WT/DS534/R/Add.1  
 
9 April 2019 
(19-2216) Page: 1/61 
    
 
  
UNITED  STATES  – ANTI -DUMPING MEASURES APPLYING DIFFERENTIAL PRICING 
METHODOLOGY TO SOFTWOOD LUMBER FROM CANADA (DS 534)  
 
REPORT OF THE PANEL  
Addendum  
This addendum  contains Annexes A to C to the Report of the Panel to be found in document  
WT/DS534/R . 
 
 
_______________  
 
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LIST OF ANNEXES  
ANNEX  A 
PANEL DOCUMENTS  
Contents  Page  
Annex  A-1 Working Procedures of the Panel  4 
Annex  A-2 Additional Working Procedures on Business Confidential Information  10 
Annex A -3 Additional Working Procedures on Open Meetings  12 
Annex  A-4 Timetable for the Panel proceedings  13 
Annex A -5 Interim Review  15 
ANNEX  B 
ARGUMENTS OF THE PARTIES  
Contents  Page  
Annex  B-1 First integrated executive summary of the arguments of Canada  18 
Annex  B-2 Second integrated executive summary of the arguments of Canada  23 
Annex  B-3 First integrated executive summary of the arguments of the United  States  30 
Annex  B-4 Second integrated executive summary of the arguments of the United  States  41 
ANNEX  C 
ARGUMENTS OF THE THI RD PARTIES  
Contents  Page  
Annex  C-1 Integrated executive summary of the arguments of Brazil  53 
Annex C -2 Integrated executive summary of the arguments of China  55 
Annex  C-3 Integrated executive summary of the arguments of the European Union  57 
Annex  C-4 Integrated executive summary of the arguments of Japan  59 
 
 
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  ANNEX A  
PANEL DOCUMENTS  
Contents  Page  
Annex  A-1 Working Procedures of the Panel  4 
Annex  A-2 Additional Working Procedures on Business Confidential Information  10 
Annex A -3 Additional Working Procedures on Open Meetings  12 
Annex  A-4 Timetable for the Panel proceedings  13 
Annex A -5 Interim Review  15 
 
 
 
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  ANNEX  A-1 
WORKING PROCEDURES O F THE PANEL  
Adopted on 20 June 2018  
 
General  
 
1. (1) In this proceeding, the Panel shall follow the relevant provisions of the Understanding 
on Rules and Procedures Governing the Settlement of Disputes ("DSU"). In addition, the 
following Working Procedures apply.  
(2) The Panel reserv es the right to modify these procedures as necessary, after consultation 
with the parties.  
Confidentiality  
2. (1) The deliberations of the Panel and the documents submitted to it shall be kept 
confidential. Members shall treat as confidential information that is submitted to the Panel which 
the submitting Member has designated as confidential.  
(2) Nothing in the DSU or in these Working Procedures shall preclude a party or third party 
from disclosing statements of its own positions to the public.  
(3) If a party submits a confidential version of its written submissions to the Panel, it shall 
also, upon request of a Mem ber, provide a non -confidential summary of the information 
contained in its submissions that could be disclosed to the public.  
(4) The parties and third parties shall treat business confidential information in accordance 
with the procedures set forth in t he Additional Working Procedures of the Panel Concerning 
Business Confidential Information.  
Submissions  
 
3. (1) Before the first substantive meeting of the Panel with the parties, each party shall 
submit a written submission in which it presents the facts of the case and its arguments, in 
accordance with the timetable adopted by the Panel.  
(2) Each party shall also submit to the Panel, prior to the second substantive meeting of 
the Panel, a written rebuttal, in accordance with the timetable adopted by the Pan el.  
(3) Each third party that chooses to make a written submission prior to the first substantive 
meeting of the Panel with the parties shall do so in accordance with the timetable adopted by 
the Panel.  
(4) The Panel may invite the parties or thi rd parties to make  additional submissions in the 
course of the proceeding, including with respect to requests for preliminary rulings in accordance 
with paragraph 4 below.  
Preliminary rulings  
4. (1) The following procedures shall apply if the responding part y asks for a ruling that certain 
measures or claims are not properly before the Panel:  
If the United States considers that the Panel should make a ruling prior to the issuance of the 
Report that certain measures or claims in the panel request or Canada's f irst written submission 
are not properly before the Panel, the following procedure applies. Exceptions to this procedure 
shall be granted upon a showing of good cause.    WT/DS534/R/Add.1  
 
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  a. the United States shall submit any such request for a preliminary ruling at the earlies t 
possible opportunity and in any event no later than in its first written submission to the 
Panel. Canada shall submit its response to the request prior to the first substantive 
meeting of the Panel, at a time to be determined by the Panel in light of the  request.  
b. The Panel may issue a preliminary ruling on the issues raised in such a preliminary ruling 
request before, during or after the first substantive meeting, or the Panel may defer a 
ruling on the issues raised by a preliminary ruling request until i t issues its Report to the 
parties.  
c. In the event that the Panel finds it appropriate to issue a preliminary ruling prior to the 
issuance of its Report, the Panel may provide reasons for the ruling at the time that the 
ruling is made, or subsequently in it s Report.   
d. Any request for such a preliminary ruling by the United States prior to the first meeting, 
and any subsequent submissions of the parties in relation thereto prior to the first meeting, 
shall be served on all third parties. The Panel may provide  all third parties with an 
opportunity to provide comments on any such request, either in their submissions as 
provided for in the timetable or separately. Any preliminary ruling issued by the Panel 
prior to the first substantive meeting on whether certain  measures or claims are properly 
before the Panel shall be communicated to all third parties.  
(2) The procedure set out in paragraph (1) is without prejudice to any of the parties' right 
to request other types of preliminary or procedural rulings in the course of the proceeding, and 
to the procedures that the Panel may follow with respect to such requests.  
Evidence  
5. (1) Each party shall submit all evidence to the Panel no later than during the first 
substantive meeting, except evidence necessary for pu rposes of rebuttal, or evidence necessary 
for answers to questions or comments on answers provided by the other party. Additional 
exceptions may be granted upon a showing of good cause.  
(2) If any new evidence has been admitted upon a showing of good caus e, the Panel shall 
accord the other party an appropriate period of time to comment on the new evidence submitted.  
6. (1) Where the original language of an exhibit or portion thereof is not a WTO working 
language, the submitting party or third party shall simu ltaneously submit a translation of the 
exhibit or relevant portion into the WTO working language of the submission. The Panel may 
grant reasonable extensions of time for the translation of exhibits upon a showing of good cause.  
(2) Any objection as to the  accuracy of a translation should be raised promptly in writing, 
preferably no later than the next submission or meeting (whichever occurs earlier) following the 
submission which contains the translation in question. Any objection shall be accompanied by a  
detailed explanation of the grounds for the objection and an alternative translation.  
7. (1) To facilitate the maintenance of the record of the dispute and maximize the clarity of 
submissions, each party and third party shall sequentially number its exhibit s throughout the 
course of the dispute, indicating the submitting Member and the number of each exhibit on its 
cover page. Exhibits submitted by Canada should be numbered CAN -1, CAN -2, etc. Exhibits 
submitted by the United States should be numbered USA -1, USA-2, etc. If the last exhibit in 
connection with the first submission was numbered CAN -5, the first exhibit in connection with 
the next submission thus would be numbered CAN -6.  
(2) Each party shall provide an updated list of exhibits (in Word or Excel f ormat) together 
with each of its submissions, oral statements, and responses to questions.  
(3) If a party submits a document that has already been submitted as an exhibit by the 
other party, it should explain why it is submitting that document again.  WT/DS534/R/Add.1  
 
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  Edito rial Guide  
8. In order to facilitate the work of the Panel, each party and third party is invited to make its 
submissions in accordance with the WTO Editorial Guide for Panel Submissions (electronic copy 
provided).  
Questions  
 
9. The Panel may pose questions to t he parties and third parties at any time, including:  
a. Prior to any meeting, the Panel may send written questions, or a list of topics it intends to 
pursue in questioning orally in the course of a meeting. The Panel may ask different or 
additional questions at the meeting.  
a. The Panel may put questions to the parties and third parties orally in the course of a 
meeting, and in writing following the meeting, as provided for in paragraphs 14 and 20 
below.  
Substantive meetings  
 
10. The parties shall be present at the  meetings only when invited by the Panel to appear before it. 
The Panel may open its meetings with the parties to the public, subject to appropriate procedures 
to be adopted by the Panel after consulting the parties.  
11. (1) Each party has the right to determi ne the composition of its own delegation when 
meeting with the Panel.  
(2) Each party shall have the responsibility for all members of its delegation and shall 
ensure that each member of its delegation acts in accordance with the DSU and these Working 
Procedures, particularly with regard to the confidentiality of the proceeding a nd the submissions 
of the parties and third parties.  
12. Each party shall provide to the Panel the list of members of its delegation no later than 5.00  p.m. 
(Geneva time) three working days preceding the first day of each meeting with the Panel.  
13. A request fo r interpretation by any party should be made to the Panel as early as possible, 
preferably at the organizational stage, to allow sufficient time to ensure availability of 
interpreters.  
14. The first substantive meeting of the Panel with the parties shall be co nducted as follows:  
a. The Panel shall invite Canada to make an opening statement to present its case first. 
Subsequently, the Panel shall invite the United States to present its point of view. Before 
each party takes the floor, it shall provide the Panel and  other participants at the meeting 
with a provisional written version of its statement. In the event that interpretation is 
needed, each party shall provide additional copies for the interpreters.  
b. Each party should avoid lengthy repetition of the argument s in its submissions. Each party 
is invited to limit the length of its opening statement to 60minutes. If either party considers 
that it requires more time for its opening statement, it should inform the Panel and the 
other party at least 5days prior to th e meeting, and it should also provide, at the same 
time, an estimate of the length of its statement. The Panel will accord equal time to both 
parties for their statements.   
c. After the conclusion of the opening statements, the Panel shall give each party th e 
opportunity to make comments or ask the other party questions.  
d. The Panel may subsequently pose questions to the parties.  
e. Once the questioning has concluded, the Panel shall afford each party an opportunity to 
present a brief closing statement, with Cana da presenting its statement first. Before each WT/DS534/R/Add.1  
 
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  party takes the floor, it shall provide the Panel and other participants at the meeting with 
a provisional written version of its closing statement, if available.  
f. Following the meeting:  
i. Each party shall submit  a final written version of its opening statement no later than 
5.00 p.m. (Geneva time) on the first working day following the meeting. At the same 
time, each party should also submit a final written version of any prepared closing 
statement that it delive red at the meeting.  
ii. Each party shall send in writing, within the timeframe established by the Panel prior 
to the end of the meeting, any questions to the other party to which it wishes to receive 
a response in writing.  
iii. The Panel shall send in writing, wi thin the timeframe established by the Panel prior to 
the end of the meeting, any questions to the parties to which it wishes to receive a 
response in writing.  
iv. Each party shall respond in writing to the questions from the Panel, and to any 
questions posed by the other party, within the time -frame established by the Panel 
prior to the end of the meeting.  
15. The second substantive meeting of the Panel with the parties shall be conducted in the same 
manner as the first substantive meeting with the Panel, except t hat the United States shall be 
given the opportunity to present its oral statement first. If the United States chooses not to avail 
itself of that right, it shall inform the Panel and the other party no later than 5.00pm (Geneva 
time) three working days da y prior to the meeting. In that case, Canada shall present its opening 
statement first, followed by the United States. The party that presented its opening statement 
first shall present its closing statement first.  
Third party session  
 
16. The third parties shall be present at the meetings only when invited by the Panel to appear 
before it.  
17. (1) Each third party has the right to determine the composition of its own delegation when 
meeting with the Panel.  
(2) Each third party shall have the responsibility for all members of its delegation and shall 
ensure that each member of its delegation acts in accordance with the DSU and these Working 
Procedures, particularly with regard to the confidentiality of the proceeding and the submissions 
of the parties and third parties.  
18. A request for interpretation by any third party should be made to the Panel as early as possible, 
preferably upon receiving the working procedures and timetable for the proceeding, to allow 
sufficient time to ensure availability  of interpreters.  
19. (1) Each third party may present its views orally during a session of the first substantive 
meeting with the parties set aside for that purpose.  
(2) Each third party shall indicate to the Panel whether it intends to make an oral statemen t 
during the third party session, along with the list of members of its delegation, in advance of 
this session and no later than 5.00  p.m. (Geneva time) three working days preceding the first 
day of the third party session of the meeting with the Panel.  
20. The third party session shall be conducted as follows:  
a. All parties and third parties may be present during the entirety of this session.  
b. The Panel shall first hear the oral statements of the third parties, who shall speak in 
alphabetical order. Each third  party making an oral statement at the third party session WT/DS534/R/Add.1  
 
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  shall provide the Panel and other participants with a provisional written version of its 
statement before it takes the floor. In the event that interpretation of a third party's oral 
statement is n eeded, that third party shall provide additional copies for the interpreters.  
c. Each third party should limit the length of its statement to 15 minutes, and avoid repetition 
of the arguments already in its submission.  
d. After the third parties have made thei r statements, the parties shall be given the 
opportunity to pose questions to any third party for clarification on any matter raised in 
that third party's submission or statement.  
e. The Panel may subsequently pose questions to any third party.  
f. Following the third party session:  
i. Each third party shall submit the final written version of its oral statement, no later 
than 5.00  p.m. (Geneva time) on the first working day following the meeting.  
ii. Each party may send in writing, within the timeframe to be establishe d by the Panel 
prior to the end of the meeting, any questions to a third party or parties to which it 
wishes to receive a response in writing.  
iii. The Panel may send in writing, within the timeframe to be established by the Panel 
prior to the end of the meeti ng, any questions to a third party or parties to which it 
wishes to receive a response in writing.  
iv. Each third party choosing to do so shall respond in writing to written questions from 
the Panel or a party, within a timeframe established by the Panel prio r to the end of 
the meeting.  
Descriptive part and executive summaries  
 
21. The description of the arguments of the parties and third parties in the descriptive part of the 
Panel report shall consist of executive summaries provided by the parties and third part ies, which 
shall be annexed as addenda to the report. These executive summaries shall not in any way 
serve as a substitute for the submissions of the parties and third parties in the Panel's 
examination of the case.  
22. Each party shall submit two integrated executive summaries. The first integrated executive 
summary shall summarize the facts and arguments as presented to the Panel in the party's first 
written submission, its first oral statement, and where possible, its responses to questions 
following the fi rst substantive meeting. The second integrated executive summary shall 
summarize its second written submission, its second oral statement, and where possible, its 
responses to the second set of questions and comments thereon following the second 
substantiv e meeting. The timing of the submission of these two integrated executive summaries 
shall be indicated in the timetable adopted by the Panel.  
23. Each integrated executive summary shall be limited to no more than 15 pages.  
24. The Panel may request the parties a nd third parties to provide executive summaries of facts and 
arguments presented in any other submissions to the Panel for which a deadline may not be 
specified in the timetable.  
25. Each third party shall submit an integrated executive summary of its argument s as presented in 
its written submission and statement in accordance with the timetable adopted by the Panel. 
This integrated executive summary may also include a summary of responses to questions, if 
relevant. The executive summary to be provided by each third party shall not exceed six  pages.  WT/DS534/R/Add.1  
 
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  Interim review  
 
26. Following issuance of the interim report, each party may submit a written request to review 
precise aspects of the interim report and request a further meeting with the Panel, in accordance 
with the timetable adopted by the Panel. The right to request such a meeting shall be exercised 
no later than at the time the written request for review is submitted.  
27. In the event that no further meeting with the Panel is requested, each party may submit written 
comments on the other party's written request for review, in accordance with the timetable 
adopted by the Panel. Such comments shall be limited to commenting on  the other party's 
written request for review.  
Interim and Final Report  
28. The interim report, as well as the final report prior to its official circulation, shall be kept strictly 
confidential and shall not be disclosed.  
Service of documents  
 
29. The following procedures regarding service of documents shall apply:  
a. Each party and third party shall submit all submissions, exhibits, oral statements, 
responses to questions, comments on responses, comments on comments, comments on 
the descriptive part of the Panel re port, and comments on the Interim Report of the Panel 
by filing them via the Digital Dispute Settlement Registry (DDSR) by 5.00 p.m. (Geneva 
time) on the due dates established by the Panel. The electronic version uploaded into the 
DDSR shall constitute the  official version for the purposes of the record of the dispute. 
Upload into the DDSR shall also constitute electronic service on the Panel, the other party, 
and the third parties.  
b. In case any party or third party is unable to meet the 5.00 p.m. deadline because of 
technical difficulties in uploading these documents into the DDSR, the party or third party 
concerned shall send these documents by e -mail to DSRegistry@wto.org , WTO Secretariat 
staff whose e -mail addres ses have been provided to the parties in the course of the 
proceeding, the other party, and where appropriate, the third party by 6.00 pm. The 
uploading to the DDSR shall be made on the following working day.  
c. Any request for technical assistance regarding  the use of DDSR shall be addressed to 
DSRegistry@wto.org  and ddsrsupport@wto.org  (assistance available only during WTO 
working hours).  
d. For all documents that were filed v ia DDSR, each party and third party shall file one paper 
copy of such documents with the DS Registry the working day following the electronic 
filing.  
e. The Panel shall provide all documents and communications to the parties and the third 
parties via e -mail. When the Panel provides the parties or third parties both paper and 
electronic versions of a document, the electronic version shall constitute the official version 
for the purposes of the record of the dispute.  
Correction of clerical errors in submissions  
30. The Panel may grant leave to a party or third party to correct clerical errors in any of its 
submissions (including paragraph numbering and typographical mistakes). Any such request should 
identify the nature of the errors to be corrected, and should be made promptly following the filing 
of the submission in question.  
 
