, is that deciding dependent claims will not provide additional guidance as to the steps to be undertaken by the United States in order to implement the Panel's recommendation regarding the violation on which the recommendation is dependent. The interim review request of the European Communities contains no argumentation that calls into question the logic of that reasoning. We also note that in footnote 134 we have drawn attention to recent panel reports that have adopted the same approach with respect to the treatment of dependant claims. Particularly noteworthy in this context is the panel report in US – Softwood Lumber V. After finding that model zeroing in an original investigation is inconsistent with Article 2.4.2 of the AD Agreement, that panel declined to make a finding on a claim that zeroing is also inconsistent with Article 9.3 of the AD Agreement based on the reasoning articulated in paragraph 7.34 of our Report. In light of these considerations, we have decided not change our Report as proposed by the European Communities.

3. Request for a revision of the Panel's reasoning regarding zeroing as a methodology

6.7 The European Communities disagrees with what it characterizes as the conclusion of the Panel that the standard zeroing procedures "do not exist in written form". The United States opposes this request.

6.8 Although the European Communities does not make reference to a particular paragraph of the Report, we believe that this comment pertains to paragraph 7.104 where we state that there is a zeroing methodology which is manifested in the Standard Zeroing Procedures and which represents a well-established and well-defined norm but which "is not expressed in writing". Thus, strictly speaking, we have not stated that the "Standard Zeroing Procedures do not exist in written form" but that the zeroing methodology itself "is not expressed in writing". The European Communities does not submit any factual or legal arguments to explain why it considers that the Panel erred in making this statement. We therefore have not changed the Report in this respect.

4. Request for a finding by the Panel on the claim of the European Communities under Article 2.4 of the AD Agreement

6.9 In its interim review comments, the European Communities requests the Panel to make a finding on its claims that the use of zeroing in original investigations is inconsistent with Article 2.4 of the AD Agreement.109 The European Communities considers that a decision on whether and to what extent the zeroing practice is violating Article 2.4, in particular the independent and overarching obligation contained in the first sentence thereof, in the context of original investigations, is essential to give the United States the guidance it needs in order to bring its measures into conformity with the AD Agreement. The United States opposes this suggestion.

6.10 We have explained in paragraph 7.33 of the Report why, having found that the use of model zeroing in the investigations at issue is inconsistent with Article 2.4.2 of the AD Agreement, we do not consider it necessary to examine whether the use of model zeroing in these investigations is also inconsistent with Article 2.4. We consider that this approach is within our discretion to exercise judicial economy. The fundamental consideration regarding the appropriateness of the exercise of judicial economy in WTO dispute settlement is that a panel only needs "to address those claims on which a finding is necessary in order to enable the DSB to make sufficiently precise recommendations and rulings so as to allow for prompt compliance by a Member with those recommendations and rulings".110 In our view, in determining whether or not to exercise judicial economy, we must determine whether a finding requested by a party is necessary to decide those specific claims that are actually before us. In the present case, the European Communities has raised the same issue under Articles 2.4.2 and 2.4 of the AD Agreement, namely the lawfulness of model zeroing in the context of average-to-average comparisons between export price and normal value in original investigations. While the interim review request of the European Communities asserts that a finding by the Panel under Article 2.4 is essential, it does not advance any argument demonstrating that action by the United States to remove the inconsistency with Article 2.4.2 would not at the same time also remove the alleged inconsistency with Article 2.4 of the AD Agreement. Thus, it remains our view that a DSB recommendation based on our finding of inconsistency of the application of zeroing with Article 2.4.2 is sufficiently precise. We also note that, as described in footnote 133 of the Report, other panel reports have also refrained from making findings on whether zeroing is inconsistent with Article 2.4 after finding that zeroing is inconsistent with Article 2.4.2. In sum, the European Communities has not provided any cogent argument to demonstrate that we erred in deciding to exercise judicial economy with respect to its claims under Article 2.4, and we disagree with the European Communities that in the present case a decision on Article 2.4 is somehow essential. Thus, we have not made any changes to the Report in this respect.

B. COMMENTS BY THE UNITED STATES

1. Request for changes to paragraph 2.5 of the Report

6.11 The United States requests that we insert the word "dumped" before "amount" in the second and third sentences of paragraph 2.5 of the Report. The United States further requests that we replace "customs" with "US Bureau of Customs and Border Protection ('USCBP')" in the seventh sentence of paragraph 2.5 and that we substitute "USCBP" for "customs" in the next sentence. The European Communities agrees. We have decided to accept these changes, which we regard as being of a purely editorial nature.

2. Request for changes to paragraph 2.6 of the Report

6.12 The United States requests the Panel to replace paragraph 2.6 of the Report with paragraph 2.4 of the original draft descriptive part of the Report. The United States objects in particular to the inclusion in this paragraph of references to three kinds of "measures": (1) the Issues and Decision Memoranda; the (2) Final Margin Program Logs and Outputs; and (3) assessment instructions. The United States considers that these three measures are not part of the request for establishment of a panel. The European Communities objects to the amendments suggested by the United States.

6.13 When read in light of the relevant paragraphs of the First Written Submission of the European Communities, as referred to in footnotes 21 and 22 of the Report, it is clear to us that paragraph 2.6 of the Report does not treat the Issues and Decision Memoranda, the Final Margin Program Logs and Outputs, and the assessment instructions as three separate categories of measures but as aspects of the measures at issue.111 Thus, paragraph 2.6 of our Report does not imply that we are presented with a request for separate findings on the Issues and Decision Memoranda, the Final Margin Program Logs and Outputs and the assessment instructions. While it is certainly true that there is no express mention of these "measures" in the request for the establishment of a panel, they clearly form part of the measures mentioned in that document.112 Therefore, we have not made the change requested by the United States.

3. Request for changes to paragraph 7.67 of the Report

6.14 The United States requests that the Panel delete the second sentence and the first part of the third sentence of paragraph 7.67 of the Report. The United States considers that the second sentence can be read to imply that Appellate Body reports constitute sources of WTO law and that the Panel's statement in footnote 167 of the Interim Report on the Sunset Policy Bulletin is unclear. The European Communities objects to these changes proposed by the United States but suggests that the issue raised by the United States regarding the second sentence of paragraph 7.67 can perhaps be addressed by substituting "understood" for "interpreted".

6.15 To accommodate the concern of the United States regarding the possible implications of the statement in the second sentence of paragraph 7.67, we have slightly redrafted that sentence and have deleted footnote 167 of the Interim Report. However, we see no reason to delete or amend the first part of the third sentence of paragraph 7.67.

6.16 Finally, in addition to the above-mentioned changes, we have corrected a number of typographical errors in the Interim Report.

VII. FINDINGS

A. INTRODUCTION

7.1 The European Communities requests the Panel to find that:113

(a) In the cases and measures listed in Exhibits EC-1 to EC-15, the United States acted inconsistently with (1) Articles 2.4 and 2.4.2; 3.1, 3.2 and 3.5; 5.8; 9.3; 1 and 18.4 of the AD Agreement, (2) Articles VI:1 and VI:2 of the GATT 1994 and (3) Article XVI:4 of the WTO Agreement by setting at zero negative margins when aggregating the intermediate results of comparisons between averaging groups for the purposes of calculating the margin for the subject product.

(b) The "Standard Zeroing Procedures" used by the United States in original investigations (or the US practice or methodology of zeroing) and Sections 771(35)(A) and (B), 731 and 777(A(d) of the Tariff Act are as such inconsistent with: (1) Articles 2.4 and 2.4.2; 5.8; 9.3; 1 and 18.4 of the AD Agreement; (2) Articles VI:1 and VI:2 of the GATT 1994; and (3) Article XVI:4 of the WTO Agreement.

(c) In the cases and measures listed in Exhibits EC-16 to EC-31, the United States acted inconsistently with: (1) Articles 2.4 and 2.4.2; 9.3; 11.1 and 11.2; 1 and 18.4 of the AD Agreement; (2) Articles VI:1 and VI:2 of GATT 1994; and (3) Article XVI:4 of the WTO Agreement by comparing a weighted average normal value with individual export transactions, without explanation or justification, and by setting at zero negative margins when aggregating the intermediate results of such comparisons for the purposes of calculating the margin of dumping for the subject product.

(d) The "Standard Zeroing Procedures" used by the United States in periodic reviews (or the US practice or methodology of zeroing), 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 USDOC's Regulations are as such inconsistent with (1) Articles 2.4; 2.4.2; 9.3; 11.1 and 11.2; 1 and 18.4 of the AD Agreement, (2) Articles VI:1 and VI:2 of the GATT 1994 and (3) Article XVI:4 of the WTO Agreement.

