|
|
espa�ol - fran�ais - portugu�s |
Search
|
UNITED STATES � LAWS, REGULATIONS AND
Report of the Panel
I. INTRODUCTION A. COMPLAINT OF THE EUROPEAN COMMUNITIES B. ESTABLISHMENT AND COMPOSITION OF THE PANEL C. PANEL PROCEEDINGS II. FACTUAL ASPECTS III. REQUESTS FOR FINDINGS AND RECOMMENDATIONS A. THE EUROPEAN COMMUNITIES B. UNITED STATES A. BURDEN OF PROOF AND STANDARD OF REVIEW B. "AS APPLIED" CLAIMS C. "AS SUCH" CLAIMS V. ARGUMENTS OF THE THIRD PARTIES A. ARGENTINA B. BRAZIL C. CHINA D. HONG KONG, CHINA E. INDIA F. JAPAN G. REPUBLIC OF KOREA H. MEXICO I. NORWAY J. TURKEY VI. INTERIM REVIEW A. COMMENTS BY THE EUROPEAN COMMUNITIES B. COMMENTS BY THE UNITED STATES VII. FINDINGS A. INTRODUCTION B. RELEVANT PRINCIPLES REGARDING STANDARD OF REVIEW, TREATY INTERPRETATION AND BURDEN OF PROOF C. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF CERTAIN ORIGINAL INVESTIGATIONS D. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF "STANDARD ZEROING PROCEDURES" AND CERTAIN PROVISIONS OF THE TARIFF ACT IN RELATION TO ORIGINAL INVESTIGATIONS E. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF CERTAIN ADMINISTRATIVE REVIEWS F. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF THE STANDARD ZEROING PROCEDURES, THE TARIFF ACT AND THE USDOC'S REGULATIONS IN RELATION TO PERIODIC ADMINISTRATIVE REVIEWS G. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF THE STANDARD ZEROING PROCEDURES, THE TARIFF ACT AND THE USDOC'S REGULATIONS IN RELATION TO NEW SHIPPER REVIEWS, CHANGED CIRCUMSTANCES REVIEWS AND SUNSET REVIEWS VIII. CONCLUSIONS AND RECOMMENDATION
LIST OF ANNEXES
ANNEX A
REQUEST FOR CONSULTATIONS AND REQUEST FOR THE
TABLE OF CASES CITED IN THIS REPORT
Short Title
Full Case Title and Citation
I. INTRODUCTION 1.1 On 12 June 2003 and 8 September 2003, the European
Communities requested consultations with the United States of America (the
"United States") under Article 4 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes (the "DSU"); Article XXII:1 of the General
Agreement on Tariffs and Trade 1994 (the "GATT 1994"); and Articles 17.2 and
17.3 of the Agreement on implementation of Article VI of the General Agreement
on Tariffs and Trade 1994 (the "AD Agreement") with regard to certain
laws, regulations and methodologies for calculating dumping margins including
so-called zeroing.1 Consultations were held on 17 July 2003 and 6 October 2003,
but failed to result in a mutually satisfactory resolution of the matter. 1.2 On 5 February 2004, the European Communities requested
the establishment of a Panel to examine the matter.2 This request was revised on
16 February 2004.3
B. ESTABLISHMENT AND COMPOSITION OF THE PANEL 1.3 At its meeting on 19 March 2004, the Dispute Settlement
Body ("DSB") established a Panel pursuant to the request of the European
Communities in document WT/DS294/7/Rev.1, in accordance with Article 6 of the
DSU. 1.4 At that meeting, the parties to the dispute also agreed
that the Panel should have standard terms of reference. The terms of reference
are, therefore, the following: "To examine, in the light of the relevant provisions of
the covered agreements cited by the European Communities in document
WT/DS294/7/Rev.1, the matter referred to the DSB by the European Communities
in that document, and to make such findings as will assist the DSB in making
the recommendations or in giving the rulings provided for in those
agreements." 1.5 On 27 October 2004, the parties agreed to the following
composition of the Panel: 1.6 Argentina; Brazil; China; Hong Kong, China; India; Japan;
Korea, Rep. of; Mexico; Norway; Chinese Taipei; and Turkey reserved their
third-party rights.
C. PANEL PROCEEDINGS 1.7 On 7 February 2005, the Panel received an amicus
curiae brief from the Committee to Support US Trade Laws ("CSUSTL").
Recalling the statement of the Appellate Body that a panel has "the
discretionary authority either to accept and consider or to reject information
and advice submitted to it, whether requested by a panel or not",4 the Panel
invited the parties and third parties to express their views on how it should
handle CSUSTL's brief. After reviewing the comments of the parties and third
parties, the Panel decided that it would not further consider the arguments in
the CSUSTL brief except to the extent that the parties reflected those arguments
in their written submissions and/or oral statements.5 1.8 The Panel met with the parties on 16-17 March 2005 and on
26-27 April 2005. The Panel met with the third parties on 17 March 2005. 1.9 The Panel submitted the Interim Report to the parties on
4 August 2005. The Panel submitted the Final Report to the parties on 28
September 2005.
II. FACTUAL ASPECTS 2.1 This dispute concerns the application by the United
States of the so-called zeroing methodology when determining dumping margins in
anti-dumping proceedings, including proceedings resulting in the imposition of
anti-dumping measures and proceedings relating to the collection of anti-dumping
duties. 2.2 The imposition and collection of anti-dumping duties in
the United States can be broadly described in the following terms. In order to
determine whether the imposition of anti-dumping measures on known exporters of
a product under consideration may be justified, the United States examines
whether dumping existed during a given period of investigation. This
determination is made by the United States Department of Commerce ("USDOC") and
is published in a Notice of Final Determination of Sales at Less Than Fair
Value. The Notice of Final Determination of Sales at Less Than Fair Value sets
out USDOC's assessment of the existence and level of dumping. The United States
International Trade Commission ("USITC") will then determine whether the
relevant United States industry was injured by reason of the dumped imports.
When USDOC finds dumping and USITC finds that such dumping caused injury to the
domestic industry, USDOC issues a Notice of Antidumping Duty Order imposing
final measures, including a cash-deposit rate equivalent to the margin of
dumping found to exist for each known exporter. 2.3 When calculating the magnitude of any margin of dumping
in order to determine whether the imposition of anti-dumping measures on known
exporters of a product under consideration may be justified, the United States
uses a method that the European Communities refers to as model zeroing. The
investigating authority, as well as determining the overall product scope of the
proceeding (also referred to as subject product or subject merchandise)6, will,
in applying the weighted average-to-weighted average comparison method, identify
those sales of sub-products in the United States considered "comparable", and
will include such sales in an "averaging group".7 An averaging group consists of
merchandise that is identical or virtually identical in all physical
characteristics.8 Each category of sub-product within the subject merchandise is
assigned a control number, or CONNUM.9 The weighted-average-to-weighted-average
comparison between normal value and export price is made within each averaging
group.10 The amount by which normal value exceeds export price is considered by
the United States to be a "dumping margin"11 or dumped amount � referred to by the
United States as the Potential Uncollectible Dumping Duties, or PUDD.12 If export
price exceeds normal value (the margin is negative), the "dumping margin" or
dumped amount or PUDD for that averaging group is considered to be zero.
The margin of dumping for the overall product is calculated by combining the
averaging group results. The total of the dumped amounts or PUDDs (excluding the
negative amounts or treating them as zero) is expressed as a percentage of the
total export prices (including all averaging groups). An averaging group, as
well as consisting of merchandise that is identical or virtually identical in
all physical characteristics, also consists of merchandise that is sold at the
same level of trade. In identifying sales to be included in an averaging group,
the United States also takes into account, where appropriate, the region of the
United States in which the merchandise is sold, and such other factors as are
considered relevant.13 2.4 Subsequently, the United States will assess the liability
for anti-dumping duties on specific entries of the subject product by individual
importers. The United States system of duty assessment operates on a
retrospective basis. Under this system, an anti-dumping duty liability attaches
at the time of entry, but duties are not actually assessed at that time. Rather,
the United States collects security in the form of a cash deposit at the time of
entry, and determines the amount of duties due on the entry at a later date.
Specifically, once a year (during the anniversary month of the orders)
interested parties may request a review to determine the amount of duties owed
on entries made during the previous year.14 The amount of anti-dumping duties owed
by each individual importer (the assessment rate) is calculated on the basis of
a comparison of each individual import to a contemporaneous average normal
value. The total amount of dumping associated with each importer is then
aggregated and expressed as a percentage of that importer's United States
imports. This assessment rate is then applied to imports during the period
reviewed. The amount of dumping found on all imports from a given exporter
(regardless of the importer) is also used to derive a cash-deposit rate that
will apply on future entries from that exporter. If no review is requested, the
cash deposits made on the entries during the previous year are automatically
assessed as the final duties. The final anti-dumping duty liability for past
entries and the new cash-deposit rate for future entries is calculated by USDOC
and published in a Notice of Final Results of Antidumping Duty Administrative
Reviews. 2.5 When calculating the magnitude of any margin of dumping
for the purpose of assessing an importer's final liability for paying
anti-dumping duties and any future cash-deposit rate, the United States normally
uses the average-to-transaction method15 and applies, what the
European Communities refers to as, simple zeroing. When comparing a
weighted-average normal value with an individual export transaction, the amount
by which normal value exceeds export price is considered to be the "dumping
margin"16 or "dumped" amount for that export transaction.17 If export price exceeds
normal value (the margin is negative), the "dumping margin" or "dumped" amount
for that export transaction is considered to be zero. The overall margin of
dumping is calculated by combining the results of each comparison. The total
dumping amount (excluding the negative amounts or treating them as zero) is
expressed as a percentage of the total export price (including all export
transactions). The importer is liable to pay the final anti-dumping duty. USDOC
sends appraisement instructions to the US Bureau of Customs and Border
Protection ("USCBP"), determining "an assessment rate" and thus the final
anti-dumping duty to be paid.18 When USDOC gives percentage instructions, it
calculates an assessment rate, to be applied by USCBP to all entries during the
relevant period.19 For the purpose of calculating an assessment rate, USDOC
divides the total margin or amount of dumping calculated during the period of
review, by the entered values of the products sold.20 2.6 The European Communities challenges certain United States
legal instruments, procedures, methodologies and practice, "as such" and "as
applied". In the 15 "as applied" cases, referred to by the European Communities
as "original investigations", the challenged measures are: the 15 Notices of
Final Determinations of Sales at Less Than Fair Value, including any amendments,
and including all the Issues and Decision Memoranda to which they refer, and all
the Final Margin Program Logs and Outputs to which they in turn refer, for all
the firms investigated; each of the 15 Anti-dumping Duty Orders; each of the
assessment instructions issued pursuant to any of the 15 Anti-dumping Duty
Orders; and each of the USITC final injury determinations.21 In the 16 "as
applied" cases, referred to by the European Communities as "periodic reviews",
the challenged measures are: the 16 Notices of Final Results of Antidumping Duty
Administrative Reviews, including any amendments, and including all the Issues
and Decision Memoranda to which they refer, and all the Final Margin Program
Logs and Outputs to which they in turn refer, for all the firms investigated;
and each of the assessment instructions issued pursuant to any of the 16 Notices
of Final Results.22 The legal instruments, procedures, methodologies and practice
challenged by the European Communities "as such" are the following: (a) Sections 731, 751(a)(2)(A)(i) and (ii),
771(35)(A) and (B), and 777A(d) of the Tariff Act of 1930, as amended; (b) Section 351.414(c)(2) of the United States
Department of Commerce Regulations; (c) certain provisions of the "1997 edition of the
Import Administration Anti-Dumping Manual"; (d) the "Standard AD Margin Program", which includes
the "Standard Zeroing Procedures"; and (e) the United States practice or methodology of
zeroing.23 2.7 The European Communities considers the above legal
instruments, procedures, methodologies and practice, as well as each of the
identified measures at issue in the 31 "as applied" cases, to be inconsistent
with the United States' obligations under the AD Agreement, the GATT
1994 and the WTO Agreement. 2.8 The European Communities sets out its claims and
arguments with respect to the 31 "as applied" cases by first presenting certain
general facts and evidence of relevance to each case. Secondly, the European
Communities presents its claims and arguments with respect to the specific facts
of two sample "as applied" cases. It then alleges that the same claims and
arguments apply, mutatis mutandis, with respect to the measures at issue
in the 29 other determinations it is challenging. 2.9 The first sample case presented by the European
Communities is with respect to the Notice of Final Determination of Sales at
Less Than Fair Value regarding stainless steel bar from Italy, issued by the
USDOC on 23 January 200224, including the related Notice of Antidumping Duty
Order issued by USDOC on 7 March 2002.25 The rates of ad valorem
anti‑dumping duty applied in this case were 2.50 per cent for Acciaierie
Valbruna Srl/Acciaierie Bolzano D.p.A, 7.07 per cent for Acciaiera Foroni SpA,
3.83 per cent for Rodacciai S.p.A, 33 per cent for Cogne Acciai Speciali Srl and
3.81 per cent for all others.26 2.10 In calculating the dumping margins applied in this case,
the USDOC identified sub-groups of products within the product under
investigation ("averaging groups") on a per model basis. Within each of the
averaging groups, a weighted average export price was established and compared
to the corresponding weighted average normal value. The results of these
comparisons on an "averaging group" basis were added up to establish the dumping
margin of the product under investigation as a whole for each individual
exporter. In this process, any negative margins or negative amounts of "dumping"
resulting from the comparison of weighted average normal values with weighted
average export prices on an "averaging group" basis were, through application of
the "Standard Zeroing Procedures", equated with zero. The European Communities
describes this methodology as model zeroing.27 Exhibits EC-2 to EC-15 include the
final determinations and facts with respect to 14 other Notices of Final
Determinations of Sales at Less Than Fair Value and Notices of Antidumping Duty
Orders made between 24 July 1996 and 24 April 2003 where the same methodology
described above, including the "Standard Zeroing Procedures", was applied.28 2.11 The second sample case presented by the European
Communities is with respect to the Notice of Final Results of Antidumping Duty
Administrative Reviews regarding ball bearings from Italy, issued by the USDOC
on 30 August 2002.29 The dumping margin calculated by USDOC in these proceedings
was 3.70 per cent for SKF Industrie SpA and 1.42 per cent for FAG Italia SpA. 2.12 In calculating the relevant dumping margins in this
case, the USDOC identified sub-groups of products of normal vale sales based on
physical characteristics and level of trade. Within each of the sub-groups, a
weighted average normal value was compared to individual export prices. When
adding up the results of the comparisons to determine the total amount or margin
of dumping of the product under investigation, any negative amounts of "dumping"
were, through application of the "Standard Zeroing Procedures", counted as zero.
The European Communities describes this methodology as simple zeroing.30 Exhibits
EC-17 to EC-31 include the final determinations and facts with respect to 15
other Notices of Final Results of Antidumping Duty Administrative Reviews issued
between 26 October 2001 and 24 March 2003 where the same methodology described
above, including the "Standard Zeroing Procedures", was applied.31
III. REQUESTS FOR FINDINGS AND
RECOMMENDATIONS (a) As a consequence of the use of model zeroing in
the original investigations identified in Exhibits EC-1 to EC-15,
the United States acted inconsistently with Articles 2.4 and 2.4.2 of
the AD Agreement and Articles 3.1, 3.2, 3.5 and 5.8 and Articles
9.3, 1 and 18.4 of the AD Agreement; Articles VI:1 and VI:2 of
GATT 1994; and Article XVI:4 of the WTO Agreement. The
European Communities states that the Panel need make no findings with
regard to Articles 3.1, 3.2 and 3.5 of the AD Agreement where the
corrected margin of dumping for individual exporters is not less than 2
per cent; and Article 5.8 of the AD Agreement in cases where the
corrected margin of dumping for the exporting country is not less than 2
per cent. (b) The "Standard Zeroing Procedures" used in
original investigations (or the United States practice or
methodology of zeroing) and Sections 771(35)(A) and (B), 731 and 777A(d)
of the Tariff Act are "as such" inconsistent with Articles 2.4 and 2.4.2
of the AD Agreement and Articles 5.8, 9.3, 1 and 18.4 of the
AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4
of the WTO Agreement. (c) As a consequence of comparing a weighted average
normal value with individual export transactions, without explanation or
justification, and the use of simple zeroing in the periodic reviews
listed in Exhibits EC-16 to EC-31, the United States acted
inconsistently with Articles 2.4, 2.4.2 and 9.3 of the AD Agreement
and Articles 11.1, 11.2, 1 and 18.4 of the AD Agreement;
Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO
Agreement. (d) The "Standard Zeroing Procedures" used in
periodic reviews (or the United States practice or methodology of
zeroing) and Sections 771(35)(A) and (B), 731, 777A(d) and
751(a)(2)(A)(i) and (ii) of the Tariff Act and Section 351.414(c)(2) of
the Regulations are "as such" inconsistent with Articles 2.4, 2.4.2 and
9.3 of the AD Agreement and Articles 11.1, 11.2, 1 and 18.4 of
the AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and
Article XVI:4 of the WTO Agreement. (e) The "Standard Zeroing Procedures" used or relied
upon in new shipper, changed circumstances reviews and sunset reviews
(or the United States practice or methodology of zeroing) and Sections
771(35)(A) and (B), 731, 777A(d) and 751(a) (2)(A)(i) and (ii) of the
Tariff Act and Section 351.414(c)(2) of the Regulations are "as such"
inconsistent with Articles 2.4, 2.4.2, 9.3, 9.5, 11.1, 11.2 and 11.3 of
the AD Agreement and Articles 1 and 18.4 of the AD Agreement;
Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO
Agreement. B. UNITED
STATES 3.2 The United States requests that the Panel reject the
claims of the European Communities in their entirety.33
A. BURDEN
OF PROOF AND STANDARD OF REVIEW 1. Burden of Proof
(a) The United States34 4.1 The United States submits that the AD Agreement
imposes obligations on investigating authorities that they must satisfy, but the
burden of proving that those obligations have not been satisfied is on the
complaining party. Accordingly, in this dispute, the burden is on the European
Communities to prove that the United States acted in a WTO-inconsistent manner
with respect to both its "as applied" and its "as such" claims. The burden is
not on the United States to prove that it acted in a WTO-consistent manner. (b) The European Communities35 4.2 The European Communities argues that it has presented
facts and evidence more than sufficient to make out a prima facie case,
in relation to both its "as applied" and "as such" claims, and has fully
explained what specific obligations in the AD Agreement it considers the
United States has failed to comply with, and why. In the light of these
circumstances, the European Communities argues that it is incumbent on the
United States to substantiate its defence, failing which the claims of the
European Communities must prevail. In particular, the European Communities
submits that, where the United States has not contested the facts and adduced
evidence, the Panel must base itself on the facts and evidence presented by the
European Communities. The European Communities also notes that the United
States' first written submission did not contest claims nor respond to arguments
presented by the European Communities in relation to the "as applied" cases in
original investigations. The European Communities further argues that the burden
of establishing that the phrase "the existence of margins of dumping during the
investigation phase" has the special meaning asserted by the United States, as
provided for in Article 31(4) of the Vienna Convention, falls on or has
been shifted to the United States, and has not been discharged by the United
States.
