WORLD TRADE
ORGANIZATIONWT/DS141/AB/R
1 March 2001
(01-0973)
Original: English
EUROPEAN COMMUNITIES – ANTI-DUMPING DUTIES ON IMPORTS
OF COTTON-TYPE BED LINEN FROM INDIA
AB-2000-13
Report of the Appellate BodyWT/DS141/AB/R
Page i
I. Introduc tion................................................................................................................. ................1
II. Arguments of the Participants  and the Third Particip ants ..........................................................4
A. Claims of Error by the Eu ropean Communities – Appellant.............................................. 4
1. Article 2.4.2 of the  Anti-Dumping Agreement – Practice of "zeroing" ............4
B. Arguments of I ndia – Appellee............................................................................................. 5
1. Article 2.4.2 of the  Anti-Dumping Agreement – Practice of "zeroing" ............5
C. Claims of Error by  India – Appellant.................................................................................. 6
1. Article 2.2.2(ii) of the  Anti-Dumping Agreement  – Data from "other
exporters or producers" .....................................................................................6
2. Article 2.2.2(ii) of the  Anti-Dumping Agreement  – "actual amounts
incurred and re alized"........................................................................................8
D. Arguments of the Europe an Communities – Appellee ........................................................ 8
1. Article 2.2.2(ii) of the Anti-Dumping Agreement – Data from "other
exporters or producers" .....................................................................................8
2. Article 2.2.2(ii) of the  Anti-Dumping Agreement  – "actual amounts
incurred and re alized"........................................................................................9
E. Arguments of the Th ird Partic ipants ................................................................................... 9
1. Egypt..................................................................................................................9
2. Japan................................................................................................................10
3. United States....................................................................................................11
III. Issues Raised in this Appeal ............................................................................................... ......12
IV. Article 2.4.2 of the  Anti-Dumping Agreement .........................................................................12
V. Article 2.2.2(ii) of the  Anti-Dumping Agreement ....................................................................21
VI. Findings and Conclusions.................................................................................................... .....27WT/DS141/AB/R
Page 1
WORLD TRADE ORGANIZATION
APPELLATE BODY
European Communities – Anti-Dumping Duties
on Imports of Cotton-Type Bed Linen from
India
European Communities,  Appellant/Appellee
India,  Appellant/Appellee
Egypt,  Third Participant
Japan,  Third Participant
United States,  Third ParticipantAB-2000-13
Present:Bacchus,  Presiding Member
Abi-Saab,  MemberFeliciano,  Member
I. Introduction
1. The European Communities and India appeal certain issues of law and legal interpretations in
the Panel Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed
Linen from India (the "Panel Report").1  The Panel was established to consider a complaint by India
with respect to definitive anti-dumping duties imposed by the European Communities on imports of
cotton-type bed linen.
2. On 13 September 1996, the European Communities initiated an anti-dumping investigation
into certain imports of cotton-type bed linen from, inter alia , India.2  The European Communities
made its preliminary affirmative determination of dumping, injury and causal link on 12 June 1997,and imposed provisional anti-dumping duties with effect from 14 June 1997.
3  The European
Communities made its final affirmative determination of dumping, injury and causal link on
                                                     
1WT/DS141/R, 30 October 2000.
2Panel Report, para. 2.3.
3Commission Regulation (EC) No 1069/97 of 12 June 1997 imposing a provisional anti-dumping duty
on imports of cotton-type bed linen originating in Egypt, India and Pakistan, Official Journal, No L 156,13 June 1997, p. 11.WT/DS141/AB/R
Page 2
28 November 1997, and imposed definitive anti-dumping duties with effect from 5 December 1997.4
The factual aspects of this dispute are set out in greater detail in the Panel Report.5
3. The Panel considered claims by India that, in imposing the anti-dumping duties on imports of
cotton-type bed linen, the European Communities acted inconsistently with Articles 2.2, 2.2.2, 2.4.2,
3.1, 3.4, 3.5, 5.3, 5.4, 12.2.2, and 15 of the  Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994  (the " Anti-Dumping Agreement ").6
4. In its Report, circulated to Members of the World Trade Organization (the "WTO") on
30 October 2000, the Panel concluded that:
… the European Communities did not act inconsistently with its
obligations under Articles 2.2, 2.2.2, 3.1, 3.4, 3.5, 5.3, 5.4, and 12.2.2
of the AD Agreement in:
(a) calculating the amount for profit in constructing normal value
(India's claims 1 and 4),
(b) considering all imports from India (and Egypt and Pakistan)
as dumped in the analysis of injury caused by dumped
imports (India's claims 8, 19, and 20),
(c) considering information for producers comprising the
domestic industry but not among the sampled producers inanalyzing the state of the industry (India's claim 15, in part),
(d) examining the accuracy and adequacy of the evidence prior to
initiation (India's claim 23),
(e) establishing industry support for the application (India's claim
26), and
(f) providing public notice of its final determination (India's
claims 3, 6, 10, 22, 25 and 28).
7
… the European Communities acted inconsistently with itsobligations under Articles 2.4.2, 3.4, and 15 of the AD Agreement in:
                                                     
4Council Regulation (EC) No 2398/97 of 28 November 1997 imposing a definitive anti-dumping duty
on imports of cotton-type bed linen originating in Egypt, India and Pakistan, Official Journal, No L 332,4 December 1997, p. 1.
5Panel Report, paras. 2.1-2.11.
6The Panel did not examine the claims withdrawn by India in the course of the Panel proceedings and
declined to consider certain claims falling outside the scope of its terms of reference.  Furthermore, the Panel
did not deem it necessary nor appropriate to make fi ndings on a number of other claims in light of
considerations of judicial economy.  See Panel Report, para. 7.3.
7Panel Report, para. 7.1.WT/DS141/AB/R
Page 3
(g) determining the existence of margins of dumping on the basis
of a methodology incorporating the practice of zeroing (India's
claim 7),
(h) failing to evaluate all relevant factors having a bearing on the
state of the domestic industry, and specifically all the factors
set forth in Article 3.4 (India's claim 11),
(i) considering information for producers not part of the domestic
industry as defined by the investigating authority in analyzing
the state of the industry (India's claim 15, in part), and
(j) failing to explore possibilities of constructive remedies before
applying anti-dumping duties (India's claim 29).8
5. The Panel recommended that the Dispute Settleme nt Body (the "DSB") request the European
Communities to bring its measure into conformity with its obligations under the  Anti-Dumping
Agreement .9
6. On 1 December 2000, the European Communities notified the DSB of its intention to appeal
certain issues of law covered in the Panel Report and certain legal interpretations developed by thePanel, pursuant to paragraph 4 of Article 16 of the  Understanding on Rules and Procedures
Governing the Settlement of Disputes (the "DSU"), and filed a Notice of Appeal pursuant to Rule 20
of the  Working Procedures for Appellate Review (the " Working Procedures ").
On 11 December 2000, the European Communities filed its appellant's submission.
10 On
18 December 2000, India filed an other appellant's submission.11  On 4 January 2001, Egypt filed a
third participant's submission.  On 8 January 2001, India and the European Communities each filed anappellee's submission.  On the same day, Japan and the United States each filed a third participant's
submission.
12
7. The oral hearing in the appeal was held on 24 January 2001.  The participants and third
participants presented oral arguments and responded to questions put to them by the Members of theDivision hearing the appeal.
                                                     