(e) The "Standard Zeroing Procedures" used by the United States in new shipper reviews, changed circumstances reviews and sunset reviews (or the US practice or methodology of zeroing), 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 USDOC's Regulations are as such inconsistent with (1) Articles 2.4 and 2.4.2; 9.3 and 9.5; 11.1, 11.2 and 11.3; 1 and 18.4 of the AD Agreement; (2) Articles VI:1 and VI:2 of the GATT 1994 and (3) Article XVI:4 of the WTO Agreement.

7.2 The European Communities requests that the Panel recommend that the United States take the steps necessary to bring its measures into conformity with the cited WTO provisions.

7.3 The United States requests that the Panel reject the claims of the European Communities.

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

1. Standard of Review

7.4 Article 11 of the DSU provides the standard of review for WTO panels in general. Article 11 imposes upon panels a comprehensive obligation to make an "objective assessment of the matter", an obligation which embraces all aspects of a panel's examination of the "matter", both factual and legal.114

7.5 Article 17.6 of the AD Agreement sets forth the special standard of review applicable to disputes under the AD Agreement:

(i) in its assessment of the facts of the matter, the panel shall determine whether the authorities' establishment of the facts was proper and whether their evaluation of those facts was unbiased and objective. If the establishment of the facts was proper and the evaluation was unbiased and objective, even though the panel might have reached a different conclusion, the evaluation shall not be overturned;

(ii) the panel shall interpret the relevant provisions of the Agreement in accordance with customary rules of interpretation of public international law. Where the panel finds that a relevant provision of the Agreement admits of more than one permissible interpretation, the panel shall find the authorities' measure to be in conformity with the Agreement if it rests upon one of those permissible interpretations.

Thus, taken together Article 11 of the DSU and Article 17.6 of the AD Agreement establish the standard of review this Panel must apply with respect to both the factual and the legal aspects of the present dispute.

2. Rules of Treaty Interpretation

7.6 Article 3.2 of the DSU provides that the dispute settlement system serves to clarify the provisions of the covered agreements "in accordance with customary rules of interpretation of public international law". It is generally accepted that these customary rules are reflected in Articles 31-32 of the Vienna Convention on the Law of Treaties. Article 31(1) of the Vienna Convention provides:

"A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose".

7.7 In the context of disputes under the AD Agreement, the Appellate Body has stated that:

"The  first  sentence of Article 17.6(ii), echoing closely Article 3.2 of the DSU, states that  panels 'shall' interpret the provisions of the  AD Agreement 'in accordance with customary rules of interpretation of public international law.' Such customary rules are embodied in Articles 31 and 32 of the Vienna Convention on the Law of Treaties  ('Vienna Convention'). Clearly, this aspect of Article 17.6(ii) involves no 'conflict' with the DSU but, rather, confirms that the usual rules of treaty interpretation under the DSU also apply to the  AD Agreement. …

The  second  sentence of Article 17.6(ii) … presupposes  that application of the rules of treaty interpretation in Articles 31 and 32 of the  Vienna Convention  could give rise to, at least, two interpretations of some provisions of the  AD Agreement,  which, under that Convention, would both be 'permissible  interpretations.' In that event, a measure is deemed to be in conformity with the  AD Agreement 'if it rests upon one of those permissible interpretations."115

Thus, it is clear that under the AD Agreement, we are to follow the same rules of treaty interpretation as in any other dispute. The difference is that if we find more than one permissible interpretation of a provision of the AD Agreement, we may uphold a measure that rests on one of those interpretations.

3. Burden of Proof

7.8 The general principles applicable to burden of proof in WTO dispute settlement require that a party claiming a violation of a provision of the WTO Agreement by another Member assert and prove its claim.116 The European Communities as the complaining party must therefore make a prima facie case of violation of the relevant provisions of the relevant WTO agreements, which the respondent must refute. We also note, however, that it is generally for each party asserting a fact, whether complainant or respondent, to provide proof thereof.117 In this respect, therefore, it is also for the United States to provide evidence for the facts which it asserts. We also recall that a prima facie case is one which, in the absence of effective refutation by the other party, requires a panel, as a matter of law, to rule in favour of the party presenting the prima facie case.

C. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF CERTAIN ORIGINAL INVESTIGATIONS118

1. Measures at issue

7.9 The European Communities claims that the United States has acted inconsistently with its WTO obligations in 15 anti-dumping investigations listed in Exhibits EC-1 to EC-15119 because USDOC, when calculating the weighted average dumping margin for exporters/manufacturers of the product subject to investigation on the basis of multiple comparisons between average export prices and average normal values within "averaging groups"120 consisting of merchandise that was identical or virtually identical in all physical characteristics, included in the numerator used to calculate the weighted average dumping margin only the results of those comparisons in which average export prices were below average normal values. The European Communities uses the term model zeroing to refer to this exclusion from the numerator of the weighted average dumping margin of any amounts by which average export prices within individual averaging groups based upon physical characteristics exceeded average normal values.

7.10 In the latter regard, we note that the parties to this dispute disagree on the appropriate terminology to describe this aspect of the dumping margin calculation methodology of USDOC. The United States rejects the term model zeroing used by the European Communities as being without any textual basis in the AD Agreement or in the anti-dumping laws and regulations of the United States. On the other hand, the European Communities contests that, as argued by the United States, the issue before the Panel is properly characterized in terms of whether or not an investigating authority must "grant" an "offset" or "credit" for "negative dumping". It is important to emphasize in this respect that where this Report uses the terms employed by the parties, this should not necessarily be seen as an acknowledgement by the Panel of the legal relevance of those terms under the AD Agreement.

7.11 As explained by the European Communities, USDOC's Regulations also provide for the possibility to establish averaging groups based on other factors, e.g. level of trade. While the claims of the European Communities regarding the original investigations at issue pertain specifically to model zeroing i.e. zeroing in the context of averaging groups established on the basis of physical characteristics, the claims of the European Communities that "Standard Zeroing Procedures" and certain provisions of the United States' anti-dumping legislation are WTO-inconsistent as such are broader in scope in this respect and concern the use of zeroing in the context of any type of averaging group. We consider that the specific criterion used in establishing an averaging group is of no particular relevance to our legal analysis and that our reasoning with respect to model zeroing is equally applicable to the use of zeroing in relation to averaging groups established on the basis of factors other than physical characteristics.

2. Order of analysis

7.12 The European Communities presents claims regarding the WTO-inconsistency of the application of model zeroing in the subject anti-dumping investigations under: (1) Articles 1, 2.4 and 2.4.2, 3.1, 3.2, 3.5, 5.8, 9.3 and 18.4 of the AD Agreement; (2) Articles VI:1 and VI:2 of the GATT 1994; and (3) Article XVI:4 of the WTO Agreement. There is a clear distinction between the claims of the European Communities under Articles 2.4 and 2.4.2 of the AD Agreement and the claims under the other WTO provisions invoked by the European Communities in that the alleged breach of these other provisions is a consequence of the alleged violation of Articles 2.4 and 2.4.2 of the AD Agreement.121 Because of this difference between "independent" claims under Articles 2.4 and 2.4.2 and "dependent" claims under other WTO provisions, we commence our analysis with the claims of the European Communities under Articles 2.4 and 2.4.2 of the AD Agreement.

7.13 Regarding the order in which we should take up the claims of the European Communities under Articles 2.4 and 2.4.2 of the AD Agreement, we consider that a panel is entitled to structure its analysis in a manner most appropriate to facilitate the analysis of the issues presented to it. In this respect, we note that Article 2.4.2 expressly deals with the question of how export price and normal value must be compared for purposes of establishing the existence of margins of dumping during the investigation phase. Article 2.4 requires Members to make a fair comparison between export price and normal value and contains rules on allowances that must be made to this end but does not expressly address the issue of the establishment of margins of dumping. In contrast, Article 2.4.2 addresses the issue of the establishment of margins of dumping specifically. Moreover, several panel and Appellate Body reports have made findings under Article 2.4.2 with respect to claims concerning the methodology for calculating margins of dumping. While the Appellate Body has in some cases expressed views on the implications of the "fair comparison" language in Article 2.4 for the calculation of margins of dumping, to date no panel or Appellate Body report has actually made findings under Article 2.4 with respect to a claim concerning the calculation of margins of dumping. For these reasons, we decide to examine first the claim of the European Communities that the model zeroing methodology employed by USDOC in the subject investigations is in breach of Article 2.4.2 of the AD Agreement.