 
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  ANNEX A -2 
ADDITIONAL WORKING P ROCEDURES ON BUSINES S CONFIDENTIAL INFOR MATION  
Adopted on 20 June 2018  
 
1. The following procedures apply to business confidential information (BCI) submitted in the 
course of the present Panel proceedings.  
2. For the purposes of these proceedings, BCI is defined as any information that has been 
designated as such by a party or a third party submitting the information to the Panel. The parties 
or third  parties shall only designate as BCI information that is not available in the public domain, the 
release of which would cause serious harm to the interests of the originator(s) of the information. 
BCI may include information that was previously treated by the US Department of Commerce as 
confidential or proprietary information protected by Administrative Protective Order in the course of 
the antidumping proceeding at issue in this dispute, entitled Softwood Lumber from Canada 
(A-122-857). In addition, these  procedures do not apply to any BCI if the entity which provided the 
information in the course of the aforementioned investigation has agreed in writing to make the 
information publicly available.  
3. If a party considers it necessary to submit to the Panel  BCI as defined above from an entity 
that submitted that information in the investigation at issue, the party shall, at the earliest possible 
date, obtain an authorizing letter from the entity and provide such authorizing letter to the Panel, 
with a copy t o the other party. The authorizing letter from the entity shall authorize both Canada 
and the United States to submit in this dispute, in accordance with these procedures, any confidential 
information submitted by that entity in the course of the investiga tion. Each party shall, at the 
request of the other party, facilitate the communication to an entity in its territory of any request to 
provide an authorizing letter referred to above. Each party shall encourage any entity in its territory 
that is requeste d to grant the authorization referred to in this paragraph to grant such authorization.  
4. No person may have access to BCI except a member of the Secretariat or the Panel, an 
employee of a party or third party, or an outside advisor to a party or third pa rty for the purposes 
of this dispute. However, an outside advisor to a party or third party is not permitted access to BCI 
if that advisor is an officer or employee of an enterprise engaged in the production, sale, export, or 
import of the products that we re the subject of the investigation at issue in this dispute, or an officer 
or employee of an association of such enterprises.  
5. A person having access to BCI shall treat it as confidential, i.e. shall not disclose that 
information other than to persons a uthorized to have access to it pursuant to these procedures. 
Each party and third party is responsible for ensuring that its employees and/or outside advisors 
comply with these procedures. BCI obtained under these procedures may be used only for the 
purpos e of providing information and argumentation in this dispute and for no other purpose. All 
documents and electronic storage media containing BCI shall be stored in such a manner as to 
prevent unauthorized access to such information. Third parties' access t o BCI shall be subject to the 
terms of these procedures.  
6. A party submitting BCI shall mark the cover and/or first page of the document containing BCI, 
and each page of the document, to indicate the presence of such information. The specific 
information in question shall be placed between double brackets, as follows: [[xx,xxx.xx]]. The first 
page or cover of the document shall state "Contains Business Confidential Information on 
pages  xxxxxx", and each page of the document shall contain the notice "Contai ns Business 
Confidential Information" at the top of the page. A party submitting BCI in the form of, or as part 
of, an Exhibit shall, in addition to the above, so indicate by putting "BCI" next to the exhibit number 
(e.g. Exhibit CAN -1 (BCI)).  
7. Where BCI  is submitted in electronic format, the file name shall include the terms "Business 
Confidential Information" or "BCI". In addition, where applicable, the label of the storage medium 
shall be clearly marked with the statement "Business Confidential Informa tion" or "BCI".  
8. Where a party submits a document containing BCI to the Panel, the other party or third party 
referring to that BCI in its documents, including written submissions and oral statements, shall WT/DS534/R/Add.1  
 
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  clearly identify all such information in those documents. All such documents shall be marked and 
treated as described in paragraph 6. In the case of an oral statement containing BCI, the party or 
third party making such a statement shall inform the Panel before making it that the statement will 
contain  BCI, and the Panel will ensure that only persons authorized to have access to BCI pursuant 
to these procedures are present or observing the session at that time. The written versions of such 
oral statements submitted to the Panel shall be marked as provid ed for in paragraph 6.  
9. If a party or third party considers that information submitted by the other party or a third 
party should have been designated as BCI and objects to its submission without such designation, 
it shall forthwith bring this objection to the attention of the Panel and the other party, and, where 
relevant, the third parties, together with the reasons for the objection. Similarly, if a party or third 
party considers that the other party or a third party designated as BCI information which  should not 
be so designated, it shall forthwith bring this objection to the attention of the Panel and the other 
party, and, where relevant, the third parties, together with the reasons for the objection. The Panel 
shall decide whether information subject  to an objection will be treated as BCI for the purposes of 
these proceedings on the basis of the criteria set out in paragraph 2.  
10. The Panel will not disclose BCI, in its report or in any other way, to persons not authorized 
under these procedures to h ave access to BCI. The Panel may, however, make statements of 
conclusion drawn from such information. Before the Panel circulates its final report to the Members, 
the Panel will give each party an opportunity to review the report to ensure that it does not  contain 
any BCI.  
11. Submissions, exhibits, and other documents or recordings containing BCI will be included in 
the record forwarded to the Appellate Body in the event of an appeal of the Report of the Panel.  
 
 
 
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  ANNEX A -3 
ADDITIONAL WORKING P ROCEDURES ON OPEN MEETINGS  
Adopted on 20 June 2018  
 
1. The Panel will start substantive meetings with the parties  (dates of substantive meetings 
provided for in its Timetable) with a session open to the public at which no confidential information 
shall be referred to or disclosed ("non -confidential session").  
2. At such sessions, each party will be asked to make opening and closing statements which shall 
not include confidential information. After both parties have made their opening statements, each 
party will be given the opportunity to pose questions or make comments on the other party's 
statement, as described in the Working Procedures adopted by the Panel. The Panel may pose any 
questions or make any comments during such session. Such questions shall no t include confidential 
information.  
3. To the extent that the Panel or either of the parties considers it necessary, the Panel shall 
proceed to a closed session ("confidential session"), during which the parties will be allowed to make 
additional statement s or comments and pose questions that involve confidential information. The 
Panel may also pose questions during the confidential session.  
4. The Panel will start the third party session of its first substantive meeting with the parties by 
opening a porti on of this session to the public ("non -confidential third party session"). At this portion 
of the third party session, no confidential information shall be referred to or disclosed. Each third 
party wishing to make its statement in the non -confidential thi rd party session shall do so, but shall 
ensure that its statement does not include confidential information. After such third parties have 
made their statements, questions or comments from the parties or the Panel may be presented 
concerning these statemen ts, as foreseen in the Working Procedures adopted by the Panel. Such 
questions or comments shall not include confidential information. To the extent that the Panel or 
any of the other third parties considers it necessary, the Panel shall then conclude this  portion of 
the third party session and proceed to a third party closed session ("confidential third party session") 
during which other third parties shall make their statements.   
5. During the confidential sessions referred to above, the following person s shall be admitted 
into the meeting room:  
• Members of the Panel;  
• Members of the delegations of the parties;  
• Members of the delegations of the third parties throughout the third party session;  
• WTO Secretariat staff assisting the Panel.  
 
6. As set out below in paragraph 7, a live closed -circuit television broadcast of the Panel meeting 
to a separate viewing room in the WTO shall be used to allow other WTO Members, Observers, staff 
members, and registered members of the public to observe the non -confidential s essions.  
7. The viewings will be open to officials of WTO Members, Observers and staff members of the 
WTO Secretariat upon presentation of their official badges. Accredited journalists and 
representatives of relevant non -governmental organizations (NGOs) may indicate to the Secretariat 
(Information and External Relations Division) their interest in attending the viewings. No later than  
four weeks before the substantive meetings, the WTO Secretariat will place a notice on the WTO 
website informing the publi c of the non -confidential sessions. The notice shall include a link through 
which members of the public can register directly with the WTO. The date(s) of the deadline for 
public registration will be informed to the parties as soon as it has been establish ed. 
 
 
 
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  ANNEX A -4 
TIMETABLE FOR THE PA NEL PROCEEDINGS1  
Adopted on 20 June 2018  
Revised on 7 December 2018  
 
 
Panel established on 9 April 2018  
Panel composed on 22 May 2018  
 
Description  Dates2 
a. Receipt of first written submissions   
i. Canada  
 22 June 2018 
 
ii. United States  
 24 July 2018  
 
b. Receipt of third parties' written submissions  31 July 2018  
c. First substantive meeting with the parties  12, 13 September 2018  
 Third party session  13 September 2018  
d. Receipt of responses to questions posed by the Panel  27 September 2018  
e. Receipt of integrated executive summaries of third parties  
Receipt of the first integrated executive summaries of the parties  4 October 2018  
f. Receipt of written rebuttals of the parties  17 October 2018  
 
g. Second substantive meeting with the parties  
 4 December 2018 (and 
5 December if necessary)  
 
h. Receipt of responses to questions posed by the Panel  19 December 2018  
 
i. Receipt of comments on responses to questions posed by the Panel  10 January 2019  
 
j. Receipt of second integrated executive summaries of parties  17 January 2019  
 
k. Issuance of descriptive part of the report to the parties  29 January 2019  
                                                
1 The above timetable may be changed in the light of subsequent developments . 
2 The exact time of the deadline for receipt of documents are 5 p.m. of the date indicated in this column 
unless the Panel separately otherwise indicates .  WT/DS534/R/Add.1  
 
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  Description  Dates2 
l. Receipt of comments by the parties on the descriptive part of the 
report  8 February 2019  
m. Issuance of the interim report, including findings and conclusions 
to the parties  28 February 2019  
n. Deadline for parties to request review of part(s) of the report and 
to request interim review meeting  7 March 2019  
o. Interim review meeting, if request ed – If no meeting requested, 
deadline for comments on requests for review  13 March 2019  
p. Issuance of final report to the parties  27 March 2019  
q. Circulation of the final report to the Members  9 April 2019  
 
 
 
 
 WT/DS534/R/Add.1  
 
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  ANNEX A -5 
INTERIM REVIEW  
1.  INTRODUCTION  
1.1.  In accordance with Article  15.3 of the DSU, this Annex sets out our discussion of the arguments 
made at the interim review stage. We have revised certain aspects of the Interim  Report in light of 
the comments received during the interim review process. In addition, we have made certain 
editorial changes to improve the clarity and accuracy of the Final Report, or to correct typographical 
and non -substantive errors, including those suggested by the United States. The para graph and 
footnote numbers in the Final Report remain unchanged.  
2.  SPECIFIC REQUEST S FOR REVIEW SUBMITT ED BY THE PARTIES  
2.1.  Paragraph 7.19  
2.1.  Noting that we observed in paragraph 7.19 of the Interim Report that it is "well established by 
now in WTO  jurisprudence" that "zeroing is prohibited under the W -W and T -T methodologies", the 
United States contends that this sentence as drafted may suggest that WTO rights and obligations 
originate in WTO panel or Appellate Body reports, rather than the covered  agreements.1 Thus, the 
United States requests us to modify this sentence. Canada opposes the United States' request, 
asserting that this request is premised on a misinterpretation of Article 3.2 of the DSU and that 
interim review is not an appropriate tim e to reopen such an issue.2 
2.2.  We have made the modifications suggested by the United States because they do not change 
the meaning or scope of what is already stated in this paragraph of the Interim Report. We also do 
not share Canada's concerns with r espect to the United States' request. In this regard, we note that 
the modifications made do not affect our own analysis or findings in this dispute.  
2.2.  Paragraph 7.25  
2.3.  The United States requests us to modify paragraph 7.25 of the Interim Report wh ere we stated 
that the USDOC used "statistical analysis" to consider whether the difference in the weighted average 
prices to the test group and the comparison group was significant.3 The United States submits that 
our description of the USDOC's actions is  inaccurate because the USDOC did not assert that it was 
conducting formal "statistical analysis".4 The United States requests that we remove the reference 
to the USDOC's use of "statistical analysis" and instead state that the USDOC used "the Cohen's d 
coefficient, which is a generally recognized statistical measure of the extent of the difference 
between the mean of a test group and the mean of a comparison group".5 Canada opposes the 
United States' request, noting that because it has not challenged the C ohen's d test, this 
test's  precise nature is not a n issue that is either before the Panel or that would be appropriate for 
the Panel to determine.6 
2.4.  We were not required to, and did not, express any view in these panel proceedings on whether 
the Cohen 's d coefficient is a "generally recognized statistical measure". Making the drafting changes 
proposed by the United States may incorrectly suggest to the reader of our Report that we expressed 
such a view. Therefore, we decline to  modify this paragraph in  the manner proposed by the 
United  States. Nonetheless, we have made certain changes to more accurately reflect the 
USDOC's  description of the Cohen's d test.  
                                                
1 United States' request for interim review, para. 4.  
2 Canada's comments on the United States' request for interim review, para. 3.  
3 United States' request for interim review, para. 5.  
4 United States' request for interim review, para. 5.  
5 United States' request for interim review, para. 5. (emphasis omitted)  
6 Canada's comments on the United States' request for interim review, para. 5.  WT/DS534/R/Add.1  
 
- 16 - 
 
  2.3.  Paragraphs 7.28 and 7.32  
2.5.  The United States requests us to make certain changes in par agraphs 7.28 and 7.32 to 
accurately describe how the USDOC applied the DPM in the underlying investigation.7 Canada does 
not comment on the United States' request.  
2.6.  We have made the changes requested by the United States.  
2.4.  Paragraph 7.36(b)  
2.7.  The United States requests us to modify this paragraph by noting that the pattern found by 
the USDOC in the underlying investigation included prices to purchasers, regions or time periods 
that differed significantly because they were significantly lower  than export prices to other 
purchasers, regions or time periods.8 Canada does not comment on the United States' request.  
2.8.  We decline to make the modifications requested by the United States. In paragraphs 7.36 
and 7.37 we set out the issues that the pa rties disagree on as "a matter of law". The parties do not 
disagree that a pattern of export prices which differ significantly may include export prices that differ 
significantly because they are significantly lower than export prices to other purchasers, regions or 
time periods. Thus, the modifications proposed by the United States would affect the clarity of our 
Report . We also note that paragraph 7.31 of our Report already sets out the relevant facts in this 
regard.  
2.5.  Paragraph 7.46  
2.9.  The United States requests us to make certain changes to accurately reflect its arguments.9 
Canada does not comment on the United States' request.  
2.10.   We have made the changes requested by the United States.  
2.6.  Paragraph 7.83  
2.11.   The United States requests us to modify this paragraph to accurately reflect the text of the 
pattern clause.10 Canada does not comment on the United States' request.  
2.12.   We have made the modification requested by the United States.  
2.7.  Paragraph 7.107  
2.13.   The United States opposes the reference to "cogent reasons" in this paragraph and asks us 
to make edits by removing this reference.11 Canada opposes the United States' request, noting in 
this regard that interim review is not the appropriate stage for the Unite d States to reopen this 
issue.12 
2.14.   We decline to make the changes suggested by the United States in interim review and 
consider that our Report adequately sets out the legal as well as factual basis for our conclusions in 
this dispute.  
 
_______________  
 
 
 
                                                
7 United States' request for interim review, paras. 6 -7. 
8 United States' request for interim review, para. 8.  
9 United States' request for interim review, para. 9.  
10 United States' request for interim review, para. 10.  
11 United States' request for interim review, para. 11.  
12 Canada's comments on the United States' request for interim review, para. 4.  
 WT/DS534/R/Add.1  
 
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  ANNEX B  
ARGUMENTS OF THE PAR TIES 
Contents  Page  
Annex  B-1 First integrated executive summary of the arguments of Canada  18 
Annex  B-2 Second integrated executive summary of the arguments of Canada  23 
Annex  B-3 First integrated executive summary of the arguments of the United  States  30 
Annex  B-4 Second integrated executive summary of the arguments of the United  States  41 
 
 
 WT/DS534/R/Add.1  
 
- 18 - 
 
  ANNEX B -1 
FIRST INTEGRATED EXE CUTIVE SUMMARY OF TH E ARGUMENTS OF CANAD A 
I. INTRODUCTION  
 
1. This dispute concerns the continued improper application of the U.S. Differential Pricing 
Methodology ("DPM") – a measure that the Dispute Settlement Body has ruled to be "as such" 
inconsistent with Articles 2.4 and 2.4.2 of the Agreement on Implementation of Article VI of the 
General Agreement on Ta riffs and Trade 1994 ("Anti -Dumping Agreement"), when it adopted the 
Appellate Body and panel reports in US – Washing Machines  on September 26, 2016.  
 
2. On November 25, 2016, the Committee Overseeing Action for Lumber International Trade 
Investigations or  Negotiations ("Petitioner") filed an anti -dumping petition concerning Certain 
Softwood Lumber Products from Canada . Commerce initiated an anti -dumping investigation on 
December 15, 2016. On January 27, 2017, Commerce selected Canfor Corporation, Canadian Forest 
Products Ltd. and Canfor Wood Products Marketing Ltd. ("Canfor"), Resolute FP Canada Inc. 
("Resolute"), Tolko Marketing and Sales Ltd. ("Tolko"), and West Fraser Mills Ltd. ("West Fraser") 
as mandatory respondents.  
 
3. On June 23, 2017, Commerce iss ued its preliminary determination and applied the DPM. The 
Governments of Canada, Ontario, and Québec as well as the British Columbia Lumber Trade Council, 
the Conseil de l'industrie forestière du Québec, and the Ontario Forest Industries Association filed  a 
joint case brief on August 7, 2017, arguing that the Appellate Body Report in US – Washing Machines  
found the DPM  to be "as such" inconsistent with the United States' WTO obligations and therefore 
argued that Commerce should not apply it in this case. Nonetheless, Commerce continued to apply 
the DPM its Final Determination, which it issued on November 1, 2017.  
 
4. Following the U.S. International Trade Commission's final affirmative injury determination, 
Commerce published its anti -dumping duty order on January 3, 2018.  
 
5. The DPM is a methodology that Commerce uses to bypass the regular methodologies for 
calculating  a margin of dumping. Article 2.4.2 of the Anti -Dumping Agreement provides that margins 
of dumping shall normally be calculated using either the weighted -average -to-weighted -average 
("W-W") or transaction -to-transaction ("T -T") comparison methodologies. In  order to have recourse 
to the exceptional weighted -average -to-transaction ("W -T") methodology, an investigating authority 
must meet the criteria set out in the second sentence of Article 2.4.2. Commerce applies the DPM 
in all cases, and, ignoring the crit eria in Article 2.4.2, utilizes the DPM in an attempt to justify its 
frequent recourse to the exceptional W -T methodology.  
 