8Panel Report, para. 7.2.
9Panel Report, para. 7.5.
10Pursuant to Rule 21 of the Working Procedures .
11Pursuant to Rule 23(1) of the Working Procedures .
12Following a joint request by the European Communities and India, the Division hearing the appeal
decided on 12 December 2000, pursuant to Rule 16(2) of the  Working Procedure  and in the light of the
"exceptional circumstances" in this appeal, to extend the time-period for filing the appellee's and third
participant's submissions from 2 January 2001 to 8 January 2001.WT/DS141/AB/R
Page 4
II. Arguments of the Participants and the Third Participants
A. Claims of Error by the European Communities – Appellant
1. Article 2.4.2 of the  Anti-Dumping Agreement – Practice of "zeroing"
8. The European Communities appeals the finding of the Panel that the European Communities
acted inconsistently with Article 2.4.2 of the  Anti-Dumping Agreement   by "zeroing" the "negative
dumping margins" established for certain models or product types of cotton-type bed linen – theproduct under investigation – when calculating the overall rate of dumping for bed linen.  TheEuropean Communities alleges the following specific  errors committed by the Panel in reaching its
finding.
9. The European Communities first claims that the Panel, in making its finding, did not follow
the rules of interpretation of the  Vienna Convention on the Law of Treaties  (the " Vienna
Convention ").
13  In particular, the Panel did not begin its analysis with the text of the provision at
issue, Article 2.4.2, but, rather, with another provision, Article 2.
10. Next, the European Communities submits that the interpretation of the Panel fails to give
proper meaning to the word "comparable" in Articl e 2.4.2.  Article 2.4.2 requires only that weighted
average normal value be compared with weighted average export prices for "comparable"transactions.  By determining a dumping margin for individual product types, i.e., for "comparable"transactions, this is precisely what the European Communities did.
11. Furthermore, the European Communities contends that in this case, the calculation of the
overall   rate of dumping for the product under investigation does not fall within the express terms of
Article 2.4.2.  Article 2.4.2 provides no guidance as to how the "dumping margins" determined forindividual product types should be combined in order to calculate an overall rate of dumping for theproduct under investigation.
12. The European Communities then argues that the Panel's interpretation is based on the
erroneous premise that dumping margins can be established only for the  product   under investigation.
The concept of "dumping margin", as used in the  Anti-Dumping Agreement , may refer not only to the
dumping margin for the  product   under investigation, but also to the dumping margin established for
each  product type  or for each  individual transaction .
                                                     
13Done at Vienna, 23 May 1969, 1155 U.N.T.S. 331;  8 International Legal Materials 679.WT/DS141/AB/R
Page 5
13. The European Communities further claims that the Panel's interpretation would distort price
comparability and disregard the notion of "normal value", as the existence of dumping margins woulddepend on the product mix sold by the exporter.  By requiring "positive dumping margins" to beoffset by "negative dumping margins", the Panel is effectively requiring comparison of a weightedaverage normal value for  all product types  of bed linen with a weighted average export price for  all
product types .
14. In addition, the European Communities submits that the Panel's finding would disadvantage
Members applying anti-dumping duties on a "prospective" basis because a Member applying anti-
dumping duties "retrospectively" is not required to give credit for transactions with a "negativedumping margin".  Another result of the interpretati on of the Panel is that Members would not be able
to counter dumping targeted to certain product types.
15. Finally, the European Communities argues that  the Panel failed to apply the standard of
review set out in Article 17.6(ii) of the  Anti-Dumping Agreement .  In particular, in interpreting
Article 2.4.2, the Panel never referred to Article 17.6(ii), and did not determine whether Article 2.4.2admits of more than one permissible interpretation.
B. Arguments of India – Appellee
1. Article 2.4.2 of the  Anti-Dumping Agreement – Practice of "zeroing"
16. India submits that in interpreting Article 2.4.2 of the  Anti-Dumping Agreement , the Panel
properly followed the rules of interpretation of the  Vienna Convention .  Article 2.4 and the remainder
of Article 2 of the  Anti-Dumping Agreement   constitute the context of Article 2.4.2, since the entire
Article relates to the determination of whether dumping exists.  Accordingly, the Panel properlybegan its analysis with the text of Article 2.4.2 and correctly considered it in its context.
17. Next, India is of the view that the Panel correctly interpreted the word "comparable" in
Article 2.4.2 of the  Anti-Dumping Agreement   in the light of its context.  Even assuming that the
word "comparable" carries with it a different meaning in Article 2.4.2, it does not follow that zeroingof these "comparable" data is allowed.  The European Communities incorrectly represented thehistorical background of the word "comparable" and of Article 2.4.2.  India believes that the addition
of this word in the last phase of the Uruguay Round negotiations does not mean that "comparable" hasa different meaning than in Article VI of the GATT 1994 or the rest of Article 2 of the  Anti-Dumping
Agreement .WT/DS141/AB/R
Page 6
18. India also claims that the Panel rightly applied Article 2.4.2 to the calculation of the overall
rate of dumping for the product under investigation.  The calculation of the amount of dumping forvarious models or types of the product under investigation is not separate from the calculation of thedumping margin for the product under investigation.  Both fall within the terms of Article 2.4.2.
Furthermore, the drafting history does not support the European Communities' view of Article 2.4.2
as allowing the practice of "zeroing".
19. Next, India argues that the Panel correctly determined that the concept of "dumping margin"
in Article 2.4.2 of the  Anti-Dumping Agreement   refers only to the dumping margin established for
each product, and not for each model of that produc t, or for each individual transaction.  India
distinguishes the  dumping results or amounts , that is, the differences between the normal value and
export price on a per type basis, and the  dumping margin , that is, the final expression of the total of
these amounts (for the product, for a particular producer).  It is clear from Articles 2.1 and 2.2 that a"dumping margin" is to be calculated for the "product under investigation".
20. Moreover, the interpretation of the Panel neither distorts price comparability nor disregards
the notion of "normal value".  For India, the finding of the Panel does not disadvantage the importingMembers applying anti-dumping duties on a prospective basis.  Results under a prospective systemshould not necessarily be the same as under a retrospective system and a retrospective system shouldnot necessarily form a bench mark for the prospective system.
21. With regard to the question whether the Panel's finding would preclude Members from
countering dumping targeted to certain product types,  India's view is that the Panel's finding rightly
disallows Members to do so.  The text of Article 2.4.2 does not provide for the possibility to counterdumping targeted to certain product types.
22. Finally, India believes that the Panel applied the appropriate standard of review pursuant to
Article 17.6(ii) of the  Anti-Dumping Agreement .  The Panel was not faced with a choice between
multiple "permissible" interpretations, requiring deference, because the ordinary meaning of the termsof Article 2.4.2, in their context and in the light of the object and purpose of the  Anti-Dumping
Agreement , is clear.
C. Claims of E rror by India – Appellant
1. Article 2.2.2(ii) of the  Anti-Dumping Agreement  – Data from "other
exporters or producers"
23. India argues that the Panel erred in finding that Article 2.2.2(ii) of the  Anti-Dumping
Agreement  may be applied in circumstances where data is available for only one other exporter orWT/DS141/AB/R
Page 7
producer.  The Panel's ruling to this effect is incons istent with the rules of treaty interpretation in the
 Vienna Convention .
24. India stresses that Article 2.2.2(ii) refers to the "weighted average" of the "amounts" incurred
and realized by other "exporters or producers".  The use of the plural form of "amounts" and"exporters or producers", in combination with the reference to a "weighted average" of the "amounts",indicates that figures for multiple exporters or producers must be available if Article 2.2.2(ii) is to berelied on.  The Panel's conclusion that Article 2.2.2(ii) may be applied where data is available for only
one exporter or producer ignores the clear meaning of these words.
25. India further argues that the Panel should have examined whether the choice of the European
Communities of the method to calculate the amounts for administrative, selling and general costs andfor profits set out in Article 2.2.2(ii) was "objective and fair".  Article 17.6(i) of the  Anti-Dumping
Agreement  requires that the evaluation of the investigating authorities of the facts be "unbiased and
objective".  With viable alternatives, such as Article 2.2.2(i) and Article 2.2.2(iii), available, theinsistence of the European Communities on using the second option cannot have been "unbiased and
objective".  By failing to consider whether this choice of methodology was proper, the Panel erred inlaw.
26. Finally, India contends that the finding of th e Panel that the European Communities was not
obligated to look at available information outside th e sample is not only inconsistent with the standard
of review set out in Article 17.6(i), but is also inco mpatible with the later finding of the Panel that "it
is not possible to have an objective evaluation of the evidence if some of the evidence is required tobe ignored, even though it relates precisely to the issues to be resolved."
14  In the circumstances of this
case, data for an additional producer was available to the European Communities in the "reservesample" it had established for the investigation.  Information from this producer should have beentaken into account when relying on the methodology pr ovided in Article 2.2.2(ii).  India recalls that,
in examining the question of injury to the domes tic industry, the European Communities relied on
information from outside the sample, and the Panel upheld this decision by the European
Communities.  Failure to take into account the available information of an exporting producerincluded in the reserve sample for dumping, while  simultaneously taking into account information
outside the sample when establishing whether injury to the domestic industry had occurred, does notconstitute an "unbiased and objective" investigation.  The Panel's failure to reach this conclusionviolates the standard of review set out in Article 17.6(i).
                                                     