3. Claim of the European Communities under Article 2.4.2 of the AD Agreement

(a) Arguments of the parties

7.14 The European Communities, referring to the Appellate Body report in EC – Bed Linen and the panel and Appellate Body reports in US – Softwood Lumber V, submits that since Article 2.1 of the AD Agreement defines "dumping" in relation to a product, the term "margins of dumping” in Article 2.4.2 applies to the product subject to investigation as a whole and not to models, types or categories of a product. Intermediate margins calculated by the USDOC in respect of particular models are not margins of dumping within the meaning of Article 2.4.2. Having defined the product subject to investigation, USDOC was bound by its own logic and should have determined a margin of dumping in conformity with Article 2.4.2 for the product as a whole. Thus, USDOC, which correctly compared a weighted average normal value to a weighted average export price of all transactions within individual averaging groups, including export prices above normal value, should also have incorporated "negative margins" of particular averaging groups when it calculated a margin of dumping for the product as a whole. The European Communities asserts that this interpretation is supported by the fact that Article 2.4.2 requires a simple comparison between export price and normal value, and that any difference between export price and normal value, whether positive or negative, is a "margin" for purposes of Article 2.4.2. The European Communities also recalls that the Appellate Body reports in EC – Bed Linen and US – Softwood Lumber V reject the view that where a margin of dumping is calculated on the basis of comparisons between export price and normal value in individual averaging groups, Article 2.4.2 only applies to the comparisons within these groups and not to the subsequent aggregation of these results into an overall margin.122

7.15 The United States disagrees that the term "margins of dumping" in Article 2.4.2 of the AD Agreement can only apply to the product under investigation as a whole, and not to a product type, model or category. The GATT 1994 and the AD Agreement demonstrate that the drafters used the term "margin of dumping" to refer both to the results of particular comparisons between normal value and export price and to the overall results of those comparisons.123 The United States considers that the Appellate Body erred in finding, in US – Softwood Lumber V, that the AD Agreement requires Members, in the investigation phase, to calculate and give credit for weighted average comparisons when the export price exceeds the normal value. First, it is factually incorrect to contend that USDOC "excludes" non-dumped transactions from the calculation of an overall margin of dumping under the average-to-average comparison method used in the investigation phase because, taken together, the averaging groups comprise all comparable export transactions and because all export transactions are included in the figure by which the aggregate amount of dumping is divided. Second, Article 2.4.2 restricts the use of the average-to-transaction comparison method in the investigation phase but does not address the offsetting of negative dumping. The negotiating history of Article 2.4.2 demonstrates that negotiators were only able to reach a limited agreement on the issue of "asymmetry" and that the issue of zeroing was raised but ultimately not addressed. Moreover, the concept of negative margins is without textual support in Article VI of the GATT 1994 or the AD Agreement. In the context of Article VI of the GATT 1994 and the AD Agreement, the term "margin of dumping" refers to the amount by which normal value exceeds the export price. Article 2.4.2 does not in any way modify this meaning of "margin of dumping" and contains no reference to the concept of negative margins of dumping. Since Article 2.4.2 contains no obligation to calculate an overall margin of dumping, let alone any obligations detailing the manner in which such a calculation must be performed, it cannot serve as the basis for finding a requirement to offset negative dumping.124

(b) Arguments of third parties

7.16 Argentina agrees with the European Communities that the use of model zeroing by USDOC in original investigations is inconsistent with Article 2.4.2 because, as the Appellate Body found in EC – Bed Linen and US – Softwood Lumber V, zeroing fails to take into account all transactions used to serve as the basis for the determination of the existence dumping.

7.17 Hong Kong, China submits that the Appellate Body has already held in EC – Bed Linen and US – Softwood Lumber V that the use of the model zeroing methodology in the context of a weighted-average-to weighted average comparison between export price and normal value is inconsistent with Article 2.4.2 because by using such a methodology an authority fails to establish an overall margin of dumping for the product under investigation on the basis of all comparable export transactions.

7.18 Japan submits that, as held by the Appellate Body in EC – Bed Linen and US – Corrosion-Resistant Steel Sunset Review, both model zeroing and simple zeroing are inconsistent with the "fair comparison" requirement contained in Articles 2.4 and 2.4.2. Specifically with regard to Article 2.4.2, Japan notes in this connection that zeroing amounts to a failure to take into account prices of all comparable export transactions.

7.19 India submits that, as found by the Appellate Body in EC – Bed Linen, model zeroing is inconsistent with the "fair comparison" required by Articles 2.4 and 2.4.2 because it means that an authority does not fully take into account the prices of all comparable export transactions.

7.20 Korea submits that the decisions of the Appellate Body in EC – Bed Linen, US – Corrosion-Resistant Steel Sunset Review and US – Softwood Lumber V make it clear that zeroing is inconsistent with Articles 2.4 and 2.4.2 of the AD Agreement because it involves a failure to take into account all comparable export transactions.

7.21 Mexico argues that model zeroing as used by USDOC in original investigations is inconsistent with Article 2.4.2 of the AD Agreement because USDOC failed to fully take account of prices of all comparable export transactions. USDOC thereby also failed to make a fair comparison, as required by Article 2.4.

7.22 Norway submits that the prohibition against zeroing in original investigations (and in reviews under Article 11.3 of the AD Agreement) has already been established by the Appellate Body in EC – Bed Linen, US – Corrosion-Resistant Steel Sunset Review and US – Softwood Lumber V.

7.23 Turkey argues that the model zeroing method used by the United States in determining the dumping margin in original investigations leads to an unfair comparison of export price and normal value within the meaning of Articles 2.4 and 2.4.2 of the AD Agreement. Turkey refers in this regard to the panel and Appellate Body ruling in EC – Bed Linen that Article 2.4.2 requires authorities to take full account of prices of all comparable export transactions and that margins of dumping can only be established for the product under investigation as a whole.

(c) Evaluation by the Panel

7.24 In the anti-dumping investigations at issue in the present dispute125 USDOC first compared normal values and export prices for individual models of the subject product. For each model, a weighted average normal value was compared to a weighted average of prices of all export transactions, which, by definition, included export prices of individual transactions that were above normal value. USDOC then aggregated the results of these model-specific weighted-average-to-weighted average comparisons into an overall dumping margin for the product under investigation for each exporter/manufacturer. In so doing, USDOC did not include in the numerator used to calculate the overall dumping margin the results of those comparisons where the weighted-average export price of a model exceeded its weighted-average normal value. It is not in dispute that USDOC included all export transactions in the denominator of this overall dumping margin calculation.

7.25 The European Communities does not challenge the use of multiple averaging per se i.e. the making of separate comparisons between export prices and normal values for individual models.126 Nor does it contest any aspect of the manner in which the model-specific comparisons of export prices and normal value were made. Rather, the European Communities challenges the manner in which USDOC aggregated the results of those comparisons for purposes of determining an overall margin of dumping for the product subject to investigation. Specifically, the European Communities claims that "the setting at zero" or zeroing of the results of comparisons in which weighted-average export prices were above weighted-average normal values is inconsistent with Article 2.4.2 of the AD Agreement.

7.26 Article 2.4.2 of the AD Agreement provides:

"Subject to the provisions governing fair comparison in paragraph 4, the existence of margins of dumping during the investigation phase shall normally be established on the basis of a comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions or by a comparison of normal value and export prices on a transaction‑to‑transaction basis. A normal value established on a weighted average basis may be compared to prices of individual export transactions 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."

The legal issue presented by the claim of the European Communities under Article 2.4.2 concerns the interpretation of the first of the two methods set out in the first sentence of Article 2.4.2. In particular, the question is whether establishing "the existence of margins of dumping during the investigation phase...on the basis of a comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions" means that, if multiple comparisons are made between export price and normal value for individual models, all differences between weighted average export prices and weighted average normal values resulting from such comparisons, positive or negative, must be fully reflected in the computation of the overall margin of dumping for the product in question.