2. Standard of Review
(a) The United States36 4.3 The United States recalls that the standard of review
with respect to a panel's task of assessing an investigating authority's
establishment and evaluation of facts, and its interpretation of the provisions
of the AD Agreement, is set forth in Articles 17.6(i) and 17.6(ii) of the
AD Agreement. The United States highlights that the standard of review
described in Article 17.6(i) has been interpreted by several panels as
prohibiting a panel from engaging in de novo review. As regards the
standard of review expressed in Article 17.6(ii), the United States asserts that
the question it poses is whether an investigating authority's interpretation of
the AD Agreement is a permissible interpretation. According to the United
State, Article 17.6(ii) acknowledges that there may be provisions of the
AD Agreement that "admit[] of more than one permissible interpretation."
Where that is the case, and where the investigating authority has relied upon
one such interpretation, a panel is to find that interpretation to be in
conformity with the AD Agreement. 4.4 For the reasons discussed elsewhere, interpreting "during
the investigation phase" under Article 2.4.2 as referring to an investigation
under Article 5 is a permissible interpretation. Likewise, interpreting Article
2.4 as containing no independent and overarching requirements with respect to
offsetting and symmetry is a permissible interpretation. Therefore, because the
challenged measures rest on permissible interpretations, Article 17.6(ii) of the
AD Agreement requires the Panel to find that those measures are in
conformity with the AD Agreement. As found by the panel in Argentina �
Poultry, "[I]n accordance with Article 17.6(ii) of the AD Agreement,
if an interpretation is "permissible", then we are compelled to accept it."37
(b) The European Communities38 4.5 The European Communities argues that the submissions of
the United States on the question of the standard of review for facts do not
appear to serve any useful purpose. In particular, the European Communities
argues that it has presented facts and evidence more than sufficient to make out
a prima facie case, which facts and evidence have not for the most part
been contested by the United States. Furthermore, the submissions of the United
States are irrelevant to the "as such" claims, with respect to which the facts
concern United States municipal anti-dumping law "as such", and have not been
"established" by an investigating authority. 4.6 Second, on the questions of law, the European Communities
argues that it is highly significant that the United States refers, in its first
written submission, to "the possibility that customary rules of interpretation
would not always yield definitive meanings of particular provisions of the AD
Agreement."39 The European Communities agrees with this statement of the
United States, and ascribes to it particular relevance in the context of its
claims with respect to Article 2.4.2. In particular, the European Communities
argues that the statement effectively amounts to an admission from the United
States that, after applying customary rules of interpretation of international
law to the interpretation of the word "investigation" in Article 2.4.2, the
conclusion must be that that word does not have the limited or defined meaning
argued for by the United States in these panel proceedings. This being so, for a
Member to give that word such a limited or defined meaning, and apply the AD
Agreement accordingly, would not be a permissible interpretation of
Article 2.4.2.
B. "AS APPLIED" CLAIMS 1. Claims with respect to Article 2.4 of the
AD
Agreement
(a) The European Communities40 4.7 The European Communities argues that, because of the use
of model zeroing, each of the measures at issue in the cases identified in
Exhibits EC-1 to EC-15 (described by the European Communities as "original
investigations"), violated United States' obligations under Article 2.4 of the
AD Agreement; and that because of the use of simple zeroing, each of the
measures at issue in the cases identified in Exhibits EC-16 to EC-31 (described
by the European Communities as "periodic reviews"), similarly violated United
States' obligations under Article 2.4 of the AD Agreement. The European
Communities presents essentially the same claims and arguments, mutatis
mutandis, with respect to both "original investigations" and "periodic
reviews", namely, that, in each of the "as applied" cases, the United States
violated (first claim) the first sentence of Article 2.4 because model zeroing
and simple zeroing (absent targeted dumping) are unfair; and (second claim) the
third to fifth sentences of Article 2.4 because model zeroing and simple zeroing
(absent targeted dumping) effectively result in an impermissible adjustment to
export price. 4.8 The European Communities contends that Article 2.4 of the
AD Agreement establishes an overarching and independent obligation to
make a fair comparison between export price and normal value. In contrast with
the Tokyo Round Anti-Dumping Code, in the Uruguay Round AD Agreement,
the words "fair comparison � between the export price and the normal value" were
lifted up and placed on their own in a new first sentence of Article 2.4.
According to the European Communities, the drafters would not have done this
without a purpose. Thus, the change introduced in the Uruguay Round confirms
that Article 2.4 contains an overarching and independent obligation to make a
fair comparison that goes beyond the obligations to make due adjustment
described in Article 2.4. 4.9 The European Communities does not consider that the
meaning of the first sentence of Article 2.4 is limited by the second sentence
of Article 2.4. In other words, the European Communities does not consider that
the fair comparison referred to in the first sentence of Article 2.4 is only
what is contemplated in the second sentence of Article 2.4. Rather, the European
Communities considers that the first sentence of Article 2.4 contains an
obligation that is overarching � in the sense that it is further elaborated in
the other provisions of Article 2.4, including Articles 2.4.1 and 2.4.2; and
independent � in the sense that the other provisions of Article 2.4, including
Articles 2.4.1 and 2.4.2, do not exhaust the fair comparison requirement in the
first sentence of Article 2.4. 4.10 The third sentence of Article 2.4 is a development of
the first and second sentences of Article 2.4. Read in isolation, the third
sentence would make little sense. The words "price comparability" that appear
twice in the third sentence relate to the "fair comparison" between export price
and normal value referred to in the first and second sentences. The third
sentence, like the second sentence, refers expressly to "level[s] of trade". The
word "allowances" in the fourth sentence refers back to "due allowance" in the
second sentence. The fifth sentence also refers to "price comparability" and
"level of trade" (twice), and to the making of a "due allowance as warranted
under this paragraph". The words "this paragraph" refer to all of Article 2.4.
The fifth sentence, as well as the third sentence, contain obligations regarding
allowances or "adjustments" (to use the vocabulary of footnote 7), whether made
to normal value or export price. The final sentence of Article 2.4 expressly
refers again to the "fair comparison" obligation in the first sentence of
Article 2.4; and the procedural rules it contains regulate all of the
substantive obligations set out in the first to final sentences of Article 2.4. 4.11 If the meaning of the first sentence of Article 2.4
would be considered to be limited by the second sentence of Article 2.4, or for
that matter the remainder of Article 2.4, or Article 2.4 including Articles
2.4.1 and 2.4.2, then the first sentence would serve no purpose. It could just
as well be deleted without changing the obligations of Members. That would be to
render the first sentence of Article 2.4 a nullity � which would not be a
permissible interpretation. 4.12 The European Communities argues that model zeroing and
simple zeroing (absent targeted dumping) fail to fully and duly account for
actual prices of export transactions that take place during a period of
investigation and thereby result in an inflated dumping margin. To the extent
that they inflate the margin of dumping or convert a negative dumping margin
into a positive dumping margin, such methodologies are inherently biased and
therefore unfair within the meaning of Article 2.4 of the AD Agreement.
The European Communities finds support for this conclusion in the findings of
the Appellate Body in EC-Bed Linen41, US � Corrosion Resistant Steel
Sunset Review42, and US �Softwood Lumber V.43
4.13 Given the common and ordinary meaning of the word
"fair", the European Communities argues that the obligation to make a fair
comparison under Article 2.4 must necessarily normally involve a fairly balanced
comparison, being one based on equivalent methodologies � that is, a symmetrical
comparison. A symmetrical comparison for the purposes of calculating a margin of
dumping and eventually imposing a duty, in relation to a given product or time,
is necessarily one that precludes model zeroing and simple zeroing. Thus, the
European Communities contends that the obligation imposed by Article 2.4 to
conduct a fair comparison precluded the model zeroing and simple zeroing
methodologies applied by the United States in the cases in dispute. 4.14 In this context, the European Communities refers to the
language of Article VI of the GATT 1994, the preamble to the AD Agreement,
and various provisions of the AD Agreement, such as Articles 2.1, 2.6 and
4, supporting the view that the various parameters by which markets are
generally defined, namely, physical characteristics, geography and time, play a
central role in the AD Agreement. This also reflects a general
requirement that permeates the entire AD Agreement, according to which
investigating authorities must apply basic economic concepts in a consistent
manner. The method used by the United States is actually incapable of measuring
international price discrimination, because it is internally inconsistent, and
thus unfair. 4.15 In addition, the European Communities also argues that
the practice of zeroing involves effectively making an adjustment to export
price that is impermissible under Article 2.4, third to fifth sentences, and
thus also Article 2.4, first sentence. Such an adjustment is not allowed because
it is based on a factor which does not affect price comparability. Indeed, the
fact that the "export price" is above the comparable "normal value" is not a
difference which affects price comparability. It is actually part of the very
price difference that the investigating authorities have to establish.
The practice of zeroing involves an adjustment for "non-dumping", which Article
2.4 does not, in general, permit. 4.16 The European Communities does not consider that it is
possible to read the second to fifth sentences of Article 2.4 as only
imposing obligations on Members to make allowance or adjustment for differences
that affect price comparability. These provisions also impose an obligation
not to make an allowance or adjustment when there is no such
difference. Otherwise, faced with differences affecting price comparability, a
Member would first be required to make a series of due allowances or
adjustments, in order to render normal value and export price comparable; but
having done that, the Member would then be free to make further allowances or
adjustments, even if not for differences affecting price comparability, and even
if reversing the effects of the first set of allowances or adjustments �
without acting inconsistently with Article 2.4. That would introduce a
distortion or inherent bias in the comparison and would be to render the
provisions of Article 2.4 a nullity. 4.17 This is exactly what the United States practice of
zeroing at issue in these proceedings does. After making adjustments for
differences affecting price comparability, the investigating authority makes
certain intermediate comparisons between export transactions and a "normal
value"; and then makes further adjustments if the value of the export
transaction exceeds that of the normal value. Thus, to the extent that the
United States applied model zeroing or simple zeroing in the cases in dispute,
the United States effectively made an improper adjustment to export price and
violated its obligations under Article 2.4. 4.18 In response to the United States invocation of the
second sentence of Article 2.4.2 as context � a provision that, in the view of
the European Communities, the United States has never claimed that it was
applying in the cases before the Panel � the European Communities considers that
an adjustment or allowance in the context of targeted dumping might be "due",
within the meaning of the third sentence of Article 2.4, if it is made under the
conditions laid out in the second sentence of Article 2.4.2. According to the
European Communities, if two distinct patterns of export prices are identified,
in accordance with the second sentence of Article 2.4.2, then there is a
difference. Article 2.4.2 refers expressly to "a pattern of export prices which
differ"; and to "differences" that cannot otherwise be taken into account. Such
differences may affect price comparability. It is self-evident that prices in
what has been identified as distinct market A cannot � without some further
consideration and explanation - necessarily simply be directly compared with
prices in what has been identified as distinct market B; and that an
investigating authority would be justified if it decided that the data from
markets A and B could not be simply lumped together and compared with market C.
An adjustment in such circumstances would be made for a difference (between
markets A and B) that affected price comparability (between markets A and B;
and between A, B and C). This is also clear from Article 2.4.2, which uses
the words "compared" and "comparison". Thus, according to the European
Communities, to the extent that the United States applied simple zeroing in the
cases at issue, without justifying resort to an asymmetrical comparison
methodology, the United States effectively made an improper adjustment to export
price and violated Article 2.4, third to fifth sentences, and thus also Article
2.4, first sentence. 4.19 The European Communities does not agree that its
interpretation of the AD Agreement renders the words: "Subject to the
provisions governing fair comparison in paragraph 4" in Article 2.4.2 redundant.
The "provisions governing fair comparison" are sentences 2 to 6 of paragraph 4
of Article 2. The first sentence of Article 2.4 sets forth the fair comparison
obligation itself � it does not contain provisions governing that comparison.
The words "subject to" simply indicate that the rules in Article 2.4.2 are
subject to sentences 2 to 6 of Article 2.4. In other words, in case of conflict,
the provisions of sentences 2 to 6 of Article 2.4 prevail over those of Article
2.4.2. To put matters another way, the rules in Article 2.4.2 cannot be applied
in such a way as to frustrate or compromise the fair comparison required by
Article 2.4. 4.20 In addition, the European Communities argues that
Articles 2.4 and 9.3 require that the total amount of duty collected with
respect to exports made by one specific exporter during the assessment period
must not exceed the relevant margin of dumping of the same exporter. The only
relevant margin of dumping permitted to be calculated under the AD Agreement,
whether in an original investigation or a periodic review, is that pertaining to
the exporter, not that pertaining to individual importers. 4.21 The European Communities rejects the contention of the
United States that importer-specific final assessment on a transaction by
transaction basis involving zeroing is contemplated under the AD Agreement
by virtue of Article 9.4(ii). First, the European Communities notes that the
prospective normal value or variable duty methodology recognised in Article
9.4(ii) is not in fact what was applied in any of the periodic reviews at issue.
Secondly, Article 9.4 is not concerned directly with the concept of "a
prospective normal value and variable duty". Rather, it sets out specific
obligations concerning imposition and collection where the authorities have
limited their examination in accordance with the second sentence of paragraph 10
of Article 6 � that is, when sampling has been used. Article 9.4(ii) mentions in
passing the situation where the liability for payment of anti‑dumping duties has
been calculated on the basis of a prospective normal value � but that is not
what the provision is directly concerned with. As such, all that Article 9.4(ii)
does is to confirm that a prospective normal value and variable duty is
possible. 4.22 In any event, the collection of anti-dumping duties on
the basis of prospective normal values is only one possible intermediate stage
of the prospective system since it is subject to "a prompt refund, upon request"
under Article 9.3.2 of the AD Agreement, which is itself subject to the
full disciplines of Article 2. Thus, it is legally erroneous to rely on one
possible intermediate stage of the prospective system, to justify the final
result reached by the United States in the application of its retrospective
system. There is nothing in Article 9.4 that releases authorities from the
obligations in Article 9.3, including Articles 9.3.1 or 9.3.2. Thus, Members
must ensure that the obligations in Article 9.3.2 are complied with whenever the
"amount of the anti-dumping duty is assessed on a prospective basis". Provision
must be made for a prompt refund; and in any re-calculation of the exporter
specific margin of dumping the authorities must ensure that the amount of the
anti-dumping duty does not exceed the margin of dumping as established under
Article 2, including Article 2.4.2. 4.23 The reason why Article 9.3.2 provides for the
possibility of refund in a prospective system is simply that the initial
anti-dumping duty is based on the margin of dumping or normal value established
during the original investigation. Therefore, there will be excess collection
whenever the amount of duty collected exceeds the actual margin of dumping. The
possibility of excess collection arises for all forms of duty (ad valorem,
variable or other) and for a number of reasons. This is why Article 9.3.2
obliges Members applying the prospective system to put in place a mechanism of
prompt refund. The mechanism is available irrespective of the form of the duty (ad
valorem, variable or other). If the amount of duty collected is higher than
the new dumping margin, the difference will be repaid. 4.24 Viewed in this light, the prospective system is no
different from the retrospective system. The retrospective system also requires
the calculation of a new margin of dumping in order to establish the final duty
liability on the basis of current data. 4.25 There are, however, some important differences between
the prospective system and the retrospective system operated by the United
States. The prospective refund system can only result in a reduction of the
total duty paid. On the other hand, the retrospective system, at least as
applied by the United States, may lead to either a decrease or an increase in
the margin of dumping, resulting in a decrease or increase of the total duty
payable. Another difference is that a request for refund in the prospective
system will, as a matter of logic, only ever be made by the exporter/importers,
whereas, in the United States retrospective system, a revised determination of
the dumping margin may also be requested by the domestic industry. 4.26 The type of duty has no bearing on the requirement to
provide for a prompt refund mechanism. As a previous Panel stated: "(�), a
properly designed variable duty system would include a refund mechanism
consistent with Article 9.3.2, (�)".44 The European Communities agrees.