14Panel Report, para. 6.181.WT/DS141/AB/R
Page 8
2. Article 2.2.2(ii) of the  Anti-Dumping Agreement  – "actual amounts incurred
and realized"
27. The Panel found that it is permissible to exclude sales outside the ordinary course of trade in
calculating amounts for administrative, selling and general costs ("SG&A") and for profits underArticle 2.2.2(ii) of the  Anti-Dumping Agreement .  According to India, such finding is contrary to the
text and context of Article 2.2.2(ii).  The text of Article 2.2.2(ii) explicitly refers to the "amountsincurred and realized", whereas, by contrast, the text of the chapeau of Article 2.2.2 requires toconsider the relevant data "in the ordinary course of trade".  Nothing in the terms of Article 2.2.2(ii)
suggests that only "amounts" of profitable sales are concerned.  Article 2.2.2(ii) simply does not
contain an "ordinary course of trade" restriction.
28. India contends that the context of Article 2.2.2(ii) confirms this interpretation.  It would be
illogical to read into the three alternative options a principle appearing in the chapeau of Article 2.2.2,since the alternative options come into play when the chapeau does not apply.  Further, none of themain principles contained in Articles 2.1 and 2.2 contain any specific "ordinary course of trade"requirement with regard to the calculation of amount s for SG&A and profits.  According to India, the
negotiating history of the  Anti-Dumping Agreement  supports its view on this point.
D. Arguments of the European Communities – Appellee
1. Article 2.2.2(ii) of the Anti-Dumping Agreement – Data from "other exporters
or producers"
29. The European Communities submits that the Panel correctly found that Article 2.2.2(ii) of the
Anti-Dumping Agreement  may be invoked even when only one other exporter or producer has eligible
data.  The Panel performed an analysis of the ordinary meaning of the words in Article 2.2.2(ii), andproperly took account of the phrase "weighted average".  The interpretation of the Panel does notundermine the effect of the phrase "weighted averag e" in Article 2.2.2(ii), since another arithmetic
mean could have been set out therein for cases involving two or more exporters or producers.
30. Next, the European Communities rejects India's contention that the anti-dumping
investigation at issue in this case was not "unbiased and objective" as required under Article 17.6(i) ofthe  Anti-Dumping Agreement   because the European Communities chose to apply Article 2.2.2(ii)
rather than Article 2.2.2(i).  According to the Euro pean Communities, this is not a proper subject for
appeal, and India's claim fails to raise any substantive issue.  India's contention was not set out in its
request for a panel nor in its submissions to the Panel and, therefore, it is not a proper subject for thisappeal, since Article 17.6 of the DSU confines appeals to issues of law or legal interpretationsdeveloped by the panel.  In addition, India's allegation may raise new legal issues which could requireWT/DS141/AB/R
Page 9
proof of new facts.  India's argument is not a substantive claim, because Article 17.6 of the  Anti-
Dumping Agreement   establishes that the obligation of national authorities to be unbiased and
objective applies to the evaluation of the facts of the case.
31. Finally, in the view of the European Communities, India's allegation that the implementation
of Article 2.2.2(ii) by the investigating authorities of the European Communities was not "unbiasedand objective", for not taking account of certain data from an additional producer, is similarly not aproper subject for appeal, for the same reasons as above.
2. Article 2.2.2(ii) of the  Anti-Dumping Agreement  – "actual amounts incurred
and realized"
32. The European Communities argues that investigat ing authorities are allowed to disregard data
relating to sales that are not made in the ordinary course of trade, in particular those made at prices
below cost, when establishing a constructed normal value pursuant to Article 2.2.2(ii) of the  Anti-
Dumping Agreement .  As the Panel observed, if sales not in the ordinary course of trade were
considered, "the constructed value could be equal to cost and thus would not include a reasonableamount for profit"
15.  Moreover, the "ordinary course of trade" principle in Article 2 and in the
chapeau of Article 2.2.2 would become meaningless, and therefore redundant, if sales not in theordinary course of trade were included.
33. With regard to the context of Article 2.2.2(ii), the European Communities suggests that the
exclusion of sales not in the ordinary course of trade in Article 2.2.2(i) is not "impossible".  The  Anti-
Dumping Agreement  merely authorizes Members to exclude those sales but does not require to do so.
Finally, India's claim that under the Panel's interpretation of Article 2.2.2(ii) exporters would be
unfairly treated, because at the time of selling, they would not be in a position to anticipate whethertheir sales would be found to be dumped, has no merit and should be rejected.
E. Arguments of the Third Participants
1. Egypt
34. Egypt welcomes the finding of the Panel that the practice of "zeroing" employed by the
European Communities in calculating the margin of dumping violated the provisions of Article 2.4.2of the  Anti-Dumping Agreement .   Furthermore, Egypt argues that the European Communities
violated the provisions of Article 2.2.2(ii) of the  Anti-Dumping Agreement  for not having properly
applied the method identified therein nor met its requirements.WT/DS141/AB/R
Page 10
35. In addition, Egypt submits views on certain issues  that it considers to be fundamental for the
proper legal interpretation of the  Anti-Dumping Agreement .  In particular, Egypt makes a number of
comments on the findings of the Panel in relation to Articles 3.4, 5.3, and 15 of the  Anti-Dumping
Agreement .  However, since none of these findings have been appealed, Egypt's comments do not
directly bear upon this appeal.
2. Japan
36. Japan argues that the analysis of the Panel relating to the practice of "zeroing" of the
European Communities was consistent with the rules of interpretation of the  Vienna Convention .
Japan submits that the decision of the Panel with respect to "zeroing" was also consistent with thestandard of review in Article 17.6(ii) of the  Anti-Dumping Agreement .
37. Furthermore, Japan underlines that the European Communities did not justify the need for
introducing the concept of "overall rate of dumping",  a concept not referred to anywhere in the  Anti-
Dumping Agreement .  Moreover, the use of the plural form of the word "margins" in Article 2.4.2 of
the  Anti-Dumping Agreement  is merely indicative that there may be more than one exporter involved
in an investigation.  According to Japan, the Panel correctly interpreted the word "comparable" inArticle 2.4.2, finding that it echoed the overall mandate in the Anti-Dumping Agreement  that dumping
calculations be based on fair comparison, and made between "comparable transactions".
38. Moreover, according to Japan, the argument of the European Communities that the
interpretation of the Panel would disadvantage Members applying anti-dumping duties on aprospective basis is irrelevant.  In the view of Japan, the Panel correctly focused its findings onArticle 2.4.2, since the dispute was related to the calculation of dumping margins for the productunder investigation.  The manner in which duties may be collected under the  Anti-Dumping
Agreement  is relevant, only if, and only after, the investigating authorities find dumping for a
particular producer as a result of a proper application of the methodologies set out in the  Anti-
Dumping Agreement .
39. Finally, Japan finds the "policy" argument of the European Communities regarding "product
targeting" not persuasive.  The European Communities ignores the fact that Article 2.4.2 does notinclude "product targeting" as a specific form of dumping justifying an exceptional calculationmethodology, whereas Article 2.4.2 identifies three other forms of "targeting" justifying suchexceptional methodology.
                                                                                                                                                                    