7.27 We recall that in EC – Bed Linen and US – Softwood Lumber V, which both involved original investigations, the panels and the Appellate Body found that, if an authority divides a product into different models, compares the weighted average of prices of all comparable export transactions and weighted average normal value for each of those models and aggregates the results of those model-by-model comparisons to arrive at a margin of dumping for the product as a whole, it is inconsistent with Article 2.4.2 not to include in the numerator the results of comparisons where the weighted average of prices of all comparable export transactions is above the weighted average normal value.127

7.28 The information before us shows that in the anti-dumping investigations at issue in this dispute128 USDOC calculated aggregate margins of dumping in a manner that, with respect to the treatment of weighted-average export prices that were above normal value, was identical in relevant respects to the zeroing methodology considered by the panels and Appellate Body in EC – Bed Linen and US – Softwood Lumber V.129

7.29 The Panel has carefully considered the arguments advanced by the United States with respect to what the United States considers to be flaws in the reasoning of the Appellate Body in US – Softwood Lumber V. In this respect, we are mindful of our obligations under Article 11 of the DSU. At the same time, we note that the issues raised by the United States regarding the meaning of the term "margin of dumping" and the relevance of the historical background of Article 2.4.2 of the AD Agreement were addressed by the Appellate Body in US – Softwood Lumber V.

7.30 Although previous Appellate Body decisions are not strictly speaking binding on panels, there clearly is an expectation that panels will follow such decisions in subsequent cases raising issues that the Appellate Body has expressly addressed. The Appellate Body has stated that adopted Appellate Body reports should be taken into account where they are relevant to any dispute.130 In US – Oil Country Tubular Goods Sunset Reviews, the Appellate Body specifically stated that:

"... following the Appellate Body's conclusions in earlier disputes is not only appropriate, but is what would be expected from panels, especially where the issues are the same".131

We also note that Article 3.2 of the DSU refers to the DSU as "a central element in providing security and predictability to the multilateral trading system".

7.31 Therefore, we do not believe that it would be appropriate for us to depart from the Appellate Body's conclusion that when a margin of dumping is calculated on the basis of multiple averaging by model type, the margin of dumping for the product in question must reflect the results of all such comparisons, including weighted average export prices that are above the normal value for individual models.

7.32 In light of the foregoing considerations, the Panel finds that the United States has acted in breach of Article 2.4.2 of the AD Agreement when in the anti-dumping investigations at issue132 USDOC did not include in the numerator used to calculate weighted average dumping margins any amounts by which average export prices in individual averaging groups exceeded the average normal value for such groups.

4. Claim of the European Communities under Article 2.4 of the AD Agreement

7.33 In light of its finding with respect to the claim of the European Communities under Article 2.4.2 of the AD Agreement, the Panel considers that it is not necessary to address the claim of the European Communities that the application of the model zeroing method in these investigations was also inconsistent with Article 2.4 of the AD Agreement.133

5. Claims of the European Communities under other provisions of the AD Agreement, Articles VI:1 and VI:2 of the GATT 1994 and Article XVI:4 of the WTO Agreement.

7.34 The Panel also perceives no need to pronounce on the dependent claims raised by the European Communities under Articles 1; 3.1, 3.2 and 3.5; 5.8; 9.3; and 18.4 of the AD Agreement, Articles VI:1 and VI:2 of the GATT 1994 and Article XVI: 4 of the WTO Agreement. Deciding such dependent claims would provide no additional guidance as to the steps to be undertaken by the United States in order to implement our recommendation regarding the violation on which it is dependent.134

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

7.35 The European Communities claims that, with respect to the use of a zeroing135 methodology in the calculation of margins of dumping in original investigations, USDOC's "Standard Zeroing Procedures" and certain provisions of the Tariff Act of 1930, as amended ("Tariff Act") are as such inconsistent with Articles 2.4 and 2.4.2, 5.8, 9.3, 1 and 18.4 of the AD Agreement, Articles VI:1 and VI:2 of the GATT 1994 and Article XVI:4 of the WTO Agreement.

7.36 It is not in dispute that the provisions of the Tariff Act, as such, can be challenged as measures. By contrast, the parties disagree on whether what has been described for the purposes of this dispute by the European Communities as "Standard Zeroing Procedures", as such, constitute measures that can be challenged in WTO dispute settlement. Because it is possible that a finding with respect to the merits of the claims of the European Communities regarding the provisions of the Tariff Act may obviate the need to address the issue of the status of the "Standard Zeroing Procedures", we examine first the "as such" claims of the European Communities regarding the Tariff Act.

1. The "as such" claims of the European Communities with respect to the Tariff Act

(a) Relevant provisions

7.37 The provisions of the Tariff Act challenged by the European Communities are: (i) Sections 771(35)(A) and (B); (ii) Section 731; and (iii) Section 777A(d).136

7.38 Section 771(35) of the Tariff Act137 provides:

"DUMPING MARGIN; WEIGHTED AVERAGE DUMPING MARGIN

(A) Dumping margin. The term "dumping margin" means the amount by which the normal value exceeds the export price or constructed export price of the subject merchandise.

(B) Weighted average dumping margin. The term "weighted average dumping margin" is the percentage determined by dividing the aggregate dumping margins determined for a specific exporter or producer by the aggregate export prices and constructed export prices of such exporter or producer."

7.39 Section 731 of the Tariff Act138 provides:

" ANTIDUMPING DUTIES IMPOSED

If :

(1) The administering authority determines that a class or kind of foreign merchandise is being, or is likely to be, sold in the United States at less than its fair value; and

(2) The Commission determines that:

(A) An industry in the United States:

(i) is materially injured, or

(ii) is threatened with material injury, or

(B) the establishment of an industry in the United States is materially retarded, by reason of imports of that merchandise or by reason of sales (or the likelihood of sales) of that merchandise for importation, then there shall be imposed upon such merchandise an antidumping duty, in addition to any other duty imposed, in an amount equal to the amount by which the normal value exceeds the export price (or the constructed export price) for the merchandise. For purposes of this subsection and Section 735(b)(1), a reference to the sale of foreign merchandise includes the entering into of any leasing arrangement regarding the merchandise that is equivalent to the age sale of the merchandise."

7.40 Section 777A(d) of the Tariff Act139 provides:

"(d) Determination of Less Than Fair Value.

(1) Investigations.

(A) In general. In an investigation under subtitle B, the administering authority shall determine whether the subject merchandise is being sold in the United States at less than fair value

(i) by comparing the weighted average of the normal values to the weighted average of the export prices (and constructed export prices) for comparable merchandise, or

(ii) by comparing the normal values of individual transactions to the export prices (or constructed export prices) of individual transactions for comparable merchandise.

(B) Exception. The administering authority may determine whether the subject merchandise is being sold in the United States at less than fair value by comparing the weighted average of the normal values to the export prices (or constructed export prices) of individual transactions for comparable merchandise, if

(i) there is a pattern of export prices (or constructed export prices) for comparable merchandise that differ significantly among purchasers, regions, or periods of time, and

(ii) the administering authority explains why such differences cannot be taken into account using a method described in paragraph (1)(A)(i) or (ii).

(2) Reviews. In a review under Section 751, when comparing export prices (or constructed export prices) of individual transactions to the weighted average price of sales of the foreign like product, the administering authority shall limit its averaging of prices to a period not exceeding the calendar month that corresponds most closely to the calendar month of the individual export sale."

(b) Arguments of the parties

7.41 The European Communities submits that Section 771(35)(A) of the Tariff Act is inconsistent with the requirement of Articles 2.4 and 2.4.2 of the AD Agreement that any difference between export price and normal value be treated as a margin of dumping because (a) it expressly provides only for the measurement of the amount by which the normal value exceeds the export price, (b) it uses the word "amount", which requires or at the very least strongly suggests a positive result and (c) it uses the concept of "dumping margin" which is almost indistinguishable from the concept of "margins of dumping" in Article 2.4.2 but which has a different meaning, thus obfuscating the proper application of the AD Agreement.140

7.42 Regarding Section 771(35)(B) of the Tariff Act, the European Communities asserts that this provision is inconsistent with Articles 2.4 and 2.4.2 of the AD Agreement because the use of the word "aggregate" rather than "average" suggests something that is positive and because the use of the plural "dumping margins" for an individual exporter is inconsistent with Article 2.4.2 as dumping and margins of dumping can only be established in relation to the subject product as a whole.141

7.43 The European Communities submits that Section 731 of the Tariff Act, which provides for the imposition of an anti-dumping duty "in an amount equal to the amount by which the normal value exceeds the export price" is inconsistent as such with the AD Agreement because it is vitiated by the same language as Section 771(35)(A) and (B).142

7.44 The European Communities submits that Section 777A of the Tariff Act only provides for the possibility of determining that the subject merchandise is sold at less than fair value, rather than providing for the simple comparison required by Article 2.4 of the AD Agreement. Second, instead of the words "all comparable" used in Article 2.4 of the AD Agreement, it uses the word "comparable".143