The European Communities does not see how the choice of a specific form of duty
could in any way alter a Member's obligation under Article 9.3 of the AD
Agreement not to collect in excess of the actual exporter specific margin of
dumping. Thus, the obligation applies with equal force to variable duties. To
decide otherwise would imply that the choice of a particular form of duty
entitles Members to collect anti-dumping duties irrespective of the actual
margin of dumping and even in cases where the exporter has eliminated its margin
of dumping. 4.27 Finally, the European Communities argues that if simple
zeroing is allowed in periodic reviews conducted under Article 9.3.1, it would
effectively open up a gross distortion between prospective and retrospective
systems of duty assessment. The position being advocated by the European
Communities, on the other hand, would maintain the situation in which the two
systems lead to an equal amount of duty collected in identical situations. The
European Communities does not agree with the United States that it would be
possible for the European Communities to achieve the same result as the United
States in an assessment proceeding by conducting a changed circumstances review
where, according to the United States, the prohibition of zeroing would not
apply. The European Communities disagrees, first, with the assertion that the
prohibition of zeroing does not apply in a changed circumstances review � the
entire discipline of Article 2 is applicable in all margin of dumping
calculations. Second, the European Communities notes that, in any event, a
changed circumstances review would only cover future shipments whereas an
assessment proceeding covers past sales.
(b) The United States45 4.28 The United States argues that the "fair comparison"
language of Article 2.4 refers to price adjustments and does not create an
"overarching and independent" obligation that applies beyond the content of
Article 2.4 itself. The text of Article 2.4 establishes the obligation that a
fair comparison be made between normal value and export price and provides
detailed guidance as to how that fair comparison is to be made. The focus of
Article 2.4 is on how the authorities are to select transactions for comparison
and make the appropriate adjustments for differences that affect price
comparability. As the panel in Egypt � Steel Rebar explained: "[A]rticle
2.4 in its entirety, including its burden of proof requirement, has to do with
ensuring a fair comparison, through various adjustments as appropriate, of
export price and normal value."46 Thus, the United States contests the suggestion
of the European Communities that the first sentence of Article 2.4 creates an
obligation � the extent of which is unstated in the AD Agreement� that is
independent of the remainder of Article 2.4, that applies after the comparisons
between normal value and export price are made, and that is results-oriented.
4.29 The United States argues that the "fair comparison"
referred to in Article 2.4, first sentence, is informed by the second sentence
of Article 2.4, which provides that "[t]his comparison shall be made ...". In
this way, the second sentence of Article 2.4 describes the basic framework by
which fair comparisons between export price and normal value must be made.
However, the remaining sentences of Article 2.4 also inform the meaning of the
first sentence of Article 2.4. Those remaining sentences of Article 2.4
(dealing, inter alia, with terms of sale, taxation, and physical
characteristics) provide additional, relevant discussion of allowances that may
be due in order that the comparison to be made between export price and normal
value will be fair. Thus, the second sentence, along with the remaining
sentences, "limit" the first sentence. 4.30 The United States argues that its interpretation of
Article 2.4 is supported by the rationale underlying the introduction of the
provision following the Uruguay Round. Article 2.6 of the Tokyo Round
Antidumping Code ("AD Code") stated, "In order to effect a fair comparison ...
." While the United States agrees that Article 2.6 of the AD Code addressed how
to make a fair comparison, according to the United States, the language was
ambiguous as to whether a fair comparison was required. Thus, all of Article 2.6
of the AD Code could have been read as non-mandatory. 4.31 The ambiguity contained in Article 2.6 of the AD Code
was eliminated in the AD Agreement by separating and revising the first
sentence of Article 2.4 of the AD Agreement so as to make explicit the
requirement to make a fair comparison. However, the remainder of Article 2.4 of
the AD Agreement, like its predecessor, defines the elements of a fair
comparison. Thus, Article 2.4 of the AD Agreement is clearly mandatory �
it requires Members to make a fair comparison and instructs them how to do so.
4.32 This interpretation of Article 2.4 is consistent with
its drafting history. In what is known as the "Dunkel Draft", Article 2.4 read
as follows: "A fair comparison shall be made between the export price
and the normal value. The two prices shall be compared at the same level of
trade ... ." Arguably, that formulation was ambiguous as to the elements
that make up a fair comparison. That ambiguity was eliminated in the final
draft, however, by revising the text to read as follows: "A fair comparison shall be made between the export price
and the normal value. This comparison shall be made at the
same level of trade ... ." (Emphasis added). Substitution of the phrase "this comparison" establishes a
reference back to the subject of the prior sentence � i.e., a fair comparison �
which is what is being defined. 4.33 Further support for this reading of Article 2.4 is found
in the first sentence of Article 2.4.2 of the AD Agreement which refers
to "the provisions governing fair comparison in paragraph 4." The plural term
"provisions," as well as the reference to "paragraph 4," rather than a
particular portion of paragraph 4, clarify that the entirety of Article 2.4
constitutes the provisions "governing fair comparison." 4.34 To the extent that the European Communities argues that
a requirement to make "symmetrical" comparisons between normal values and export
prices can be found in the fair comparison language of Article 2.4, the United
States contends that such an argument cannot be reconciled with the text of
Article 2.4.2. The first sentence of Article 2.4.2 provides that those
"symmetrical" comparisons are "subject to" the provisions governing "fair
comparison." In the view of the United States, the drafters never intended "fair
comparison" to cover symmetrical comparisons, because such coverage would have
rendered this language superfluous. Furthermore, according to the United States,
the AD Agreement explicitly provides for the use of asymmetrical
comparisons in at least two places, neither of which is identified as an
exception to the "fair comparison" requirement of Article 2.4. First,
asymmetrical comparisons are expressly provided for in the targeted dumping
provision � the second sentence of Article 2.4.2. While this provision is an
express exception to the symmetry requirements of the first sentence of Article
2.4.2, there is no basis for interpreting it to be an exception to the fair
comparison requirements of Article 2.4. Second, in the application of
antidumping duties to imports from producers for which an individual dumping
margin has not been separately calculated, Article 9.4(ii) of the AD
Agreement expressly provides for the use of asymmetric comparisons by
Members with prospective normal value systems. Nothing in Article 9.4 suggests
that this methodology was provided as an exception to the fair comparison
requirement of Article 2.4 or the criteria for using the targeted dumping
methodology of Article 2.4.2. 4.35 The United States argues that the European Communities'
claim that zeroing is permissible, when the conditions under Article 2.4.2 for
conducting a targeted dumping analysis are fulfilled, cannot be squared with the
European Communities' contention that zeroing is prohibited under Article 2.4
because it amounts to "an arbitrary and artificial reduction" of the export
price and that "an adjustment to export price, normal value or otherwise for
differences that do not affect price comparability is inconsistent with Article
2.4." The United States contends that the targeted dumping methodology is not an
exception to the "fair comparison" requirement of Article 2.4; it is an
exception to the symmetrical comparison requirements for investigations set
forth in the first sentence of Article 2.4.2. According to the United States,
having asserted that zeroing is an "impermissible adjustment to export price"
not related to a difference that affects price comparability as provided in
Article 2.4, the European Communities has failed to explain how this
"adjustment" becomes "permissible" when the targeted dumping methodology is
used. In any case, the United States is of the view that the so-called zeroing
does not constitute an adjustment to price within the meaning of Article 2.4.
2. Claims with respect to Article 2.4.2 of the AD
Agreement
(a) The European Communities47 4.36 The European Communities argues that, because of the use
of model zeroing, each of the measures at issue in the cases identified in
Exhibits EC-1 to EC-15 (described by the European Communities as "original
investigations"), violated United States' obligations under Article 2.4.2 of the
AD Agreement; and that because of the use of simple zeroing, each of the
measures at issue in the cases identified in Exhibits EC-16 to EC-31 (described
by the European Communities as "periodic reviews"), similarly violated United
States' obligations under Article 2.4.2 of the AD Agreement.
(i) Article 2.4.2 prohibits model zeroing
4.37 The European Communities argues that the wording of
Article 2.1 of the AD Agreement implies that an anti-dumping proceeding
concerns a product (the subject product), and that, therefore, the margin of
dumping to which Article 2.4.2 refers must be the margin of dumping for the
subject product. According to the European Communities, this means that
"dumping" for the purposes of the AD Agreement can be found to exist only
for the product under investigation as a whole, and cannot be found to exist
only for a type, model or category of that product. 4.38 In the original investigations at issue, the United
States established "averaging groups" and made a separate calculation of
"dumping" for each one. While the use of averaging groups is permissible
under Article 2.4.2 of the AD Agreement, it is not a requirement.
Article 2.4 of the AD Agreement requires only that due allowance and a
fair comparison be made. Due allowance could have been made by adjusting the
relevant prices to take account of differences in physical characteristics
affecting price comparability, before making the (single) comparison referred to
in Article 2.4 of the AD Agreement, and thus before calculating a
(single) margin of dumping. 4.39 Having decided to establish averaging groups in
the original investigations at issue, the United States considered itself under
an obligation to compare weighted-average "normal value" with a weighted-average
of prices of all comparable export transactions, for each averaging group. For
this purpose, the United States considered that the weighted-average "normal
value" was that for the relevant averaging group. The "comparable export
transactions" were those relating to the same averaging group, country
and exporter. The "weighted-average of prices of all comparable export
transactions" was calculated in respect of all export transactions,
including export transactions that exceeded the "normal value" used for that
averaging group. There was no zeroing within an averaging group. Export
prices in excess of normal value were fully incorporated, before the comparison
between "normal value" and export price, mathematically, in the calculation of
the weighted-average export price. 4.40 The United States then combined the margins calculated
for each averaging group, in order to calculate the margin of dumping for
the subject product. In this second stage of the calculation the
weighted-average normal value was that for the subject product. The
comparable export transactions must, by definition, necessarily have been
those that related to the same subject product, country and
exporter. The "prices" of those export transactions were reflected in the total
value of exports, which total value was incorporated, mathematically, in the
margins calculated for each averaging group, whether positive or
negative. Just as in the first stage, in the second stage "negative margins"
for averaging groups should have been incorporated, mathematically, in the
calculation of the weighted-average of prices of all comparable export
transactions for the subject product before the comparison
between normal value and export price. 4.41 Further support for this view may be found in a
consideration of the ordinary meanings of the words "comparison" and "margin" in
Article 2.4.2 of the AD Agreement � at least to the extent that the
United States asserts that the results of intermediate comparisons are "margins"
within the meaning of that provision. Article 2.4.2 requires a simple
comparison between normal value and export price. If there is a difference,
according to the text, that difference is a margin. A margin is the amount by
which one thing differs from another. Normal value may exceed export price. Or
export price may exceed normal value. In both cases there is a margin. It
is not possible to conclude in either case that there is no margin, or that the
margin is zero. That would only be the case if normal value and export price
were equal. Article 2.4.2 does not prejudge how the two elements to be compared
are juxtaposed, nor, thus, whether each one of a series of intermediate
"margins" is expressed as positive or negative. 4.42 Nor is it possible to prematurely conclude, before the
final calculation is complete, that, in relation to some discrete model or type
or category of exports, when "export price" exceeds "normal value", there is no
or a zero margin of dumping, because Article 2.4.2 of the AD
Agreement is precisely concerned with determining whether or not there is
a margin of dumping for the subject product. 4.43 In summary, the European Communities submits that, in
the second stage of the calculation, the United States was bound by the
obligations contained in Article 2.4.2 of the AD Agreement, and
particularly the obligation to make a fair comparison between a
weighted-average normal value and a weighted-average of prices of all
comparable export transactions. The European Communities argues that in the
EC � Bed Linen48 and US � Softwood Lumber V49 cases, the Appellate
Body rejected the notion that, in circumstances where there is more than one
averaging group based on differences in physical characteristics, and two stages
to the calculation, the second stage falls outside Article 2 of the AD
Agreement and indeed outside the AD Agreement altogether. The precise
and detailed rules set out in the AD Agreement would be pointless if, in
the final step of the calculation, the importing Member would be free to make an
unfair comparison. 4.44 The European Communities considers that the use of the
plural "margins of dumping" in Article 2.4.2 reflects the possibility of
different margins for different countries and exporters. The European
Communities further considers that an investigating authority is not entitled to
consider certain transactions to have become "non-comparable" simply because the
results of certain intermediate comparisons are negative. There are other types
of non-comparable transactions, such as : transactions in relation to
merchandise outside the scope of the proceedings; transactions made at a time
outside the investigation period; transactions in relation to another
geographical region; transactions that relate to another exporting country; etc. 4.45 The European Communities considers that the view that
"dumping" and "margins of dumping" can only be established for the product under
investigation as a whole is in consonance with the need for consistent treatment
of a product in an anti-dumping investigation. Thus, having defined the product
under investigation, the investigating authority must treat that product as a
whole for, inter alia, the following purposes: determination of the
volume of dumped imports, injury determination, causal link between dumped
imports and injury to domestic industry, and calculation of the margin of
dumping. Furthermore, according to Article VI:2 of the GATT 1994 and Articles
9.2 and 9.3 of the AD Agreement, an anti-dumping duty can be levied only
on a dumped product. For all these purposes, the product under investigation is
treated as a whole, and so-called "non-dumped" export transactions should not be
excluded. There is no basis in the AD Agreement for treating a
transaction as "non-dumped" for one purpose and "dumped" for other purposes, as
the United States did in the cases subject to this dispute. 4.46 The European Communities considers that, unlike other
provisions of the AD Agreement that are explicit regarding the
permissibility of disregarding certain matters (such as Article 2.2.1;
Article 9.4; Article 2.7 and Annex II, paragraph 5) Article 2.4.2 contains no
express language permitting an investigating authority to disregard certain
results of multiple comparisons at the aggregation stage. 4.47 For all of these reasons, the European Communities
concludes that, having defined the subject product in the original
investigations at issue, the United States was not entitled to set at zero the
negative margins calculated for certain averaging groups based on differences in
physical characteristics. The United States had become bound by its own logic.
The use of such a method by the United States in this case was not in conformity
with obligations imposed on the United States by Article 2.4.2 of the AD
Agreement.
(ii) Article 2.4.2 is not limited to original
investigations
4.48 The European Communities argues that Article 2.4.2
applies to all types of investigations undertaken pursuant to Article VI of the
GATT 1994 and the AD Agreement in which margins of dumping are calculated
or relied upon, including, original investigations, periodic reviews, new
shipper reviews, changed circumstances reviews and sunset reviews. The European
Communities argues that the United States has failed to establish that the word
"investigation" or the phrase "existence of margins of dumping during the
investigation phase" in Article 2.4.2 is limited to original investigations. 4.49 The European Communities observes that the term "margin
of dumping" is defined in Article VI:2 of the GATT 1994, which definition
is implemented and further elaborated in Article 2. The same defined
term, "margin of dumping", is also used in Article 9.3, which cross-refers to
all of Article 2. It also appears in Articles 9.1 and 9.5. 4.50 Article 2.4.2 states what it applies to, not what it
does not apply to. Unlike the United States Statement of Administrative Action
("SAA"), it does not contain the words "(not reviews)". The United States is
therefore using a contrario reasoning in an attempt to defeat the
definition of "margin of dumping" and the cross-reference in Article 9.3. If the
Members had really wanted to achieve what the United States asserts, it would
have been a simple matter for them to have used express exclusionary language,
such as that in Article 2.2.1; Article 2.7; Article 9.4(ii); or Annex II,
paragraph 5. The Members did not do that. 4.51 The GATT 1994 and the AD Agreement define eight
terms, but do not define the word "investigation". Its meaning in Article 2.4.2
must be determined in accordance with the rules of treaty interpretation found
in customary international law. According to the European Communities, the
ordinary meaning of the word "investigation", referring to The New Shorter
Oxford English Dictionary, indicates a systematic examination or inquiry or a
careful study of or research into a particular subject. The European Communities
believes that what makes an "investigation" an "investigation" is the nature of
the activity carried out by the investigating authority, not the material scope
of what is examined. For example, a cursory glance is not an investigation. The
random or capricious fabrication of a margin of dumping would not be based on an
investigation. On the other hand, an "objective examination" of "positive
evidence", involving the "considerations", "assessments", "evaluations",
"demonstrations", "determinations" and "special care", as for example, expressly
referred to and required by Article 3 of the AD Agreement, does involve
an "investigation". The European Communities is of the view that this type of
activity takes place not only during an original investigation, but also in a
periodic review, a new shipper review, a changed circumstances review and a
sunset review. 4.52 The European Communities contests the United States
assertion that the term "investigation" has a particular meaning � namely
original investigation - throughout the AD Agreement.50 Rather, the
European Communities considers that the word "investigation" is used in
different senses (such as: review investigation; injury investigation; country
specific investigation; company specific investigation; on-the-spot
investigation; preliminary investigation; etc.) in the AD Agreement and
in past panel, Appellate Body and GATT panel reports, as well as by USDOC, the
ITC and in United States municipal anti-dumping law. 4.53 The European Communities contests the United States
assertion that the meaning of the word "investigation" or the phrase "existence
of margins of dumping during the investigation phase" in Article 2.4.2 is
limited by the context of Article 5.1. To this end, the European Communities
argues that the obligations set out in Article 5.1 of the AD Agreement
apply only to an investigation to determine the existence, degree and effect of
any alleged dumping � that is, an original investigation. The European
Communities is of the view that it is precisely the presence of the words "to
determine the existence, degree and effect of any alleged dumping" that limit
the meaning of the word "investigation" in Article 5.1 of the AD Agreement
and in the other paragraphs of that article. The absence of these words in
Article 2.4.2 confirms that the word "investigation" or the phrase "existence of
margins of dumping during the investigation phase" in Article 2.4.2 does not
have the limited or defined meaning that the United States asserts. The European
Communities contends that if the United States would be correct in its
assertions, the words "to determine the existence, degree and effect of any
alleged dumping" in Article 5.1 would be redundant and without meaning. 4.54 The European Communities considers that Article 2.2,
which is also part of Article 2, and thus also part of the implementation of the
definition of "margin of dumping", is more immediate and relevant context. It
points to the use � eight times � of the word "investigation" in Article 2.2. It
notes that these are provisions in respect of which implementation in the United
States also for retrospective assessments was, according to the SAA, "required
or appropriate". It particularly notes the use of the phrases "in the course of
the investigation" in Article 2.2.1.1 and "during the investigation" in footnote
6. The European Communities also cites as relevant context the repeated use of
the word "investigation" in Article 6. 4.55 Similarly, the European Communities contests the United
States assertion that Article 1 of the AD Agreement means that the word
"investigation" in Article 2.4.2 refers to an "original investigation" only.