6. Applying the DPM, and the W -T methodology to all transactions with zeroing, Commerce's 
final calculations yielded margins for Res olute, Tolko, and West Fraser of 3.20%, 7.22%, and 5.57%. 
The use of this methodology increased their respective margins from 0.00%, 4.07%, and 2.28%, 
under the default W -W methodology.  
 
II. THE USE OF THE DPM IN THIS INVESTIGATION VIOLATED THE ANTI -DUMPIN G 
AGREEMENT  
 
7. Commerce erred when it applied the DPM in its investigation into Certain Softwood Lumber 
Products from Canada . Commerce's reliance on the DPM is contrary to the plain wording of 
Article  2.4.2 of the Anti -Dumping Agreement. Moreover, the app lication of the DPM in this 
investigation was the identical methodology the Appellate Body found "as such" inconsistent in 
US - Washing Machines . 
 
8. Article 2.4.2 is a tool that allows Members to address targeted dumping and therefore permits 
an investiga ting authority to have recourse to the exceptional W -T methodology, albeit in very 
limited circumstances. Article 2.4.2 expressly requires that, before resorting to the W -T 
methodology, an investigating authority must identify a "pattern of export prices w hich differ 
significantly among different purchasers, regions or time periods."  WT/DS534/R/Add.1  
 
- 19 - 
 
   
9. The Appellate Body has confirmed that the ordinary meaning of the term "pattern" means that 
a pattern must constitute a regular and intelligible form or sequence discernible in certain actions or 
situations. The Appellate Body further confirmed that the use of the term "among" requires that 
each category be considered on its own. A "pattern" must therefore exist with respect to certain 
purchasers, to certain time p eriods, or to certain regions. Finally, when Article 2.4.2 is read in the 
context of its purpose of addressing targeted dumping, and in the wider context of the Anti -Dumping 
Agreement as a whole, it is clear that the relevant transactions for the purpose o f identifying a 
pattern are low priced transactions.  
 
10. The DPM, however, fails to identify a pattern of any kind. Instead, it compares all export 
transactions across the different categories, identifies both high and low priced transactions as part 
of the claimed pattern, and then aggregates the results from these unrelated categories. The plain 
language meaning of the term "pattern" simply cannot be reconciled with Commerce's approach of 
weighing the value of sales that happen to pass the DPM's statisti cal test with no assessment of 
whether there is regularity or a sequence to the export prices that have passed the test. The DPM 
merely identifies differences in price rather than a pattern of export prices.  
 
11. In its investigation, Commerce improperly a ggregated the results of its application of the 
Cohen's d test in the DPM for all categories (purchasers, regions, and time periods) before using this 
aggregated total to determine that the DPM's 66% threshold was met for each of the respondents. 
In applyi ng the DPM, Commerce also improperly aggregated both high priced and low priced 
transactions and combined transactions that passed the Cohen's d test based on purchasers, regions, 
and time periods. The use of this process to justify the application of the exceptional W -T 
methodology was therefore improperly based on both high priced and low priced transactions and 
ignored the requirement set out in Article 2.4.2 to identify a pattern among  purchasers, regions or 
time periods. One cannot have a "pattern" con sisting of fundamentally different prices. This is 
contrary to the ordinary meaning of the word "pattern".  
 
12. Consequently, on the basis of all of the above, Commerce acted inconsistently with 
Article  2.4.2 of the Anti -Dumping Agreement when it applied t he exceptional W -T methodology to 
Resolute, Tolko, and West Fraser.  
 
III. THE USE OF ZEROING AS PART OF THE DPM IN THIS INVESTIGATION VIOLATED THE 
ANTI -DUMPING AGREEMENT  
 
13. Commerce further erred when it applied zeroing as part of the DPM in its investig ation. The 
Appellate Body has confirmed that the zeroing methodology is inconsistent with the Anti -Dumping 
Agreement when applying any of the three comparison methodologies permitted under Article 2.4.2. 
In US – Washing Machines , the Appellate Body express ly found that Commerce's reliance on the 
DPM to reintroduce zeroing through the W -T methodology was "as such" inconsistent with the 
United  States' WTO obligations.  
 
14. Despite clear guidance as to the WTO -inconsistency of zeroing in the DPM, Commerce 
nevertheless relied on the DPM to apply this same zeroing technique in its W -T methodology when 
calculating the dumping margins for Resolute, Tolko, and West Fraser. The use of zeroing as part of 
the DPM as applied in Commerce's investigation into Certain Soft wood Lumber Products from Canada  
is necessarily WTO -inconsistent for at least three reasons.  
 
15. First, zeroing is simply impermissible during the application of the W -T methodology. This is 
clear both from the text of Article 2.4.2 and from the Anti -Dump ing Agreement as a whole. The 
concepts of "dumping" (as defined by Article 2.1) and "margins of dumping" are the same throughout 
the Anti -Dumping Agreement. This means that the previous interpretations related to these terms 
over some 18 years of WTO juris prudence are equally applicable to the interpretation of the second 
sentence of Article 2.4.2. Intermediate transactions are not margins of dumping.  
 
16. WTO panels and the Appellate Body have also consistently held that the zeroing methodology 
is inconsi stent with the Anti -Dumping Agreement. This is because zeroing effectively alters certain 
transactions or treats them as less than their actual value.  
 
17. Second, zeroing in the W -T methodology does not account for all of the purported "pattern" 
transacti ons in calculating the margin of dumping. As the Appellate Body confirmed in US – Washing WT/DS534/R/Add.1  
 
- 20 - 
 
  Machines , while export prices within an Article 2.4.2 "pattern" must differ significantly from other 
export prices, the pattern ultimately used in the W -T calculation  must be composed of all the export 
prices to one or more particular purchasers, regions, or time periods, not just those export prices 
that are below normal value. The Appellate Body further determined, in that dispute, that there is 
no basis for excludin g pattern transactions that are priced above normal value.  
 
18. These Appellate Body findings are firmly rooted in the text of the Anti -Dumping Agreement. 
Article 2.4.2 allows an investigating authority to narrow the universe of export transactions. For t he 
purposes of the numerator in a W -T comparison, this means that all of the export transactions in 
the relevant universe of sales under consideration must be considered. The second sentence of 
Article 2.4.2, with its emphasis on "individual export transac tions", distinguishes the universe of 
sales under consideration for the W -T comparison process from the universe of export sales under 
consideration in the first sentence, which is all export sales. The text requires that, if an investigating 
authority cho oses to use the W -T methodology, it is required to assess the whole pattern , and not 
only part of it. Zeroing within an identified pattern detaches the notion of "pattern" in the second 
sentence of Article 2.4.2 from the pattern to which the W -T comparison  methodology is applied for 
establishing margins of dumping in order to address targeted dumping. Zeroing within the W -T 
methodology thus improperly considers only those transactions that fall below the normal value 
rather than, as required by Article 2.4. 2, the entire universe  of export transactions that fall within 
the pattern as properly identified. The narrowing of the universe of export transactions to all pattern 
transactions, and the inclusion of all transactions in the denominator, ensures that the resultant 
dumping margin is for the product as a whole.  
 
19. Third, zeroing does not lead to a fair comparison of export prices as required by Article 2.4 of 
the Anti -Dumping Agreement. The chapeau  of Article 2.4 requires that "[a] fair comparison shall be  
made between the export price and the normal value", while the introductory clause to Article 2.4.2 
expressly provides that the dumping calculation methodologies set out in that Article are subject to 
the fair comparison obligation in Article 2.4.  
 
20. Disregarding the results of certain intermediate comparisons is inconsistent with the obligation 
to make a "fair comparison" under Article 2.4. The ordinary meaning of "fair" requires impartiality 
and a lack of bias. The Appellate Body in US – Corrosion -Resistant Steel Sunset Review  found that 
there is an inherent bias in the zeroing methodology as the methodology may inflate the magnitude 
of a dumping margin and may also distort a finding of the very existence of dumping itself.  
 
21. In the con text of zeroing in the W -T methodology, in US – Washing Machines , the Appellate 
Body confirmed that setting to zero intermediate negative comparison results inflates the magnitude 
of dumping and also makes positive determinations of dumping more likely whe re export prices 
above normal value exceed those below normal value. It also concluded that, by setting to zero 
"individual export transactions" that yield a negative comparison result, an investigating authority 
fails to compare all comparable export tran sactions that form Article 2.4.2's "universe of export 
transactions". Zeroing in applying the W -T methodology thus fails to make a fair comparison between 
export prices and normal value.  
 
22. In this case, zeroing produced the unfair results foreseen by the Appellate Body. It not only 
inflated the margins of dumping for Tolko and West Fraser, but it also created a positive 
determination of dumping for Resolute where none otherwise existed. Whil e Resolute's calculated 
margin of dumping was -2.61%, Commerce's use of zeroing in the W -T methodology ultimately 
inflated Resolute's margin of dumping by 5.81 percentage points. As a result, a company that on 
average sold for a price that was higher than normal value in the United States is subject to an anti -
dumping order because of zeroing.  
 
23. Despite all of the above, the United States argues that, without zeroing, all three of the 
comparison methodologies yield the same result, a concept it calls "ma thematical equivalency". 
However, the Appellate Body expressly found in US – Washing Machines  that mathematical 
equivalency is not determinative of the meaning of the text. Moreover, the United States itself 
acknowledged during the Appellate Body hearing f or US – Washing Machines  that calculating a 
margin of dumping focused only on pattern transactions would lead to a mathematically different 
result.  
 
24. Canada further notes that, when the W -T and W -W methodologies are applied correctly, they 
yield mathema tically different results. The W -T and the W -W methodologies, as described in the WT/DS534/R/Add.1  
 
- 21 - 
 
  Anti-Dumping Agreement, and when properly interpreted, cannot be applied to the same set of 
export transactions. In order to manipulate the W -T calculation to yield mathemati cally equivalent 
results to the W -W methodology, among other choices that would need to be made in the calculation, 
the W -T calculation would have to be applied to all export transactions. However, Article 2.4.2 
clarifies that the W -T methodology may be ap plied only to "pattern" sales and not to all export 
transactions. Had Commerce correctly applied the W -W and W -T methodologies to Resolute, Tolko, 
and West Fraser, without zeroing, they would have yielded mathematically different results.  
 
25. The United S tates also argues that the Panel should resort to the negotiating history of the 
Anti-Dumping Agreement to interpret this provision. However, as the meaning of the second 
sentence of Article 2.4.2 is clear, there is no need to resort to negotiating history  to interpret it.  
 
26. Consequently, on the basis of all of the above, when Commerce applied zeroing as part of the 
DPM in calculating the dumping margins using the W -T methodology for Resolute, Tolko, and West 
Fraser, it breached the United States' obliga tions under the second sentence of Article 2.4.2 and 
Article 2.4.  
 
IV. PANELS ARE EXPECTED TO FOLLOW APPELLATE BODY REPORTS  
 
27. Panels are expected to follow Appellate Body reports, absent cogent reasons to do otherwise, 
to ensure the security and predict ability of the multilateral trading system. The Appellate Body has 
repeatedly confirmed this principle, which arises directly from the provisions of the Dispute 
Settlement Understanding ("DSU").  
 
28. The DSU specifies that the Appellate Body may, on appeal , uphold, modify or reverse the legal 
findings and conclusions of a panel. The DSU therefore clearly creates a hierarchical system. In all 
legal systems the decisions of a hierarchically superior court or tribunal are generally followed by 
subsidiary bodie s. For this reason, while reports formally bind only the parties to a particular dispute, 
panels cannot disregard adopted Appellate Body decisions.  
 
29. This is clear from the text of Article 3.2 of the DSU. In US — Stainless Steel (Mexico) , the 
Appellate Body confirmed that this Article informs a panel's function under the DSU. Article 3.2 
states that the dispute settlement system "is a central element in providing security and 
predictability" and serves "to clarify" the provisions of the WTO agreements. A ppellate Body 
oversight of panel decisions promotes security and predictability by ensuring the consistent 
interpretation of the WTO agreements. In US — Stainless Steel (Mexico) , the Appellate Body noted 
that the reference to clarification in Article 3.2 d emonstrates that adopted reports are relevant 
beyond the application of a particular provision in a particular case and found that a panel that fails 
to follow the Appellate Body undermines the development of a coherent and predictable body of 
jurisprudenc e.  
 
30. The Appellate Body in US – Shrimp (Article 21.5 – Malaysia)  also confirmed that adopted 
reports are part of the WTO acquis and that these reports create legitimate expectations among the 
Members. For this reason, every panel and Appellate Body rep ort cites to previous findings and 
Members repeatedly cite prior reports in their pleadings. The United States itself does this, including 
in the present dispute.  
 
31. Finally, in US — Oil Country Tubular Goods Sunset Reviews , the Appellate Body expressly  
found that where a panel relies on the Appellate Body's conclusions with respect to the exact same 
issue, it will not have failed to make an objective assessment for the purposes of Article 11 of the 
DSU. To the contrary, it is appropriate for a panel to rely on the Appellate Body's conclusions.  
 
32. In this dispute, however, the United States has gone so far as to expressly invite this Panel to 
ignore Appellate Body guidance. It has also suggested that Canada's position is contrary to 
Article  IX:2 of the Marrakesh Agreement Establishing the World Trade Organization. Jurisprudence 
addresses the relationship between this Article and adopted reports. The panel in US – Countervailing 
and Anti -Dumping Measures (China)  considered that, if a multilateral interpre tation under 
Article  IX:2 conflicts with a prior Appellate Body interpretation, cogent reasons may exist for a panel 
to refuse to follow the Appellate Body. There is no multilateral interpretation relevant to this dispute, 
and there are no cogent reasons t o depart from Appellate Body findings with respect to the DPM.  
 WT/DS534/R/Add.1  
 
- 22 - 
 
  33. Consequently, this Panel must objectively assess whether the DPM is the same DPM that was 
at issue in US – Washing Machines . If it is, and it is, this Panel must follow the Appellate Body' s 
decision in that dispute.  
 
 
 
 
  WT/DS534/R/Add.1  
 
- 23 - 
 
  ANNEX B -2 
SECOND INTEGRATED EX ECUTIVE SUMMARY OF T HE ARGUMENTS OF CANADA  
I. INTRODUCTION  
 
1. This dispute concerns the continued improper application of the United States' Differential 
Pricing Methodology ("DPM ") – a measure that the Dispute Settlement Body has ruled to be "as 
such" inconsistent with Articles  2.4 and 2.4.2 of the Agreement on Implementation of Article  VI of 
the General Agreement on Tariffs and Trade 1994  ("Anti -Dumping Agreement"), when it adopt ed 
the Appellate Body and panel reports in US – Washing Machines on September  26, 2016.  
 
2. The DPM is a methodology that the United States Department of Commerce ("Commerce") 
uses to bypass the regular methodologies for calculating a margin of dumping. Ar ticle 2.4.2 of the 
Anti-Dumping Agreement provides that margins of dumping shall normally be calculated using either 
the weighted -average -to-weighted -average ("W -W") or transaction -to-transaction ("T -T") 
comparison methodologies. In order to have recourse to the exceptional weighted -average -to-
transaction ("W -T") methodology, an investigating authority must meet the criteria set out in the 
second sentence of Article  2.4.2.  Commerce applies the DPM in all cases, and, ignoring the criteria 
in Article 2.4.2, u tilizes the DPM in an attempt to justify its frequent recourse to the exceptional W -T 
methodology.  
 
3. Applying the DPM, and the W -T methodology to all transactions with zeroing, Commerce's 
final calculations yielded margins for Resolute FP Canada Inc. ("R esolute"), Tolko Marketing and 
Sales Ltd. ("Tolko"), and West Fraser Mills Ltd. ("West Fraser") of 3.20%, 7.22%, and 5.57%. The 
use of this methodology increased their respective margins from 0.00%, 4.07%, and 2.28%, under 
the default W -W methodology.  
 
II. THE USE OF THE DPM IN THIS INVESTIGATION VIOLATED THE ANTI -DUMPING 
AGREEMENT  
 
4. Commerce erred when it applied the DPM in its investigation into Certain Softwood Lumber 
Products from Canada . Commerce's reliance on the DPM is contrary to the plain wording  of 
Article  2.4.2 of the Anti -Dumping Agreement. Moreover, the application of the DPM in this 
investigation was the identical methodology the Appellate Body found "as such" inconsistent in 
US - Washing Machines . 
 
5. The second sentence of Article 2.4.2 is a tool that allows Members to unmask and address 
targeted dumping by an exporter. It permits an investigating authority to have recourse to the 
exceptional W -T methodology, albeit in very limited circumstances. Before resorting to the W -T 
methodology, an i nvestigating authority must identify a "pattern of export prices which differ 
significantly among different purchasers, regions or time periods". The application of the Article 
therefore hinges on the identification and proper analysis of the requisite pat tern. 
 
6. The Appellate Body has confirmed that the ordinary meaning of the term "pattern" means that 
a pattern must constitute a regular and intelligible form or sequence discernible in certain actions or 
situations. The Appellate Body further confirmed t hat the use of the term "among" requires that 
each category be considered on its own. A "pattern" must therefore exist with respect to certain 
purchasers, to certain time periods, or to certain regions. This narrowing of the universe of export 
transactions  is clearly provided for in the text. The text does not, however, create a relationship 
between the term "pattern" and normal value. Consequently, both pattern transactions and 
non-pattern transactions may be above or below normal value.  
 
7. Once a pattern  is identified, all the pattern transactions are part of the comparison. Finally, 
when Article 2.4.2 is read in the context of its purpose of addressing targeted dumping, and in the 
wider context of the Anti -Dumping Agreement as a whole, it is clear that t he relevant transactions 
for the purpose of identifying a pattern are lower priced transactions.  
 