7.45 The European Communities asserts that the relevant standard with respect to "as such" claims is whether a measure is in conformity with the AD Agreement, i.e. whether or not it is a sound implementation. If a domestic law contributes forcefully to the adoption of a series of measures that are inconsistent with the AD Agreement, this means that the root of the problem lies at least in part with the relevant provision of that law. That the provisions of the Tariff Act are at least in part the source of the inconsistency is evident from the fact that USDOC has repeatedly asserted that zeroing is required by these provisions.144

7.46 The European Communities considers that whether legislation is mandatory or discretionary is only one of the questions to be examined in determining its compatibility with WTO provisions. If a measure is discretionary, its effects must also be taken into account. In determining whether legislation is WTO-inconsistent as such, one must weigh and assess all relevant factual evidence to determine whether it is possible to determine whether the law, or more generally the document containing the general rule or norm for prospective application is the root of the problem. Under this approach, legislation that is open to interpretation and is in fact consistently interpreted and applied by the investigating authority as permitting WTO-inconsistent conduct could be found to be inconsistent as such.145

7.47 The United States submits that Sections 771(35)(A) and (B) and 777A(d) of the Tariff Act are not inconsistent as such with the WTO provisions cited by the European Communities because they do not prohibit USDOC from providing an offset for non-dumped transactions. The European Communities cannot demonstrate that these provisions prohibit USDOC from providing an offset for non-dumped transactions because the United States Court of Appeals for the Federal Circuit has held twice that the Tariff Act, including these provisions in particular, does not require the use of zeroing.146

7.48 The United States submits in this connection that a measure is WTO-inconsistent as such if it mandates WTO-inconsistent action or precludes WTO-consistent action.147 Numerous panel reports have applied this mandatory/discretionary distinction and there has been no instance in which a panel or the Appellate Body has found a measure WTO-inconsistent as such if the measure was found to neither mandate WTO-inconsistent action nor preclude WTO-consistent action. The United States rejects the argument of certain third parties that recent Appellate Body decisions have called into question the mandatory/discretionary test and refers in this respect to the panel report in Korea – Commercial Vessels. The United States asserts that the European Communities has not been able to cite any panel or Appellate Body report that supports its approach to determining when legislation is WTO-inconsistent as such.148

(c) Arguments of third parties

7.49 Third parties have not submitted arguments specifically in respect of the particular provisions of the Tariff Act challenged by the European Communities in this dispute.149 150

(d) Evaluation by the Panel

7.50 It is well-established in GATT and WTO dispute settlement practice that a Member may bring a complaint under the DSU with respect to another Member's legislation as such151 i.e. "independently from the application of that legislation in specific instances".152 Thus, legislation as such can be a "measure" as that term is used in the DSU.153

7.51 The Appellate Body has on several occasions pronounced on the burden of proof and relevant evidence to sustain an "as such" claim with respect to legislation:

"... a responding Member's law will be treated as WTO-consistent until proven otherwise. The party asserting that another party's municipal law, as such, is inconsistent with relevant treaty obligations bears the burden of introducing evidence as to the scope and meaning of such law to substantiate that assertion. Such evidence will typically be produced in the form of the text of the relevant legislation or legal instruments, which may be supported, as appropriate, by evidence of the consistent application of such laws, the pronouncements of domestic courts on the meaning of such laws, the opinions of legal experts and the writings of recognized scholars. The nature and extent of the evidence required to satisfy the burden of proof will vary from case to case."154

7.52 The Appellate Body has also emphasized that:

"[w]hen a measure is challenged 'as such', the starting point for an analysis must be the measure on its face. If the meaning and content of the measure are clear on its face, then the consistency of the measure as such can be assessed on that basis alone. If, however, the meaning or content of the measure is not evident on its face, further examination is required …"155

7.53 WTO panels and the Appellate Body have applied the principle, articulated by the Permanent Court of International Justice, that municipal laws are facts before international tribunals.156 One aspect of this is the need for an international tribunal to take account of decisions of domestic courts on the meaning of municipal law.157

7.54 While there is no disagreement between the parties to the present dispute that legislation can be challenged as such in WTO dispute settlement, they have expressed divergent views on the substantive criterion for determining whether legislation is WTO-inconsistent as such. In particular, they disagree on the significance to be attached in this respect to whether legislation is "mandatory" or "discretionary" with respect to the allegedly WTO-inconsistent conduct in question.

7.55 We note that a considerable number of WTO panel reports have applied the principle that domestic legislation is WTO-inconsistent as such if it mandates WTO-inconsistent conduct but not if it merely provides the executive branch with the discretion to act inconsistently with WTO obligations.158 Although the Appellate Body has in several cases found that legislation that provided the executive with sufficient discretion to avoid acting inconsistently with WTO-obligations was not WTO-inconsistent as such159, it has also made it clear in US – Corrosion Resistant Steel Sunset Review that it has not "pronounce[d] generally upon the continuing relevance or significance" of the mandatory/discretionary distinction".160 The Appellate Body went on to observe that:

"... Nor do we consider that this appeal calls for us to undertake a comprehensive examination of this distinction. We do, nevertheless, wish to observe that, as with any such analytical tool, the import of the 'mandatory/discretionary distinction' may vary from case to case. For this reason, we also wish to caution against the application of this distinction in a mechanistic fashion."161

7.56 The parties and third parties have expressed sharply divergent views with respect to the question of whether the mandatory/discretionary distinction continues to be relevant.162 We consider, however, that it is neither necessary nor appropriate for us to articulate a comprehensive view on this question in the abstract. Instead, we will address this issue only to the extent necessary in light of our analysis of the provisions challenged by the European Communities in this proceeding.

7.57 In this regard, we recall that the issue before us is the alleged WTO-inconsistency of certain provisions of the Tariff Act with regard to the manner in which export prices that are above the normal value are treated if an overall margin of dumping for a product is calculated based on the results of average-to-average comparisons between export price and normal value for individual averaging groups. As explained below, in our view, the text of these provisions simply does not address this particular aspect of the methodology for calculating a dumping margin.

7.58 We recall that the textual basis of the claim of the European Communities with respect to Section 771(35)(A) and (B) is the use of the word "amount", the phrase "amount by which the normal value exceeds the export price or constructed export price...", the use of the concept of "dumping margin", the use of the plural "dumping margins" in relation to individual exporters and the use of the word "aggregate" rather than "average".

7.59 We consider that the word "amount" and the phrase "the amount by which the normal value exceeds the export price or constructed export price" in Section 771 (35)(A) reflect the fact that this provision addresses the magnitude and not just the existence of dumping per se. In this regard, we note that Article VI:2 of the GATT 1994, read together with Article VI:1, defines the margin of dumping as "the price difference" when products of one country are introduced into the commerce of another country at less than their normal value. A product is introduced into the commerce of another country at less than its normal value if its export price is less than the comparable price for the like product in the domestic market of the exporting country or in the absence of such a domestic price, is less than a comparable price at which the product is exported to a third country or the constructed value of the product. Thus, the concept of "margin of dumping" in GATT Article VI is defined in terms of a price difference in a situation in which a product is introduced into the commerce of another country at less than its normal value i.e. when the export price of the product is less than the normal value of the product. We fail to see how the word "amount" and the phrase "the amount by which the normal value exceeds the export price or constructed export price..." are qualitatively different from, and less neutral, than the notion of a price difference that exists when the export price is less than the normal value. We consider that it is not possible to draw any conclusion from the use of terminology that can be seen as simply paraphrasing the language of Article VI of the GATT 1994 as to the approach envisioned with respect to the specific issue of whether or not export prices above normal value will be taken into account when an average dumping margin is calculated on the basis of multiple comparisons.

7.60 Regarding the term "dumping margin(s)" in Section 771(35)(A) and (B), we note that the use of the plural "dumping margins" logically implies that there can be more than one "dumping margin" for a specific exporter or producer, which is in contradiction with the interpretation of "margins of dumping" by the Appellate Body. The term "dumping margin" as used in Section 771(35)(A) and (B) would appear to refer to what the Appellate Body has termed "intermediate calculations" and "intermediate values".163 At the same time, a finding on whether legislation is WTO-inconsistent as such should be based on the substantive content of the legislation rather than on its terminology. The issue before us is not whether Section 771(35) uses terminology that is different from the terminology of relevant WTO provisions but whether it provides for a methodology that is substantively inconsistent with the requirements of the AD Agreement regarding the calculation of "margins of dumping". Since the use of "dumping margin" and the plural "dumping margins" do not indicate whether in the aggregation phase account will be taken of average export prices that are above the average normal values for particular averaging groups, we consider the difference in terminology between these provisions and the relevant WTO provisions to be of no relevance to the issue before us.