15Panel Report, para. 6.86; European Communities' appellee's submission, para. 46.WT/DS141/AB/R
Page 11
3. United States
40. In the view of the United States, the Panel failed to interpret the weighted-average
comparison provision of Article 2.4.2 of the  Anti-Dumping Agreement  in its context and in the light
of the object and purpose of the  Anti-Dumping Agreement .  The  Anti-Dumping Agreement  does not
require that importing countries reduce dumping margins by amounts by which export pricesexceeded normal value on other, non-comparable transactions.  The United States supports themethodology of the European Communities for calculating the overall margin of dumping.
41. Next, the United States contends that the Panel failed to account for the remaining provisions
of Article 2.4.2.  The Panel should have addressed the totality of Article 2.4.2 before turning toArticle 2.1 for providing the context to Article 2.4.2.  The Panel incorrectly emphasized the word"all", and lost sight of the fact that Article 2.4.2 refers to only all "comparable"  export transactions.
Article 2.4.2 makes it clear that averages must be limited to "comparable" transactions.
42. The United States submits that the Panel was correct in holding that Article 2.2.2(ii) of the
 Anti-Dumping Agreement may be applied where there is data concerning only one other exporter or
producer.  The phrase "weighted average" is not determinative of this issue, but simply clarifies themethod to be employed when there are two or more companies from which data will be utilised
pursuant to Article 2.2.2(ii).  Likewise, the word "amounts" in Article 2.2.2(ii) is not determinative,
since it refers to the "amounts for administrative, selling and general costs and for profits", providedfor in the chapeau.  There is no guidance as to whether these amounts can be drawn from a singlecompany or multiple companies.  In addition, the phrase "other exporters or producers" is also notdeterminative, in the United States' view, because it cannot be read to exclude a single exporter orproducer without creating "absurd results" throughout the  Anti-Dumping Agreement , which often
uses plurals as including the singular.
43. Moreover, the United States argues that the Panel was not required to examine separately
whether the choice of the European Communities of the method set out in Article 2.2.2(ii) of the
 Anti-Dumping Agreement  was objective and fair, pursuant to Article 17.6(i) of the  Anti-Dumping
Agreement , as compared with the alternative methods provided for in Articles 2.2.2(i) and 2.2.2(iii).
44. The United States concurs with the Panel an d the European Communities that pursuant to
Article 2.2.2(ii) of the  Anti-Dumping Agreement , below-cost sales may be excluded from constructed
normal value calculations.  Nothing in the text  requires  this exclusion, but nothing in the text  forbids
such an exclusion either.  It is therefore permissible, though not mandatory, to exclude sales outsidethe ordinary course of trade from the calculations made pursuant to Article 2.2.2(ii).  In addition,WT/DS141/AB/R
Page 12
excluding the profit on sales not in the ordinary course of trade from the figures used pursuant to
Article 2.2.2(ii) is consistent with the overall operation of Article 2 of the  Anti-Dumping Agreement .
III. Issues Raised in this Appeal
45. This appeal raises the following issues:
(a) Whether the Panel erred in finding that the practice of "zeroing" when establishing
"the existence of margins of dumping", as applied by the European Communities inthe anti-dumping investigation at issue in this dispute, is inconsistent with
Article 2.4.2 of the  Anti-Dumping Agreement ;  and
(b) Whether the Panel erred in finding that:
(1) the method for calculating amounts for administrative, selling and general
costs and profits provided for in Article 2.2.2(ii) of the  Anti-Dumping
Agreement  may be applied where there is data on administrative, selling and
general costs and profits for only one other exporter or producer;  and
(2) in calculating the amount for profits under Article 2.2.2(ii) of the  Anti-
Dumping Agreement , a Member may exclude sales by other exporters or
producers that are not made in the ordinary course of trade.
IV. Article 2.4.2 of the  Anti-Dumping Agreement
46. The first issue raised in this appeal is whether the practice of "zeroing" when establishing "the
existence of margins of dumping", as applied by the European Communities in the anti-dumpinginvestigation at issue in this dispute, is consistent with Article 2.4.2 of the  Anti-Dumping Agreement .
47. The practice of "zeroing", as applied in this dispute, can briefly be described as follows
16:  
first, the European Communities id entified with respect to the product under investigation – cotton-
type bed linen – a certain number of different "models" or "types" of that product.  Next, the European
Communities calculated, for each of these models, a  weighted average  normal value and a  weighted
average  export price.  Then, the European Communitie s compared the weighted average normal value
with the weighted average export price for each model.  For some models, normal value was  higher
than export price;  by subtracting export price from normal value for these models, the EuropeanCommunities established a " positive  dumping margin" for each model.  For other models, normal
value was  lower  than export price;  by subtracting export price from normal value for these other
                                                     
16For a more detailed description, see Panel Report, para. 6.102.WT/DS141/AB/R
Page 13
models, the European Communities established a " negative  dumping margin" for each model.17  Thus,
there is a "positive dumping margin" where there  is dumping, and a "negative dumping margin"
where there  is not .  The "positives" and "negatives" of the amounts in this calculation are an
indication of precisely  how much  the export price is above or below the normal value.  Having made
this calculation, the European Communities then added up the amounts it had calculated as "dumpingmargins" for each model of the product in order to determine an  overall   dumping margin for the
product  as a whole .  However, in doing so, the European Communities treated any "negative
dumping margin" as zero – hence the use of the word "zeroing".  Then, finally, having added up the
"positive dumping margins" and the zeroes, the European Communities divided this sum by thecumulative total value of all the export transactions involving all types and models of that product.  In
this way, the European Communities obtained an overall margin of dumping for the product underinvestigation.
48. With respect to this first issue appealed, the Panel found that:
… the European Communities acted inconsistently with Article 2.4.2
of the AD Agreement in establishing the existence of margins of
dumping on the basis of a methodology which included zeroing
negative price differences calculated for some models of bed linen.
18
49. The European Communities appeals this finding.  In defending its practice of "zeroing", the
European Communities principally argues that the Panel was mistaken about the ordinary meaning ofArticle 2.4.2.  According to the European Communities, Article 2.4.2 requires a comparison with a"weighted average of prices of all  comparable  export transactions" (emphasis added), which, in the
view of the European Communities, as we understand it, is not the same as requiring a comparisonwith a weighted average of  all export transactions.  Emphasizing the presence in Article 2.4.2 of the
word "comparable", the European Communities maintains that, where the product under investigation
consists of various "non-comparable" types or models, the investigating authorities should first
calculate "margins of dumping" for each of the "non-comparable" types or models, and, then, at asubsequent stage, combine those "margins" in order to calculate an overall margin of dumping for theproduct under investigation.  Thus, the European Communities sees two stages in calculating marginsof dumping in such an anti-dumping investigation, and contends that Article 2.4.2 provides  no
guidance  as to how the "margins of dumping" for each of the types or models should be combined in
the second stage in order to calculate an overall margin of dumping for the product under
                                                     