8. The DPM, however, fails to identify a pattern of any kind.  Instead, it compares all export 
transactions across the different categories, identifies both hi gh and low priced transactions as part 
of the claimed pattern, and then aggregates the results from these unrelated categories.  The plain WT/DS534/R/Add.1  
 
- 24 - 
 
  language meaning of the term "pattern" simply cannot be reconciled with Commerce's approach of 
weighing the value of s ales that happen to pass the DPM's statistical test with no assessment of 
whether there is regularity or a sequence to the export prices that have passed the test.  The DPM 
merely identifies differences in price rather than a pattern of export prices.  It is therefore 
unsurprising that Commerce determined that all four respondents, Canadian Forest Products Ltd 
("Canfor"), Resolute, Tolko, and West Fraser, had a "pattern" of export prices that differ 
significantly.1  
 
9. While the United States initially asser ted that Commerce undertook a "rigorous, holistic 
examination" to determine whether a pattern existed in this case2, it subsequently admitted that 
Commerce had failed to identify specific transactions that formed part of the pattern.3 This admission 
cannot  be reconciled with the assertion that the USDOC determined that a pattern existed. It is 
inconceivable that an investigating authority would purport to have identified a pattern but not be 
able to specify what that pattern is. In this case, the Commerce d id not identify a pattern because 
the DPM does not identify a pattern.  
 
10. All Commerce did was apply its ratio test. This exclusive reliance on the ratio test is not 
consistent with the wording of the second sentence of Article  2.4.2. The ratio test is designed to sum 
the value of transactions that are identified by the Cohen's d test as differentially priced. The ratio 
test in no way determines whether there is a regular or intelligible sequence to the identified 
transactions, as required by the ordinary meaning of the term "pattern".  
 
11. Commerce also improperly aggregated th e results of its application of the Cohen's d test in 
the DPM for all categories  (purchasers, regions, and time periods) and improperly aggregated both 
high priced and low priced transactions and combined transactions that passed the Cohen's  d test 
based o n purchasers, regions, and time periods. The United States defends the use of this process 
on the basis that a pattern would "transcend multiple purchasers, regions, or time periods".4 This 
approach is nonsensical. There can be no regular and intelligible sequence that transcends the 
differences between purchasers, and the differences between regions, and the differences between 
time periods. Aggregating different types of transactions cannot identify the requisite regular or 
intelligible sequence. There is no relationship or similarity between these transactions grouped 
together and there is no "pattern" whatsoever.  
 
12. The United States contends that a pattern could also consist of every transaction in an 
investigation.5 This is incorrect. As the panel in US – Anti-Dumping Methodologies (China)  found, 
the "export prices which form part of that discernible group form the relevant 'pattern' rather than 
the larger universe of export prices from which that group is discerned or distinguished".6 The wor d 
"pattern" suggests a subset of export prices that is discernable from the larger universe of export 
prices. It is those export prices —which form part of the discernable group —that form the pattern, 
not the larger universe of export prices from which they  differ.7  
 
                                                
1 For Resolute: US Department of Commerce, Antidumping Duty Investigation of Certain Softwood 
Lumber Products: Analysis of Data Submitted by Resolute FP Canad a, Inc. for the Final Determination  
(A-122-857), November  1, 2017, Exhibit  CAN-07 (BCI) , p.7. For Tolko: US Department of Commerce, 
Antidumping Duty Investigation of Certain Softwood Lumber Products: Analysis of Data Submitted by Tolko 
Marketing and Sales Ltd. and Tolko Industries Ltd for the Final Determination (A-122-857), November  1, 2017, 
Exhibit  CAN-08 (BCI) , p.8. For West Fraser: US Department of Commerce, Antidumping Duty Investigation 
of Certain Softwood Lumber Products from Canada: Analysis of Data  Submitted by West Fraser Mills Ltd. for 
Final Determination  (A-122-857), November  1, 2017, Exhibit  CAN-09 (BCI) , p.7. For Canfor: US Department 
of Commerce, Antidumping Duty Investigation of Certain Softwood Lumber Products from Canada: Analysis of 
Data S ubmitted by Canfor Corporation, Canadian Forest Products Ltd., and Canfor Wood Products Marketing 
Ltd. for the Amended Final Determination (A-122-857), December  4, 2017, Exhibit  CAN-06, p.3.  
2 United States' second written submission, para. 21.  
3 United St ates' response to Panel question No. 4 in connection with the second substantive meeting, 
para. 43.  
4 United States' second written submission, para. 42.  
5 United States' first written submission, para. 62; United States' second written submission, para. 4 8; 
where the United States maintains that the pattern is the overall pricing behaviour of an exporter.  
6 Panel Report, US – Anti-Dumping Methodologies (China) , para. 7.178.  
7 Appellate Body Report, US – Anti-Dumping Methodologies (China) , para.  5.31; see a lso Panel Reports, 
US – Washing Machines , para. 7.142, and US – Anti-Dumping Methodologies (China) , para.  7.178; Appellate 
Body Report, US – Washing Machines , para.  5.31. WT/DS534/R/Add.1  
 
- 25 - 
 
  13. The United States also asserts that aggregation is necessary to account for the product as a 
whole.8 However, the United States offers no explanation as to why the correct approach, as 
discussed in the Appellate Body's report in US – Washin g Machines , fails to account for the product 
as a whole. In fact, by searching for a pattern in only one category, all relevant transactions are 
considered. This permits an analysis of the product as a whole.  
 
14. Finally, in an attempt to find textual sup port for its position, United States suggests that the 
word "among" would appear three times in Article 2.4.2 if that term was meant to limit the 
identification of a pattern to the consideration of transactions within a single category, e.g., before 
"purch asers", "regions", and "time periods".9 At the second substantive meeting of the Panel, Canada 
demonstrated that this approach was misguided. The word "different" clearly qualifies each of the 
categories and yet it too occurs only once.  
 
15. Consequently, on the basis of all of the above, Commerce acted inconsistently with 
Article  2.4.2 of the Anti -Dumping Agreement when it applied the exceptional W -T methodology to 
Resolute, Tolko, and West Fraser.  
 
III. THE USE OF ZEROING AS PART OF THE DPM IN THIS INVEST IGATION VIOLATED THE 
ANTI -DUMPING AGREEMENT  
 
16. Commerce further erred when it applied zeroing as part of the DPM in its investigation. The 
Appellate Body has confirmed that the zeroing methodology is inconsistent with the 
Anti-Dumping  Agreement when appl ying any of the three comparison methodologies permitted 
under Article 2.4.2. In US – Washing Machines , the Appellate Body expressly found that Commerce's 
reliance on the DPM to reintroduce zeroing through the W -T methodology was "as such" inconsistent 
with the United States' WTO obligations.  
 
17. Despite clear guidance as to the WTO -inconsistency of zeroing in the DPM, Commerce 
nevertheless relied on the DPM to apply this same zeroing technique in its W -T methodology when 
calculating the dumping margins fo r Resolute, Tolko, and West Fraser. Canada has demonstrated 
that the use of zeroing as part of the DPM as applied in Commerce's investigation into Certain 
Softwood Lumber Products from Canada is necessarily WTO -inconsistent for at least three reasons.  
 
18. First, zeroing is impermissible during the application of the W -T methodology. This is clear 
both from the text of Article 2.4.2 and from the Anti -Dumping Agreement as a whole. The concepts 
of "dumping" (as defined by Article  2.1 and Article VI:1 of the G ATT 1994) and "margins of dumping" 
are the same throughout the Anti -Dumping Agreement. This means that the previous interpretations 
related to these terms over some 18 years of WTO jurisprudence are equally applicable to the 
interpretation of the second se ntence of Article 2.4.2.10 Intermediate comparison results are not 
margins of dumping. The second sentence of Article 2.4.2 cannot be used as a justification to depart 
from any other obligation. It cannot change the definition of dumping or transform an int ermediate 
comparison result into a margin of dumping.  
 
19. Second, zeroing in the W -T methodology does not account for all of the "pattern" transactions 
in calculating the margin of dumping. As the Appellate Body confirmed in US – Washing Machines , 
while export prices within an Article 2.4.2 "pattern" must differ significantly from other export prices, 
the pattern ultimately used in the W -T calculation must be composed of all the export prices to one 
or more particular purchasers, regions, or time periods,  not just those export prices that are below 
normal value.  The Appellate Body further determined, in that dispute, that there is no basis for 
excluding pattern transactions that are priced above normal value.  
 
20. These Appellate Body findings are firmly rooted in the text of the Anti -Dumping Agreement. 
Article 2.4.2 allows an investigating authority to narrow the universe of export transactions in 
accordance with the text. For the purposes of the numerator in a W -T comparison, this means that 
all of the e xport transactions in the relevant universe of sales under consideration must be 
                                                
8 United States' response to Panel question No. 1  in connection with the second subst antive meeting, 
para. 3.  
9 United States' first written submission, para. 86; United States' second written submission, para. 41; 
United States' opening statement at the first substantive meeting of the Panel, para. 27.  
10 WTO panels and the Appellate Body have also consistently held that the zeroing methodology is 
inconsistent with the Anti -Dumping Agreement. This is because zeroing effectively alters certain transactions or 
treats them as less than their actual value.  WT/DS534/R/Add.1  
 
- 26 - 
 
  considered. The second sentence of Article 2.4.2, with its emphasis on "individual export 
transactions", distinguishes the universe of sales under consideration for the W -T comparison 
process from the universe of export sales under consideration in the first sentence, which is all 
export sales. The text requires that, if an investigating authority chooses to use the W -T 
methodology, it is required to assess the whole pattern , and not only part of it. As the Appellate  Body 
clarified, "the 'targeted dumping' to be 'unmasked' corresponds to the properly identified 'pattern', 
and not to a set of sales below normal value within that pattern for which there exists neither a 
textual no r a contextual basis in the second sentence".11 Zeroing within an identified pattern 
detaches the notion of "pattern" in the second sentence of Article  2.4.2 from the pattern to which 
the W -T comparison methodology is applied for establishing margins of dum ping in order to address 
targeted dumping.  Zeroing within the W -T methodology thus improperly considers only those 
transactions that fall below the normal value  rather than, as required by Article 2.4.2, the entire 
universe  of export transactions that fall  within the pattern as properly identified.  
 
21. The narrowing of the universe of export transactions to all pattern transactions, and the 
inclusion of all transactions in the denominator, ensures that the resultant dumping margin is for 
the product as a whole.  By contrast, the Appellate Body has repeatedly found that zeroing fails to 
take into account the product as a whole.  Indeed, zeroing arbitrarily manipulates the data such that 
they no longer reflect the underlying transactions.  
 
22. Third,  zeroing d oes not lead to a fair comparison of export prices as required by Article  2.4 of 
the Anti -Dumping Agreement.  The chapeau  of Article  2.4 requires that "[a] fair comparison shall be 
made between the export price and the normal value", while the introductory clause to Article  2.4.2 
expressly provides that the dumping calculation methodologies set out in that Article are subject to 
the fair comparison obligation in Article  2.4.  
 
23. Disregarding the results of certain intermediate comparisons is inconsistent w ith the obligation 
to make a "fair comparison" under Article  2.4. The ordinary meaning of "fair" requires impartiality 
and a lack of bias. The Appellate Body in US – Corrosion -Resistant Steel Sunset Review  found that 
there is an inherent bias in the zeroin g methodology as the methodology may inflate the magnitude 
of a dumping margin and may also distort a finding of the very existence of dumping itself.  
 
24. In the context of zeroing in the W -T methodology, in US – Washing Machines , the 
Appellate  Body confirmed that setting to zero intermediate negative comparison results inflates the 
magnitude of dumping and also makes positive determinations of dumping more likely where export 
prices above normal value exceed those below normal value. It also concluded that, by setting to 
zero "individual export transactions" that yield a negative comparison result, an investigating 
authority fails to compare all comparable e xport transactions that form Article 2.4.2's "universe of 
export transactions". Zeroing in applying the W -T methodology thus fails to make a fair comparison 
between export prices and normal value.  
 
25. In this case, zeroing produced the unfair results fore seen by the Appellate Body. It not only 
inflated the margins of dumping for Tolko and West Fraser, but it also created a positive 
determination of dumping for Resolute where none otherwise existed.  While Resolute's calculated 
margin of dumping was -2.61%, Commerce's use of zeroing in the W -T methodology ultimately 
inflated Resolute's margin of dumping by 5.81 percentage points. As a result, a company that on 
average sold for a price that was higher than normal value in the United States is subject to an ant i-
dumping order because of zeroing.  Nonetheless, the United States asserts that both the Appellate 
Body's approach in US – Washing Machines  and zeroing are "in reality and effect, essentially the 
same"12, and therefore, zeroing cannot violate the fair comparison requirement.13 This assertion is 
untrue. At the second substantive meeting of the Panel, Canada demonstrated that both approaches 
would produce different results for Resolute and  that zeroing was actually necessary to manufacture 
a margin of dump ing for that company.14  
 
26. Despite all of the above, the United States attempts to support zeroing by arguing that, 
without zeroing, the comparison methodologies described in Article 2.4.2 and a so -called mixed 
                                                
11 Appellate Body Report, US – Washing Machines , para.  5.156.  
12 United States' second written submission, para. 83.  
13 United States' second written submission, paras. 84 and 85.  
14 Canada's opening statement at the second substantive meeting of the Panel, 4 December 2018, 
paras. 9 -11; Resolute's  Margin of Dumping, Exhibit CAN -13 (BCI) ; Alternative Margin Analysis, Resolute, 
Exhibit CAN -32 (BCI) . WT/DS534/R/Add.1  
 
- 27 - 
 
  methodology (W -T and W -W) would "always yie ld" the same result15, a concept it calls "mathematical 
equivalency". The United States' arguments concerning purported mathematical equivalency are not 
well founded.  
 
27. First, any potential, and hypothetical, mathematical equivalency is not determinative  of the 
correct interpretation of Article 2.4.2.16 
 
28. Second, it would be incorrect to interpret the meaning of the Article based on the purported 
mathematical equivalency of the WTO -inconsistent mixed methodology. The Appellate Body has 
found that the us e of two separate methodologies to calculate a margin of dumping is not permitted 
under the Anti -Dumping Agreement.17 The three permissible methodologies are expressly set out in 
Article 2.4.2, which specifies that margins of dumping "shall normally be esta blished" on the basis 
of the W -W or the T -T methodology, and then creates an exceptional methodology that may be used 
when the requirements of the second sentence are met. There is, however, no support in the text 
for the United States' proposed mixed comp arison methodology. Conducting separate comparisons 
would undermine the purpose of the second sentence of Article 2.4.2, which is to unmask targeted 
dumping.18 Moreover, the export transactions to which the W -T methodology would apply would 
merely re -assess  a subset of the same transactions already captured by the W -W analysis, which 
necessarily compares all transactions.  
 
29. Finally, Canada has concretely demonstrated that mathematical equivalence will not arise in 
every case. At the second substantive me eting of the Panel, Canada established that the correct 
application of the W -T methodology without zeroing19 to Resolute's transactions in this case clearly 
yields mathematically different results when compared to the W -W methodology.20 Similarly, in its 
responses to Panel questions in connection with the second substantive meeting, Canada calculated 
margins of dumping for a hypothetical set of transactions. For the mixed methodology example, the 
W-T calculation compared a quarterly weighted average normal va lue to each pattern transaction, 
while the W -W calculation compares annual weighted average prices. These comparisons yielded 
different margins of dumping.21  
 
30. Relying on its highly problematic mathematical equivalency theory, the United States claims 
that zeroing is necessary to unmask evidence of dumping.22 However, in so doing, the United States 
ignores that the purpose of Article 2.4.2 is to unmask targeted  dumping.  In US – Washing Machines , 
the Appellate Body clarified that the text narrows the unive rse of export transactions with references 
both to the "pattern" and "individual export transactions" (terms rooted in the text). Targeted 
dumping is properly unmasked by narrowing the universe of export transactions to the pattern 
transactions for the pur pose of calculating the numerator, regardless of whether they are above or 
below normal value.23 The Appellate Body's approach does not exclude from the numerator all sales 
above normal value, as zeroing does. Moreover, as mentioned above, zeroing finds no basis in the 
text whatsoever and actually alters certain intermediate comparison results based solely on their 
relationship to normal value.24  
 
                                                
15 United States' response to Panel question No. 2(a) in connection with the second substantive 
meeting, para. 32.  
16 Appellate Body Reports, US – Washing Machines , para. 5.128, and US – Softwood Lumber V 
(Article  21.5 – Canada) , para. 99.  
17 Appellate Body Report, US – Washing Machines , para. 5.120.  
18 Appellate Body Report, US – Washing Machines , para. 5.122.  
19 Note that Canada's calculations below do not correct for errors in failing to identify a pattern.  
20 Effect of Comparison Methodology on Resolute's Margin of Dumping, Exhibit CAN -31. 
21 Mixed Methodology Calculation, Exhibit CAN -33. Canada also notes that t he United States itself 
acknowledged during the Appellate Body hearing for US – Washing Machines  that calculating a margin of 
dumping focused only on pattern transactions would lead to a mathematically different result.  
22 United States' response to Panel question No. 2(a) in connection with the second substantive 
meeting, para. 22.  
23 The United States asserts that the WTO -consistent manner of properly narrowing the universe of 
export transactions, as articulated by the App ellate Body, is simply the "findings of two Appellate Body 
Members" (United States' response to Panel question No. 8 in connection with the second substantive meeting, 
para. 55). This is wrong on its face as the findings in an Appellate Body report are the  findings of that Body, as 
a whole.  The United States' assertion is further undermined because the entire division agreed that the 
universe of export transactions should be narrowed.  
24 Appellate Body Report, US – Washing Machines, para. 5.170; Panel Repor t, US – Anti-Dumping 
Methodologies (China) , para. 7.208.  WT/DS534/R/Add.1  
 
- 28 - 
 
  31. The United States also argues that the Panel should resort to the negotiating history of the 
Anti-Dumping Ag reement, including previous drafts, to interpret Article 2.4.2, at least in part 
because it alleges that the Appellate Body invented a new methodology for calculating margins of 
dumping that is unsupported by the text of the Article. This is incorrect for several reasons.  
 