First, according to the European Communities Article 1 does not exhibit the
characteristics of a definition. Secondly, the word "original" does not appear
in Article 1. Likewise, the European Communities also contests that footnote 1
of Article 1 defines the term "investigation" for the purpose of the entire
AD Agreement, including Article 2.4.2. Rather, it defines the word
"initiated" � other types of investigation, such as sunset reviews, changed
circumstances reviews, new shipper reviews and periodic reviews also being
"initiated". Footnote 1 refers to Article 5.1 only for the purposes of
determining what is "the procedural action by which a Member formally commences
an investigation". 4.56 With respect to the word "phase" in Article 2.4.2, and
considering its ordinary meaning, especially in conjunction with the word
"during", referring to the New Shorter Oxford English Dictionary, as indicating
a stage in the passage of time, the European Communities argues that it has no
incidence on the meaning of the word "investigation" in Article 2.4.2. The
European Communities points to several other words that are used only once in
the AD Agreement without that having any legal significance. It also
points to several other concepts that are referred to in the AD Agreement
in different ways (as in "period" and "phase") without that having any legal
significance. Thus, according to the European Communities, the word "phase"
cannot, as a matter of law, lead to the conclusion that the term "investigation"
is defined in Article 5.1 or elsewhere for the purposes of the entire AD
Agreement, including Article 2.4.2. Finally, the European Communities points
out that the word "phase" does not appear in Article 2.4.1 � which is treated
the same way by the United States, simply on the basis of an erroneous
assumption that "investigation" always means "not reviews". 4.57 The European Communities makes similar arguments with
respect to the word "existence". The European Communities contends that it is
simply not possible to entirely dissociate the "existence" of dumping and the
"degree" of dumping. The ordinary meaning of "exist" being "having objective
reality", it does not, when used in conjunction with the phrase "dumping
margin", encompass the concept of an amount or margin somewhere between zero
and infinity. In this respect, the European Communities points to the references
in Article 7 to the "amount" of dumping; and in Article 9.1 to the "amount" and
"full margin of dumping"; and in Article 3.4 to the "magnitude of the margin of
dumping". The AD Agreement uses the word "existence" in other provisions,
without that being of any legal consequence, as does the SCM Agreement,
including in the provisions relating to imposition and collection. The
proposition that this one word in Article 2.4.2 could have as a consequence that
the basic principles for calculating a margin of dumping should be rendered
entirely worthless in a system applying retrospective assessment is tenuous and
implausible. In any event, the European Communities argues that the United State
is wrong to assert that the only time that the "existence" of a margin of
dumping is determined is in an original investigation. Issues relating to the
"existence" of dumping may also arise, for example, in the context of a changed
circumstances review, or in a sunset review. The European Communities requests
the Panel not to base itself on the esoteric mathematical and philosophical
combination dictionary meanings referred to by the United States. The
European Communities also invites the Panel to pay due regard to the French and
Spanish texts of the AD Agreement, the titles of which make it clear that
all of the provisions of Article 2 � including those that the United
States admits apply in a retrospective assessment � are concerned with the
"existence" of dumping. Finally, the European Communities points out that the
word "existence" does not appear in Article 2.4.1 � which is treated the same
way by the United States, simply on the basis of an erroneous assumption that
"investigation" always means "not reviews". 4.58 The European Communities points to the object and
purpose of retrospective assessment, as it appears from the AD Agreement,
and as set out in the Manual and confirmed by the United States in these
proceedings: it is just a temporal up-date. The European Communities also points
to the object and purpose of the AD Agreement, which at the very least
requires basic consistency in the application of economic concepts. The European
Communities considers that the United States has failed to articulate any
alleged object or purpose to explain why, at the moment of final payment, the
basic method for calculating a margin of dumping should suddenly change, and be
substantially unregulated by the AD Agreement.
4.59 The European Communities considers that since the United
States has failed to establish that the word "investigation" or the phrase
"existence of margins of dumping during the investigation phase" has the limited
meaning argued for by the United States � and that since a consideration of the
ordinary meaning, context, and object and purpose confirms that there is no such
limited meaning � there is no need to have recourse to the preparatory work. In
these circumstances, the preparatory work could only ever be used to confirm the
meaning resulting from Article 31 of the Vienna Convention. That is
precisely what it does. The negotiators were acutely aware of and sensitive to
the issue of definitions: it really matters whether or not something is defined;
and the fact that some terms are defined and others not must be given meaning.
There was general consensus on the need for a consistent, balanced and fair
application of anti-dumping measures. There was broad consensus on both sides of
the debate that international markets and business had evolved, and that the
AD Agreement should be up-dated accordingly. At no point in the debate was
it ever suggested that there should be different treatment for original
investigations and retrospective assessments on the fundamental question of how
to calculate a margin of dumping. This is so notwithstanding the fact that
assessment and refund issues were repeatedly discussed in detail and at length,
with regard to the "duty as a cost" and "lesser duty" issues. There is a clear
and strong indication of consensus that the interests of both parties in the
asymmetry and zeroing debate could be accommodated in the targeted dumping
provisions that eventually became the second sentence of Article 2.4.2 of the
AD Agreement. There is an overwhelming indication of consensus that the
presence of the word "investigation", used repeatedly in what was to become
Article 2.2 of the AD Agreement, did not mean that those provisions were
to be irrelevant when a margin of dumping was calculated in retrospective
assessments. Right from the start, there was a "strong convergence of views" on
the need to strengthen the rules applicable to the pre-investigation phase,
without, however, placing an unreasonable burden on complainants or authorities. 4.60 The European Communities considers that the negotiating
history of Article 2.4.2 does not record which Member or Members � if any �
proposed the particular form of words "during the investigation phase" or why.
However, had the United States actually put to the other Members, during the
negotiations, an express provision excluding the disciplines of Article 2.4.2
from retrospective assessments � the European Communities contends that there is
no doubt at all, based on a fair consideration of the negotiations, that the
other Members would never have agreed to it. This was confirmed by each of the
11 third parties in response to a question posed by the European Communities
during the meeting with the third parties: none of them thought that the AD
Agreement means that investigating authorities are free to calculate margins
of dumping in all reviews and all retrospective assessments as they wish, and
free from the disciplines of Article 2, including Article 2.4.2. Furthermore,
the European Communities argues that subsequent practice of the Members with
respect to the implementation of Article 2.4.2 is supportive of its case. In
this regard, the European Communities notes that its review of the notifications
of the anti-dumping legislation of 105 Members indicates that no Members take
the view being advocated by the United States in the present dispute. The
European Communities cites this in support of its case as "subsequent practice"
within the meaning of Article 31(3)(b) of the Vienna Convention on the Law of
Treaties; and also as evidence of the intention of the Members, within the
meaning of Article 31(4) of the Vienna Convention. 4.61 The European Communities does not consider that its
interpretation of the word "investigation" in Article 2.4.2 renders the words
"during the investigation phase" in Article 2.4.2 meaningless. In this regard,
the European Communities suggests four different alternative, but not
necessarily mutually exclusive, possible meanings of these terms: during the
investigation period; during the period in which the particular type of
investigation must be concluded; not during the pre-investigation phase; or that
the words are merely descriptive, in the sense that the United States considers
the words "to determine the existence, degree and effect of any alleged dumping"
in Article 5.1 to be merely descriptive. 4.62 With regard to the first meaning, if, referring to a
dictionary, "phase" indicates a distinct period in a process of change or
development, and "during" indicates a temporal connotation, then an
investigation phase is something that spans a period of time, such as the
"investigation period". The word "phase" and the word "period" have very similar
meanings, especially when the word "phase" is associated with the word "during",
giving it a temporal connotation. The two words may be considered synonymous in
the context of Article 2 of the AD Agreement, referring to a "stage" in
the passage of time. 4.63 The most natural reading of Article 2.4.2, and the
reading that is grammatically correct, is that the words "during the
investigation phase" are associated with the word "existence" rather than with
the word "established". In other words, the provision does not refer to
something that has to happen (the "establishment" of the margins of dumping)
during the period of time in which an investigating authority must normally make
its determination (generally 12 to 18 months). Rather, it refers to something
that has to be established (whether or not there is dumping, and if so, what the
margin of dumping is) by reference to a certain period of time: the
investigation period. If the drafters had intended to associate the phrase
"during the investigation phase" with the word "established", the provision
could have been drafted differently. For example, it could have read "� the
existence of margins of dumping shall normally be established during the
investigation phase �". 4.64 Contextual support for such an approach may be found in
various other provisions of Article 2 of the AD Agreement. Article 2
provides valuable and persuasive context, because Article 2.4.2 is part of
Article 2, and because Article 2 implements the definitions of dumping and
margin of dumping set out in Article VI of the GATT 1994. Article 2.2.1 imposes
obligations on investigating authorities concerning the circumstances in which
sales of the like product in the domestic market "may be disregarded" as
below cost. As such, it is of double interest as context, given that the
practice of zeroing with which these proceedings are concerned also involves the
investigating authority disregarding or adjusting, at least in part, certain
export sales or other data. The object and purpose of this rule is clear. By
requiring an investigating authority to consistently use data arising during the
investigation period, the AD Agreement is imposing basic obligations of
consistency, objectivity and fairness. Precisely the same is true of Article
2.4.2 of the AD Agreement. If the data used to establish normal value
arose during the investigation period, but, in the final step of comparison, the
existence of margins of dumping were permitted to be established by reference to
another period, there would clearly be a rupture in the basic structure and
continuity of the method for establishing whether or not there is dumping, and
if so what the margin of dumping is, in conformity with the definitions set out
in Article VI of the GATT 1994, as implemented in Article 2 of the AD
Agreement. It is thus entirely consistent with the object and purpose of
Article 2.4.2 of the AD Agreement that it should continue to require
at the comparison stage, just as at the normal value stage, that the margins
of dumping must be established by reference to data arising during the
investigation period (or phase). Precisely the same observations may be made
with respect to the references to the investigation period in Article 2.2.1.1,
final sentence; footnote 6, second phrase; and Article 2.4.1, final phrase of
the AD Agreement. 4.65 Other references in Article 2 to the investigation
period are references to the methodology for establishing normal value.
The provision that primarily relates to export price � Article 2.3 of the
AD Agreement � contains no reference to data arising during the
investigation period. Thus, aside from Article 2.4.2 of the AD Agreement,
there is no other express textual provision that would oblige an investigating
authority to use export price data arising during the investigation period (or
phase). The phrase "at as nearly as possible the same time" in Article 2.4 is
qualified, and in any event does not relate to the exclusion of transactions
outside the chosen period. Thus, absent the words "during the investigation
phase" in Article 2.4.2, an investigating authority might, for one reason or
another, seek to draw on export price data arising outside the investigation
period. Viewed in this light, the phrase during the investigation phase (or
period) in Article 2.4.2 of the AD Agreement has an important � even
vital � role to play. 4.66 Further contextual support for this view may be found in
the reference to "the period of investigation" in Article 9.5 of the AD
Agreement. What happens in a new shipper review is that an unrelated
exporter that did not export during the original investigation period can, on
request, obtain "a determination of dumping". In the opinion of the European
Communities, that "determination of dumping" must be consistent with all of the
disciplines set out in Article 2 of the AD Agreement � including Article
2.4.2. What makes an unrelated "new shipper" new is precisely the fact that,
during the original investigation period (or phase) it did not export. That is
why, in the original investigation, no specific margin of dumping could
have been calculated in relation to such new shipper. Viewed in this light, it
is clear that the phrase "during the period of investigation" in Article 9.5
refers back to the phrase "during the investigation phase" in Article 2.4.2, and
confirms that the word "phase" in Article 2.4.2 is in fact synonymous with the
word "period". 4.67 The European Communities does not consider it remarkable
that, in some instances, different language is used to refer to concepts that
are the same, such as a stage in the passage of time (that is, in this case,
"period" and "phase"). Where the drafters sought a particularly high level of
consistency, they defined the relevant terms (there are eight such definitions
in the GATT 1994 and the AD Agreement). There are many other examples in
the AD Agreement of different words or phrases being used to refer to the
same thing. All of these terms fall to be interpreted according to the Vienna
Convention, being given their ordinary meaning and having regard to context
and object and purpose. There is nothing in the Vienna Convention that excludes
the possibility that such different terms in fact have the same meaning. In such
circumstances, the mere fact that the terms are different is of no further legal
consequence. 4.68 The European Communities observes that, if the drafters
had intended to take a step of such great importance as jettisoning, in
retrospective assessments, the basic principles governing the determination of
dumping margins, as defined in Article VI of the GATT 1994 and elaborated in
Article 2 and particularly Article 2.4.2, thus rendering the results of original
investigations worthless, they would not have chosen to: a) rely on an over
subtle distinction between the words "during � period" and the words "during �
phase", neither the word "period" nor "phase" being defined, and those phrases
bearing the same ordinary meaning, if reference is made to a dictionary; b) in
circumstances where the use of one word or the other logically had no incidence
whatsoever on the meaning of the word "investigation" in Article 2.4.2 �
investigation itself not being a defined term: c) by associating the phrase with
the word "existence" as opposed to "established", in a manner that is
grammatically incorrect given their alleged objective; and d) whilst at the same
time including the directly contradictory cross-reference in Article 9.3 to the
whole of Article 2. Rather, given the importance of the step the drafters were
allegedly taking, they would rather have simply expressly stated that the rules
in Article 2.4.2 could be disregarded in retrospective assessments. Just as they
did in Article 2.2.1 with regard to sales not in the ordinary course of trade.
Just as they did in Article 9.4 with regard to zero, de minimis and facts
available margins. Just as they did in Article 2.7 with regard to non-market
economies. That, at least, is what the third parties in this case seem to think. 4.69 A second possible meaning of the words "during the
investigation phase" in Article 2.4.2 is that the investigating authority must
make the determination within the 12 to 18 month period during which
investigations must generally be concluded. 4.70 In the context of an original investigation, Article
5.10 of the AD Agreement contains the procedural rule that:
"Investigations shall, except in special circumstances, be concluded within one
year, and in no case more than 18 months, after their initiation." Article 2.4.2
takes this procedural rule one step further, and makes it a substantive rule,
clearly of application to investigations of all types. It provides that the
"margins of dumping" must be established during the 12 to 18 month original
investigation phase. Thus, if a margin of dumping resulting from an original
investigation were determined 2 years after the initiation of the original
investigation, the Member responsible would act inconsistently with the AD
Agreement. The same would be true if a Member purported to alter the margin
of dumping determined during the original investigation, after the end of the
18 month period, without conducting a new investigation. It should not be
forgotten that, with a new investigation, there comes, in principle, a new
investigation period (or review period) � that is, fresh data (see further
below) � and a new obligation to make any necessary margin of dumping
determinations required by Article 2 within the new investigation phase. 4.71 The reasons for this rule are self-evident. First, it
would be Kafkaesque if a producer or exporter were to find itself forever "under
investigation" without ever being subject to a measure (or having the
investigation terminated). That would be inconsistent with the basic
requirements of certainty and predictability in international trade, which the
Appellate Body has so clearly stated lie at the heart of the WTO Agreements.
Second, although the AD Agreement contains no rule concerning the
establishment of periods of investigation, it is well established that an
investigating authority is not entirely unfettered in this matter. In principle,
the period of investigation must end as close as reasonably possible to the date
on which the investigation is initiated. There are very good reasons for this.
Anti-dumping measures can only reasonably be imposed on the basis of
sufficiently fresh data. Absent some special justification, it would not be
reasonable or acceptable under the AD Agreement for an investigating
authority to impose anti-dumping measures today, based on data from 10 years
ago. Requiring the dumping margin determination to be made within the
investigation phase is an essential part of this "fresh data" rule: there would
be no point in requiring the investigation to be initiated shortly after the end
of the investigation period, if the dumping margin determination could be
delayed until several years later. Third, given the importance of this rule, it
is entirely appropriate that it should be expressed not only in the essentially
procedural terms of Article 5.10 of the AD Agreement, which relates to
original investigations, but that it should also be recalled, or expressed in
more substantive terms, in the context of Article 2.4.2 of the AD Agreement,
and in relation to all types of investigation. This makes it clear that failure
to respect the rule would result not merely in a procedural inconsistency with
the AD Agreement, but would vitiate the very core of the determination �
the establishment of the margin of dumping. And it makes it clear that the rule
applies in all types of investigation. 4.72 In the context of changed circumstances reviews, Article
11.4 of the AD Agreement provides that the review should be carried out
expeditiously and normally concluded within 12 months of the date of initiation.