17For these latter models, in other words, dumping had not occurred, as the  export price exceeded the
normal value .
18Panel Report, para. 6.119.WT/DS141/AB/R
Page 14
investigation.  On this reasoning, the European Communities asserts that, as "zeroing" takes place
during this second stage of the domestic anti-dumping process, "zeroing" cannot be inconsistent withArticle 2.4.2.  Accordingly, the European Communities concludes that the Panel failed to give propermeaning to the word "comparable" as well as to the comparability requirement in Article 2.4.2
19,
erroneously applied Article 2.4.2 to the calculation of the overall margin of dumping for the product
under investigation20, and erred in its overall analysis of this issue on the premise that dumping
margins can be established only for a  product .21
50. As always, we turn first to the text of the provision at issue on appeal.  Article 2.4.2 of the
 Anti-Dumping Agreement  states:
Subject to the provisions governing fair comparison in paragraph  4, the
existence of margins of dumping  during the investigation phase shall
normally be established on the basis of a comparison of a weighted
average normal value with a weighted average of prices of all
comparable export transactions or by a comparison of normal value andexport prices on a transaction-to-transaction basis.  A normal value
established on a weighted average basis may be compared to prices of
individual export transactions if the authorities find a pattern of export
prices which differ significantly among different purchasers, regions or
time periods, and if an explanation is provided as to why suchdifferences cannot be taken into account appropriately by the use of a
weighted average-to-weighted average or transaction-to-transaction
comparison. (emphasis added)
51. Article 2.4.2 of the  Anti-Dumping Agreement  explains how domestic investigating authorities
must proceed in establishing "the existence of margins of dumping", that is, it explains how they must
proceed in establishing that there  is dumping.  Toward this end, Article 2.1 states:
For the purpose of this Agreement, a  product  is to be considered as
being dumped , i.e. introduced into the commerce of another country at
less than its normal value, if the export price of the product exported
from one country to another is less th an the comparable price, in the
ordinary course of trade, for the like product when destined for
consumption in the exporting country. (emphasis added)
From the wording of this provision, 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 .
                                                     
19European Communities' appellant's submission, paras. 14-20 and 38-41.
20European Communities' appellant's submission, paras. 21-30.
21European Communities' appellant's submission, paras. 31-37.WT/DS141/AB/R
Page 15
52. We observe that, in this case, the European Communities defined the  product  at issue in its
anti-dumping investigation as follows:
The  proceeding covers bed linen of cotton–type fibres , pure or mixed
with man-made fibres or flax, bleached, dyed or printed.  Bed linen
includes bed sheets, duvet covers and pillow cases, packaged for saleeither separately or in sets.
…
Notwithstanding the  different possible product types  due to different
weaving construction, finish of the fabric, presentation and size,
packing, etc., all of them constitute a single product for the purpose of
this proceeding  because they have the same physical characteristics
and essentially the same use.
22 (emphasis added)
53. Thus, of its own accord, the European Communities clearly identified cotton-type bed linen as
the  product  under investigation in this case.  This is undisputed in this appeal.  Having defined the
 product  as it did, the European Communities was bound to treat that  product  consistently thereafter
in accordance with that definition.  Thus, it follows that, with respect to Article 2.4.2, the EuropeanCommunities had to establish "the existence of margins of dumping" for the  product  – cotton-type
bed linen – and not for the various types or models of that product.  We see nothing 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 of margins of dumping" are referencesto the  product  that is subject of the investigation.  Likewise, we see nothing in Article 2.4.2 to
support the notion that, in an anti-dumping investigation, two different stages are envisaged ordistinguished in any way by this provision of the  Anti-Dumping Agreement , nor to justify the
distinctions the European Communities contends can be made among  types or models  of the same
product on the basis of these "two stages".  Whatever the method used to calculate the margins of
dumping, in our view, these margins must be, and can only be, established for the  product  under
investigation as a whole.  We are unable to agree with the European Communities that Article 2.4.2provides no guidance as to how to calculate an  overall  margin of dumping for the product under
investigation.
54. With this in mind, we recall that Article 2.4.2, first sentence, provides that "the existence of
margins of dumping" for the product under investigation shall normally be established according to
                                                     
22Commission Regulation (EC) No 1069/97, supra , footnote 3, para. 10.  See also Council Regulation
(EC) No 2398/97, supra , footnote 4, para. 9.WT/DS141/AB/R
Page 16
one of two methods.  At issue in this case is the first method set out in that provision, under which
"the existence of margins of dumping" must be established:
… on the basis of a comparison of a weighted average normal value
with a weighted average of prices of all comparable exporttransactions …
55. Under this method, the investigating authorities ar e required to compare the weighted average
normal value with the weighted average of prices of  all comparable export transactions.  Here, we
emphasize that Article 2.4.2 speaks of "all" comparable  export transactions.  As explained above, when
"zeroing", the European Communities counted as zero  the "dumping margins" for those models where
the "dumping margin" was "negative".  As the Panel correctly noted, for those models, the EuropeanCommunities counted "the weighted average export pr ice to be equal to the weighted average normal
value … despite the fact that it was, in reality , higher than the weighted average normal value."
23  By
"zeroing" the "negative dumping margins", th e European Communities, therefore, did  not take fully
into account the entirety of the prices of  some  export transactions, namely, those export transactions
involving models of cotton-type bed linen where "negative dumping margins" were found.  Instead, the
European Communities treated those export prices as if they were less than what they were.  This, in
turn, inflated the result from the calculation of  the margin of dumping.  Thus, the European
Communities did  not establish "the existence of margins of dumping" for cotton-type bed linen on the
basis of a comparison of the weighted average normal value with the weighted average of prices of  all
comparable export transactions – that is, for  all transactions involving  all models or types of the
product under investigation.  Furthermore, we are al so of the view that a comparison between export
price and normal value that does  not take fully into account the prices of  all comparable export
transactions – such as the practice of "z eroing" at issue in this dispute – is  not a "fair comparison"
between export price and normal value, as required by Article 2.4 and by Article 2.4.2.
56. We are mindful that Article 2.4.2 provides for "a comparison of a weighted average normal
value with a weighted average of prices of all   comparable  export transactions". (emphasis added)  In
our view, the word "comparable" in Article 2.4.2 does not affect, or diminish in any way, theobligation of investigating authorities to establish the existence of margins of dumping on the basis of"a comparison of the weighted average normal value with the weighted average of prices of  all
comparable export transactions". (emphasis added)
57. The ordinary meaning of the word "comparable" is "able to be compared".
24  "Comparable
export transactions" within the meaning of Article 2.4.2 are, therefore, export transactions that are                                                     
23Panel Report, para. 6.115.
24The Concise Oxford Dictionary of Current English  (Clarendon Press, 1995), p. 269.WT/DS141/AB/R
Page 17
able to be compared.  The European Communities ar gues before us that export transactions involving
different types or models of cotton-type bed linen are not "comparable" because different types ormodels of cotton-type bed linen have very different physical characteristics.  Specifically, theEuropean Communities suggests that the differences between the various models or types of bed lineninvolved in the relevant export transactions are "so substantial that they cannot be eliminated bymaking adjustments for differences in physical characteristics".
25  However, as we have already noted,
at the very outset of its anti-dumping investigation, the European Communities identified, of its own
accord, cotton-type bed linen as the  product  under investigation.  Moreover, in defining cotton-type
bed linen as the product at issue, the European Communities stated that "the  different  possible
product types  … constitute a single product  for the purpose of this proceeding because  they have the
same physical characteristics  and  essentially the same use ".26 (emphasis added)  Furthermore, we
observe that, in the context of defining the product at issue, the European Communities also made thefollowing determination relating to the identity of the "like product" on the Community market
subject to its investigation:
The Commission examined whether cotton-type bed linen produced
by the Community industry and sold on the Community market, aswell as cotton-type bed linen produced in Egypt, India and Pakistan
and sold on the Community market and on their domestic markets
were alike.
…
                                                     