7.61 The use of the word "aggregate" in Section 771(35)(B) in our view reflects a necessary feature of a method that calculates a margin of dumping on the basis of multiple comparisons between export price and normal value because the results of those comparisons must be "combined". We note in this regard that the Appellate Body has used the same term "aggregate" in referring to the process of combining the results of multiple comparisons.164 The word "aggregate" in and of itself does not indicate whether in the process of combining results of multiple comparisons results of comparisons in averaging groups in which the average export price is higher than the normal value will be included in the numerator of the average dumping margin.165

7.62 Thus, our analysis of the specific textual arguments of the European Communities in support of its claim that certain provisions of the Tariff Act are as such WTO-inconsistent with regard to the use of model zeroing in original investigations leads to the conclusion that those provisions do not speak to that issue.

7.63 In any event, even if we had come to a different understanding of the meaning of these provisions of the Tariff Act, we note that while USDOC has interpreted Section 771(35)(A) and (B) of the Tariff Act as precluding it from taking into account "negative dumping margins"166, the United States Court of Appeals for the Federal Circuit has recently rejected the view that these provisions in and of themselves require USDOC to disregard negative dumping margins. Thus, in Timken Co. v. United States, the Court held that the word "exceeds" "could arguably allow for negative dumping margins" and that, as a consequence, the definition of "dumping margin" as "the amount by which the normal value exceeds the export price" " ...does not unambiguously require that dumping margins be positive numbers". In fact, the Court further explained that "the statute does not directly speak to the issue of negative-value dumping margins".167 In light of this finding, the Court examined whether USDOC's interpretation was "based on a permissible statutory construction". The Court held that USDOC "reasonably interpreted §1677(35)(A) to allow for zeroing" and that "Commerce based its zeroing practice on a reasonable interpretation of the statute".168 Moreover, most recently, in Corus Staal BV v. United States, the Court observed that "Section 1677(35) presented Commerce with a choice as to how it calculates weighted-average dumping margins".169 We conclude therefore that the Court has established that the Tariff Act does not require, albeit that it does not preclude, USDOC from zeroing.

7.64 The meaning of municipal law in a WTO dispute settlement proceeding is a fact to be established by relevant evidence. Although relevant evidence of the meaning of a law may take various forms, including evidence of the consistent application of the law170 we must accord greater weight to the interpretation of the meaning of domestic law by the competent domestic tribunal than to the interpretation by the agency administering that law. We note in this respect the statement of the United States that "the Federal Circuit has the final say as to what the U.S. antidumping statute means".171

7.65 We recall that the Court found that the provisions of the Tariff Act at issue "do not directly speak to the issue" of (model) zeroing, that the law "presents Commerce with a choice" and that "Commerce reasonably interpreted" the statute "to allow for zeroing". Therefore, we conclude from our own analysis of the text of the provisions of the Tariff Act challenged by the European Communities and from the decisions of the United States Court of Appeals for the Federal Circuit that these provisions do not specifically address the issue of zeroing.

7.66 It is clear to us that under the "mandatory/discretionary" approach as applied in many GATT and WTO panel reports, the provisions of the Tariff Act challenged by the European Communities cannot be found to be WTO-inconsistent as such since they cannot be considered to be "mandatory" within the meaning of that distinction. We also note, however, that while the Appellate Body has not rejected the validity of the mandatory/discretionary distinction as an "analytical tool", it has also indicated that it had not yet pronounced on the continuing relevance or significance of this distinction and has cautioned against its mechanistic application.172

7.67 In that connection, we have found in the present case that the provisions of law that are being challenged as WTO-inconsistent as such do not specifically address the issue in respect of which it is claimed that they are WTO-inconsistent. If we had found that the relevant provisions of the Tariff Act, while not requiring the use of a zeroing methodology, at least specifically addressed that, it might perhaps have been necessary to reach the question whether recent Appellate Body decisions173 should perhaps be understood to mean that a provision of a law can be WTO-inconsistent if it envisions WTO-inconsistent conduct without necessarily requiring such conduct. However, while we are cognizant of the need for caution with respect to the application of what after all is nothing more than an "analytical tool", we cannot see any support in GATT and WTO dispute settlement practice, including recent Appellate Body decisions, for the proposition that a law can be found to be WTO-inconsistent as such with respect to an issue that it does not specifically address. In our view, the very notion of a law as being WTO-inconsistent necessarily entails that the law must address that issue with a certain degree of specificity. In this case such specificity does not exist. While the law at issue envisions the calculation of dumping margins, the relevant United States court has made clear that as the provisions of the law "do not directly speak to the issue", USDOC retains the freedom in making those calculations as to whether to zero or not.

7.68 We note, in this respect, the argument of the European Communities that an "as such" finding should be possible where it can be determined that a provision of a law contributes forcefully to the adoption of a series of WTO-inconsistent measures and is thereby "the root of the problem" and the "source" of the inconsistency.174 While we are not entirely sure what the European Communities means by this, if it means that a law can be found to be WTO-inconsistent as such even where it does not address the issue, we reject that position.175

7.69 The Panel therefore finds that Sections 771(35)(A) and (B), 731 and 777A(d) of the Tariff Act are not as such inconsistent with Articles 2.4, 2.4.2, 5.8, 9.3, 1 and 18.4 of the AD Agreement, Articles VI:1 and VI:2 of the GATT 1994 and Article XVI:4 of the WTO Agreement with respect to the use of a zeroing methodology in the calculation of margins of dumping in original investigations.  
 

To continue with 2. The "as such" claims of the European Communities with respect to "standard zeroing procedures" Return to Table of Contents


82 EC-First Written Submission, paras. 130-147, 215 and 225-226; EC-Rebuttal Submission, paras. 83-90; EC-Response to Panel Question 67.

83 Appellate Body Report, EC–Bed Linen, para. 51, final sentence, Panel Report, para. 6.114; Appellate Body Report, US-Softwood Lumber V, paras. 91 to 94 and para. 97.

84 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 paras. 4.121, 4.126-4.130.

85 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 paras. 4.122, 4.126-4.130.

86 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 paras. 4.122, 4.126-4.130.

87 US-First Written Submission, paras 74-80, 98-105; US-Second Written Submission, paras. 65-72; US-Response of 7 April 2005 to question 66.

88 Appellate Body Report, US – Carbon Steel, para. 157.

89 Timken Co. v. United States, 354. F.3d 1334 (Fed. Cir. 2004), rehearing denied, 2004 US App. LEXIS 6741 (17 March 2004), cert. denied, 160 L.Ed.2d 352, 125 S.Ct. 412, 2004 US LEXIS 7382, 73 USLW 3273 (US 2004)

90 Corus Staal BV v. United States, No. 04-1107, 2005 US App. LEXIS 1077 (Federal Circuit, 21 January 2005)

91 EC-First Written Submission, paras. 218-219 and 223; EC-Rebuttal Submission, para. 237.

92 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 paras. 4.122, 4.126-4.130.

93 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 paras. 4.122, 4.126-4.130.

94 US-First Written Submission, paras 98-101; US-Second Written Submission, paras. 69-72.

95 EC-First Written Submission, paras. 220-223; EC-Rebuttal Submission, para. 238.

96 US-First Written Submission, paras. 102-105.

97 Appellate Body Report, EC – Bed Linen, para. 59.

98 EC – Bed Linen and US – Softwood Lumber V.

99 Appellate Body Report, EC – Bed Linen, paras. 53-65.

100 Appellate Body Report, US – Softwood Lumber V, paras. 97-103.

101 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 135.

102 Appellate Body Report, EC – Bed Linen, para 55.

103 Appellate Body Report, EC – Bed Linen; Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review; and Appellate Body Report, US – Softwood Lumber V.

104 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 111.

105 Appellate Body Report, US – Corrosion Resistant Steel Sunset Review, para. 127

106 Appellate Body Report, US - Corrosion Resistant Steel Sunset Review, para. 135.

107 Section VI of this report, entitled "Interim Review" therefore forms part of the final findings of the panel report, in accordance with Article 15.3 of the DSU.

108 EC- First Written Submission, paras. 28, 54, 94-96 and Exhibit EC-1.7.1.

109 It is not entirely clear whether this request pertains only to the "as applied" claims of the European Communities under Article 2.4 or to both the "as applied" and "as such" claims. In any event, our analysis applies to both.