32. At the outset, it is not necessary to have recourse to the negotiating history to confirm the 
meaning of the second sentence of Article 2.4.2.25 The Appellate Body did not invent an entirely new 
methodology. It merely clarified the WT O-consistent functioning of the W -T methodology with 
reference to the text of the Article. That clarification is consistent both with the approach taken by 
the panels in US - Washing Machines and in  US-Anti-Dumping Methodologies (China)26 and with the 
interpretation of the provision provided by the third parties in this dispute.27 This common 
understanding of the meaning of the text suggests that the Appellate Body's interpretation was 
indeed contemplated by the Members. As the meaning of the second sentence of Article 2.4.2 is 
clear, there is no need to resort to negotiating history to interpret it.  
 
33. Moreover, attempting to interpret the current text of Article 2.4.2 with reference to past drafts 
is problematic as those earlier texts did not contain some  of the key terms that are crucial to 
understanding the different comparison methodologies. In particular, unlike previous drafts, the final 
text specifically indicates that the W -W methodology is a comparison of "all comparable export 
transactions", while  the discussion of the exceptional weighted -average -to-transaction methodology 
in the second sentence of the final draft expressly does not contain a similar reference to "all" 
transactions. This demonstrates that the exceptional methodology, as adopted in  the final text, is 
not meant to apply to the same universe of transactions.  
 
34. An analysis of Article 2.4.2 demonstrates that it is the United States, and not the 
Appellate  Body, that has invented a methodology that does not have a basis in the text.  
 
35. Consequently, on the basis of all of the above, when Commerce applied zeroing as part of the 
DPM in calculating the dumping margins using the W -T methodology for Resolute, Tolko, and West 
Fraser, it breached the United States' obligations under the se cond sentence of Article 2.4.2 and 
Article 2.4.  
 
IV. PANELS ARE EXPECTED TO FOLLOW APPELLATE BODY REPORTS  
 
36. Panels are expected to follow Appellate Body reports, absent cogent reasons to do otherwise, 
to ensure the security and predictability of the mul tilateral trading system. The United States 
continues to argue that there is no textual support for this principle28, ignoring that it arises directly 
from the provisions of the Dispute Settlement Understanding ("DSU").  
 
37. The DSU  specifies that the Appellate Body may, on appeal, uphold, modify or reverse the legal 
findings and conclusions of a panel. The DSU therefore clearly creates a hierarchical system. In all 
legal systems the decisions of a hierarchically superior court or tr ibunal are generally followed by 
subsidiary bodies. For this reason, while reports formally bind only the parties to a particular dispute, 
panels cannot disregard adopted Appellate Body decisions.  
 
38. This is confirmed by Article  3.2 of the DSU. In US — Stainless Steel (Mexico) , the 
Appellate  Body determined that this Article informs a panel's function under the DSU. Article 3.2 
states that the dispute settlement system "is a central element in providing security and 
predictability" and serves "to clarify"  the provisions of the WTO agreements. Appellate Body 
oversight of panel decisions promotes security and predictability by ensuring the consistent 
interpretation of the WTO  agreements. In US — Stainless Steel (Mexico) , the Appellate Body noted 
that the ref erence to clarification in Article  3.2 demonstrates that adopted reports are relevant 
beyond the application of a particular provision in a particular case . 
 
39. The Appellate Body in US – Shrimp (Article 21.5 – Malaysia)  also confirmed that a dopted 
report s are part of the WTO acquis  and that  these reports create legitimate expectations among the 
                                                
25 Appellate Body Report, US – Washing Machines , para. 5.167.  
26 Panel Reports, US – Washing Machines , para. 7.160, and US – Anti-Dumping Methodologies (China) , 
para. 7.208.  
27 Brazil's third party sta tement, para. 13; European Union's third party submission, para. 22; Japan's 
third party submission, paras. 19 -22. 
28 United States' second written submission, para.  12. WT/DS534/R/Add.1  
 
- 29 - 
 
  Members. For this reason, every panel and Appellate Body report cites to previous findings and 
Members repeatedly cite prior reports in their pleadings. The United States itself does this, including 
in the present dispute.  
 
40. Finally, the Appellate Body expressly found that where a panel relies on the Appellate Body's 
conclusions with respect to the exact same issue, it will not have failed to make an object ive 
assessment for the purposes of Article  11 of the DSU.29 To the contrary, it is appropriate for a panel 
to rely on the Appellate Body's conclusions and  that Body expects panels to accede to the hierarchical 
structure of WTO dispute settlement and to foll ow previous adopted Appellate Body reports.30 The 
Appellate Body has also determined that a panel's decision to depart from these reports is of deep 
concern and has serious implications for the dispute settlement system.31 In this dispute, however, 
the Unite d States has gone so far as to expressly invite this Panel to ignore Appellate Body guidance.  
 
41. The United States argues that Canada's position is contrary to Article IX:2 of the 
Marrakesh  Agreement Establishing the World Trade Organization.  Jurisprude nce addresses the 
relationship between this Article and adopted reports. If a multilateral interpretation under 
Article  IX:2 conflicts with a prior Appellate Body interpretation, cogent reasons may exist for a panel 
to refuse to follow the Appellate Body.  There is no multilateral interpretation relevant to this dispute, 
and there are no cogent reasons to depart from Appellate Body findings with respect to the DPM.  
 
42. The United States also relies on an out -of-context statement by the Appellate Body in 
Japan - Alcoholic Beverages II .32 This reliance is misplaced. First, the Appellate Body was considering 
whether adopted reports constituted either "subsequent practice" or other decisions of the 
Contracting Parties under the GATT.33 These questions are not befo re this Panel. Moreover, in that 
report, the Appellate Body expressly acknowledged that adopted reports form part of the acquis , 
create legitimate expectations amongst the Members, and ought to be taken into account when they 
are relevant.34 Second, in US – Stainless Steel (Mexico) , the Appellate Body cited its decision in 
Japan – Alcoholic Beverages II  for the proposition that subsequent panels are not free to disregard 
the legal interpretations and findings in adopted Appellate Body reports.35 
 
43. Conseque ntly, this Panel must objectively assess whether the DPM is the same DPM that was 
at issue in US – Washing Machines . If it is, and it is, this Panel must follow the Appellate Body's 
decision in that dispute.  
 
 
                                                
29 Appellate Body Report,  US — Oil Country Tubular Goods Sunset Reviews , para. 188.  
30 Appellate Body Report,  US — Continued Zeroing , paras. 362 and 365.  
31 Appellate Body Report,  US – Stainless Steel (Mexico) , para. 162.  
32 United States' second written submission, para. 14.  
33 Appellate Body Report, Japan – Alcoholic Beverages II , p. 14.  
34 Appellate Body Report, Japan – Alcoholic Beverages II , p. 14.  
35 Appellate Body Report, US – Stainless Steel (Mexico) , para. 158.  WT/DS534/R/Add.1  
 
- 30 - 
 
  ANNEX B -3 
FIRST INTEGRATED EXE CUTIVE SUMMARY O F THE ARGUMENTS OF T HE UNITED  STATES  
I. INTRODUCTION  
 
1. In this dispute, Canada challenges the determination of the U.S. Department of Commerce 
("USDOC ") in an antidumping investigation of softwood lumber from Canada. Specifically, Canada 
claims that the USDOC's determination is inconsistent with the Agreement on Implementation of 
Article VI of the General Agreement on Tariffs and Trade 1994  ("AD Agreeme nt") and the 
General  Agreement on Tariffs and Trade 1994  ("GATT 1994").  
 
2. Canada begins its first written submission by asserting that "this dispute is a profoundly simple 
one: the Panel must follow the [Dispute Settlement Body ("DSB")] rulings in US – Washing Machines " 
and find that the USDOC's application of a differential pricing analysis and its use of zeroing in the 
antidumping investigation of softwood lumber from Canada is inconsistent with Articles 2.4 and 2.4.2 
of the AD Agreement. Canada's portr ayal of the role of the Panel in this dispute is fundamentally 
contrary to the Understanding on Rules and Procedures Governing the Settlement of Disputes  
("DSU") and the Agreement Establishing the World Trade Organization  ("WTO Agreement").  
 
3. To resolve  this dispute, rather, the Panel will need to make an objective assessment of the 
matter before it and undertake an interpretive analysis of the terms of the second sentence of 
Article  2.4.2 of the AD Agreement in accordance with the customary rules of int erpretation of public 
international law. A WTO dispute settlement panel has no authority under the DSU or the WTO 
Agreement simply to apply an interpretation in a report adopted by the DSB in a prior dispute, rather 
than to interpret and apply the text of the covered agreements. And under the DSU, neither the 
Appellate Body nor any panel can issue, because the DSB has no authority to adopt, an authoritative 
interpretation of the covered agreements. That authority is reserved to the Ministerial Conference 
or the General Council acting under a special procedure.  
 
4. Canada has not done anything to help the Panel accomplish the task it has been given under 
the DSU. Instead of presenting interpretive analyses of the AD Agreement applying customary rules 
of inter pretation to support its claims, Canada simply refers to and relies on interpretations 
presented in prior Appellate Body reports. However, the interpretations for which Canada advocates 
cannot be reconciled with the customary rules of interpretation. When they are subjected to scrutiny, 
all of Canada's proposed interpretations of the AD Agreement simply are not supported by the 
ordinary meaning of the text of the AD Agreement, read in context, and in light of the object and 
purpose of the AD Agreement.  
 
5. In fact, Canada's proposed interpretation of Article 2.4.2 of the AD Agreement effectively 
rewrites the second sentence of that provision and reads the alternative, average -to-transaction 
comparison methodology out of the AD Agreement entirely. In doing  so, Canada's proposed 
interpretation effectively renders this provision inutile  by failing to "give meaning and effect to all 
the terms of the treaty". Accordingly, all of Canada's legal claims lack merit, and should be rejected.  
 
II. STANDARD OF REVIEW, RULES OF INTERPRETATION, AND BURDEN OF PROOF  
 
6. Article 3.2 of the DSU provides that the dispute settlement system of the WTO "serves to 
preserve the rights and obligations of Members under the covered agreements, and to clarify the 
existing provisions of  those agreements in accordance with customary rules of interpretation of 
public international law." The applicable standard of review to be applied by WTO dispute settlement 
panels is that provided in Article 11 of the DSU and, with regard to antidumping measures, 
Article  17.6 of the AD Agreement. Per these standards, the Panel should "review whether the 
authorities have provided a reasoned and adequate explanation as to (i) how the evidence on the 
record supported its factual findings; and (ii) how those factual findings support the overall 
determination."  
 
7. There is no provision in the DSU or any of the covered agreements that establishes a system 
of "case law" or "precedent," or that otherwise requires a panel to follow or be bound by the findings 
in previously adopted panel or Appellate Body reports. There is no provision in the DSU or the WT/DS534/R/Add.1  
 
- 31 - 
 
  covered agreements that refers to "cogent reasons" or that suggests that a panel must justify legal 
findings not consistent with the reasoning set out in prior repo rts. 
 
8. To the contrary, Article 3.9 of the DSU expressly states that the DSU, including adoption of 
panel and Appellate Body reports by the DSB, is without prejudice to the procedure to obtain an 
authoritative interpretation by the Ministerial Conference  or General Council. Article IX:2 of the 
WTO Agreement provides that "[t]he Ministerial Conference and the General Council shall have the 
exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade 
Agreements." Article IX:2  also sets out a special adoption procedure for those authoritative 
interpretations. Thus, the adoption by the DSB of reports from panels or the Appellate Body cannot 
constitute authoritative interpretations that a subsequent panel must follow.  
 
9. Finally , it is a "generally -accepted canon of evidence" that "the burden of proof rests upon the 
party, whether complaining or defending, who asserts the affirmative of a particular claim or 
defence." Canada must establish a prima facie  case of inconsistency with  a provision of a WTO 
covered agreement before the United States, as the defending party, has the burden of showing 
consistency with that provision.  
 
III. CANADA'S CLAIMS RELATED TO THE USDOC'S APPLICATION OF THE ALTERNATIVE, 
AVERAGE -TO-TRANSACTION COMPARI SON METHODOLOGY SET FORTH IN THE SECOND 
SENTENCE OF ARTICLE 2.4.2 OF THE AD AGREEMENT LACK MERIT  
 
A. Introduction and Overview of Article 2.4.2 of the AD Agreement  
 
10. Article 2.4.2 sets forth three comparison methodologies for determining the "existence of 
margins of dumping." The two primary comparison methodologies are the average -to-average and 
transaction -to-transaction comparison methodologies. The Appellate Body has observed that "there 
is no hierarchy between them" and "it would be illogical to int erpret" them "in a manner that would 
lead to results that are systematically different."  
 
11. The second sentence of Article 2.4.2 describes a third comparison methodology, the average -
to-transaction comparison methodology, which may be used only when two conditions are met. First, 
an investigating authority must "find a pattern of export prices which differ significantly among 
different purchasers, regions or time periods" and, second, the investigating authority must provide 
an explanation "as to why such  differences cannot be taken into account appropriately by the use of 
a weighted average -to-weighted average or transaction -to-transaction comparison." The 
Appellate  Body has observed that the third methodology is an "exception." As an exception, the third  
comparison methodology, logically, should "lead to results that are systematically different" from 
the two "normal" comparison methodologies when the conditions for its use have been met.  
 
12. Canada seeks to rewrite the second sentence of Article 2.4.2,  and to read the alternative, 
average -to-transaction comparison methodology out of the AD Agreement entirely. Canada's 
proposed interpretation is erroneous and does not accord with the customary rules of interpretation 
of public international law.  
 
B. Canada's Claims Regarding the "Pattern Clause" of the Second Sentence of 
Article  2.4.2 of the AD Agreement Lack Merit  
 
13. The "pattern clause" in the second sentence of Article 2.4.2 requires finding a regular and 
intelligible form or sequence of export pri ces that are unlike in an important manner or to a 
significant extent as between different purchasers, regions, or time periods. An investigating 
authority examining whether a "pattern of export prices which differ significantly" exists should 
employ rigor ous analytical methodologies and view the data holistically.  
 
14. In the antidumping investigation of softwood lumber from Canada, the USDOC  used 
analytically sound methods that relied upon objective criteria and verified factual information. 
Specifically, the USDOC applied a differential pricing analysis, in which it used the "Cohen's d test" 
to "evaluate the extent to which the prices to the  particular purchaser, region, or time period differ 
significantly from the prices of all other sales of comparable merchandise", and the USDOC also used 
the "ratio test" to "assess the extent of the significant price differences for all sales as measured by 
the Cohen's d test."  
 WT/DS534/R/Add.1  
 
- 32 - 
 
  15. The USDOC undertook a rigorous, holistic examination of each respondent's export prices in 
order to ascertain whether there existed a regular and intelligible form or sequence of export prices 
that were unlike in an important m anner or to a significant extent as among different purchasers, 
regions or time periods. A proper interpretive analysis pursuant to the customary rules of 
interpretation of public international law reveals that that is precisely what the "pattern clause" o f 
the second sentence of Article 2.4.2 of the AD Agreement requires an investigating authority to do. 
In addition to explaining its analytical approach in the preliminary decision memorandum and the 
final issues and decision memorandum, the USDOC addressed  arguments raised by interested 
parties concerning the USDOC's analysis. Those memoranda provide a reasoned and adequate 
explanation of the USDOC's determination and demonstrate that the USDOC's application of a 
differential pricing analysis is not inconsi stent with the "pattern clause" of the second sentence of 
Article 2.4.2 of the AD Agreement.  
 
16. Canada advances two main arguments. First, Canada argues that the USDOC's differential 
pricing analysis is inconsistent with the "pattern clause" of the secon d sentence of Article 2.4.2 
because it considers both high -priced and low -priced export sales transactions. Second, Canada 
contends that the USDOC's differential pricing analysis breaches the "pattern clause" because it 
aggregates transactions across purch asers, regions, and time periods and does not identify a pattern 
among purchasers, regions, or time periods. Each of Canada's arguments lacks merit.  
 
i. The USDOC's Consideration of Both Low and High Prices Is 
Not Inconsistent with the "Pattern Clause" of the Second 
Sentence of Article 2.4.2 of the AD Agreement  
17. A differential pricing analysis seeks to identify a "pattern" by looking for export prices to a 
purchaser, region, or time period which are either significantly higher or significantly lower tha n the 
export prices to other purchasers, regions, or time periods. Such an analysis is consistent with the 
express terms of the "pattern clause" of the second sentence of Article 2.4.2 of the AD Agreement, 
which calls upon investigating authorities to find  "export prices which differ significantly," but which 
does not require or foreclose a focus either on lower -priced or higher -priced export sales. Logically, 
any analysis pursuant to the "pattern clause" must examine both lower and higher export prices to 
establish the presence of export prices which differ significantly.  
 
18. In US – Washing Machines , the Appellate Body found that "the relevant 'pattern' for the 
purposes of the second sentence of Article 2.4.2 is comprise d of the export prices to one or more 
particular purchasers which differ significantly from the prices to the other purchasers because they 
are lower  than those other prices (with the same applying to regions and time periods, 
respectively)", and "the rele vant 'pattern' … cannot be identified by considering prices that are higher 
than other prices." These findings, on which Canada relies, are not consistent with the terms of the 
"pattern clause" of the second sentence of Article 2.4.2 of the AD Agreement. A  set of lower -priced 
export sales to a particular purchaser (or to a particular region or during a particular time period) is 
not "a pattern of export prices which differ significantly". It would be a pattern of export prices which 
are similar to one anoth er, and which happen also to be lower than export prices to other purchasers 
(or regions or time periods). Additionally, a set of lower -priced export sales to a particular purchaser  
(or to a particular region or during a particular time period) is not "a p attern of export prices … 
among different  purchasers, regions or time periods". It would be a pattern of export prices to a 
particular purchaser  (or to a particular region or during a particular time period). In effect, the 
Appellate Body in US – Washing M achines  rewrote the "pattern clause" of the second sentence of 
Article 2.4.2 by changing the word "among" to "from". The pattern described by the Appellate Body 
simply is a different pattern than that which is described in the "pattern clause" of the secon d 
sentence of Article 2.4.2 of the AD Agreement.  
 