The reasoning is analogous. If the review involves reliance on or determination
of a new "margin of dumping", that determination must comply with the
requirements of Article 2 of the AD Agreement, and must be made during
the 12 month review investigation phase. The same reasoning applies, mutatis
mutandis, to sunset reviews under Article 11.3. Similarly, Article 9.5 of
the AD Agreement provides that new shipper reviews must be initiated and
carried out on an accelerated basis, compared to normal duty assessment and
review proceedings. In the same vein, both Articles 9.3.1 and 9.3.2 of the AD
Agreement expressly provide for an investigation phase of normally 12 months
and in no case less than 18 months. Thus, this is the period or phase during
which the investigating authority must make any "margin of dumping" calculations
required by Article 2 of the AD Agreement. That is what the words "during
the investigation phase" in Article 2.4.2 of the AD Agreement mean. 4.73 A third meaning is that Article 2.4.2 does not apply in
the pre-investigation phase. The first step in anti-dumping proceedings is not
the initiation of an original investigation. The first step is normally the
written application by the domestic industry, pursuant to Article 5.1 of the
AD Agreement. There are several provisions of the AD Agreement
regulating the period prior to the initiation of an original investigation.
These provisions impose obligations on Members. For example, Article 5.2 sets
out the minimum content of an application. If an application does not meet these
requirements, a Member cannot initiate an original investigation without acting
inconsistently with the AD Agreement. According to Article 5.3 of the
AD Agreement, the authorities must examine the accuracy and adequacy of the
evidence provided in the application to determine whether there is sufficient
evidence to justify the initiation of an investigation. Article 5.4 of the AD
Agreement requires the authorities to determine that the application is
supported by a sufficient proportion of the domestic industry � otherwise "An
investigation shall not be initiated �". Article 5.5 of the AD Agreement
prohibits the authorities from publicising the application prior to initiation
of an investigation, and requires pre-notification to the government of the
exporting Member. Article 5.7 of the AD Agreement contains rules
regarding the consideration of dumping and injury, both in the pre-investigation
phase, and "thereafter". Article 5.8 of the AD Agreement sets out
circumstances in which an application must be rejected, and de minimis
rules. 4.74 There is therefore, incontestably, a period of time
before a decision is taken on whether or not to initiate an original
investigation during which: (1) facts material to a possible final determination
arise or are placed on the record; (2) procedural steps are taken both by
"interested parties" (the domestic industry) and by the authorities; and (3)
AD Agreement rules apply and impose obligations on Members. This period of
time may be termed the pre-investigation phase. 4.75 Thus, the rule in Article 2.4.2 of the AD Agreement
would not apply, for example, during the pre-investigation phase. That is
common sense and consistent with the other provisions of the AD Agreement.
Article 5.2 of the AD Agreement requires the applicant to provide "such
information as is reasonably available to the applicant". Article 5.2 (iii) of
the AD Agreement refers to "information on prices" in the domestic market
and "information on export prices". That might, for example, include published
price lists. In the opinion of the European Communities, the threshold
established by Article 5.2(iii) can be met by information that falls short, very
far short, of the information necessary to make a full anti-dumping
determination. In fact, this will normally be the case. That is because the very
detailed and complete information concerning like product, model types,
costs of production, domestic export transactions and export transactions, and
all information necessary to make a fair comparison pursuant to Article 2.4 of
the AD Agreement, will simply not be available, or reasonably available,
to the applicant. Complaints are not required to contain precise and accurate
dumping margin calculations. So the AD Agreement provides that the rules
of Article 2.4.2 apply in the investigation phase, and thus not in the
pre-investigation phase. 4.76 In the opinion of the European Communities, Article
5.2(iii) of the AD Agreement, viewed in isolation, would not achieve this
result. It simply requires information about prices in the domestic and export
markets. That is not in itself enough. Article 5.2 requires that the application
must contain sufficient evidence of "dumping" and Article 5.3 requires an
authority to determine whether or not there is sufficient evidence to justify
initiation. Quite apart from Article 5.2(iii), the authority will therefore have
to make some kind of rudimentary comparison. And that is the point at which the
rule in Article 2.4.2, on the basis of this interpretation, would have value
added, because it would release the authority from the unreasonable burden of
applying the rules set out in Article 2.4.2, which essentially pre-suppose that
the questionnaire responses, with all the detailed data on domestic and export
prices, have already been filed. 4.77 Furthermore, the European Communities emphasizes that
its view is consistent with the position that there is a clear distinction
between each type of investigation conducted under the AD Agreement.
Original investigations, new shipper reviews, changed circumstances reviews,
sunset reviews and duty assessment proceedings each have a different purpose and
are subject to a different set of provisions under the AD Agreement �
although they are all subject to Article VI of the GATT 1994 and must be
conducted in a manner consistent with the object and purpose of anti-dumping
measures. On the other hand, some provisions of the AD Agreement apply to
more than one or all such investigations, and Article 2.4.2 is one such
provision.
(iii) Article 2.4.2 prohibits simple zeroing
4.78 The European Communities argues that the reasoning of
the Appellate Body in the EC � Bed Linen51 and US � Softwood Lumber V52
cases in relation to model zeroing applies equally whenever an investigating
authority decides to fix the parameters of its investigation, whether in
relation to a subject product, time period, level of trade, region, or any other
parameter. Once such parameters are defined, an investigating authority becomes
bound by its own logic, and must complete its analysis on the basis of the same
logic. 4.79 The European Communities finds contextual support for
this position in the second sentence of Article 2.4.2 of the AD Agreement,
which refers expressly to certain parameters of relevance to a determination of
the existence of dumping, including "time periods". In the light of the periodic
reviews at issue, the European Communities argues that these words imply that,
having fixed the temporal parameters of the relevant proceeding, the United
States had become bound by its own logic, unless the exceptional situation
described in the second sentence of Article 2.4.2 of the AD Agreement
were present (which was not the case). 4.80 More generally, the same is true with respect to any
other parameters of an investigation that are fixed by an investigating
authority, notably the purchasers and regions concerned, these also being
matters referred to in the second sentence of Article 2.4.2. According to the
European Communities, the simple zeroing method used by the United States is, at
least potentially, offensive to any one of these parameters, because it is
performed at the most disaggregated level, that is, at the level of individual
transactions. In other words, instead of treating all the relevant export
transactions as a whole, the United States methodology results in treating each
export transaction individually in the same manner as model zeroing results in
treating each model separately. Thus, the European Communities challenges the
United States practice, in each of the periodic reviews at issue, of considering
each export transaction in isolation. 4.81 In addition, the European Communities argues that
Articles 2.4, 2.4.2 and 9.3 require that the total amount of duty collected with
respect to exports made by one specific exporter during the assessment period
must not exceed the relevant margin of dumping of the same exporter. The only
relevant margin of dumping permitted to be calculated under the AD Agreement,
whether in an original investigation or a periodic review, is that pertaining to
the exporter, not one or more entries made by individual importers. 4.82 As explained above in the section concerning Article
2.4, the European Communities rejects the contention of the United States that
importer-specific final assessment on a transaction-by-transaction basis
involving zeroing is contemplated under the AD Agreement by virtue of
Article 9.4(ii). The arguments presented by the European Communities on this
issue are detailed in paragraphs 4.21 to 4.26 above.
(iv) Conditions for the Application of the Asymmetrical
Comparison Methodology
4.83 The European Communities considers that the main purpose
of Article 2.4.2 of the AD Agreement is to provide for an exception
(asymmetrical comparison in the case of targeted dumping) to the normal methods
of comparison (symmetrical comparison) in order to ensure a fair comparison
within the meaning of Article 2.4. An asymmetrical comparison can only be used
if the circumstances defined in the second sentence of Article 2.4.2 of the
AD Agreement are met. Thus, it transformed a comparison method
(weighted-average-to-transaction) commonly used before the Uruguay Round AD
Agreement was adopted into an exception subject to strict conditions. 4.84 In the periodic reviews at issue in the present dispute,
in order to establish the existence of a margin of dumping for the subject
product during the period of review, the United States did not use either of the
normal methods of comparison provided for in the first sentence of Article 2.4.2
of the AD Agreement (weighted-average-to-weighted-average or
transaction-to-transaction). Rather, the United States compared a normal value
established on a weighted-average basis to prices of individual export
transactions. That corresponds to the asymmetrical method described in the
second sentence of Article 2.4.2. 4.85 Further to the second sentence of Article 2.4.2, the
asymmetrical method may only be used if the authorities find a pattern of export
prices which differ significantly among different purchasers, regions or time
periods, and if an explanation is provided as to why such differences
cannot be taken into account appropriately by the use of a
weighted-average-to-weighted-average or transaction-to-transaction comparison.
Thus, in order for the United States to use the asymmetrical method, the
conditions laid out in Article 2.4.2 of the AD Agreement should have been
met. Furthermore, to the extent that the asymmetrical method was not available,
the United States was under an obligation to use one of the normally applicable
methods provided for in the first sentence of Article 2.4.2 of the AD
Agreement. Thus, in this case, on this point, the United States acted
inconsistently with the AD Agreement because it used the asymmetrical
method when none of the conditions were fulfilled; and failed to use a
symmetrical method when that was the only lawful option. 4.86 As explained above in the section concerning Article
2.4, the European Communities rejects the contention of the United States that
importer-specific final assessment on a transaction by transaction basis
involving zeroing is contemplated under the AD Agreement by virtue of
Article 9.4(ii). The arguments presented by the European Communities on this
issue are detailed in paragraphs 4.21 to 4.26 above.
(b) The United States53
(i) Article 2.4.2 does not prohibit model zeroing
4.87 The United States submits that in US � Softwood
Lumber V, the Appellate Body erred in finding that the AD Agreement
requires Members, in the investigation phase, to give credit for weighted
average comparisons when the export price exceeds the normal value. 4.88 With respect to the investigation phase, the "as
applied" and "as such" claims of the European Communities are based on its
assertion that the AD Agreement requires an offset for non-dumped sales.
However, according to the United States, neither the text of the AD Agreement
nor its negotiating history recognizes the concept of "negative dumping
margins," and the AD Agreement does not contain any obligations with
respect to them. An offset requirement � if one existed � would apply to the
results of comparisons, and would not pertain to the comparisons themselves.
Article 2.4.2 limits the use of average-to-transaction comparisons in the
investigation phase, a common practice before the Uruguay Round. Neither the
text of the AD Agreement nor its negotiating history suggest that the
drafters agreed to require a credit for sales made at above normal value.
Because such a requirement is antithetical to the historic manner in which
antidumping investigations have been conducted by many Members, both before and
after the completion of the Uruguay Round, and there is no indication in the
text of an agreement to change this historic approach, such an obligation should
not be created through the dispute settlement process on the basis of tenuous
inferences. 4.89 The United States contests the assertion of the European
Communities that it "excludes" non-dumped transactions from its calculation of
an overall margin of dumping in the investigation phase and that such exclusions
are "unfair." When applying the average-to-average method, the United States
calculates multiple weighted average normal values, and compares each to a
distinct set of weighted average export prices. Each average-to-average pairing
is distinguished by a common set of variables establishing their comparability (e.g.,
model, level of trade). Taken together, these groups of export transactions
contain "all comparable export transactions." No export transaction is excluded. 4.90 For each comparison group, the United States compares
the weighted average of all the normal values to the weighted average of all the
export prices. However, the United States does not determine whether dumping
"exists" so as to warrant the imposition of an anti-dumping measure. It simply
calculates an amount of dumping for each comparison group. Consistent
with the language in Article VI, paragraphs 1 and 2, of GATT 1994, when the
weighted average export price for a group of transactions is less than its
weighted average normal value, this difference is an amount of dumping. The
summation of these dumping amounts occurs subsequently, in order to determine
whether the dumping margin for the product is above or below the de minimis
standard. In this exercise, all export transactions are considered,
because they are included in the figure by which the aggregate of the dumping
amounts is divided. The result of this calculation is the percentage dumping
margin against which the de minimis standard is applied. 4.91 The Appellate Body's ultimate finding in US �
Softwood Lumber V turned on a subsidiary finding that the United States
practice of calculating intermediate "margins of dumping", while setting the
results of those intermediate comparisons that resulted in "negative margins" to
zero, was contrary to the requirements of Article 2.4.2. However, it is
inaccurate to state that USDOC's intermediate stage calculations constitute a
determination of whether dumping margins "exist" within the meaning of the AD
Agreement. The calculation of an overall percentage dumping margin (i.e.
expressing the overall amount of dumping found during the investigation phase as
a percentage of overall export sales), and using this percentage to determine
whether dumping "exists" such that the imposition of an antidumping measure is
justified, is only done in a separate step in order to satisfy the requirements
of Article 5.8 of the AD Agreement. 4.92 The Appellate Body's understanding of the facts may have
resulted from the use of terminology in United States law that has been
interpreted as having a different meaning in the context of the AD Agreement.
The Appellate Body effectively interpreted the term "margin of dumping" for
AD Agreement purposes as applying only to the percentage margin for the
product as a whole, against which the de minimis standard is measured. In
the context of this dispute, the "margin of dumping" for AD Agreement
purposes is equivalent to the "weighted average dumping margin" defined in
Section 771(35)(B) of the Act. United States law separately defines "dumping
margin" in Section 771(35)(A) as "the amount by which the normal value exceeds
the export price or constructed export price of the subject merchandise."
Nevertheless, the reference in United States law to the intermediate dumping
amounts as "dumping margins" does not alter the fact that those intermediate
dumping amounts were treated in a manner consistent with the AD Agreement
and Article VI:1 and 2 of GATT 1994. 4.93 The United States disagrees with the position of the
European Communities on the meaning of the word "margin" in Article 2.4.2. In
the AD Agreement, the word "margin" is modified by the word "dumping,"
giving it a special meaning. Paragraph 2 of Article VI of GATT 1994 provides
that "[f]or the purposes of this Article, the margin of dumping is the price
difference determined in accordance with the provisions of paragraph 1." When
read with the provisions of paragraph 1, the "margin of dumping" is the price
difference when a product has been "introduced into the commerce of an importing
country at less than its normal value"; i.e., the price difference when the
product has been dumped. 4.94 The provisions of the AD Agreement must be read
in conjunction with Article VI of GATT 1994. While the AD Agreement does
not provide a definition of "margin of dumping," Article 2.1 does define
"dumping" in a manner consistent with the definition provided in Article VI. The
express terms of Article VI provide that the margin of dumping is the
amount by which normal value "exceeds" export price, or alternatively the amount
by which export price "falls short" of normal value. Consequently, there is no
textual support in Article VI of the GATT or the AD Agreement for the
concept of "negative dumping." 4.95 Similarly, there is nothing in the text to suggest that
the prevailing meaning of the term "dumping" is suspended for purposes of
Article 2.4.2. Article 2.4.2 sets forth three comparison methods for
establishing "the existence of margins of dumping" in an investigation. There is
no reference in Article 2.4.2 to "negative margins," "negative dumping," or any
other modification to the term "margin of dumping." Article 2.4.2 establishes an
obligation for the administering authority to determine whether dumping "exists"
based on certain methodological constraints. Nothing in Article 2.4.2 requires
the expression of the margin of dumping as a percentage. Article 5.8 is the only
place in the AD Agreement where the amount of dumping must be expressed
as a percentage margin so that it may be measured against the de minimis
standard. 4.96 In the absence of any obligation in Article 2.4.2 to
calculate an overall margin of dumping, let alone any obligations detailing the
manner in which such a calculation must be performed, Article 2.4.2 cannot serve
as the basis for finding a requirement to offset negative dumping. 4.97 According to the United States, the negotiating history
confirms that Article 2.4.2 does not require an offset for negative dumping.
Prior to the entry into force of the WTO Agreement, many users of the
antidumping remedy, including the United States and the European Communities,
determined the existence of dumping margins by using the average-to-transaction
comparison method. Several delegations sought to negotiate a change in this
practice in the Uruguay Round negotiations. The negotiations over this
"asymmetry" issue were protracted and difficult. Article 2.4.2 of the AD
Agreement was ultimately agreed upon specifically to address this
"asymmetry" issue. 4.98 Separately, a number of signatories to the Tokyo Round
Anti-Dumping Code, including the United States and the European Communities,
utilized a methodology whereby they calculated the final overall margin of
dumping for a company by aggregating the positive dumping amounts for
comparisons where normal value exceeded export price and dividing that number by
the aggregate of all export prices. So-called "negative margins" were not taken
into account in aggregating the overall amount of dumping. This practice was
well-known by the Uruguay Round negotiators and was referred to as "zeroing."
Concurrent with the negotiations, the practice of zeroing was reviewed by two
dispute settlement panels and was found to be consistent with the Anti-dumping
Code. In the Uruguay Round negotiations, several delegations sought to prohibit
zeroing and to require an offset for "negative dumping." No provision to require
such offsetting was agreed to by the negotiators. While agreement was reached to
address the "asymmetry" issue through, and to the extent provided for in, the
language of Article 2.4.2 of the AD Agreement, the Agreement ultimately
did not address the zeroing issue.
