WORLD TRADE
ORGANIZATIONTN/RL/W/113
6 June 2003
(03-2928)
Negotiating Group on Rules Original:  English
PROPOSAL ON PROHIBITION OF ZEROING
Paper from Brazil;  Chile;  Columbia;  Costa Rica;  Hong Kong, China;  Israel;  Japan;
Korea;  Mexico;  Norway;  the Separate Customs Territory of Taiwan, Penghu,
Kinmen and Matsu;  Singapore;  Switzerland and Thailand
The following communication, dated 5 June 2003, has been received from the delegations of
Brazil;  Chile;  Colombia;  Costa Rica;  Hong Kong, China;  Israel;  Japan;  Korea;  Mexico;  Norway;
the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu;  Singapore;  Switzerland and
Thailand.
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This proposal concerns the Prohibition of Zeroing in the calculation of dumping margins.  As
it will be recalled, this issue has been identi fied in document TN/RL/W/6.  Other Members have
referred to this issue in document TN/RL/W/26 and TN/RL/W/66.
This proposal indicates one way to overcome or resolve the problem of the practice of zeroing
in investigations and reviews.  The discussions in  the Negotiating Group may assist in improving this
proposal.  Consequently, we reserve our right to m odify or complement the proposal as appropriate.
In preparing and/or analyzing specific provisions, it is clear that amendment of the existing
text may have an impact on other Articles of the AD Agreement, which have so far not been explicitly
addressed.  These links cannot be fully addressed until we have seen a comprehensive overview ofproposed amendments.  Consequently, we also reserve the right to make proposals on provisions
which may not have been explicitly addressed so far for clarification or improvement.
Issue :  Prohibiting the Practice of Zeroing
Relevant Provision :  Articles 2.1, 2.4, 2.4.2, 9.3, 9.5, 11.2 and 11.3
Description of Problem (TN/RL/W/6) :
Article VI:1 of the General Agreement on Tariffs and Trade 1994 (GATT) addresses dumping
in the context of “a product” being introduced into the commerce of an importing country at less than
its normal value.  Similarly, Article VI:2 of the GA TT provides for the levying of anti-dumping duties
on a product.  This reference to a “product” is carried over to the AD Agreement.  Article 2.1 provides
that, for the purpose of the AD Agreement, “a product” is to be considered as being dumped, if the
export price of “the product” is less than the comparable price for the like product.  Articles 5.2(ii)and 12.2.1(ii) states that an AD investigation must be conducted with respect to the (alleged dumped)
product .  Article 6.10 obliges the authorities to determine an individual margin of dumping for each
known exporter or producer of the product under investigation.TN/RL/W/113
Page 2
Thus, it is clear that the basic principle of the AD Agreement is that an investigation shall
determine whether imports from an exporter or producer of a product as a whole  have been dumped
in the importing market, not whether there are individual sales of that product or models of that
product, which have been sold below normal value.  In this sense, the establishment of dumping
margin under the Agreement should be made by evaluating the product under investigation as awhole, not just a portion of the products like some models or specifications.  In this context, it should
be noted that we will submit a separate proposal on the definition of “a product under investigation”.
Article 2.4 of the AD Agreement seeks to ensure a “fair comparison” between export price
and the normal value of the product under considerat ion.  As part of a fair comparison, Article 2.4.2
defines the basis of the comparison that should be made between export prices of all comparable
transactions and normal value, namely comparison on a weighted average-to-weighted average ortransaction-to-transaction basis. The Appellate Body confirmed this basic principle in European
Communities - Anti-Dumping Du ties on Imports of Cotton-Type Bed Linen from India.
1
Although there are many issues relating to “fair comparison” under Article 2.4 of the AD
Agreement that should be addressed and such issues are interlinked, this proposal focuses on theprohibition of “zeroing”.  We will submit proposals addressing other issues related to “fair
comparison”, including issues related to the calcu lation methodologies set out in Article 2.4.2 in a
separate paper.