25European Communities' appellant's submission, para. 39.  See also para. 40 and footnote 34 of the
European Communities' appellant's submission.
26Commission Regulation (EC) No 1069/97, supra , footnote 3, para. 10.WT/DS141/AB/R
Page 18
The Commission concluded that although there were differences in
the mix of products produced in the Community and that sold for
export to the Community or sold domestically in the countries
concerned, there were no differences in the basic characteristics and
uses of the different types and qualities of bed linen of cotton-typefibres .  Therefore domestic and export types in the countries
concerned and types produced in the Community were considered
 like products  within the meaning of Article 1(4) of Regulation (EC)
No 384/96 … 
27 (emphasis added)
58. Having defined the product at issue and the "like product" on the Community market as it did,
the European Communities could not, at a subsequent  stage of the proceeding, take the position that
some types or models of that product had physical characteristics that were so different from eachother that these types or models were not "comparable".  All types or models falling within the scopeof a "like" product must necessarily be "comparable", and export transactions involving those types ormodels must therefore be considered "comparable export transactions" within the meaning ofArticle 2.4.2.
59. This interpretation of the word "comparable" in Article 2.4.2 is reinforced by the context of
this provision .  Article 2.4 of the  Anti-Dumping Agreement  states in relevant part:
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,
normally at the ex-factory level, and in respect of sales made at as
nearly as possible the same time.  Due allowance  shall be made in each
case, on its merits, for differences which affect price comparability ,
including differences in conditions and terms of sale, taxation, levels of
trade, quantities, physical characteristics, and any other differences
which are also demonstrated to affect price comparability. (emphasisadded)
Article 2.4 sets forth a general obligation to make a "fair comparison" between export price and
normal value.  This is a general obligation that, in our view, informs all of Article 2, but applies, in
particular, to Article 2.4.2 which is specifically made "subject to the provisions governing faircomparison in [Article 2.4]".  Moreover, Article 2.4 sets forth specific obligations to makecomparisons at the same level of trade and at, as nearly as possible, the same time.  Article 2.4 alsorequires that "due allowance" be made for differences affecting "price comparability".  We note, inparticular, that Article 2.4 requires investigating authorities to make due allowance for "differences in… physical characteristics".
                                                     
27Commission Regulation (EC) No 1069/97, supra , footnote 3, paras. 11 and 14.  See also Council
Regulation (EC) No 2398/97, supra , footnote 4, para. 9.WT/DS141/AB/R
Page 19
60. We note that, while the word "comparable" in Article 2.4.2 relates to the comparability of
export transactions, Article 2.4 deals more broadly with a "fair comparison" between export price andnormal value and "price comparability".  Nevertheless, and with this qualification in mind, we seeArticle 2.4 as useful context sustaining the conc lusions we draw from our analysis of the word
"comparable" in Article 2.4.2.   In our view, the word "comparable" in Article 2.4.2 relates back to both
the general and the specific obligations of the in vestigating authorities when comparing the export
price with the normal value.  The European Communities argues on the basis of the "due allowance"
required by Article 2.4 for "differences in physical characteristics" that distinctions can be made among
different types or models of cotton-type bed linen when determining "comparability".  But here again
we fail to see how the European Communities can be  permitted to see the physical characteristics of
cotton-type bed linen in one way for one purpose and in another way for another.
28
61. In support of its appeal of the Panel's interpretation of Article 2.4.2, the European
Communities argues, additionally, that this interpretation would not allow Members to counterdumping "targeted" to certain types of the product under investigation.
29  With respect to the notion of
"targeted" dumping, we note that Article 2.4.2, second sentence, states:
A normal value established on a weighted average basis may be
compared to prices of individual export transactions if the authoritiesfind  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 accountappropriately by the use of a weighted average-to-weighted average or
transaction-to-transaction comparison. (emphasis added)
62. This provision allows Members, in structuring their anti-dumping investigations, to address
three kinds of "targeted" dumping, namely dumping that is targeted to certain purchasers, targeted tocertain regions, or targeted to certain time periods.  However, neither Article 2.4.2, second sentence,nor any other provision of the  Anti-Dumping Agreement  refers to dumping "targeted" to certain
"models" or "types" of the same product under investigation.  It seems to us that, had the drafters ofthe  Anti-Dumping Agreement  intended to authorize Members to respond to such kind of "targeted"
dumping, they would have done so explicitly in Article 2.4.2, second sentence.  The EuropeanCommunities has not demonstrated that any provision of the Agreement implies that targeted
dumping may be examined in relation to specific ty pes or models of the product under investigation.
Furthermore, we are bound to add that, if the European Communities wanted to address, in particular,
                                                     
28See  supra , paras. 57-58.
29European Communities' appellant's submission, paras. 46-49.WT/DS141/AB/R
Page 20
dumping of certain types or models of bed linen, it could have defined, or redefined, the  product
under investigation in a narrower way.30
63. Finally, the European Communities argues that the Panel did not establish that the
interpretation of Article 2.4.2 by the European Communities was "impermissible" and that, therefore,
the Panel failed to apply the standard of review laid down in Article 17.6(ii) of the  Anti-Dumping
Agreement .31  On this, we observe that Article 17.6(ii) states:
the panel shall interpret the relevant provisions of the Agreement in
accordance with customary rules of in terpretation of public international
law.  Where the panel finds that a relevant provision of the Agreement
admits of more than one permissible interpretation, the panel shall find
the authorities' measure to be in c onformity with the Agreement if it
rests upon one of those permissible interpretations.
64. In this case, the Panel explicitly reco gnized that it was to interpret the  Anti-Dumping
Agreement  in accordance with the customary rules of in terpretation of public international law as set
out in the  Vienna Convention .32  Having interpreted Article 2.4.2 accordingly, the Panel found:
… that the European Communities acted  inconsistently  with
Article 2.4.2 of the AD Agreement in establishing the existence of
margins of dumping on the basis of a methodology which included
zeroing negative price differences calculated for some models of bedlinen.
33 (emphasis added)
65. It appears clear to us from the emphatic and unqualified nature of this finding of
inconsistency that the Panel did not view the interpretation given by the European Communities ofArticle 2.4.2 of the  Anti-Dumping Agreement as a "permissible interpretation" within the meaning of
Article 17.6(ii) of the  Anti-Dumping Agreement .  Thus, the Panel was not faced with a choice among
multiple "permissible" interpretations which would have required it, under Article 17.6(ii), to givedeference to the interpretation relied upon by the European Communities.  Rather, the Panel wasfaced with a situation in which the interpretatio n relied upon by the European Communities was, to
                                                     