(ii) Scope of Article 2.4.2 is Limited to Original
Investigations
4.99 The United States argues that the express terms of
Article 2.4.2 limit its application to the original investigation phase of an
antidumping proceeding. Moreover, nothing in the text of Article 9 contradicts
or invalidates the express limitation found in Article 2.4.2. On this basis, the
claims of the European Communities with respect to Article 2.4.2 and phases of
an anti-dumping proceeding other than the original investigation, must fail. 4.100 The express terms of Article 2.4.2 limit its
application to the "investigation phase" of a proceeding. The United States
asserts that to require the application of Article 2.4.2 to Article 9 assessment
proceedings would read out of the AD Agreement Article 2.4.2's express
limitation to investigations, and would be inconsistent with the principle of
effectiveness. 4.101 Other provisions of the AD Agreement also
expressly limit their application to the investigation phase of an antidumping
proceeding, and do not apply elsewhere. For instance, panels have consistently
found that the references to "investigation" in Article 5 only refer to the
original investigation and not to subsequent phases of an antidumping
proceeding. 4.102 According to the United States, the limited
applicability of Article 2.4.2 could not be plainer. The text leaves no doubt
that the Members did not intend to extend these obligations to any phase beyond
the investigation phase. As the panel in Argentina � Poultry
Anti-Dumping Duties found: "Article 2.4.2, uniquely among the provisions of
Article 2, relates to the establishment of the margin of dumping "during the
investigation phase."54 4.103 The limited application of Article 2.4.2 to the
investigation phase is consistent with the divergent functions of investigations
and other proceedings under the AD Agreement. The United States asserts
that in arguing that Article 2.4.2 applies to phases of an anti-dumping
proceeding beyond original investigations, the European Communities has argued
that the AD Agreement does not distinguish between the rules governing
investigations, assessment proceedings, and the various proceedings that
constitute Article 11 reviews. However, according to the United States,
investigations and assessment proceedings constitute distinct phases of an
anti-dumping proceeding and have different purposes. 4.104 Article 18.3 of the AD Agreement explicitly
recognizes the difference between investigations, which may lead to the
imposition of a measure, and "reviews" of existing measures. The consistency
with which the Appellate Body and panels have recognized the distinctions
between investigations and other segments of an antidumping proceeding is
consistent with the distinct purpose of the investigation phase, which is to
establish as a threshold matter whether the imposition of an antidumping measure
is warranted. Other phases (such as Article 9 assessment proceedings or
Article 11 sunset reviews) have different purposes. Whereas the purpose of an
investigation is to determine whether a remedy against dumping should be
provided, the purpose of an assessment proceeding is to determine the precise
amount of that remedy. As mentioned above, the Appellate Body has already
recognized that investigations and other proceedings serve different purposes
and have different functions, and therefore are subject to different obligations
under the Agreement. The AD Agreement does not require Members to examine
whether margins of dumping "exist" in the assessment phase. Article 9 assessment
proceedings are not concerned with the existential question of whether injurious
dumping "exists" above a de minimis level such that the imposition of
antidumping measures is warranted. Instead, Article 9 focuses on the amount of
duty to be assessed on particular entries, an exercise that is separate and
apart from the calculation of an overall dumping margin during the threshold
investigation phase. 4.105 The express limitation in Article 2.4.2 to the
investigation phase is also consistent with the fact that the antidumping
systems of Members are different for purposes of the assessment phase. The
different methods used by Members pursuant to Article 9 include the use of
prospective normal values, retrospective normal values, and prospective ad
valorem assessment. If the requirements of Article 2.4.2 regarding
comparison methods applied to the assessment of antidumping duties, this
divergence of assessment systems would not be possible. For example, it is not
possible to reconcile the prospective normal value system used by some Members
with a requirement to use either the average-to-average or
transaction-to-transaction method, because such systems compare weighted average
normal values to individual export prices to assess dumping duties on individual
transactions. Furthermore, anti-dumping duties, like other duties, are levied on
individual imports, consistent with the circumstances associated with each
particular import transaction. Individual importers pay such duties. To the
extent that an authority may use weighted average to weighted average
comparisons in an investigation to determine whether margins of dumping exist
sufficient to justify the imposition of an antidumping measure, once that
measure is imposed, it is the importers that will incur liability for duties.
Consequently, it is appropriate to determine that liability on an importer- and
transaction-specific basis. Thus, to retain the flexibility in assessment
systems reflected in Article 9, it was not only appropriate, but necessary, to
limit the requirements of Article 2.4.2 to the investigation phase. 4.106 The United States contends that Article 9 does not
incorporate the requirements of Article 2.4.2. The general reference to Article
2 in Article 9.3 necessarily includes any limitations found in the text of
Article 2. As discussed above, Article 2.4.2 by its own terms is explicitly
limited to the investigation phase. The reference in Article 9.3 to Article 2
means that the amount of antidumping duty assessed may not exceed the amount of
antidumping duty calculated in accordance with the general requirements of
Article 2, such as making the various adjustments set forth in Article 2.4
necessary to provide a fair comparison. Furthermore, Article 9 contains certain
procedural obligations applicable in assessment reviews. However, Article 9 does
not prescribe methodologies for assessment proceedings such as those established
in Article 2.4.2 for the investigation phase. Instead, Article 9 establishes
time limits for conducting assessment proceedings, ensuring that respondent
companies may obtain timely refund of any excess antidumping duties collected by
a Member. The United States finds support for its interpretation of Article 9 in
the panel's findings in Argentina � Poultry Anti-Dumping Duties.55 4.107 The United States argues that the phrase "the existence
of margins of dumping during the investigation phase", when considered in its
entirety, makes it clear that the obligations in Article 2.4.2 do not extend
beyond an investigation within the meaning of Article 5. The use of the terms
"investigation," "existence," and "initiated" creates a linkage that ties
Articles 1, 2.4.2 and 5 together in such a way that confirms that the drafters
were referring to Article 5 investigations when they provided that the Article
2.4.2 comparison methodologies are to be used to establish "the existence of
margins of dumping during the investigation phase." 4.108 Thus, Article 1 defines the "initiation" of the
investigation phase that leads to an anti-dumping measure as "the procedural
action by which a Member formally commences an investigation as provided in
Article 5." Article 5.1, in turn, provides that investigations are initiated
upon a written application, or pursuant to other specified conditions, to
determine the "existence, degree and effect" of alleged dumping. Consequently,
there is no ambiguity as to the nature of the "investigations initiated and
conducted" pursuant to Article 1. Because there is only one type of
investigation provided for in Article 5, and footnote 1 to Article 1 explicitly
links Article 1 to "an investigation as provided in Article 5," Article 1 can
only be referring to Article 5 investigations. 4.109 To complete the linkage between Articles 1, 2.4.2, and
5, the term "existence" as it is used in Article 5.1 of the AD Agreement
must be considered. The word existence is used in connection with the term
dumping in only one other place in the AD Agreement besides Article 5.1:
Article 2.4.2. The ordinary meaning of the word "existence" according to The New
Shorter Oxford English Dictionary is "the fact or state of existing; actual
possession of being; a mode or kind of existing; dealing with the existence of a
mathematical or philosophical entity." The word "existence" before the phrase
"of margins of dumping" indicates that Members are to determine the "existence
of [the] mathematical or philosophical entity" referred to as "margins of
dumping." This "existence" is a necessary part of an Article 5 investigation
which may lead to applying an antidumping measure consistent with Article 1. 4.110 The drafters' intent to limit Article 2.4.2 exclusively
to Article 5 investigations is further demonstrated by the use of the definite
article "the" before the term "investigation phase", rather than the indefinite
article "an". According to The New Shorter Oxford English Dictionary, the
ordinary meaning of the article "the" is "designating one or more persons or
things already mentioned or known, particularized by context, or circumstances,
inherently unique, familiar or otherwise sufficiently identified." If, as the
European Communities contends, the term "investigation" in the context of
Article 2.4.2 may be interpreted in generic terms, rather than as a term of art
referring to the Article 5 phase, then the use of the indefinite article "an"
would have been much more appropriate. However, according to the United States,
that is not what the AD Agreement states.
(iii) Conditions for the Application of the Asymmetrical
Comparison Methodology
4.111 According to the United States, not only are the
Article 2.4.2 restrictions on the investigation phase irrelevant in assessment
proceedings, but Article 9 expressly provides for comparisons between weighted
average normal values and individual export transactions in assessment
proceedings. Article 9.4(ii) explicitly provides for the calculation of
antidumping duties, in the assessment phase, on the basis of a comparison of
weighted average normal values and individual export prices. This provision
plainly indicates that there is nothing exceptional about assessing antidumping
duties on the basis of comparisons of weighted average normal values with
individual export prices. 4.112 A panel recently found the calculation of
transaction-specific antidumping duties in assessment reviews to be entirely
consistent with the AD Agreement. In Argentina � Poultry Anti-Dumping
Duties, the panel found the Argentine prospective normal value assessment
system to be fully consistent with the AD Agreement. 4.113 Thus, the United States contends that the claim of the
European Communities that, with respect to the assessment proceedings at issue
in this dispute, USDOC erred in not applying either the average-to-average or
transaction-to-transaction methods must fail. There is no textual basis in the
AD Agreement for the assertion that Article 9.3 requires the application
of Article 2.4.2 in assessment proceedings. On the contrary, as the panel in
Argentina � Poultry correctly found, the reference in Article 9.3 to Article
2 does not overcome the limiting language in Article 2.4.2 which, by its own
terms, limits its obligations to "the investigation phase."
3. Consequential Claims with respect to Articles 3.1, 3.2
and 3.5 of the AD Agreement
(a) The European Communities56 4.114 The European Communities considers that, as a
consequence of the unlawful zeroing methods applied by USDOC in the original
investigations identified in Exhibits EC-1 to EC-15, the United States acted in
a manner inconsistent with obligations imposed on it by Articles 3.1, 3.2
and 3.5 of the AD Agreement. The European Communities argues, inter
alia, that because investigating authorities used the unlawful zeroing
method in the original investigations at issue, the volume of imports determined
to be dumped in each case was inflated. Accordingly, it is the European
Communities' position that the United States therefore acted inconsistently with
Article 3.1 of the AD Agreement because it did not base its injury
determination on an objective examination of the volume of dumped imports. 4.115 The United States also acted inconsistently with
Article 3.2 of the AD Agreement, because it failed to properly consider
whether or not there had been a significant increase in dumped imports; and
because when considering whether or not there was significant price undercutting
or price depression it based its assessment also on non-dumped imports, when it
was only entitled to take into account dumped imports. 4.116 The United States similarly acted inconsistently with
Articles 3.1, 3.2 and 3.5 of the AD Agreement, because it examined the
impact of non-dumped imports on domestic producers, when it was only entitled to
examine the impact of dumped imports; and because it established a causal
relationship between injury and non-dumped imports, when it was only entitled to
do so in relation to dumped imports. The United States thus unlawfully
attributed injury to a factor other than dumped imports, in particular a volume
of imports not sold at dumping prices. 4.117 The European Communities does not claim any
consequential inconsistency with Article 3 where the correction for unlawful
zeroing does not take the margin of dumping below 2 per cent for individual
exporters. However, it notes that it necessarily follows, from the fact that it
has demonstrated that a determination is inconsistent with the AD Agreement,
that all subsequent determinations that depend on that earlier determination are
similarly vitiated or unsound, necessarily requiring re-consideration, and thus
necessarily being inconsistent with the relevant provision(s) of the AD
Agreement.
(b) The United States57 4.118 The United States asserts that the Panel should dismiss
the claims of the European Communities concerning injury because even if the
methodology used by USDOC in the cited investigations were inconsistent with the
AD Agreement, the assertion that the margins calculated pursuant to that
methodology caused the USITC to act in a manner inconsistent with Articles 3.1,
3.2 and 3.5 is speculative and unfounded. 4.119 The European Communities cannot establish that USDOC
necessarily would have calculated zero or de minimis dumping margins in
the cited cases, or that the USITC treated certain non-dumped imports as dumped.
In the absence of such showings, the United States contends that the European
Communities has failed to meet its burden to demonstrate that any of the cited
determinations by the USITC is inconsistent with Articles 3.1, 3.2, and 3.5. 4.120 The United States notes that the European Communities,
in response to the Panel's Question 32, does not deny that its claims as to such
measures are merely speculative, given that the European Communities cannot
presume the results of an alternative margin calculation methodology permitted
by the AD Agreement. According to the United States, the European
Communities instead adopts the new position that the use of so‑called zeroing
somehow renders the injury determinations necessarily "unsound".58 The European
Communities does not explain, however, how the use of zeroing necessarily caused
the volume of dumped imports to be inflated, or how zeroing otherwise gives rise
to an Article 3 claim.
4. Consequential Claim with respect to Article 5.8 of the
AD Agreement
(a) The European Communities59 4.121 The European Communities considers that, as a
consequence of the unlawful zeroing methods applied by USDOC in the original
investigations identified in Exhibits EC-1 to EC-15, the United States acted in
a manner inconsistent with Article 5.8 of the AD Agreement. The European
Communities argues that there is a breach of Article 5.8 where the correction
for unlawful zeroing would take the margin of dumping below 2 per cent for the
exporting country.60 The European Communities does not claim any consequential
inconsistency with Article 5.8 where the correction for unlawful zeroing
does not take the margin of dumping below 2 per cent for the exporting country.
5. Consequential Claims with respect to Articles 11.1 and
11.2 of the AD Agreement
(a) The European Communities61 4.122 The European Communities argues that, as a consequence
of the unlawful zeroing methods applied by USDOC in the periodic reviews
identified in Exhibits EC-16 to EC-31, the United States acted in a manner
inconsistent with Articles 11.1 and 11.2 of the AD Agreement. However,
these claims are conditional, and may be considered withdrawn if the European
Communities' claims relating to the periodic reviews at issue succeed under
Articles 2.4, 2.4.2 and 9.3. 4.123 The Article 11 claim is based on the assumption that
part of the measures at issue (the decision in each of the periodic reviews to
apply a revised estimated anti-dumping duty deposit rate for the future)
constituted a "review" within the meaning of Article 11.2 of the AD
Agreement. The dumping determination made by the United States in each such
review was used as the basis for determining whether or not the continued
imposition of the duty was "necessary to offset dumping", within the meaning of
Article 11.2 of the AD Agreement. That determination was made pursuant to
the right expressly conferred on interested parties by Article 11.2 of the AD
Agreement, second sentence. 4.124 The European Communities considers that if an
investigating authority makes or relies on a dumping determination for the
purposes of Article 11.2 of the AD Agreement, it is bound to establish
any such dumping margin in conformity with the provisions of Article 2.4,
including Article 2.4.2 of the AD Agreement. Article 11.2 must be read in
conjunction with the other provisions of the AD Agreement, including,
necessarily, those that contain relevant definitions, such as Article 2, which
defines dumping.
(b) The United States62 4.125 The United States asserts that in its response to the
Panel regarding the basis for its claim under Articles 11.1 and 11.2, the
European Communities provided a non-response. According to the United States,
the European Communities simply asserts that "the conduct of retrospective
assessments in the United States must be consistent both with the provisions of
Articles 2.4, 2.4.2 and 9.3, and with the provisions of Article 11." The
European Communities fails, however, to provide the requested explanation,
despite the latter's own recognition that "United States 'periodic reviews' of
the amount of duty correspond to and fit within Article 9.3 of the AD
Agreement".
6. Other Consequential Claims
(a) The European Communities63 4.126 The European Communities considers that, as a
consequence of applying unlawful zeroing in the original investigations and
periodic reviews in question, the United States acted in a manner inconsistent
with the obligations imposed on it by Articles 9.3, 1 and 18.4 of the AD
Agreement; Articles VI:1 and VI:2 of GATT 1994; and Article XVI.4 of the WTO
Agreement. 4.127 Article 9.3 of the AD Agreement provides,
inter alia that the amount of the anti-dumping duty shall not exceed the
margin of dumping as established under Article 2. The European Communities does
not agree with the United States suggestion that Article 9 contains only
"procedural obligations". Nor does the European Communities agree with the
United States suggestion that Article 9 contains only "time limits". According
to the European Communities, there is nothing in Article 9 to support such
views. Article 9 contains substantive obligations, as does Article 2, to which
Article 9 expressly refers. Thus, to the extent that the dumping duties imposed
and assessed in the original investigations and periodic reviews at issue were
greater than they should have been because of zeroing, the United States
violated its obligations under Article 9.3. 4.128 The European Communities considers that the United
States acted in this case in a manner inconsistent with the obligations imposed
on it by Article 1 of the AD Agreement and Articles VI:1 and VI:2 of GATT
1994. As a result of the unlawful zeroing method applied in the original
investigations and periodic reviews at issue, the United States applied an
anti-dumping measure under circumstances other than those provided for in
Article VI of GATT 1994 and other than pursuant to investigations initiated and
conducted in accordance with the provisions of the AD Agreement. In
taking action under its domestic anti-dumping legislation, the United States
failed to respect the provisions of the AD Agreement, which provisions
govern such action, and which provisions the United States should have
respected. Accordingly, the United States acted in a manner inconsistent with
the obligations imposed on it by Article 1 of the AD Agreement. 4.129 The United States condemned the sales of the products
subject to investigation in circumstances where such products were not
introduced into the commerce of the United States at less than the normal value
of those products. The United States levied anti-dumping duties on products that
were not dumped. The United States levied anti-dumping duties, allegedly in
order to offset or prevent dumping, but in an amount greater than the margin of
dumping. The United States thus also acted in a manner inconsistent with the
obligations imposed on it by Articles VI:1 and VI:2 of GATT 1994. 4.130 As a consequence of applying unlawful zeroing in the
original investigations and periodic reviews at issue, the United States also
failed to ensure the conformity of its laws, regulations and administrative
procedures with the provisions of the AD Agreement, and has thus acted in
a manner inconsistent with obligations imposed on it by Article 18.4 of the
AD Agreement and Article XVI:4 of the WTO Agreement.