19. The Appellate Body also explained that: "[w]e fail to see how an investigating authority could 
identify and address 'targeted dumping' by considering significantly higher export prices. If the prices 
found to differ significantly are higher than other export prices, the other (lower) export prices would 
not 'mask' the (higher) dumped prices found to form the pattern." This reasoning, too, makes no 
sense, and is inconsistent with other Appellate Body find ings in US – Washing Machines . The 
Appellate Body explained that "an investigating authority would analyse the prices of all export sales  
made by the relevant exporter or producer to identify a pattern". Necessarily, an analysis of the 
prices of all export  sales would entail consideration  of both higher - and lower -priced sales. So, the 
Appellate Body's interpretation simultaneously requires and prohibits the consideration of lower -
priced and higher -priced export sales transactions. That is a logical impossi bility.  WT/DS534/R/Add.1  
 
- 33 - 
 
   
20. By comparing export prices to different purchasers, regions, and time periods, the differential 
pricing analysis seeks to identify both lower and higher export prices, because such export prices 
differ significantly, as expressly contemplated  by the "pattern clause" of Article 2.4.2 of the 
AD Agreement.  
 
ii. The USDOC's Aggregation of Price Differences Among 
Different Purchasers, Regions, or Time Periods Is Not 
Inconsistent with the "Pattern Clause" of the Second 
Sentence of Article 2.4.2 of t he AD Agreement  
21. Although the second sentence of Article 2.4.2 of the AD Agreement has been described as a 
provision that addresses "targeting" or "targeted dumping," the United States agrees with the US – 
Washing Machines  panel and most of the third pa rties to that dispute, including Canada, who 
indicated their understanding that "targeted dumping" is merely a shorthand reference to the terms 
of the second sentence of Article 2.4.2. However, the terms "targeting" and "targeted dumping" are 
not present i n Article 2.4.2 nor anywhere else in the AD Agreement. As it is written, the second 
sentence of Article 2.4.2 provides that investigating authorities are to examine "export prices" to 
determine whether there is "a pattern of export prices which differ sign ificantly among different 
purchasers, regions or time periods." A "target" analysis is just one kind of analysis an investigating 
authority might undertake when searching for "a pattern of export prices which differ significantly 
among different purchasers , regions or time periods." Investigating authorities might take other 
approaches to analyzing a "pattern" that also are consistent with the terms of the "pattern clause."  
 
22. When it applied a differential pricing analysis in the antidumping investigatio n of softwood 
lumber from Canada, the USDOC aggregated the results of the Cohen's d test as part of the ratio 
test to determine the extent of the export prices that were found to differ significantly among 
different purchasers, regions, or time periods. In  other words, the USDOC aggregated the results of 
the Cohen's d test among different purchasers, regions, or time periods found to pass the Cohen's  d 
test (without double counting those export sales that passed the Cohen's d test for more than one 
category , i.e., by purchaser, region, or time period). The UDSOC aggregated the results of the 
Cohen's d test in this manner so that it could consider the exporter's pricing behavior in the 
United  States market for the product as a whole, i.e., whether "a pattern"  exists of export prices 
which differ significantly. This accorded with the USDOC's understanding that the Cohen's d test 
results reflect different aspects of an exporter's overall pricing behavior, and it accords with prior 
Appellate Body findings regardi ng the concept of "product as a whole."  
 
23. Contrary to Canada's assertion, the USDOC's differential pricing analysis did not aggregate 
random and unrelated price variations. A respondent's pricing behavior, which reflects its market 
strategies and corpor ate goals that logically follow economic principles in a market economy, cannot 
reasonably be described as "random." The results of the Cohen's d test by purchaser, region, or time 
period represented different aspects of the particular respondent's overall  pricing behavior. Through 
the Cohen's d and ratio tests, the differential pricing analysis considered the pricing behavior of the 
respondent exporter in the United States market as a whole.  
 
24. Nothing in the text of the "pattern clause" of the second se ntence of Article 2.4.2 of the AD 
Agreement suggests that the significant export price differences among each category ( i.e., 
purchasers, regions, or time periods) cannot be considered together when assessing whether there 
exists "a pattern of export price s which differ significantly among different purchasers, regions or 
time periods." To the contrary, the text of the "pattern clause," on its face, contemplates a pattern 
of export prices that would transcend multiple purchasers, regions, or time periods. I n particular, 
the "pattern clause" directs an investigating authority to consider whether there exists a pattern of 
export prices which differ significantly " among  different purchasers, regions or time periods".  
 
25. Rather than engage in its own textual analysis, Canada primarily relies on the Appellate Body's 
findings in US – Washing Machines . The Appellate Body reasoned that "a pattern involves export 
prices which differ significantly in relation to specified sub -groups, namely, 'among different 
purchas ers, regions or time periods'", and "these terms determine how the relevant 'pattern' must 
be identified." The Appellate Body's analysis focused, in particular, on the words "or" and "among".  
 
26. The Appellate Body's reading of the word "or" is exceedingly narrow. As the Appellate Body 
itself acknowledged, "depending on the context in which it is used, the conjunction 'or' can be WT/DS534/R/Add.1  
 
- 34 - 
 
  exclusive or inclusive." The presence of the word "or," and not the w ord "and," might just as likely 
indicate that it is possible for an investigating authority to find a pattern of export prices which differ 
significantly among different purchasers, different regions, or different time periods, or any 
combination of the ab ove, but it is not necessary to find a pattern of export prices which differ 
significantly among all three, as would be suggested by the word "and". The Appellate Body's 
conclusion appears to have been colored by its misunderstanding of the relevant "patte rn" as being 
limited to low -priced sales to a "target". That understanding is not consistent with the terms of the 
"pattern clause", nor is it logical.  
 
27. The Appellate Body's understanding of the implications of the word "among" also appears to 
have bee n colored by its misunderstanding of the relevant "pattern." The Appellate Body observed 
that "the term 'among' refers to something 'in relation to the rest of the group [it belongs] to '." 
Importantly, the differential pricing analysis applied by the USDOC involved comparisons of export 
prices to each purchaser with export prices to the other purchasers , export prices to each region 
with export prices to the other regions , and export prices during each time period with export prices 
during the other ti me periods . This is logical and consistent with the understanding of the word 
"among" articulated by the Appellate Body, in particular the Appellate Body's observation that "each 
category should be considered on its own".  
 
28. The differential pricing anal ysis also sought to identify "a pattern" for an exporter and product 
as a whole by considering all of that exporter's export prices to discern whether significant 
differences in the export prices were exhibited collectively among different purchasers, or d ifferent 
regions, or different time periods. This approach is not inconsistent with the text of the "pattern 
clause" of the second sentence of Article 2.4.2 of the AD Agreement, which directs investigating 
authorities to consider whether there exists a pat tern of export prices which differ significantly 
"among" different purchasers, regions, or time periods.  
 
29. The term "among" is only used one time in the second sentence of Article 2.4.2 and it is placed 
before the identified groups of "purchasers, regio ns or time periods." Such usage suggests that those 
groups may be considered collectively in identifying a pattern of export prices which differ 
significantly. For the Appellate Body's reading of "among" to be correct, one would expect the term 
"among" to appear before the mention of each group, i.e., "among different purchasers, among  
different regions or among  different time periods." That is not how the "pattern clause" is written.  
 
30. The Appellate Body considered that such "repetition would have conve yed an identical 
meaning to that of the existing text." However, when the Appellate Body later summarized its own 
findings concerning the interpretation of the "pattern clause," it used the term "among" three times: 
"[w]e have found above that a pattern ca n only be found in prices which differ significantly either 
among  purchasers, or among  regions, or among  time periods, not across these categories." This is 
yet another internal inconsistency in the US – Washing Machines  Appellate Body report that 
demonstr ates the incorrectness of the findings in that report and undermines the persuasiveness of 
that report.  
 
31. A more plausible reading of the text of the "pattern clause" of the second sentence of 
Article  2.4.2 contemplates a holistic analysis of the expor ter's pricing behavior for the product as a 
whole, which is consistent with the Appellate Body's guidance in prior reports that a dumping margin 
must be exporter -specific and determined for the product as a whole. That is what the USDOC sought 
to accomplis h by applying a differential pricing analysis in the antidumping investigation of softwood 
lumber from Canada.  
 
C. Canada's Claims that the Use of Zeroing in Connection with the 
Application of the Alternative, Average -to-Transaction Comparison 
Methodology Is Inconsistent with Articles 2.4.2 and 2.4 of the AD 
Agreement Lack Merit  
32. An examination of the text and context of Article 2.4.2 of the AD Agreement leads to the 
conclusion that zeroing is permissible – indeed, it is necessary – when applying the alt ernative, 
average -to-transaction comparison methodology, if that "exceptional" comparison methodology is 
to be given any meaning. This conclusion follows from a proper application of the customary rules 
of interpretation of public international law. This c onclusion also accords with and is the logical 
extension of the Appellate Body's findings in previous disputes relating to the use of zeroing in 
connection with the comparison methodologies provided in the first sentence of Article 2.4.2 of the WT/DS534/R/Add.1  
 
- 35 - 
 
  AD Agreemen t. And this is the conclusion reached by one Appellate Body member in US – Washing 
Machines . 
 
1. Canada's Arguments Against the Use of Zeroing in Connection with the 
Alternative, Average -to-Transaction Comparison Methodology Lack Merit  
 
33. Canada does not  present an interpretive analysis of the second sentence of Article 2.4.2 of 
the AD Agreement. Instead, Canada simply summarizes various findings in prior Appellate Body 
reports. In approaching this dispute as it has, Canada has failed to help the Panel di scharge its 
function under Article 11 of the DSU, which requires the Panel to make its own "objective assessment 
of the matter before it". Such an objective assessment involves an objective assessment of "the 
applicability of and conformity with the releva nt covered agreements," and necessarily includes an 
interpretive analysis of any of the provisions of the covered agreements that Canada claims the 
United States has breached.  
 
34. More problematic, in presenting a selection of findings from prior reports,  Canada has chosen 
to place emphasis on findings related to the concept of "product as a whole," a concept which the 
Appellate Body has developed in prior reports. The term "product as a whole," of course, is not 
present in the AD Agreement. Additionally, the Appellate Body majority in US – Washing Machines  
prescribed a new alternative methodology for addressing targeted dumping that explicitly does not 
account for all transactions and cannot credibly be called a margin of dumping for the "product as a 
whole." In the words of the Appellate Body majority: "dumping and margins of dumping under the 
[average -to-transaction] comparison methodology applied pursuant to the second sentence of 
Article 2.4.2 are to be determined by conducting a comparison between norm al value and 'pattern 
transactions', without having to take into account  'non pattern transactions'." Thus, the Appellate 
Body majority's approach literally requires that a margin of dumping be determined not for the 
product as a whole, and in a manner tha t explicitly does not take into account all export transactions.  
 
35. Canada further argues that zeroing is impermissible in the context of the average -to-
transaction comparison methodology because zeroing within an identified pattern fails to "further 
'unmask' targeted dumping." In making this assertion, Canada again fails to engage in any 
interpretive analysis of the relevant text in Article 2.4.2 of the AD Agreement, and instead relies on 
the findings of two members of the Appellate Body in US – Washing Machines . The Appellate Body 
majority in US – Washing Machines , though, based its findings concerning the operation of the 
alternative, average -to-transaction comparison methodology and zeroing on its flawed 
understanding of the relevant "pattern." Those f indings are erroneous.  
 
36. The Appellate Body majority also stated that, in interpreting the text of Article 2.4.2, it found 
that the term "individual export transactions" "refers to the pattern of export prices identified by the 
investigating authority" that differ because they are the lower export prices. The Appellate Body 
majority indicated that it found "no such textual and contextual support to conclude that the term 
'individual export transactions' in the second sentence of Article 2.4.2 refers only  to those 
transactions that form part of the identified pattern but are priced below normal value."  Elsewhere 
in the Appellate Body report, however, the Appellate Body considered that the word "individual" also 
delineates the scope of application of the a lternative, average -to-transaction comparison 
methodology. Thus, in the Appellate Body majority's view, the word "individual" simultaneously 
reduces and expands  the scope of transactions to be included in the average -to-transaction 
comparisons under the se cond sentence of Article 2.4.2 of the AD Agreement. These divergent 
conclusions about the meaning of the term "individual" are internally inconsistent, and neither 
conclusion is supported by the ordinary meaning of the term "individual," read in its contex t. 
 
2. A Proper Application of the Customary Rules of Interpretation Reveals 
that the Use of Zeroing in Connection with the Application of the 
Alternative, Average -to-Transaction Comparison Methodology Is Not 
Inconsistent with the Second Sentence of Articl e 2.4.2 of the AD 
Agreement  
 
a. Initial Comments on the Text and Context of the Second Sentence 
of Article 2.4.2 of the AD Agreement  
 
37. When the Appellate Body found prohibitions on the use of zeroing in connection with the 
comparison methodologies described in the first sentence of Article 2.4.2 of the AD Agreement, its WT/DS534/R/Add.1  
 
- 36 - 
 
  interpretations were rooted in the text of that sentence. Specificall y, the Appellate Body has found 
that the textual basis for the prohibition on the use of zeroing in connection with the application of 
the average -to-average comparison methodology is the presence in the first sentence of Article 2.4.2 
of the word "all" in  "all comparable export transactions." The Appellate Body has found that the 
textual basis for the prohibition on the use of zeroing in connection with the application of the 
transaction -to-transaction comparison methodology is the "the reference to 'a com parison' in the 
singular" and the term "basis."  
 
38. There is no similar textual basis in the second sentence of Article 2.4.2 for finding a prohibition 
on the use of zeroing in connection with the application of the alternative, average -to-transaction 
comparison methodology when the conditions for its use have been established.  
 
39. Additional contextual analysis of the second sentence of Article 2.4.2 of the AD Agreement 
demonstrates that zeroing is permissible – and indeed, it is necessary – when apply ing the 
alternative, average -to-transaction comparison methodology provided for in the second sentence of 
Article 2.4.2 of the AD Agreement.  
 
b. The Average -to-Transaction Comparison Methodology in the 
Second Sentence of Article 2.4.2 of the AD Agreement I s an 
Exception to the Comparison Methodologies in the First Sentence 
of Article 2.4.2 and Should Be Interpreted So that It May Yield 
Results that Are "Systematically Different" from the Comparison 
Methodologies "Normally" Applied  
 
40. As an exception to th e two symmetrical comparison methodologies that an investigating 
authority must use "normally," each of which logically, the Appellate Body has explained, should not 
"lead to results that are systematically different," the third comparison methodology, by logical 
extension, should  "lead to results that are systematically different" from the "normal[]" comparison 
methodologies when the conditions for its use have been established. The Appellate Body also has 
found that this exceptional methodology provides a  means by which Members can "unmask targeted 
dumping."  
 
41. Interpreting the second sentence of Article 2.4.2 of the AD Agreement in a manner that would 
lead to the average -to-transaction comparison methodology systematically yielding results that are 
identical or similar to the results of the normal comparison methodologies would deprive the second 
sentence of Article 2.4.2 of any meaning; it would no longer be "exceptional" and would no longer 
provide a means to "unmask targeted dumping." Such an interpre tation would not be consistent 
with the customary rules of interpretation of public international law.  
 
c. Mathematical Equivalence  
 
42. If zeroing is prohibited under both the average -to-average and average -to-transaction 
comparison methodologies, then bo th methodologies, when applied to the same set of transactions, 
will always yield identical results, with respect to the total amount of all comparison results, the total 
amount of dumping, and the weighted average dumping margin for an exporter for the pr oduct 
under investigation. This is true because, for both methodologies, the calculation of the margins of 
dumping is based on the same normal value and export sales data, but the mathematical operations 
simply are conducted in a different order.  
 
d. The Appellate Body's Consideration of Mathematical Equivalence in 
Previous Disputes Does Not Compel Rejection of the Mathematical 
Equivalence Argument in this Dispute  
 
43. The Appellate Body has considered the mathematical equivalence argument in previous 
disputes, including in US – Washing Machines . The findings concerning the mathematical equivalence 
argument in prior Appellate Body reports neither support nor compel the Panel's rejection of the 
mathematical equivalence argument in this dispute.  
 
44. The Appe llate Body majority in US – Washing Machines  actually acknowledged the reality of 
mathematical equivalence, referring to "the fact that the application of the [average -to-transaction] 
comparison methodology to [the] pattern of export prices leads to equiva lent results as the 
application of the [average -to-average] comparison methodology to the same pattern". The panels WT/DS534/R/Add.1  
 
- 37 - 
 
  in US – Washing Machines  and US – Anti-Dumping Methodologies (China)  also recognized the fact 
of mathematical equivalence. No WTO panel, nor  the Appellate Body, has ever found that the United 
States is incorrect that the average -to-average comparison methodology (without zeroing) and the 
average -to-transaction comparison methodology (also without zeroing) yield the same mathematical 
result whe n applied to the same set of export transactions.  
 
45. Even though it acknowledged the fact of mathematical equivalence, the Appellate Body 
majority evaded the U.S. argument in US – Washing Machines . The majority observed that "the 
United States' argument on mathematical equivalence is premised on its understanding of what 
constitutes the relevant 'pattern' for the purposes of the second sentence of Article 2.4.2," but 
recalled that the Appellate Body had "concluded above that the 'pattern of export prices which differ 
significantly' within the meaning of the second sentence of Article 2.4.2 comprises only a subset of 
all the export transactions". The majority reasoned that "[c]omparing normal value with 'pattern 
transactions' only will not normally yield re sults that are mathematically or substantially equivalent 
to the results obtained from the application of the [average -to-average] comparison methodology 
to all export transactions."  
 
46. As an initial matter, the Appellate Body's interpretation of the term "pattern" in the second 
sentence of Article 2.4.2 of the AD Agreement is erroneous and does not follow from a proper 
application of the customary rules of interpretation of public international law. Thus, the 
Appellate  Body major ity's finding concerning the mathematical equivalence argument, which rests 
on the Appellate Body's earlier flawed finding, is, as a consequence, itself flawed.  
 