30The European Communities also argues in its appellant's submission, paras. 42-45, that the Panel's
interpretation of Article 2.4.2 would disadvantage those importing Members which collect anti-dumping dutieson a "prospective" basis when compared to those im porting Members which collect anti-dumping duties on a
"retrospective" basis.  We note, though, that Article 2.4.2 is not concerned with the collection of anti-dumpingduties, but rather with the determination of "the existence of margins of dumping".  Rules relating to the
"prospective" and "retrospective" collection of anti-dumping duties are set forth in Article 9 of the  Anti-
Dumping Agreement .  The European Communities has not shown how and to what extent these rules on the
"prospective" and "retrospective" collection of anti-dumpi ng duties bear on the issue of the establishment of "the
existence of dumping margins" under Article 2.4.2.
31European Communities' appellant's submission, paras. 50-58.
32Panel Report, para. 6.46.
33Panel Report, para. 6.119.WT/DS141/AB/R
Page 21
borrow a word from the European Communities, "impe rmissible".  We do not share the view of the
European Communities that the Panel failed to apply the standard of review set out in Article 17.6(ii)of the  Anti-Dumping Agreement .
66. For all these reasons, we uphold the finding of the Panel in paragraph 6.119 of the Panel
Report that the practice of "zeroing" when establishing "the existence of margins of dumping", asapplied by the European Communities in the anti-dumping investigation at issue in this dispute, isinconsistent with Article 2.4.2 of the  Anti-Dumping Agreement .
V. Article 2.2.2(ii) of the  Anti-Dumping Agreement
67. The two other issues raised in this appeal both concern the Panel's interpretation of
Article 2.2.2(ii) of the  Anti-Dumping Agreement .  Pursuant to Article 2.2, the margin of dumping for
the product under investigation may, in certain ci rcumstances, be determined by comparison of the
export price of the product with a constructed normal value consisting of the cost of production of theproduct in the country of origin plus a reasonable amount for administrative, selling and general costs("SG&A") as well as for profits.  Article 2.2.2 se ts forth how the amounts for SG&A and profits are to
be calculated in such circumstances.  Article 2.2.2 states:
For the purpose of paragraph 2, the amounts for administrative, selling
and general costs and for profits shall be based on actual data pertaining
to production and sales in the ordinary course of trade of the like
product by the exporter or producer under investigation.  When suchamounts cannot be determined on this basis, the amounts may be
determined on the basis of:
(i) the actual amounts incurred and realized by the exporter or
producer in question in respect of production and sales in thedomestic market of the country of origin of the same general
category of products;
(ii) the weighted average of the actual amounts incurred and
realized by other exporters or producers subject toinvestigation in respect of production and sales of the like
product in the domestic market of the country of origin ;
(iii) any other reasonable method, provided that the amount for
profit so established shall not exceed the profit normallyrealized by other exporters or producers on sales of products of
the same general category in the domestic market of the country
of origin. (emphasis added)
68. The first issue raised is whether the method of calculating amounts for SG&A and profits set
out in Article 2.2.2(ii) may be applied where there is data on SG&A and profits for only  one otherWT/DS141/AB/R
Page 22
exporter or producer.  The second issue is whether, in calculating the amount for profits under
Article 2.2.2(ii), a Member may exclude sales by othe r exporters or producers that are not made in the
ordinary course of trade.
69. With respect to the first issue, the Panel found:
As we have concluded that Article 2.2.2(ii) may be applied in a case
where there is data concerning profit and SG&A for only one other
producer or exporter,  we conclude that the European Communities
was not precluded from applying the methodology set out in thatprovision in this case, and therefore did not act inconsistently with
Article 2.2.2(ii) in this regard.
34
70. With respect to the second issue, the Panel found:
Thus we consider that an interpretation of Article 2.2.2(ii) under
which sales not in the ordinary course of trade are excluded from the
determination of the profit amount to be used in the calculation of a
constructed normal value is permissible.  We therefore conclude that
the European Communities did not err in its application ofparagraph (ii) by using data only on transactions in the ordinary
course of trade.
35
71. India appeals both these findings.  With respect to the first of these two findings of the Panel,
relating to the applicability of Article 2.2.2(ii) where there is data for only  one other exporter or
producer, India argues that the text of Article 2.2.2(ii), and, in particular, the use of the terms"amounts" and "exporters or producers" in the plural, in combination with the reference to a"weighted average" of the "amounts", clearly indicate that Article 2.2.2(ii) cannot be applied where
there is data for only  one other exporter or producer.
36  Furthermore, with respect to this finding,
India argues that the Panel failed to meet the stan dard of review set forth in Article 17.6(i) of the
 Anti-Dumping Agreement .37  With respect to the second of these two findings of the Panel, relating to
the exclusion of sales by other exporters or producers that are not made in the ordinary course oftrade, India argues that the text of Article 2.2.2(ii) states that the amount for profits must be based on"amounts incurred and realized", and that nothing in these terms suggests that they relate only toprofitable sales.
38  According to India, this reading of Article 2.2.2(ii) is confirmed by the chapeau of
Article 2.2.2, which, in contrast with Article 2.2.2(ii), explicitly excludes sales made outside theordinary course of trade.
                                                     
34Panel Report, para. 6.75.
35Panel Report, para. 6.87.
36India's appellant's submission, paras. 5-7.
37India's appellant's submission, paras. 8-17.WT/DS141/AB/R
Page 23
72. On the first of these two issues on appeal – that is, whether the method for calculating
amounts for SG&A and profits set out in Article 2.2.2(ii) may be applied where there is data onSG&A and profits for only one other exporter or producer – we recall that Article 2.2.2(ii) states that,
when this method is chosen by the investigating authorities, the amounts for SG&A and profits mustbe calculated on the basis of:
the weighted average of the actual amounts incurred and realized by
other exporters or producers subject to investigation in respect ofproduction and sales of the like product in the domestic market of the
country of origin;
Here, we note especially that Article 2.2.2(ii) refers to "the  weighted average  of the actual  amounts
incurred and realized by other exporters or producers ". (emphasis added)
73. In construing this provision, the Panel found that the phrase "other exporters or producers":
… as a general matter, admits of an understanding where the plural
form includes the singular case – the case where there is only oneother producer or exporter.  …  In this context, we do not consider that
the reference to other producers or exporters in the plural necessarily
must be understood to preclude resort to option (ii) in the case where
there is only one other producer or exporter of the like product.
39
74. We disagree.  In our view, the phrase "weighted average" in Article 2.2.2(ii) precludes, in this
particular provision, understanding the phrase "other e xporters or producers" in the plural as including
the singular case.  To us, the use of the phras e "weighted average" in Article 2.2.2(ii) makes it
impossible to read "other exporters or producers" as  "one exporter or producer".  First of all, and
obviously, an "average" of amounts for SG&A and profits  cannot  be calculated on the basis of data on
SG&A and profits relating to only  one exporter or producer.40  Moreover, the textual directive to
"weight" the average further supports this view b ecause the "average" which results from combining the
data from different exporters or producers must re flect the relative importance of these different
exporters or producers in the overall mean.41  In short, it is simply not possible to calculate the
"weighted average" relating to only one exporter or pr oducer.  Indeed, we note that, at the oral hearing in
                                                                                                                                                                    
38India's appellant's submission, paras. 18-32.
39Panel Report, para. 6.70.
40"Average" is defined in The Concise Oxford Dictionary of Current English , supra , footnote 24, p. 86,
as follows:  "an amount obtained by dividing the total of given amounts by the number of amounts in the set".
41"To weight" is defined as "multiply the components of (an average) by factors to take account of their
importance".  See  The Concise Oxford Dictionary of Current English , supra , footnote 24, p. 1589.  "Weighted
average" is defined as "resulting from the multiplication of each component by a factor reflecting its
importance". See  The New Shorter Oxford English Dictionary  (Clarendon Press, 1993), Vol. II, p. 3651.WT/DS141/AB/R
Page 24
this appeal, the European Communities conceded that the phrase "weighted average" envisages a
situation where there is more than one exporter or producer.
75. The requirement to calculate a "weighted average" in Article  2.2.2(ii) is, in our view, the key to
interpreting that provision.  It is indispensable to the calculation method set forth in this provision, and,
thus, it is indispensable to the entire provision – wh ich deals only with the mechanics of that calculation.
We disagree with the Panel that "the concept of weighted averaging is relevant only  when there is
information from more than one other producer or exporter  available to be considered."42 (emphasis
in the original)  We see no justification, textual or otherwise, for concluding that amounts for SG&A
and profits are to be determined on the basis of the weighted average  some  of the time but not  all of
the time.  In so interpreting Article 2.2.2(ii), the Panel, in effect, reads the requirement of calculating a"weighted average" out of the text in some circumstances.  In those circumstances, this wouldsubstantially empty the phrase "weighted average" of meaning.
43
76. In our view, then, the use of the phrase "weighted average", combined with the use of the
words "amounts" and "exporters or producers" in the plural in the text of Article 2.2.2(ii), clearly
anticipates the use of data from  more than one  exporter or producer.  We conclude that the method
for calculating amounts for SG&A and profits set out in this provision can only be used if datarelating to more than one other exporter or producer is available.
77. Accordingly, we reverse the finding of the Panel, in paragraph 6.75 of the Panel Report, that
the method for calculating amounts for SG&A and profits provided for in Article 2.2.2(ii) of the  Anti-
Dumping Agreement , may be applied where there is data on SG&A and profits for only one other
exporter or producer.
78. We recall that India also argues that the Panel's finding in paragraph 6.75 of the Panel Report
on the applicability of Article 2.2.2(ii) was inconsistent with the standard of review set forth in
Article 17.6(i) of the  Anti-Dumping Agreement .  However, since we have already concluded that the
finding of the Panel in that paragraph is inconsistent with Article 2.2.2(ii), there is no need for us toexamine whether the Panel in making this finding also acted inconsistently with Article 17.6(i).
                                                     