(b) The United States64 4.131 As regards the European Communities' consequential
claims with respect to Article 9.3, the United States asserts that Article 2.4.2
does not apply to assessment proceedings pursuant to Article 9.3. According to
the United States, the general reference to Article 2 in Article 9.3 necessarily
includes any limitations found in the text of Article 2. Article 2.4.2 by its
own terms is explicitly limited to the investigation phase. 4.132 Citing to the Panel report in Argentina � Poultry
Anti-Dumping Duties65, the United States argues that the reference in Article
9.3 to Article 2 means that the amount of antidumping duty assessed may not
exceed the amount of antidumping duty calculated in accordance with the general
requirements of Article 2, such as making the various adjustments set forth in
Article 2.4 necessary to provide a fair comparison. There is no basis in Article
9 to overcome the explicit language in Article 2.4.2, limiting its reach to
investigations. 4.133 In other words, the United States argues, Article 9
contains certain procedural obligations applicable in assessment reviews, but
does not prescribe methodologies for assessment proceedings, such as those
established in Article2.4.2 for the investigation phase. Instead, the United
States asserts, Article 9 establishes time limits for conducting assessment
proceedings, ensuring that respondent companies may obtain timely refund of any
excess antidumping duties collected by a Member. 4.134 With respect to the European Communities' "as applied"
claims under Article 18.4 of the AD Agreement and Article XVI:4 of the
WTO Agreement, the United States asserts that, assuming for purposes of
argument that the European Communities' positions regarding "symmetry" and
offsets for "negative dumping" are valid, the European Communities fails to
explain how the obligations of these provisions relate to determinations made in
specific antidumping proceedings. Accordingly, the Panel should reject the
European Communities' claims.
C. "AS SUCH" CLAIMS 1. The "Standard Zeroing Procedures" (or The United
States Practice or Methodology of Zeroing) Used in Original Investigations
and Periodic, New Shipper, Changed Circumstance and Sunset Reviews
4.135 The European Communities characterises this complaint
as being comprised of two possible challenges: First, to the "Standard AD Margin
Program", to the extent that it contains the "Standard Zeroing Procedures"; and
secondly, to the extent necessary, the "Import Administration Anti-Dumping
Manual" ("the Manual") and the United States practice or methodology of zeroing.
(i) The "Standard Zeroing Procedures" (or the United
States practice or methodology of zeroing) are a "measure" or part of a
"measure" that can be subject to WTO challenge
(a) The European Communities66 4.136 The European Communities contends that the "Standard
Zeroing Procedures" and the Manual to the extent the latter refers to the
"Standard Computer Programs", or the United States practice or methodology of
zeroing, are a "measure" or are part of a "measure" that can be challenged "as
such". 4.137 Referring particularly to the Appellate Body Reports in
US-Corrosion Resistant Steel Sunset Review, paragraphs 73 to 101 and
US � Oil Country Tubular Goods Sunset Reviews, paragraphs 177 to 189, the
European Communities argues that there are no limitations on the type of
"measures" that may, "as such", be the subject of dispute settlement under the
DSU or the AD Agreement. According to the European Communities, this is
consistent with the comprehensive nature of the right of Members to resort to
dispute settlement to "preserve [their] rights and obligations � under the
covered agreements, and to clarify the existing provisions of those agreements."67
Furthermore, it is compatible with the line of reasoning developed by the
Appellate Body based on the GATT acquis and the language of the AD
Agreement, in particular Articles 17.3 and 18.4.68 Thus, provided Members
respect the principles set forth in Articles 3.7 and 3.10 of the DSU, namely, to
exercise their "judgment as to whether action under these procedures would be
fruitful" and to engage in dispute settlement in good faith, then those Members
are entitled to request a panel to examine measures that the Member considers
nullify or impair its benefits. In keeping with this view, the European
Communities argues that if, as in the present case, it can find language to
adequately explain and delineate its concerns in abstract terms, particularly if
that language is contained in a document or documents drawn up by the United
States itself; and if the European Communities is prepared to expend the time
and resources required for a dispute settlement procedure on the point, that is
enough. 4.138 The European Communities argues that instruments of a
Member containing rules or norms may constitute a "measure", irrespective of how
or whether those rules or norms are applied in a particular instance. This is so
because the disciplines of the GATT and the WTO, as well as the dispute
settlement system, are intended to protect not only existing trade but also the
security and predictability needed to conduct future trade. This objective would
be frustrated if instruments setting out rules or norms inconsistent with a
Member's obligations could not be brought before a panel once they have been
adopted, irrespective of any particular instance of application of such rules or
norms. 4.139 The European Communities identifies the "Standard
Zeroing Procedures" as the lines of computer code in the United States'
"Standard AD Margin Program". According to the European Communities, the
"Standard AD Margin Program" is a part of the United States current and standard
anti-dumping margin calculation methodology. The code used as the "Standard
Zeroing Procedures" varies depending upon whether it is applied in original
investigations or periodic reviews. The European Communities describes it as a
code that is the same or has substantially the same structure or effect as the
following:
(for original investigations)
PROC MEANS NOPRINT DATA = MARGIN;
(for periodic reviews)
PROC MEANS NOPRINT DATA = MARGIN; 4.141 Moreover, the European Communities believes it is not
because the "Standard Zeroing Procedures" may be abstract; or because they are
not published in the Federal Register or at all; or because they do not bear the
title "law" or "regulation"; or because they are adopted by USDOC rather than
Congress; or because USDOC is entitled, subject to certain procedures, to change
or withdraw them for the purposes of future determinations, that they may escape
the panel's scrutiny. In this regard, the European Communities notes that the
Manual and "Standard Computer Programs" can only be correctly described as
having, at least potentially, some legal effects. Indeed, like United States
anti-dumping laws, regulations and administrative procedures, including Policy
Bulletins, which the European Communities argues are also measures, the Manual
is published by the USDOC on the internet. The Manual and the "Standard Computer
Programs" might not have the same force of law as the Tariff Act, but to assert
that they are worthless in United States courts would be to overstate the point.
In reality, USDOC treats the "Standard Zeroing Procedures" as binding, at least
until changed. 4.142 The European Communities argues that a computer program
and the procedures it contains are perhaps the paradigm example of normative
rules that apply mechanistically and automatically to a given set of facts,
without further human intervention. There is no room for administrative or
judicial interpretation. The effect of the "Standard Zeroing Procedures" in
future cases is utterly predictable. The "Standard Zeroing Procedures" provide
certainty and security (at least for United States industry) for the conduct of
future trade. They represent a degree of purity in normative terms that makes
them ideally suited as the vehicle by which the problem or matter can
best be apprehended and dealt with at its root. To this end, the European
Communities considers that the "Standard AD Margin Program" does "set out �
norms". The program is repeatedly referred to as the "standard", which the
European Communities contends for the purposes of this dispute equates to the
"norm" or what is "normal". The relevant norms are "set out" in the sense that
they are expressed in the particular computer language used by the United
States, and recorded both electronically and on paper, for all to see. The
European Communities further considers that the program "establishes rules", not
least because, like the Manual, which refers to it, it is published or issued
under the authority of USDOC, and provides guidance for USDOC officials. 4.143 According to the European Communities, there is no
reason why a "piece of computer software" should be considered incapable of
"setting out rules or norms". Computer programming language is just that � a
language, like any other. Understanding it might require special knowledge or
translation � that does not mean it is not a measure. A Member might choose to
render its entire municipal anti-dumping law in computerised format � even to
the exclusion of any other format � that would not mean that it would escape
from the disciplines of the AD Agreement. If an investigating authority
establishes a rule, especially one such as the "Standard Zeroing Procedures",
the purpose and effect of which is that equivalent situations are automatically
and consistently treated equally, then that rule must by definition be capable
of affecting the operation of the AD Agreement. It therefore necessarily
falls within the phrase "any matter affecting the operation of the Agreement"69,
and may consequently be referred to this Panel. 4.144 With respect to the claims regarding United States
practice or methodology of zeroing, the European Communities describes what it
is challenging as consisting of using the particular type of methodology
(asymmetry, model zeroing or simple zeroing) repeatedly in a series of specific
determinations, in one specific anti-dumping proceeding after another. According
to the European Communities, the particular factual circumstances of this case,
in which the practice has been lifted up into an abstract document that exists
on paper, and applies automatically, are sufficient for the Panel to find that
the practice being challenged constitutes a "measure".
(b) The United States70 4.145 The United States rejects the claim that the "Standard
AD Margin Program" can be regarded as a "measure" for purposes of WTO dispute
settlement. The United States notes that the Appellate Body has indicated that
instruments setting out rules or norms can be challenged "as such" in a WTO
dispute. However, according to the United States, the "Standard AD Margin
Program" does not set out or establish rules or norms. The United States
contends that it is a piece of computer software that, at most, implements rules
or norms adopted by a decision-maker in some other instrument, such as a
regulation or a determination in a specific anti-dumping proceeding. To the
extent that the European Communities argues that the legal status of lines of
computer code are the same as USDOC's regulations, the United States contends
that the European Communities is incorrect. Under United States law, validly
promulgated regulations are binding on USDOC, the public, and the courts.
USDOC's computer programs are not binding on anyone. Finally, the United States
points to footnote 6 of the memorandum of Ms. Owenby, submitted by the European
Communities as exhibit EC-46, where according to the United States, Ms. Owenby
acknowledges that the variables used in USDOC's "AD Margin Program" depend upon
the USDOC programmer. The United States contends that this further undermines
the claim that there is a "standard" USDOC computer program, and emphasizes that
the computer program used in any particular proceeding reflects policy choices,
rather than mandating them. 4.146 The United States does not contest the assertion of the
European Communities that the Manual is a "measure" for purposes of this WTO
dispute. 4.147 On the question of whether the "practice" identified by
the European Communities can amount to a "measure", the United States argues
that repeated application of a particular measure � such as a statute � in the
same manner, does not somehow create a new and separate "autonomous measure."
Rather, it is just what the definition implies � it is a repeated application of
a measure. The United States asserts that when panels have been asked to
find that a "practice" of the type described by the European Communities
constitutes a measure that can be challenged as such, they have uniformly
declined. According to the United States, the panel in US � India Steel Plate
correctly noted: "That a particular response to a particular set of
circumstances has been repeated, and may be predicted to be repeated in the
future, does not, in our view transform it into a measure. Such a conclusion
would leave the question of what is a measure vague and subject to dispute
itself, which we consider an unacceptable outcome. Moreover, we do not
consider that merely by repetition, a Member becomes obligated to follow its
past practice."71 4.148 Thus, according to the United States, the European
Communities has failed to explain how the repeated application of one measure �
such as a statute � in the same manner gives rise to a separate and autonomous
"measure." Moreover, the United States notes, when the Panel, in its Question
74, asked the European Communities to distinguish the situation in this dispute
from that confronting the panel in US � India Steel Plate, the European
Communities gave a non‑answer, referring to its answer to Panel Question 51.
However, the United States argues that the European Communities' answer to
Question 51 simply contains the European Communities' explanation as to why the
"Standard AD Margin Program" is a "measure" distinct from "practice." It does
not address the issue of whether "practice" can be considered a measure that can
be subject to an "as such" challenge in WTO dispute settlement.
(i) The "Standard Zeroing Procedures" (or the United
States practice or methodology of zeroing) are inconsistent with the AD
Agreement, the GATT 1994 and the WTO Agreement
(a) The European Communities72 4.149 The European Communities refutes the application of the
"mandatory/discretionary" doctrine as a mechanistic rule for determining when
"as such" measures can be WTO-inconsistent. According to the European
Communities, the relevant standard for determining the consistency of an "as
such" measure with the AD Agreement is whether or not the measure is in
conformity with the relevant provision of the AD Agreement. The European
Communities argues that this is clear from Article 18.4 of the AD Agreement
and Article XVI:4 of the WTO Agreement. Thus, the test is not whether the
measure is "mandatory" as opposed to "discretionary", or whether or not it is
"binding"73, or whether or not it obliges a Member to act in a WTO inconsistent
manner in all cases.74 To find an "as such" measure in violation of a WTO
obligation, it would suffice that it result in a WTO-inconsistent outcome only
in some cases. 4.150 Whether legislation is mandatory or discretionary is
one question that must be considered along with a multitude of others �
including, importantly, an inquiry into the nature and content of the relevant
WTO provision, and whether it permits the kind of discretion that is allowed by
the legislation at issue � in assessing the compatibility of a measure with a
WTO obligation. One major reason why the "mandatory/discretionary" doctrine
cannot be a mechanistic rule is that State measures are always, by definition,
mandatory in some sense and very often leave some element of discretion. There
are always some exceptions possible to any mandatory rule. 4.151 In any event, whichever test that might be applied in
the present case, the "Standard Zeroing Procedures", and the "Standard AD Margin
Program", are "as such" inconsistent with the AD Agreement. Article 2.4.2
of the AD Agreement mandates that Members must have a normal or standard
rule as described in that provision. The "Standard AD Margin Program" contains a
different standard or normal rule. The "Standard AD Margin Program" and its
"Standard Zeroing Procedures" are not therefore in conformity with the AD
Agreement. As they stand, without any modification of the relevant lines of
computer code, the "Standard AD Margin Program" and the "Standard Zeroing
Procedures" do preclude consistency with the AD Agreement. The fact that
they can in theory be changed, just like the Regulations or the Tariff Act, is
irrelevant. Furthermore, the mathematical character of a computer program makes
this finding inevitable, once it is established that model zeroing, zeroing with
respect to other averaging groups, simple zeroing and zeroing within the context
of importer-specific assessment rates, are inconsistent with the AD
Agreement75, and that these zeroing methodologies are incorporated into the
"Standard Computer Programs", and particularly the "Standard Zeroing
Procedures", as expressly stated in the Manual. 4.152 To the extent that the "Standard Zeroing Procedures"
used to automatically effect model zeroing or zeroing with respect to other
averaging groups in original investigations are considered to be "as such"
inconsistent with Articles 2.4 and/or 2.4.2, the European Communities argues
that it follows that they must also be "as such" inconsistent with Articles 1,
5.8, 9.3 and 18.4 of the AD Agreement, and Articles VI:1 and VI:2 of GATT
1994; and Article XVI:4 of the WTO Agreement.76 4.153 Likewise the European Communities argues that to the
extent that the "Standard Zeroing Procedures" used in periodic reviews to
unconditionally effect simple zeroing, for the purpose of calculating both an
assessment rate and a cash-deposit rate, are as such inconsistent with Articles
2.4 and/or 2.4.2, it follows that they must also be as such inconsistent with
Articles 1, 9.3, 11.1, 11.2 and 18.4 of the AD Agreement, and Articles
VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement.77 Furthermore,
the European Communities argues that to the extent that the zeroing methodology
is operative under the "Standard Zeroing Procedures" whenever importer-specific
assessment rates are calculated in a periodic review, the "Standard Zeroing
Procedures" must also, for this reason, be "as such" inconsistent with Articles
2.4, 2.4.2 and 9.3 of the AD Agreement. 4.154 Finally, the European Communities submits that the same
conclusions should be reached for new shipper, changed circumstances and sunset
reviews. To the extent that the "Standard Zeroing Procedures" are used in these
review proceedings to automatically effect model zeroing, simple zeroing or
zeroing with respect to other averaging groups, they must be considered as such
inconsistent with Articles 2.4 and/or 2.4.2, and consequently, also Articles 1,
9.3, 9.5, 11.1, 11.2, 11.3 and 18.4 of the AD Agreement; Articles VI:1
and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement.78
(b) The United States79 4.155 The United States asserts that it is well established
pursuant to the "mandatory/discretionary" test, that if a measure mandates
WTO-inconsistent action or precludes WTO-consistent action, the measure is
WTO-inconsistent "as such." According to the United States, the
"mandatory/discretionary" test has been consistently applied in GATT and WTO
dispute settlement proceedings. The test reflects the fact that, as the
Appellate Body has noted, panels may not presume bad faith on the part of
Members. Thus, if a measure provides a Member with the discretion to act in a
WTO-consistent manner, it may not be presumed that the Member will exercise that
discretion in bad faith. The United States submits that in the absence of the
"mandatory/discretionary" test, the assessments of Members over many years on
how to judge whether their measures are consistent with GATT and then WTO rules
would be severely undermined. 4.156 According to the United States, the panel in Korea �
Commercial Vessels80 rejected the very interpretation of the
"mandatory/discretionary" test advocated by the European Communities in this
dispute. In this regard, the United States contends that it is significant that
the European Communities has been unable to cite a single panel or Appellate
Body report that has followed its interpretation in assessing the
WTO-consistency of "as such" measures. 4.157 The United States argues that the European Communities
has failed to show that its claims satisfy the "mandatory/discretionary" test.