47. Even assuming, for the sake of argument, that the Appellate Body's interpretation of the t erm 
"pattern" is correct, the fact of mathematical equivalence, and the Appellate Body majority's 
recognition of that fact, undercuts the Appellate Body majority's conception of the operation of the 
alternative, average -to-transaction comparison methodolog y. The application of the average -to-
average  comparison methodology to any set of transactions  (without zeroing) is mathematically 
equivalent to the application of the average -to-transaction  comparison methodology to the same set 
of transactions  (without z eroing). Thus, how the relevant "pattern" is defined under the second 
sentence of Article 2.4.2 of the AD Agreement is completely irrelevant  to the mathematical 
equivalence argument.  
 
48. This is because, by finding that the second sentence of Article 2.4. 2 requires the application 
of the average -to-transaction  comparison methodology to a subset of transactions while also 
prohibiting the use of zeroing , the Appellate Body majority found, in effect , that the application of 
the average -to-average  comparison methodology to that subset of transactions  (without zeroing) is 
what actually  is contemplated by the second sentence of Article 2.4.2. The Appellate Body majority 
effectively rewrote  the second sentence of Article 2.4.2, changing it from allowi ng the application of 
the average -to-transaction  comparison methodology under certain circumstances to allowing the 
application of the average -to-average  comparison methodology to a subset of transactions  under 
certain circumstances. The Appellate Body maj ority invented an entirely new methodology for 
calculating a margin of dumping that is divorced from the text of the second sentence of Article  2.4.2, 
and which does not appear to have been contemplated by any WTO Member previously, neither 
during the Urug uay Round negotiations nor at any time after. Ultimately, the Appellate Body majority 
read the average -to-transaction  comparison methodology out of the second sentence of Article 2.4.2 
of the AD Agreement altogether, contrary to the principle of effectiven ess. 
 
49. The Appellate Body majority noted the U.S. argument in this regard. The Appellate Body 
majority's reasoning is dismissive of – but not responsive to – the U.S. argument. Again, the 
Appellate Body majority recognized "the fact that the application  of the [average -to-transaction] 
comparison methodology to [the] pattern of export prices leads to equivalent results as the 
application of the [average -to-average] comparison methodology to the same pattern". Thus, just 
as the United States contends, the Appellate Body majority rewrote the second sentence of 
Article  2.4.2 of the AD Agreement such that investigating authorities now are to address targeted 
dumping by applying what is, in effect , the average -to-average  comparison methodology to a subset 
of transactions. That is not what the second sentence of Article 2.4.2 of the AD Agreement provides.  
 
50. In a footnote, the Appellate Body majority also referred to earlier consideration of the 
mathematical equivalence argument in prior Appellate Body reports,  including US – Softwood 
Lumber V (Article 21.5 – Canada) , US – Stainless Steel (Mexico) , and US – Zeroing (Japan) . Like 
the Appellate Body majority's findings in US – Washing Machines , the Appellate Body's consideration WT/DS534/R/Add.1  
 
- 38 - 
 
  of the mathematical equivalence arg ument in those earlier disputes neither supports nor compels 
rejection of the mathematical equivalence argument in this dispute.  
 
51. The Appellate Body first addressed the mathematical equivalence argument in US – Softwood 
Lumber V (Article 21.5 – Canada) . In that dispute, the Appellate Body "disagree[d] with the Panel's 
analysis of the 'mathematical equivalence' argument for several reasons." Some of the reasons the 
Appellate Body gave are distinguishable from the current situation, while others are instr uctive.  
 
52. The Appellate Body disagreed with the panel in US – Softwood Lumber V (Article 21.5 – 
Canada)  on the grounds that, "[b]eing an exception, the comparison methodology in the second 
sentence of Article 2.4.2 (weighted average -to-transaction) alon e cannot determine the 
interpretation of the two methodologies provided in the first sentence, that is, transaction -to-
transaction and weighted average -to-weighted average." In this dispute, the United States does not 
offer the mathematical equivalence arg ument to support a proposed interpretation of the 
transaction -to-transaction and average -to-average comparison methodologies in the first sentence 
of Article 2.4.2 of the AD Agreement. Rather, the mathematical equivalence argument is offered 
here to suppor t the contextual argument that, as an exception, the alternative, average -to-
transaction comparison methodology should not be interpreted in a way that would lead, invariably, 
to that comparison methodology yielding results that are identical or systematic ally similar to the 
results of the normal comparison methodologies. Nor should the second sentence of Article 2.4.2 be 
interpreted so as to rewrite that provision such that targeted dumping is addressed not by the 
application of the average -to-transaction comparison methodology but, in effect, by the application 
of the average -to-average comparison methodology to a subset of transactions.  
 
53. The Appellate Body further observed in US – Softwood Lumber V (Article 21.5 – Canada)  that 
"the United States' 'mat hematical equivalence' argument assumes that zeroing is prohibited under 
the methodology set out in the second sentence of Article 2.4.2. The permissibility of zeroing under 
the weighted average -to-transaction comparison methodology provided in the second sentence of 
Article 2.4.2 is not before us in this appeal, nor have we examined it in previous cases." The 
Appellate  Body was correct, of course, that the mathematical equivalence argument is premised on 
the assumption , for the purpose of argument, that ze roing is prohibited under the average -to-
transaction comparison methodology. The United States offers the mathematical equivalence 
argument here as an argument against  finding that that is the case. That the Appellate Body 
suggested that the U.S. assumptio n in US – Softwood Lumber V (Article 21.5 – Canada)  was a 
reason for its disagreement with the panel's analysis of the mathematical equivalence argument in 
that context suggests that the use of zeroing should not be  prohibited in connection with the 
altern ative, average -to-transaction comparison methodology set forth in the second sentence of 
Article 2.4.2 of the AD Agreement.  
 
54. The Appellate Body also noted in US – Softwood Lumber V (Article 21.5 – Canada)  that "there 
is considerable uncertainty regardi ng how precisely the third methodology should be applied." 
Similarly, in US – Stainless Steel (Mexico) , Mexico and the third participants argued that "the 
'mathematical equivalence' argument works only under the assumption that the weighted average 
normal value used in the weighted average -to-transaction … comparison methodology is identical to 
that used in the [average -to-average] comparison methodology," and Mexico pointed out that that 
was "not the case under the United States' system."  
 
55. In US – Softwood Lumber V (Article 21.5 – Canada)  and US – Stainless Steel (Mexico) , as well 
as in US – Zeroing (Japan) , the Appellate Body signalled that it saw merit in the arguments of the 
participants and third participants described above. In US – Stainless Stee l (Mexico) , the Appellate 
Body expressed the view that "the 'mathematical equivalence' argument works only under a specific 
set of assumptions, and ... there is uncertainty as to how the [average -to-transaction] comparison 
methodology would be applied in p ractice."  
 
56. Those prior disputes, however, did not involve an actual application of the average -to-
transaction comparison methodology. In the softwood lumber antidumping investigation challenged 
here, and generally, the weighted average normal value use d in the application of the average -to-
average comparison methodology is no different from the weighted average normal value used in 
the application of the average -to-transaction comparison methodology.  
 
57. The panel in US – Washing Machines  "rejected Kor ea's argument that the use of different 
weighted average normal values could avoid mathematical equivalence." "Neither was the Panel WT/DS534/R/Add.1  
 
- 39 - 
 
  persuaded by Korea's argument that mathematical equivalence could be avoided if the investigating 
authority undertook a 'gr anular analysis' of the transactions involved in the [average -to-transaction] 
comparison methodology and a detailed approach to price adjustments, i.e. by rethinking the 
adjustments that might be necessary to ensure price comparability." In its discussion of 
mathematical equivalence, the Appellate Body majority noted Korea's argument on appeal that "the 
possibility of changing the normal value or the adjustments to export prices breaks mathematical 
equivalence." Aside from summarizing the panel's findings a nd Korea's arguments on appeal, 
though, the Appellate Body majority did not analyze – and did not reverse – the US – Washing 
Machines  panel's findings in this regard.  
 
58. Because of the different underlying factual situations in US – Softwood Lumber V 
(Article  21.5 - Canada) , US – Stainless Steel (Mexico) , and US – Zeroing (Japan) , as contrasted with 
the factual situation in this dispute, and because of the flaws in the rea soning of the Appellate Body 
majority in US – Washing Machines , the Appellate Body's consideration of the mathematical 
equivalence argument in those disputes does not compel rejection of the mathematical equivalence 
argument in this dispute.  
 
e. The Negotiating History of the AD Agreement Confirms that Zeroing 
is Permissible when Applying the Asymmetrical Comparison 
Methodology Set Forth in the Second Sentence of Article 2.4.2 of 
the AD Agreement  
 
59. The "asymmetrical" nature of the "third methodolog y," and the fact that it may be used "only 
in exceptional circumstances," when considered together with the negotiating history of the 
AD Agreement, confirms that zeroing is permissible under the alternative, average -to-transaction 
comparison methodology s et forth in the second sentence of Article 2.4.2 of the AD Agreement.  
 
60.  Of particular relevance are proposals from GATT Contracting Parties that sought changes to 
the Tokyo Round Antidumping Code to address concerns about certain investigating authorit ies that 
used an asymmetrical comparison methodology, in which "the 'negative' dumping margin by which 
the normal value falls below the export price in the value term will be treated as zero instead of 
being added to the other transactions to offset the du mping margin." It is clear from these proposals 
that the demandeurs  viewed asymmetry and zeroing as one and the same problem.  
 
61. The ultimate compromise agreed by the WTO Members is, of course, reflected in the text of 
Article 2.4.2 of the AD Agreement.  Article 2.4.2 provides that "normally" a symmetrical comparison 
methodology must be used, but when certain conditions are met, an investigating authority "may" 
use an asymmetrical comparison methodology to, in the words of the Appellate Body, "unmask 
targeted dumping." The negotiating history documents confirm that zeroing was understood to be a 
key feature of the asymmetrical comparison methodology, and essential for its application to address 
masked dumping.  
 
3. Canada's Claim that the Use of Zeroing in Connection with the Application 
of the Alternative, Average -to-Transaction Comparison Methodology is 
Inconsistent with Article 2.4 of the AD Agreement Lacks Merit  
 
62. Canada claims that the use of zeroing in connection with the application of the alternat ive, 
average -to-transaction comparison methodology is inconsistent with Article 2.4 of the AD 
Agreement. Canada's claim lacks merit.  
 
63. The text of Article 2.4 of the AD Agreement requires that "[a] fair comparison shall be made 
between the export price  and the normal value", and then goes on the describe how such a "fair 
comparison" is to be made, including specifying that "[t]he comparison shall be made at the same 
level of trade … and in respect of sales made at as nearly as possible the same time." A rticle 2.4 
also describes various adjustments ("[d]ue allowance[s]") that an investigating authority must make 
to export price and normal value to ensure a "fair comparison". The text of Article 2.4 says nothing 
about whether zeroing is fair or unfair. As the panel in US – Zeroing (Japan)  noted, the "precise 
meaning of" the fair comparison requirement "must be understood in light of the nature of the 
activity at issue." The panel concluded that "the 'fair comparison' requirement cannot have been 
intended to  allow a panel to review a measure in light of a necessarily somewhat subjective judgment 
of what fairness means in the abstract and in complete isolation from the substantive context."  
 WT/DS534/R/Add.1  
 
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  64. Canada once again seeks to support its claim not with a discussio n of the terms of Article 2.4 
of the AD Agreement, but instead by relying on findings in prior Appellate Body reports, including 
the findings of two Appellate Body members in US – Washing Machines . However, the findings of 
the majority in US – Washing Mach ines are internally inconsistent, and the Panel should not consider 
those findings persuasive.  
 
65. The Appellate Body majority treated nearly identical factual situations differently, deeming 
one (zeroing) to be unfair  while deeming another (the Appellate  Body majority's own prescription 
for addressing targeted dumping) to be fair. There is no textual or logical support for the 
Appellate  Body majority's finding.  
 
66. Given the Appellate Body majority's inconsistent treatment of nearly identical factual 
situations, it appears that the Appellate Body majority's finding that the use of zeroing is inconsistent 
with Article 2.4 of the AD Agreement is, in reality, dependent on and follows directly from the finding 
that the use of zeroing is inconsistent with Arti cle 2.4.2 of the AD Agreement. As demonstrated 
above, the use of zeroing in connection with the application of the alternative, average -to-
transaction comparison methodology is not inconsistent with Article 2.4.2 of the AD Agreement.  
 
67. Furthermore, ther e is no basis for finding that the use of zeroing in connection with the 
alternative, average -to-transaction comparison methodology is in any way not "fair," or that it is 
inconsistent with any "fair comparison" obligation in Article 2.4 of the AD Agreemen t. Canada argues 
that the Appellate Body has interpreted the term "fair" under Article 2.4 of the AD Agreement as 
connoting "impartiality, even -handedness, or lack of bias." It does not follow from that 
Appellate  Body finding, however, that Article 2.4 of AD Agreement prohibits the use of zeroing in 
connection with the alternative, "exceptional" average -to-transaction comparison methodology 
when the conditions set forth in the second sentence of Article 2.4.2 have been met.  
 
68. As explained above, the sec ond sentence of Article 2.4.2 of the AD Agreement provides 
Members a means to "unmask targeted dumping" in "exceptional" situations. It is "fair" to take steps 
to "unmask targeted dumping" by faithfully applying the comparison methodology in the second 
sentence of Article 2.4.2, when the conditions for its use are met. Doing so is entirely consistent 
with the obligation that an investigating authority be impartial, even -handed, and unbiased, as one 
Appellate Body member agreed in US – Washing Machines . 
 
D. Canada's Consequential Claims under Articles 1 and 2.1 of the AD Agreement 
and Articles VI:1 and VI:2 of the GATT 1994 Lack Merit  
 
69. Canada offers no support for its claims under Articles 1 and 2.1 of the AD Agreement and 
Articles VI:1 and VI:2 of the  GATT 1994. Canada does not even discuss its claims under those 
provisions except to assert in passing that breaches of those provisions purportedly follow as a 
consequence of alleged breaches of Articles 2.4 and 2.4.2 of the AD Agreement. As the United St ates 
has established, Canada's claims that the United States has acted inconsistently with Articles 2.4 
and 2.4.2 of the AD Agreement lack merit. As a consequence, Canada's claims under under Articles  1 
and 2.1 of the AD Agreement and Articles VI:1 and VI: 2 of the GATT 1994 are equally without merit.  
 
IV. CONCLUSION  
 
70. The United States respectfully requests that the Panel reject all of Canada's claims.  
 
 
 WT/DS534/R/Add.1  
 
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  ANNEX B -4 
SECOND INTEGRATED EX ECUTIVE SUMMARY OF T HE ARGUMENTS OF THE UNITED  STATES  
I. INTRODUCTION  
 
1. The U.S. first written submission demonstrates why Canada's claims under the Agreement on 
Implementation of Article VI of the General Agreement on Tariffs and Tra de 1994  (the 
"AD Agreement" ) and the General Agreement on Tariffs and Trade 1994  (the " GATT 1994" ) fail. As 
the United States has shown, Canada's proposed interpretations of the AD Agreement  are not 
supported by the ordinary meaning of terms of the AD Agre ement, read in context, and in light of 
the object and purpose of the AD Agreement.  
 
2. Canada's statements during the first substantive meeting and its responses to the Panel's 
questions have not improved Canada's case. Canada continues to refer to and re ly on findings 
presented in prior Appellate Body reports without presenting interpretive analyses of the 
AD Agreement  applying the customary rules of interpretation to support its claims. Where the 
United  States has identified errors and inconsistencies in  the Appellate Body findings on which 
Canada relies, Canada has ignored the U.S. arguments, simply repeating, for example, that the 
Panel "must follow the Appellate Body's decision" in US – Washing Machines .  
 
3. Canada's understanding of the role of the P anel in this dispute remains fundamentally contrary 
to the Understanding on Rules and Procedures Governing the Settlement of Disputes  ("DSU") and 
the Agreement Establishing the World Trade Organization  ("WTO Agreement").  To resolve this 
dispute, the Panel will need to make an objective assessment of the matter before it and undertake 
an interpretive analysis of the terms of the second sentence of Article 2.4.2 of the AD Agreement in 
accordance with the customary rules of interpretation of public internation al law. Canada still has 
done nothing to help the Panel accomplish the task it has been given under the DSU.  
 
II. CANADA MISUNDERSTANDS THE ROLE OF DISPUTE SETTLEMENT PANELS UNDER 
THE DSU  
 
4. The U.S. first written submission discusses the role of WTO dispute settlement panels in 
disputes concerning antidumping measures. The role of panels in such disputes is established by 
Articles 3.2, 3.9, 11, 19.1, and 19.2 of the DSU and Article 17.6 of th e AD Agreement.  
 
5. In sum, the role of a WTO dispute settlement panel established by the DSB is to examine the 
matter referred to the DSB  by the complaining party and to make such findings as will assist the 
DSB in making a recommendation to bring a measure into conformity under Article 19.1 of the DSU. 
In undertaking that examination, the DSU further specifies that a panel is to make an "o bjective 
assessment of the matter before it", including an objective assessment of "the applicability of and 
conformity with the covered agreements". That assessment is one of conformity with the covered 
agreements – not prior reports adopted by the DSB. T he DSU provides that this objective assessment 
of the applicability of the covered agreements occurs through an interpretive analysis of the terms 
of the applicable covered agreements "in accordance with the customary rules of interpretation of 
public inte rnational law".  
 
6. Nevertheless, Canada maintains that WTO panels are "expected to follow Appellate Body 
reports, absent cogent reasons to do otherwise, to ensure the security and predictability of the 
multilateral trading system." Canada asserts that the  notion that WTO panels are "expected" to 
follow Appellate Body reports "arises directly from the provisions of the [DSU]". Canada is mistaken, 
and such a notion is directly contrary to the DSU and the WTO Agreement.  
 
7. Under the DSU, the DSB has no autho rity to adopt an authoritative interpretation of the  
covered agreements – and, therefore, neither the Appellate Body nor any panel can issue such an 
authoritative interpretation. Per Article IX:2 of the WTO Agreement, that authority is reserved to the 
Ministerial Conference or the General Council acting under a special procedure. And Article 3.9 of 
the DSU expressly states that the DSU, including adoption of panel and Appellate Body reports by 
the DSB, is without prejudice to the procedure to obtain an auth oritative interpretation by the WT/DS534/R/Add.1  
 
- 42 - 
 
  Ministerial Conference or General Council. Accordingly, a WTO dispute settlement panel has no 
authority under the DSU or the WTO Agreement simply to apply an interpretation in a report adopted 
by the DSB  in a prior dispute.  
 