42Panel Report, para. 6.71.
43We note that in a case where there is data relating to only one other exporter or producer, a Member
may have recourse to the calculation method set forth in Article 2.2.2(iii), provided, of course, that the specific
requirements for the use of this calculation method are met.   We recall that Article 2.2.2(iii) states that amounts
for SG&A and profits may be calculated on the basis of :
any other reasonable method, provided that the amount for profit so established
shall not exceed the profit normally realized by other exporters or producers onsales of products of the same general category in the domestic market of thecountry of origin.WT/DS141/AB/R
Page 25
79. On the second issue relating to the Panel's interpretation of Article 2.2.2(ii) – that is, whether
in calculating the amount for profits pursuant to Article 2.2.2(ii), Members may exclude sales by other
exporters or producers that are not made in the ordinary course of trade – we recall that the amounts
for SG&A and profits for an exporter or a producer under investigation are, under Article 2.2.2(ii),
calculated on the basis of:
the weighted average of the actual amounts incurred and realized by
other exporters or producers subject to investigation in respect of
production and sales of the like product in the domestic market of the
country of origin;
80. Here, we note especially that Article 2.2.2(ii) refers to "the weighted average of  the actual
amounts incurred and realized   by other exporters or producers". (emphasis added)  In referring to
"the actual amounts incurred and realized", this provision does not make any exceptions or
qualifications.  In our view, the ordinary meaning of the phrase " actual  amounts incurred and
realized" includes the  SG&A actually incurred , and the  profits or  losses actually realized44 by other
exporters or producers in respect of production and sales of the like product in the domestic market ofthe country of origin.  There is no basis in Article 2.2.2(ii) for excluding  some amounts that were
actually incurred or realized from the "actual amounts in curred or realized".  It follows that, in the
calculation of the "weighted average",  all of "the actual amounts incurred and realized" by other
exporters or producers must be included, regardless  of whether those amounts are incurred and
realized on production and sales made in the ordinary course of trade or not.  Thus, in our view, a
Member is not allowed to exclude those sales that are not made in the ordinary course of trade from
the calculation of the "weighted average" under Article 2.2.2(ii).
81. We find support for this textual interpretation of Article 2.2.2(ii) in the context of this
provision and, in particular, in the first sentence of the chapeau of Article 2.2.2, which sets out theprincipal method for calculating amounts for SG&A and profits.  The method set out inArticle 2.2.2(ii) is one of three alternative methods which may be applied  only in circumstances
where the amounts for SG&A and profits cannot be determined by the principal method set out in thechapeau of Article 2.2.2.
45  In setting out this principal method, the first sentence of the chapeau of
Article 2.2.2 states:
                                                     
44It is worthwhile noting that "realized" is a word used with respect to both gains (profits) and losses.
See  Black's Law Dictionary  (West Group, 1999), p. 1271, which speaks of both "realized gain" and "realized
loss".
45See second sentence of the chapeau of Article 2.2.2.WT/DS141/AB/R
Page 26
For the purpose of paragraph 2, the amounts for administrative, selling
and general costs and for profits  shall be based on actual data
pertaining to production and sales in  the ordinary course of trade  of the
like product by the exporter or producer under investigation. (emphasis
added)
82. In contrast to Article 2.2.2(ii), the first sentence of the chapeau of Article 2.2.2 refers to
"actual data pertaining to production and sales  in the ordinary course of trade ". (emphasis added)
Thus, the drafters of the  Anti-Dumping Agreement  have made clear that sales  not in the  ordinary
course of trade  are to be  excluded  when calculating amounts for SG&A and profits using the method
set out in the chapeau of Article 2.2.2.
83. The exclusion in the chapeau leads us to believe  that, where there is no such explicit exclusion
elsewhere in the same Article of the  Anti-Dumping Agreement , no exclusion should be implied.  And
there is no such explicit exclusion in Article  2.2.2(ii).  Article 2.2.2(ii) provides for an  alternative
calculation method that can be employed precisely  when the method contemplated by the chapeau
cannot be used.  Article 2.2.2(ii) contains its own specific requirements.  On their face, theserequirements do not call for the exclusion of sales not made in the ordinary course of trade.  Reading
into the text of Article 2.2.2(ii) a requirement provided for  in the chapeau  of Article 2.2.2 is not
justified either by the text or by the c ontext of Article 2.2.2(ii).  In our Report in  India – Patent
Protection for Pharmaceutical and Agricultural Chemical Products,  we stated:
The duty of a treaty interpreter is to examine the words of the treaty to
determine the intentions of the parties.  This should be done in
accordance with the principles of treaty interpretation set out in
Article 31 of the Vienna Convention .  But these principles of
interpretation neither require nor condone the imputation into a treaty
of words that are not there or the importation into a treaty of conceptsthat were not intended.
46
84. Therefore, we reverse the finding of the Panel in paragraph 6.87 of the Panel Report that, in
calculating the amount for profits under Article 2.2.2(ii) of the  Anti-Dumping Agreement , a Member
may exclude sales by other exporters or producers that  are not made in the ordinary course of trade.
85. In view of our findings in paragraphs 77 and 84 of this Report, we conclude that the European
Communities, in calculating amounts for SG&A and profits in the anti-dumping investigation at issuein this dispute, acted inconsistently with Article 2.2.2(ii) of the  Anti-Dumping Agreement .
                                                     
46Appellate Body Report, WT/DS50/AB/R, adopted 16 January 1998, para. 45.WT/DS141/AB/R
Page 27
VI. Findings and Conclusions
86. For the reasons set out in this Report, the Appellate Body:
(1) upholds the finding of the Panel in paragraph 6.119 of the Panel Report that the
practice of "zeroing" when establishing "the existence of margins of dumping", asapplied by the European Communities in the anti-dumping investigation at issue inthis dispute, is inconsistent with Article 2.4.2 of the  Anti-Dumping Agreement ;  and
(2) reverses the findings of the Panel in paragraphs 6.75 and 6.87, respectively, of the
Panel Report that:
(a) the method for calculating amounts for administrative, selling and general
costs and profits provided for in Article 2.2.2(ii) of the  Anti-Dumping
Agreement  may be applied where there is data on administrative, selling and
general costs and profits for only one other exporter or producer;  and
(b) in calculating the amount for profits under Article 2.2.2(ii) of the  Anti-
Dumping Agreement , a Member may exclude sales by other exporters or
producers that are not made in the ordinary course of trade;
and, as a consequence, concludes that the European Communities, in calculating
amounts for administrative, selling and general costs and profits in the anti-dumping
investigation at issue in this dispute, acted inconsistently with Article 2.2.2(ii) of theAnti-Dumping Agreement .
87. The Appellate Body recommends that the DSB request that the European Communities bring
its measure found in this Report, and in the Panel Report as modified by this Report, to beinconsistent with the  Anti-Dumping Agreement  into conformity with its obligations under that
Agreement.WT/DS141/AB/R
Page 28
Signed in the original at Geneva this 8th day of February 2001 by:
_________________________
James Bacchus
Presiding Member
_________________________ _________________________
Florentino P. Feliciano Georges-Michel Abi-Saab
Member Member