The United States contends that, for some of the "measures" at issue, the
European Communities has not demonstrated that the "measures" are mandatory
within the meaning of the test. In other cases, the United States alleges that
the European Communities has failed to make even a prima facie case that
the "measure" in question is mandatory. 4.158 With respect to the Manual, the United States contends
that the European Communities has neither demonstrated that it mandates any
WTO-inconsistent conduct nor established a prima facie case of
WTO-inconsistency. 4.159 According to the United States, the Manual does not
preclude the decision-maker in USDOC from offsetting negative margins nor does
it mandate that the decision-maker in USDOC ignore negative margins. The United
States argues that the Manual does not mandate that the decision-maker in USDOC
do anything, nor does it preclude the decision-maker in USDOC from doing
anything. This is because the Manual is nothing more than a source of guidance
and training for USDOC personnel. As set forth on page one of the "Introduction"
section of the Manual: "This manual is for the internal guidance of Import
Administration (IA) personnel only, and the practices set out are subject to
change without notice." 4.160 The United States contends that the European
Communities provides no evidence to support the assertion that the "USDOC"
considers itself to be bound by the Manual. Indeed, what little evidence the
European Communities does provide on this point contradicts its own assertion.
The European Communities cites United States court decisions that expressly
state that the Manual is "not a binding legal document ... ." If USDOC were to
treat the Manual as binding, it would be in violation of the United States
Administrative Procedure Act. 4.161 The United States submits that by referring to the
"USDOC", the European Communities obscures the fact that the United States
anti-dumping law is administered by human beings, and that in the case of USDOC
there are two categories of human beings: (1) the decision-maker; and (2) the
staff that implement the decision-maker's decisions. Here, the relevant
decision-maker is the Assistant Secretary of Commerce for Import Administration.
For purposes of the mandatory/discretionary test, the question is whether the
Assistant Secretary is obligated to follow the Manual. Clearly he is not; as
indicated above, the Manual states that he can change the practices set out in
the Manual "without notice." Thus, if the Assistant Secretary decided in a
particular case to offset negative margins, the Manual could not preclude him
from doing so. 4.162 An even more fundamental flaw, the United States
argues, is that the European Communities has failed to identify the specific
portions of the Manual that allegedly mandate the WTO-inconsistent behaviour
about which the European Communities complains. By failing to do so, the
European Communities has failed to make its prima facie case.
4.163
In US � Gambling, the United States notes, the
Appellate Body emphasized the importance of the requirement that a complaining
party make its prima facie case. According to the Appellate Body: "� it is incumbent upon a party to identify in its
submissions the relevance of the provisions of legislation � the evidence �
on which it relies to support its arguments. It is not sufficient merely to
file an entire piece of legislation and expect a panel to discover, on its
own, what relevance the various provisions may or may not have for a party's
legal position."81 4.164 The United States asserts that the European Communities
has failed to demonstrate how or why each portion of the Manual that it is
challenging is inconsistent with United States' WTO obligations. According to
the United States, in its Question 53, the Panel essentially asked the European
Communities to identify the portions of the Manual that it is challenging. The
European Communities replied that it "is challenging each part of the Manual
referenced in the factual part of its first written submission, considered both
in isolation and together, including the instruction to use the Standard AD
Margin Program." However, the United States notes, the cited portions of the
European Communities' first submission identify the entire Manual as a measure
that the European Communities is challenging. Thus, if the European Communities
is to be taken at its word, it is challenging the entire Manual because
the entire Manual is referenced in its first written submission. 4.165 The United States asserts that the European Communities
has not explained how the entire Manual runs afoul of United States' WTO
obligations. The United States notes that most of the Manual has nothing to do
with the subject of this dispute. Even where the European Communities cites to
more specific portions of the Manual in the referenced portion of its first
submission, the United States argues, these portions would appear to have
nothing to do with this dispute, and the European Communities has failed to
explain how these specific portions are WTO-inconsistent. 4.166 In short, the United States argues, to paraphrase the
Appellate Body, the European Communities has filed the entire Manual and expects
the Panel to discover, on its own, what relevance the various provisions of the
Manual may or may not have for the European Communities' legal position. While
the European Communities keeps referring to its desire to "cover all the bases,"
the United States does not see this as any different from Antigua's approach in
US � Gambling. As the Appellate Body has indicated, such an approach is
neither sufficient nor acceptable. 4.167 With respect to the "Standard AD Margin Program", even
assuming that it could be a "measure," the United States argues that it does not
preclude the USDOC decision-maker from offsetting negative dumping margins nor
does it require the USDOC decision-maker to ignore negative dumping margins. If
the USDOC decision-maker decided to offset negative dumping margins in a
particular case, his decision would be implemented simply by using a different
set of computer instructions. 4.168 As regards the claims of the European Communities with
respect to United States' alleged zeroing practice and methodology, the United
States argues that even if past instances of not offsetting by USDOC were deemed
to constitute a "measure", the European Communities' claims would have to be
rejected because this alleged "measure" does not mandate anything, let alone
anything inconsistent with a WTO obligation under the "mandatory/discretionary"
test. Under United States law, there is no principle of administrative stare
decisis, and administrative agencies, such as USDOC, may depart from prior
practice as long as they provide a reasoned explanation for doing so. According
to the United States, the European Communities has failed to argue, let alone
demonstrate, that USDOC "practice" mandates a breach within the meaning of the
"mandatory/discretionary" distinction. 4.169 Finally, the United States argues that the claims of
the European Communities with respect to new shipper, changed circumstances and
sunset reviews, are unfounded. The United States argues that the European
Communities does not offer any independent arguments concerning these types of
reviews. The United States contends that it has demonstrated that the Panel
should reject the European Communities' claims insofar as original
investigations and periodic reviews are concerned; and for the same reasons, the
Panel should reject the claims of the European Communities with respect to new
shipper, changed circumstances and sunset reviews.
1 WT/DS294/1 of 19 June 2003 and WT/DS294/1/Add.1 of 15
September 2003. 2 WT/DS294/7.
3 WT/DS294/7/Rev.1.
4
Appellate Body Report, US � Shrimp, para. 108.
5 A similar approach of considering arguments in amicus
curiae briefs to the extent that such arguments were adopted by the parties
to the dispute was taken by the panels in EC � Asbestos; US � Softwood
Lumber IV ; and US � Softwood Lumber VI .
6 Tariff Act, Section 771(25).
7 Regulations, Section 351.414(d)(1).
8 Regulations, Section 351.414(d)(2).
9 Manual, Chapter 4, pp. 8 and 9 ; Chapter 5, page 9, second
paragraph; Chapter 9, pp. 23 and 27.
10 Regulations, Section 351.414(d)(1); Manual, Chapter 7, pp. 27
and 28; Chapter 9, pp. 23 and 27.
11 The European Communities considers that this concept does not
correspond to the term "margin of dumping" as used in, for example, Articles
2.4.2 and 9.3 of the AD Agreement (see infra.).
12 Manual, Chapter 6, p. 9: "The PUDD is the amount of dumping
duties that would have been collected from the U.S. sales under investigated
[sic] had an antidumping duty order been in effect during the period
investigation [sic] (i.e., before the investigation began). The PUDD is used to
establish a dumping margin which will remain in effect until the annual reviews
established [sic] rates based upon the entries for which liquidation was
suspended pursuant to the preliminary determination and for the year following
the Antidumping Duty Order. � The calculation of the PUDD is, in effect, a
two-step process. First, PUDD is determined for each U.S. sale by multiplying
the per unit dollar margin for that sale by the total number of items sold.
Second, the PUDD for each of the U.S. sales are summed to arrive at a total
PUDD. The total PUDD is then used to calculate a weighted-average margin for the
investigation �"
13 Regulations, Section 351.414 (d)(2).
14 The period of time covered by United States duty assessment
proceedings is normally twelve months. However, in the case of the first
assessment proceeding following the issuance of the Notice of Antidumping Duty
Order, the period of time may extend to a period of up to 18 months in order to
cover all entries that may have been subject to provisional measures.
15 Regulations, Section 351.414 (c)(2); Manual, Chapter 6, p. 7.
16 The European Communities considers that this concept does not
correspond to the term "margin of dumping" as used in, for example, Articles
2.4.2 and 9.3 of the AD Agreement (see infra.).
17 Tariff Act, Section 751(a)(2)(A); Section 777A(d)(2).
18 Regulations, Section 351.212(b)(1).
19 Manual, Chapter 18, pp. 11 and 12; Regulations, Section
351.212(b)(1).
20 Regulations, Section 351.212(b)(1).
21 Exhibits EC-1 to EC-15; EC-First Written Submission, paras.
48-56, 63 and 102; EC-Rebuttal Submission, para. 55.
22 Exhibits EC-16 to EC-31; EC-First Written Submission, paras.
57-61, 148 and 211.; EC-Rebuttal Submission, para. 91.
23 In response to a question from the Panel, the European
Communities indicated that it was not challenging the United States' Statement
of Administrative Action as a separate measure. EC-Response to Panel Question
50.
24 Exhibits EC-1.1.1-1.1.2, USDOC case number A-475-829, 67 Fed.
Reg. 3159 of 23 January 2002 (amended: 67 Fed. Reg. 8228, 22 February 2002).
25 Exhibits EC-1.2.1-1.2.2, USDOC case number A-475-829, 67 Fed.
Reg. 10384 of 7 March 2002 (amended: 68 Fed. Reg. 58660, 10 October 2003).
26 Ibid.
27 EC-First Written Submission, paras. 21-24, 48-55; EC-Request
for the Establishment of a Panel, p. 1.
28 EC-First Written Submission, para. 56.
29 Exhibit EC-16, USDOC case number A-475-801, 67 Fed. Reg.
55780, 30 August 2002.
30 EC-First Written Submission, paras. 37-38, 57-60; EC-Request
for the Establishment of a Panel, pp. 1-2.
31 EC-First Written Submission, para. 61. The European
Communities asserts that this same methodology is systematically applied by the
United States "in all reviews including so-called newcomer review
investigations, changed circumstances review investigations and sunset review
investigations". EC-Request for the Establishment of a Panel, p. 2.
32 EC-First Written Submission, para. 226.
33 US-First Written Submission, paras. 25-28; US-Second Written
Submission, para. 97.
34 US-First Written Submission, paras. 16-17.
35 EC-Oral Statement at the First Substantive Meeting of the
Panel, paras. 12 to 14; EC-Rebuttal Submission, paras. 11-19, 42-44, 56-63 and
65-66; EC-Oral Statement at the Second Substantive Meeting of the Panel with
Parties, paras. 2-5; EC-Response to Panel Question 2.
36 US-First Written Submission, paras. 18-19; US-Second Written
Submission, paras. 38-39.
37 Panel Report, Argentina � Poultry Anti-Dumping Duties,
para. 7.341, footnote 223.
38 EC-Rebuttal Submission, paras. 45-54.
39 US-First Written Submission, para. 22.
40 EC-First Written Submission, paras. 64-74, 149-160;
EC-Rebuttal Submission, paras. 92-106; EC-Oral Statement at the First
Substantive Meeting of the Panel, paras. 10-11; EC-Oral Statement at the Second
Substantive Meeting of the Panel, paras. 44-47; EC-Responses to Panel Questions
23-25, 27, 33, 35, 37-38, 42 and 47; and EC-Responses to Questions Posed by the
Panel at the Second Substantive Meeting paras. 1.27.
41 Appellate Body Report, EC � Bed Linen.
42 Appellate Body Report, US � Corrosion-Resistant Steel
Sunset Review.
43 Appellate Body Report, US � Softwood Lumber V .
44 Panel Report, Argentina � Poultry Anti-Dumping Duties,
para. 7.362.
45 US-First Written Submission, paras. 59-69; US-Second Written
Submission, paras. 18-29; US-Opening Statement at the First Substantive Meeting
of the Panel, paras. 8-9, 11 and 13; US-Opening Statement at the Second
Substantive Meeting of the Panel, paras. 66-7; US-Responses to Panel Questions
22, 26, 29-30, 34, 36-37 and 39-40; US-Responses to Questions Posed by the Panel
at the Second Substantive Meeting, paras. 1-4.
46 Panel Report, Egypt � Steel Rebar, para. 7.335.
47 EC-First Written Submission, paras. 75-89, 161-182; EC-Second
Written Submission, paras. 112-218; EC-Responses to Panel Questions 4, 6, 9,
11-12, 14-18, 20 and 21; EC-Closing Statement at the First Substantive Meeting
of the Panel, paras. 2-7; EC-Opening Oral Statement at the Second Substantive
Meeting of the Panel, paras. 1-40; EC-Closing Oral Statement at the Second
Substantive Meeting of the Panel, paras. 1-21.
48 Appellate Body Report, EC � Bed Linen.
49 Appellate Body Report, US � Softwood Lumber V.
50 US-First Written Submission, footnote 31.
51 Appellate Body Report, EC � Bed Linen.
52 Appellate Body Report, US � Softwood Lumber V.
53 US-First Written Submission, paras. 29-58; US-Second Written
Submission, paras. 5-17 and 79-96; US-Opening Statement at the First Substantive
Meeting of the Panel, paras. 10-19, 22-24; US-Closing Statement at the First
Substantive Meeting of the Panel, para. 112; US-Opening Statement at the Second
Substantive Meeting of the Panel, paras. 4-7; US-Closing Statement at the Second
Substantive Meeting of the Panel, para. 18; US-Responses to Panel Questions 5,
8-9, 10-11, 13-14, 16-17 and 19.
54 Panel Report, Argentina � Poultry Anti-Dumping Duties,
para. 7.357.
55 Panel Report, Argentina � Poultry Anti-Dumping Duties,
para. 7.357.
56 EC-First Written Submission, paras 90-93; EC-Rebuttal
Submission, para. 64.
57 US-First Written Submission, paras. 108-110; US-Second
Written Submission, footnote 70.
58 EC-Response to Panel Question 32.
59 EC-First Written Submission, para. 102.
60 EC-First Written Submission, para. 102, p. 37.
61 EC-First Written Submission, paras 187-199; EC-Rebuttal
Submission, para. 219; EC-Response to Panel Question 69; EC-Closing Oral
Statement at the Second Substantive Meeting of the Panel, paras. 48-51.
62 US-Second Written Submission, para. 36.
63 EC-First Written Submission, paras. 94-101, 200-210;
EC-Rebuttal Submission, paras. 65 and 222-232.
64 US-First Written Submission, paras. 49-54 and footnote 47.
65 Panel Report, Argentina � Poultry Anti-Dumping Duties,
paras. 7.355-7.357.
66 EC-First Written Submission, paras. 103-125 and 212;
EC-Rebuttal Submission, paras. 67-79; EC-Responses to Panel Questions 51-53;
EC-Opening Statement at the Second Substantive Meeting of the Panel, paras.
40-44; EC-Closing Statement at Second Meeting with the Panel, paras. 55-59.
67 DSU, Article 3.2.
68 In particular, the European Communities refers to: Appellate
Body Report, Guatemala � Cement I, para. 69, footnote 47; GATT
Panel Report, Japan � Semi-Conductors, para. 107; GATT Panel Report,
Japan � Agricultural Products I .
69 Article 17.2 of the AD Agreement.
70 US-First Written Submission, paras. 81-83 and 90-97;
US-Second Written Submission, paras. 47-49 and 60-64; US-Closing Statement at
the Second Meeting, paras. 3-7; US-Responses to Panel Questions 59-61 and 63.
71 Panel Report, US � Steel Plate, para. 7.22.
72 EC-First Written Submission, paras. 103, 126-129, 146-147,
212-214 and 224-225; EC-Rebuttal Submission, paras. 80-82; EC-Opening Statement
at the Second Substantive Meeting of the Panel, paras. 52-59; EC-Responses to
Panel Questions 54, 62, 67 and 71.
73 Appellate Body Report, US � Oil Country Tubular Goods
Sunset Reviews, para. 187.
74 Appellate Body Report, US � Oil Country Tubular Goods
Sunset Reviews, para. 247 and paras. 265-269.
75 The European Communities' arguments with respect to its claim
that model zeroing, zeroing with respect to other averaging groups, simple
zeroing and zeroing within the context of importer-specific assessment rates are
inconsistent with the AD Agreement are summarised above at paragraphs
4.7-4.27 and 4.36-4.86.
76 The European Communities' arguments with respect to the
alleged consequential violations of Articles 1, 5.8, 9.3 and 18.4 of the AD
Agreement, and Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the
WTO Agreement are summarised above at paragraphs 4.121, 4.126-4.130.
77 The European Communities' arguments with respect to the
alleged consequential violations of Articles 1, 9.3, 11.1, 11.2 and 18.4 of the
AD Agreement, and Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4
of the WTO Agreement are summarised above at paragraphs 4.122, 4.126-4.130.
78 The European Communities' arguments with respect to the
alleged consequential violations of Articles 1, 9.3, 9.5, 11.1, 11.2 and 18.4 of
the AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4
of the WTO Agreement are summarised above at paragraphs 4.122, 4.126-4.130.
79 US-First Written Submission, Executive Summary, paras. 35-37,
44-46, 48, 51 and 57-58; US-Second Written Submission, paras. 40-64, paras.
51-58.; US-Opening Statement at the First Substantive Meeting of the Panel,
paras. 20-21; US-Responses of 7 April 2005 to questions 55-56, 64-65.
80 Panel Report, Korea � Commercial Vessels, paras.
7.60-7.67.
81 Appellate Body Report, US � Gambling, para. 140,
footnote 152, quoting from Appellate Body Report, Canada � Wheat Exports,
para. 191. |
|