110 Appellate Body Report, Australia – Salmon, para. 223.

111 For example, paragraph 63 of the First Submission of the European Communities states that the "measures at issue in the sample 'as applied' case include the Final Determination and any amendments to the Final Determination. The Final Determination refers to the Issues and Decision Memorandum, which in turn refers to the 'Margin Calculations', that is the Calculation Memoranda and the Final Margin Program Log and Outputs for all the firms investigated". (footnotes omitted)

112 The request for the establishment of a panel (WT/DS294/7/Rev.1, paragraph 3.2) mentions "determinations of dumping by DOC, the determinations of injury by the United States International Trade Commission, the imposition of definitive duties in the original investigations and the outcome of the administrative review investigations as detailed in the annexes". The same paragraph refers to paragraph 3.1, which describes a number of violations of WTO obligations by the United States with respect to the manner in which the United States "calculates a margin and amount of dumping" and "calculates a margin of dumping and collects an amount of anti-dumping duty".

113 EC-First Written Submission, para. 226.

114 Article 11 of the DSU provides: The function of panels is to assist the DSB in discharging its responsibilities under this Understanding and the covered agreements. Accordingly, a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements, and make such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements.

115 Appellate Body Report, US – Hot-Rolled Steel, paras. 57 and 59 (emphasis in original).

116 Appellate Body Report, US – Wool Shirts and Blouses, p. 337.

117 Appellate Body Report, US – Wool Shirts and Blouses, p. 337.

118 The European Communities uses the term "original investigations" to refer to investigations within the meaning of Article 5 of the AD Agreement as distinguished from what it considers to be "other types of investigations" such as duty assessment proceedings under Article 9.3 and reviews under Article 11 of the AD Agreement. In light of the fact that the meaning of the term "investigations" is the subject of dispute between the parties, we have for the sake of clarity used the term "original investigations". The use of this phrase in this Report is without prejudice to our view on the legal status of that term under the AD Agreement.

119 Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Bar From Italy, 67 Fed. Reg. 3155 (23 January 2002); Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Bar From France, 67 Fed. Reg. 3143 (23 January 2002); Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Bar from Germany, 67 Fed. Reg. 3159 (23 January 2002); Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Bar From the United Kingdom, 67 Fed. Reg. 3146 (23 January 2002); Notice of Final Determination of Sales at Less Than Fair Value; Certain Hot-Rolled Carbon Steel Flat Products From The Netherlands, 66 Fed. Reg. 50408 (3 October 2001); Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Wire Rod From Sweden, 63 Fed. Reg. 40449 (29 July 1998); Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Wire Rod From Italy, 63 Fed. Reg. 40422 (29 July 1998); Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Plate in Coils From Belgium, 64 Fed. Reg.15476 (31 March 1999); Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils From France, 64 Fed. Reg. 30820 (8 June 1999); Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils From Italy, 64 Fed. Reg. 30750 (8 June 1999); Notice of Final Determination of Sales at Less Than Fair Value; Stainless Steel Sheet and Strip in Coils From The United Kingdom, 64 Fed. Reg. 30688 (8 June 1999); Notice of Final Determination of Sales At Less Than Fair Value: Certain Cut-To-Length Carbon-Quality Steel Plate Products From France, 64 Fed. Reg. 73143 (29 December 1999); Notice of Final Determination of Sales At Less Than Fair Value: Certain Cut-To-Length Carbon-Quality Steel Plate Products From Italy, 64 Fed. Reg. 73234 (29 December 1999); Notice of Final Determination of Sales At Less Than Fair Value: Certain Cut-To-Length Carbon-Quality Steel Plate Products From Italy, 64 Fed. Reg. 73234 (29 December 1999); Notice of Final Determination of Sales at Less Than Fair Value: Certain Pasta From Italy, 61 Fed. Reg. 30326 (14 June 1996); Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Wire Rod From Spain, 63 Fed. Reg. 40391 (29 July 1998). The European Communities treats Stainless Steel Bar From Italy as a sample case and indicates that the measures at issue in this sample case include the Final Determination of Sales at Less than Fair Value and any amendments thereto. The Final Determination refers to the Issues and Decision Memorandum, which in turn refers to the Margin Calculations, i.e. the Calculation Memoranda and the Final Margin Program Log and Outputs for all the firms investigated. The measures at issue also include the anti-dumping duty order and any amendments, including the assessment instructions, and the USITC injury determination. EC-First Written Submission, para. 63.

120 See supra, para. 2.3 for an explanation of the concept of "averaging groups".

121 EC-First Written Submission, paras, 90, 94, 98, 100, 101, 198, 200, 205, 209 and 210.

122 EC-First Written Submission, paras. 75-89.

123 US-Closing Statement at the First Substantive Meeting of the Panel, paras. 9-12.

124 US-Second Written Submission, paras. 81-96.

125 Supra, footnote 119.

126 The Appellate Body has affirmed in US – Softwood Lumber V that "multiple averaging" is permitted under Article 2.4.2 to establish the existence of margins of dumping for the product under investigation. Appellate Body Report, US – Softwood Lumber V, para. 81.

127 Appellate Body Report, EC – Bed Linen, paras. 46-66; Appellate Body Report, US – Softwood Lumber V, paras. 76-117. In US – Softwood Lumber V, the Appellate Body emphasized that its analysis was limited to the use of zeroing in the context of the weighted-average-to-weighted-average comparison methodology provided for in the first sentence of Article 2.4.2. Appellate Body Report, US – Softwood Lumber V, paras. 63, 104-105 and 108.

128 Supra, footnote 119.

129 E.g., Issues and Decision Memo for the Antidumping Duty Investigation of Stainless Steel Bar from Italy; Final Determination, pp. 3-5, Comment 1: Treatment of Sales Above Normal Value, Exhibit EC-1.3. See Panel Report, EC – Bed Linen, para. 6.102 and Panel Report, US – Softwood Lumber V, para. 7.185 for a description of the zeroing methodology at issue in those cases.

130 Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia), para. 109.

131 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 188.

132 Supra, footnote 119.

133 We note that the panels in EC – Tube or Pipe Fittings and in US – Softwood Lumber V likewise declined to make a finding on whether zeroing is inconsistent with the "fair comparison" language of Article 2.4 once they had found this zeroing method to be inconsistent with Article 2.4.2 of the AD Agreement. Panel Report, EC – Tube or Pipe Fittings, para. 7.219; Panel Report, US – Softwood Lumber V, para. 7.226.

134 Our decision not to make findings on dependent claims is consistent with the approach followed in recent panel reports, including, for example, Panel Report, US – Softwood Lumber V, para. 7.378; Panel Report, Argentina –Poultry Anti-Dumping Duties, para. 7.369; Panel Report, US – Softwood Lumber VI, para. 8.4.

135 It is our understanding, particularly in light of the discussion in paragraphs 146-147 of the EC-First Written Submission of "other averaging groups", that the European Communities challenges the provisions of the Tariff Act and the "Standard Zeroing Procedures" with respect to both model zeroing i.e. zeroing when multiple comparisons are made using averaging groups based on physical characteristics and zeroing involving the use of averaging groups established on the basis of other criteria.

136 Although the first written submission of the European Communities includes the Statement of Administrative Action ("SAA") among the measures at issue, it is our understanding that the European Communities does not request us to make a separate finding on the SAA as a measure which is as such WTO-inconsistent. EC-Response to Panel Question 50; EC-Rebuttal Submission, para. 68.

137 Section 771 ("Definitions; Special Rules") is the first provision in Subtitle D ("General Provisions") in Title VII of the Tariff Act ("Countervailing and Antidumping Duties").

138 Section 731 is the first provision in Subtitle B ("Imposition of Antidumping Duties") in Title VII of the Tariff Act.

139 Section 777A ("Sampling and averaging; determination of weighted average dumping margin and countervailable subsidy rate") is contained in Subtitle D ("General Provisions") of Title VII of the Tariff Act.

140 EC-First Written Submission, paras. 132-136.

141 EC-First Written Submission, paras. 139-141.

142 EC-First Written Submission, para. 142.

143 EC-First Written Submission, para. 145. The European Communities also argues that the juxtaposition between investigations and reviews indicates that the requirement contained in Section 777A(d)(1) of a symmetrical comparison method may be abandoned during reviews, including periodic reviews of the amount of the duty, and that this is inconsistent with Article 9.3 of the AD Agreement, which requires that the amount of the anti-dumping duty shall not exceed the margin of dumping as established under Article 2. We consider that this argument concerning the alleged non-application to administrative reviews of the requirement of a symmetrical comparison method in Section 777A(d)(1) logically cannot be a basis for a finding that this provision is WTO-inconsistent as such in relation to investigations.