During the course of an investigation some Members have adopted a practice whereby they
first calculate the margins of dumping on a model-specific, specification-specific, or sale-specific
basis within the product under consideration.  In calculating the entire margin of dumping for a
producer, these Members treat comparisons with individual negative dumping margins as zero rather
than using these negative margins of dumping to offset positive margins of dumping found on
comparison of other models, specifications, or sales.  This practice, commonly known as “zeroing,”overstates the margin of dumping of the imported product because it only considers positive margins
of dumping and not negative margins of dumping in arriving at the individual margin of dumping for
a producer as a whole of the product under consideration.
The arbitrary creation of individual margin of dumping for a producer based on zeroing of
negative margins of dumping cannot be justified in investigations or in reviews under Articles 9 and
11.  Therefore, Article 2.4.2, which sets forth the basis of the comparison between export prices andnormal value, needs to be clarified so as to explici tly rule out the practice of zeroing in investigations
and in reviews under Articles 9 and 11.
2
As such, we are making the following proposals.
                                                     
1 WT/DS141/R, WT/DS141/AB/R, adopted 12 March 2001.  The report states “From the wording of
{Article 2.1}, it is clear to us that the  Anti-Dumping Agreement  concerns the dumping of a  product , and that,
therefore, the margins of dumping to which Article 2.4.2 refers are the margins of dumping for a  product .”  Id.
at para. 51.  The report further states “… we see noth ing in Article 2.4.2 or in any other provision of the Anti-
Dumping  Agreement  that provides for the establishment of ‘the existence of margins of dumping’ for types or
models of the product under investigation; to the contrary, all references to the establishment of the ‘existence ofmargins of dumping’ are references to the product  that is subject of the investigation.”  Id. at para. 53.
2 In the context of the “Proposal on Reviews” (TN/RL/W/83), which proposes that the provisions of
Article 2 to 6 shall apply, whenever applicable, to revi ews, the prohibition of zeroing which is to be provided in
Article 2.4.2 should apply to the determination of dumping margins in reviews as well.TN/RL/W/113
Page 3
Elements of a Solution:
1. Prohibit the Practice of “Zeroing” in the Calculation of Dumping Margins in All AD
Proceedings
Proposals:
Amend Article 2.4.2 to explicitly provide that regardless of the basis of the comparison of
export prices to normal value (i.e. weighted average-to-weighted average or transaction-to-
transaction, or weighted average-to-transaction), all positive margins of dumping and negative
margins of dumping found on imports from an exporter or producer of the product subject to
investigation or review must be added up.
Further amend the first sentence of Article 2.4.2 to clarify that the Article applies to initial
investigations and all subsequent reviews under Articles 9 and 11.3
Explanation:
These proposals are intended to clarify that regardless of the basis of the comparison
methodology used by particular authorities, positive margins of dumping and negative margins of
dumping must be added up in the determination of the margin of dumping for the imports of the
product as a whole in both the initial investigations and subsequent reviews.
2. Clarify That A Single Margin of Dumping Must Be Calculated for the Entire Period of
Investigation or Review.
Proposal:
Add a provision to Article 2.4 clarifying that, regardless of the comparison methodology, if
margins of dumping are determined separately for imports during multiple portions of the entire
period of an investigation or review, the margin of  dumping to be determined in the investigation or
review must be a single margin of dumping for all imports during the entire period of investigation or
review.
Explanation:
It is possible to effect “zeroing” by subdividing the period of investigation or review and
calculating separate margins for each such period (e.g. month, quarter, semi-annual).  Calculating
margins for subdivided periods separately and not offsetting the positive margins with negativemargins for the entire period of investigation or review can have the same effect as zeroing.  The fact
that an exporter is dumping in some portion of the period of investigation or review, but has no
margin of dumping on exports as a whole during the full period of investigation or review, does not
justify finding margins of dumping.
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3 This proposal is also related to our previous proposal on reviews, WT/RL/W/83 (25 April 2003).