144 EC-First Written Submission, para. 143.

145 EC-Response to Panel Question 54.

146 US-First Written Submission, paras. 77-80. The two decisions referred to by the United States are: Timken Co. v. United States, 354 F.3d 1334 (Fed. Cir. 2004), rehearing denied, 2004 U.S. App. LEXIS 6741 (March 17, 2004), cert. denied, 160 L. Ed.2d 352, 125 S. Ct. 412 (U.S. 2004) and Corus Staal BV v. United States, No. 04-1107, 2005 U.S. App. LEXIS 1077 (Fed. Cir., 21 January 2005). Exhibits US-1 and 2.

147 US-First Written Submission paras. 71-73.

148 US-Response to Panel Question 55; US-Second Written Submission, paras. 40-45.

149 While Mexico argues that the United States' legal rules on anti-dumping, specifically sections 771(35)(A) and (B) and Section 777A(d) of the Tariff Act are inconsistent as such with Articles 2.4, 2.4.2, 9.3, 11 and 18.4 of the AD Agreement, Article VI:1 and VI:2 of the GATT 1994 and Article XVI:4 of the WTO Agreement, Mexico has not elaborated this argument through a textual analysis of the provisions in question.

150 We note that in connection with the issue of whether "Standard Zeroing Procedures" are measures that can be challenged as such, some third parties have presented arguments that are also relevant to the question of how to determine whether legislation is WTO-inconsistent as such, notably regarding the mandatory/discretionary distinction.

151 E.g., Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes, para. 107; Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 165; Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, paras. 82 and 85; Appellate Body Report, US – Carbon Steel, para. 156; Appellate Body Report, US - 1916 Act, paras. 60-68. In the case of the AD Agreement, Article 18.1 and 18.4 provide additional support for the view that legislation can be challenged as such. Appellate Body Report, US – 1916 Act, paras. 77-82

152 Appellate Body Report, US – 1916 Act, paras. 60-61.

153 E.g., DSU Arts. 3.3 and 4.2. The DSU focuses on "measures" as the subject of challenge in WTO dispute settlement. Appellate Body Report, US – Gambling, para. 123.

154 Appellate Body Report, US – Carbon Steel, para. 157 (footnote omitted); Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes, para. 111 and Appellate Body Report, US – Gambling, para. 138.

155 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 168; Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes, para. 112.

156 E.g., Appellate Body Report, India – Patents (US), paras. 65-67.

157 "Interpretation of their own laws by national courts is binding on an international tribunal". Ian Brownlie, Principles of Public International Law, 5th Ed. (1998) p. 40.

158 E.g., Argentina – Textiles and Apparel, paras. 6.45-6.47; US – DRAMS, paras. 6.51 and 6.53; Canada – Aircraft, paras. 9.127-9.129; Turkey – Textiles, para. 9.37; US – 1916 Act (EC), paras. 6.168-6.169; US - Hot-Rolled Steel, para. 7.90; US – Export Restraints, paras. 8.4-8.9; Brazil – Aircraft (Article 21.5 – Canada II), paras. 5.9-5.12; Canada – Aircraft Credits and Guarantees, paras. 7.56-7.59; US - Carbon Steel, para. 8.102; US – Section 211 Appropriations Act, paras. 8.136-8.137; US – Countervailing Measures on Certain EC Products, paras. 7.120-7.123; US – Steel Plate, paras. 7.88-7.90; US – Section 129(c)(1) URAA, para. 6.22; US – Softwood Lumber III, para. 7.158.

159 E.g., Appellate Body Report, US – Countervailing Measures on Certain EC Products, para. 159.

160 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 93. A footnote to this sentence explains that: "In our Report in US – 1916 Act, we examined the challenged legislation and found that the alleged 'discretionary' elements of that legislation were not of a type that, even under the mandatory/discretionary distinction, would have led to the measure being classified as 'discretionary' and therefore consistent with the AD Agreement. In other words, we assumed that the distinction could be applied because it did not, in any event, affect the outcome of our analysis. We specifically indicated that it was not necessary, in that appeal, for us to answer 'the question of the continuing relevance of the distinction between mandatory and discretionary legislation for claims brought under the  AD Agreement'. (Appellate Body Report, US – 1916 Act, para. 99) We also expressly declined to answer this question in footnote 334 to para. 159 of our Report in US – Countervailing Measures on Certain EC Products. Furthermore, the appeal in US – Section 211 Appropriations Act  presented a unique set of circumstances. In that case, in defending the measure challenged by the European Communities, the United States unsuccessfully argued that discretionary regulations, issued under a separate law, cured the discriminatory aspects of the measure at issue." Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 93, footnote 94 (emphasis original).

161 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 93.

162 We also note that this matter has been discussed in recent panel reports. At least two recent panel reports have relied on the mandatory/discretionary distinction in analyzing whether legislation is WTO-inconsistent as such. Panel Report, US – Upland Cotton, paras. 7.333-7.336, 7.748 and 7.1092 and Panel Report, Korea - Commercial Vessels, paras. 7.60-7.67. The latter panel report explicitly rejected the argument of the European Communities that in US – Corrosion-Resistant Steel Sunset Review the Appellate Body had ruled against the application of the traditional mandatory/discretionary distinction.

163 E.g., Appellate Body Report, US – Softwood Lumber V, para. 97.

164 Appellate Body Report, US – Softwood Lumber V, paras. 97-98.

165 The argument of the European Communities with respect to Section 731 of the Tariff Act is based on the use of the phrase "the amount by which the normal value exceeds the export price...". We have already analyzed this language above in connection with Section 771(35) (A) and (B). That analysis also applies to the issue raised by the European Communities in respect of the reference in Section 777A(d) to merchandise "being sold in the United States at less than fair value". Finally, we note the argument of the European Communities related to the fact that Section 777A(d) uses the word "comparable" rather than "all comparable". We see nothing in the text or context of Section 777A(d) to warrant the conclusion that this provision envisages or permits a comparison between a weighted average normal value and a weighted average export price that does not reflect all export transactions. As noted above, a finding that a domestic law is WTO-inconsistent as such cannot be based upon a mere difference in terminology between that law and the relevant WTO provision. We note that it is not contested in this dispute that when USDOC computes an average dumping margin based on multiple comparisons, it includes the values of all export transactions in the denominator of that dumping margin.

166 E.g., the Issues and Decision Memo for the Antidumping Duty Investigation of Stainless Steel Bar from Italy; Final Determination , 23 January 2002, p. 4.

167 Timken Co. v. United States, 354 F.3d 1334 (Fed. Cir. 2004), rehearing denied, 2004 U.S. App. LEXIS 6741 (17 March 2004), cert. denied, 160 L. Ed.2d 352, 125 S. Ct. 412 (U.S. 2004), US Exhibit 1, p. 4.

168 Timken Co. v. United States, 354 F.3d 1334 (Fed. Cir. 2004), rehearing denied, 2004 U.S. App. LEXIS 6741 (17 March 2004), cert. denied, 160 L. Ed.2d 352, 125 S. Ct. 412 (U.S. 2004), US Exhibit 1, pp. 4-6.

169 Corus Staal BV v. United States, No. 04-1107, 2005 U.S. App. LEXIS 1077 (Fed. Cir., 21 January 2005), US Exhibit 2, p. 5 (emphasis added).

170 Supra, para. 7.51

171 US-First Written Submission, para. 80. Review by the United States Supreme Court is possible in theory but it would appear that this has never occurred in practice.

172 Supra, para. 7.55.

173 For example, Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review.

174 EC-First Written Submission, para. 143.

175 With respect to the argument of the European Communities that the relevant criterion to apply in case of an "as such" claim is whether a measure is "in conformity" with WTO obligations, we note that the Panel in US – 1916 Act (Japan) expressed the view that because of the "in conformity" language of Article 18.4 of the AD Agreement, the notion of mandatory/discretionary legislation was no longer relevant. However, the Appellate Body in that case specifically stated that it did not find it necessary to consider whether Article 18.4 had supplanted or modified the distinction between mandatory and discretionary legislation and that the Panel did not need to opine on this issue. With respect to the reasoning of the Panel in US - 1916 Act (Japan), we note that a provision identical to Article 18.4 already existed in various Tokyo Round Agreements. No other WTO panel has adopted the view that the mandatory/discretionary distinction has lost its relevance because of Article 18.4 of the AD Agreement (or Article 32.5 of the SCM Agreement).