8. This was the view expressed by the Appellate Body in one of its first reports, in Japan – 
Alcoholic Beverages II . The United States is not aware that the Appellate Body has ever disavowed 
this understanding, which is contained in a report adopted by th e DSB.  
 
9. The appropriate course for a WTO panel, as prescribed by Article 3.2 of the DSU, is to apply 
the "customary rules of interpretation of public international law." The Appellate Body has recognized 
that Article 31 of the Vienna Convention on the L aw of Treaties  ("Vienna Convention") reflects such 
customary rules. Article 31 of the Vienna Convention provides that "[a] treaty shall be interpreted 
in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their 
context and in the light of its object and purpose."  
 
10. Ideally, WTO panels and the Appellate Body will apply the customary rules of interpretation 
correctly, and thus different adjudicators will consistently reach similar conclusions concerning the 
interpr etation of the covered agreements. After a panel first applies the customary rules of 
interpretation itself and reaches its own preliminary conclusion concerning the interpretation of a 
covered agreement, it is appropriate for the panel to take into accoun t the interpretive findings in 
prior panel and Appellate Body reports that have been adopted by the DSB. Where a panel's 
preliminary interpretive conclusion accords with the conclusion in a prior report, the panel can have 
greater confidence in the correct ness of its own conclusion and reflect that in its own report. 
However, where a panel's preliminary interpretive conclusion differs from the conclusion in a prior 
report, it may be appropriate for the panel to further consider the matter, and assess whethe r the 
panel has erred in its own application of the customary rules of interpretation, or whether the panel 
considers that the interpretive finding in a prior report is erroneous. Such an approach would be 
consistent with the role of a WTO dispute settleme nt panel, as provided in the DSU, while also taking 
appropriate account of prior reports adopted by the DSB.  
 
11. On the other hand, starting (and perhaps even ending) a so -called "interpretive analysis" with 
prior reports adopted by the DSB is not what WT O dispute settlement panels are "expected" to do, 
per the terms of the DSU. Taking such an approach would constitute a failure by a panel to fulfil its 
role under the DSU.  
 
III. CANADA'S CLAIMS RELATED TO THE USDOC'S APPLICATION OF THE ALTERNATIVE, 
AVERAGE -TO-TRANSACTION COMPARISON METHODOLOGY SET FORTH IN THE 
SECOND SENTENCE OF ARTICLE 2.4.2 OF THE AD AGREEMENT LACK MERIT  
 
A. Introduction  
 
12. The U.S. first written submission demonstrates that the interpretations that the United States 
proposes are those that result from the proper application of the customary rules of interpretation 
of public international law.  
 
13. Canada has declined to provide the Panel with an interpretive analysis of the AD Agreement 
based on the customary rules of interpretation, i.e., a discussion of the ordinary meaning of the 
terms of the AD Agreement in their context and in light of the object and purpose of the 
AD Agreement. Instead, Canada insists that this dispute is "narrow" and incorrectly urges the Panel 
simply to "follow Appellate Body reports." As the United States has demonstrated, the Panel is not 
authorized by the DSU to take the approach Canada proposes.  
 
14. Furthermore, aside from not being based on an application of the customary rules of 
interpretation, Canada's p roposed interpretations are untenable because they would read the 
average -to-transaction comparison methodology described in the second sentence of Article 2.4.2 
out of the AD Agreement entirely.  
 
15. As the United States has explained, the USDOC, through its application of a differential pricing 
analysis in the antidumping investigation of softwood lumber from Canada, undertook a rigorous, 
holistic examination to determine whether there exists a patter n of export prices which differ 
significantly among different purchasers, regions, or time periods, and the USDOC did so in a manner WT/DS534/R/Add.1  
 
- 43 - 
 
  that gives effect to the "pattern clause" and the "methodology clause" of the second sentence of 
Article 2.4.2 of the AD Ag reement.  
 
16. For the reasons given below, the United States continues to urge the Panel to engage in a 
thorough interpretive analysis in accordance with the customary rules of interpretation of public 
international law. The United States remains confident  that doing so will lead the Panel to conclude 
that Canada's claims are without merit, and the USDOC's determination in the antidumping 
investigation of softwood lumber from Canada is not inconsistent with the AD Agreement or the 
GATT 1994.  
 
B. Canada's Cl aims Regarding the "Pattern Clause" of the Second Sentence of 
Article 2.4.2 of the AD Agreement Lack Merit  
 
17. The U.S. first written submission demonstrates that the phrase "a pattern of export prices 
which differ significantly  among different purchaser s, regions or time periods " in the second sentence 
of Article 2.4.2 of the AD Agreement – the "pattern clause" – means a regular and intelligible form 
or sequence of export prices that are unlike in an important manner or to a significant extent as 
between  different purchasers , regions, or time periods. This is the interpretive conclusion that follows 
from a proper application of the customary rules of interpretation of public international law.  
 
18. The U.S. first written submission further shows that the USDOC undertook a rigorous, holistic 
examination of each respondent's export prices in order to ascertain whether there existed a regular 
and intelligible form or sequence of export prices that were unlike in an important manner or to a 
significant extent as among different purchasers, regions or time periods. In addition to explaining 
its analytical approach in the preliminary decision memorandum and the final issues and decision 
memorandum, the USDOC addressed arguments raised by interested parties concer ning the 
USDOC's analysis. Those memoranda provide a reasoned and adequate explanation of the USDOC's 
determination and demonstrate that the USDOC's application of a differential pricing analysis is not 
inconsistent with the "pattern clause" of the second sentence of Article 2.4.2 of the AD Agreement.  
 
19. Finally, the U.S. first written submission explains that Canada's arguments regarding the  
meaning and application of the "pattern clause" lack merit. In its statements at the first substantive 
meeting and  in its responses to the Panel's questions, Canada has done nothing to improve its 
deficient arguments against the USDOC's determination. Instead, Canada largely repeats arguments 
it made in its first written submission, and Canada continues to rely on fin dings in prior reports 
rather than on interpretive analyses pursuant to the customary rules of interpretation. Canada's 
arguments continue to lack merit.  
 
1. The USDOC's  Consideration of Both Low and High Prices Is Not 
Inconsistent with the "Pattern Clause" of the Second Sentence of 
Article  2.4.2 of the AD Agreement  
 
20. The U.S. first written submission demonstrates that the USDOC's consideration of both low 
and high pri ces is not inconsistent with the "pattern clause" of the second sentence of Article 2.4.2 
of the AD Agreement.  
 
21. Canada asserts that "[t]he analysis must begin from the ordinary meaning of the term 
'pattern.'" The United States agrees, and Canada's asse rtion is consistent with the customary rules 
of interpretation of public international law, as reflected in Article 31 of the Vienna Convention. The 
United States and Canada also are in agreement about the ordinary meaning of the term "pattern," 
which can be discerned from the dictionary definition of that term.  
 
22. Canada, however, quoting the Appellate Body report in US – Washing Machines , contends that 
the use of the term "pattern" "means that the sales that are part of the pattern must demonstrate 
some  similarities. One cannot have a 'pattern' consisting of fundamentally different prices." Canada's 
argument fails to account for the context in which the term "pattern" is used.  
 
23. The relevant "pattern" within the meaning of the second sentence of Arti cle 2.4.2 is "a pattern 
of export prices which differ significantly  among different purchasers, regions or time periods". Such 
a "pattern" necessarily includes both lower and higher export prices that "differ significantly" from 
one another . A set of lower -priced export sales to a particular purchaser, for example, is not "a WT/DS534/R/Add.1  
 
- 44 - 
 
  pattern of export prices which differ significantly". It would be a pattern of export prices which are 
similar to one another, and which happen also to be lower than export prices to ot her purchasers.  
 
24. Canada further contends that its proposed interpretation is "consistent with the phrase 'differ 
significantly among different purchasers, regions or time periods,' because the sales in the pattern 
differ significantly from the sales t o other purchasers, or other regions, or other time periods." The 
U.S. first written submission addresses this precise contention, but Canada has ignored the U.S. 
argument. A set of lower -priced export sales to a particular purchaser  (or to a particular re gion or 
during a particular time period) is not "a pattern of export prices … among different  purchasers, 
regions or time periods". It would be a pattern of export prices to a particular purchaser  (or to a 
particular region or during a particular time peri od). Canada, like the Appellate Body in US – Washing 
Machines , in effect rewrites the "pattern clause" of the second sentence of Article 2.4.2 by changing 
the word "among" to "from". T he "pattern clause" describes "a pattern of export prices which differ 
significantly among  different purchasers, regions or time periods", not a pattern of export prices 
which differ significantly from different purchasers, regions or time periods. The pattern described 
by Canada and the Appellate Body simply is a different pa ttern than that which is described in the 
"pattern clause" of the second sentence of Article 2.4.2 of the AD Agreement.  
 
25. Finally, Canada argues that its proposed interpretation "is further reinforced when the Article 
is read in the light of the purpose  of the second sentence of Article 2.4.2 and the 
Anti-Dumping  Agreement as a whole." Canada's proposal that the Panel interpret the second 
sentence of Article  2.4.2 of the AD Agreement in light of the purpose of the second sentence itself 
is inconsistent w ith the customary rules of interpretation. The customary rules of interpretation do 
not contemplate reading the terms of a provision of a treaty in light of the purpose of the provision. 
Doing so would carry a high risk of engaging in circular reasoning. F or example, one might incorrectly 
reason that the purpose of a provision is X, therefore the terms of the provision must mean X. But 
one cannot know what the purpose of a provision is prior to interpreting the provision. Applying the 
customary rules of int erpretation, an adjudicator can discern the meaning (and the purpose) of a 
provision by interpreting the provision "in good faith in accordance with the ordinary meaning to be 
given to the terms of the treaty in their context and in the light of [the treat y's] object and purpose." 
Canada's proposed interpretive approach is precisely backwards.  
 
26. Canada asserts that "[t]he second sentence of Article 2.4.2 allows an investigating authority 
to focus on a more limited universe of export sales than under the normal comparison methodologies 
in order to address possible 'targeted dumping.'" Canada refers  to paragraph 135 of the Appellate 
Body report in US – Zeroing (Japan)  as support for the proposition that "'individual export 
transactions' refers to transactions that fall within the 'pattern'."  
 
27. There is reason for the Panel to exercise caution when  considering whether to draw guidance 
from paragraph 135 of the Appellate Body report in US – Zeroing (Japan) . That paragraph contains 
an error. The US – Zeroing (Japan) Appellate Body report misquotes the second sentence of 
Article  2.4.2 when it states th at "[t]he emphasis in the second sentence of Article 2.4.2 is on a 
'pattern', namely a 'pattern of export prices which differs  [sic] significantly among different 
purchasers, regions or time periods[]'". Where the Appellate Body report uses the term "diffe rs," 
the second sentence of Article 2.4.2 uses the term "differ." The presence of the term "differs" would 
suggest that the "pattern" is what "differs" from something that is not the "pattern" – or the export 
prices in the "pattern" are what differs from e xport prices that are not in the "pattern". However, 
the terms of the second sentence of Article 2.4.2 provide that the relevant pattern is one that 
includes "export prices which differ significantly among different purchasers, regions or time 
periods." Th e brevity of the Appellate Body's discussion that follows the misquotation makes it 
difficult to determine whether the Appellate Body's reasoning follows from the misquotation and is 
thus itself also erroneous for that reason.  
 
28. In US – Washing Machine s, the Appellate Body addressed the U.S. argument. The United 
States does not agree that it is clear from paragraph 135 of the Appellate Body report in US – 
Zeroing (Japan)  that the Appellate Body correctly understood the terms of the second sentence of 
Article 2.4.2 of the AD Agreement. Thus, the United States would caution the Panel against relying 
on the findings in that paragraph.  
 
29. Concerning the object and purpose of the AD Agreement as a whole, the interpretation of the 
"pattern clause" proposed by the United States is consistent with and supports the object and 
purpose of the AD Agreement. Although the AD Agreement "does not conta in a preamble or an WT/DS534/R/Add.1  
 
- 45 - 
 
  explicit indication of its object and purpose," guidance can be found in Article VI:1 of the GATT 1994, 
in which Members have recognized that injurious dumping "is to be condemned." Of course, the 
AD Agreement also provides detailed rul es governing the application of antidumping measures, 
including procedural safeguards for interested parties and substantive rules on the calculation of a 
margin of dumping. The AD Agreement thus appears to be aimed at providing a balanced set of 
rights an d obligations regarding the use of antidumping measures to remedy injurious dumping.  
 
30. While the AD Agreement may be said to be concerned with injurious dumping and low -priced 
sales, there exists the possibility, as the parties and third parties appear to agree, that low -priced 
sales that would be evidence of dumping may be masked by higher -priced sales that would conceal 
the evidence of dumping. The Appellate Body, too, has observed that the second sentence of 
Article  2.4.2 of the AD Agreement provides Members a means to "unmask targeted dumping" in 
"exceptional" situations. Interpreting the "pattern clause" as proposed by the United States – i.e., 
as requiring an investigating authority to undertake a rigorous, holistic examination of the data in 
order to find a regular and intelligible form or sequence of export prices that are unlike in an 
important manner or to a significant extent as among different purchasers , regions, or time periods 
– serves the aim of the second sentence of Article 2.4.2, as desc ribed by the Appellate Body, and is 
consistent with the overall balance of rights and obligations struck in the AD Agreement. The 
interpretation proposed by the United States also is that which follows from a proper application of 
the customary rules of in terpretation, as we have demonstrated.  
 
2. The USDOC's Aggregation of Price Differences Among Different 
Purchasers, Regions, or Time Periods Is Not Inconsistent with the 
"Pattern Clause" of the Second Sentence of Article 2.4.2 of the 
AD Agreement  
 
31. The U.S. first written submission demonstrates that the USDOC's aggregation of price 
differences among different purchasers, regions, or time periods is not inconsistent with the "pattern 
clause" of the second sentence of Article 2.4.2 of the AD Agreement.  
 
32. Canada  argues that the United States is asking the Panel "essentially to rewrite [the pattern 
clause] so that it allows amalgamation across purchasers, regions, and time periods." It is not the 
United States that asks the Panel to rewrite the "pattern cl ause". The United States has 
demonstrated that Canada's proposed interpretation would require rewriting the pattern clause, 
specifically by adding two more instances of the word "among" in places in which that term does not 
appear. The United States has de monstrated this by putting before the Panel an interpretive analysis 
of the text of the "pattern clause" undertaken in accordance with the customary rules of 
interpretation. Canada, for its part, continues to quote the findings in prior Appellate Body repo rts, 
but has steadfastly refused to set forth a fulsome interpretive analysis that engages seriously with 
the text of the second sentence of Article 2.4.2; nor has Canada responded to the arguments 
presented by the United States.  
 
33. Nothing in the text o f the "pattern clause" of the second sentence of Article 2.4.2 of the 
AD Agreement suggests that the significant export price differences among each category ( i.e., 
purchasers, regions, or time periods) cannot be considered together when assessing whether there 
exists "a pattern of export prices which differ significantly among different purchasers, regions or 
time periods." To the contrary, the text of the "pattern clause," on its face, contemplates a pattern 
of export prices that would transcend multiple purchasers, regions, or time periods. In particular, 
the "pattern clause" directs an investigating authority to consider whether there exists a pattern of 
export prices which differ significantly " among different  purchasers, regions or time periods".  
 
34. In response to a question from the Panel, Canada presents arguments based on the 
negotiating history of the AD Agreement. Canada's arguments are not well founded. The "pattern" 
described in the New Zealand III text, to which Canada points, is a different p attern than that 
described in the text to which Members ultimately agreed. Canada's proposed interpretation appears 
to be more similar to the pattern in the New Zealand III text, i.e., a pattern " to particular  customers", 
as opposed to the pattern describe d in the second sentence of Article 2.4.2 of the AD Agreement, 
i.e., "a pattern of export prices which differ significantly among different  customers, regions or time 
periods".  
 
35. Canada also refers to the text of the Carlisle II draft. Once, again, Cana da misunderstands 
the implication of the changes made from the draft text to the final text. The Carlisle II text was not WT/DS534/R/Add.1  
 
- 46 - 
 
  simply modified "to remove the  repetitious and unnecessary 'or's", as Canada suggests. Also gone 
from the final text are the modifiers  in "specific  customers", " different regions", and " certain  
periods". While the Carlisle II text might have supported the interpretation Canada proposes – i.e., 
that the relevant subset of transactions is limited to " specific  customers", " different regions", or 
"certain  periods" – that is not the text to which WTO Members ultimately agreed.  
 
36. The evolution of the text of what eventually became the second sentence of Article 2.4.2 of 
the AD Agreement reveals changes that negotiators made  to the negotiated text. The Panel should 
take the evolution of the text into account to confirm the meaning of the "pattern clause" of the 
second sentence of Article 2.4.2 of the AD Agreement, which, as the United States has shown, can 
be ascertained by a  proper application of the customary rules of interpretation.  
 
37. As the United States has demonstrated, the differential pricing analysis sought to identify "a 
pattern" for an exporter and product as a whole by considering all of that exporter's export p rices 
to discern whether significant differences in the export prices were exhibited collectively among 
different purchasers, or different regions, or different time periods. This approach is not inconsistent 
with the text of the "pattern clause" of the se cond sentence of Article 2.4.2 of the AD Agreement, 
which directs investigating authorities to consider whether there exists a pattern of export prices 
which differ significantly "among different purchasers, regions or time periods".  
 
C. Canada's Claims that the Use of Zeroing in Connection with the Application of 
the Alternative, Average -to-Transaction Comparison Methodology Is 
Inconsistent with Articles 2.4.2 and 2.4 of the AD Agreement Lack Merit  
 
38. The U.S. first written submission d emonstrates that an examination of the text and context of 
Article  2.4.2 of the AD Agreement leads to the conclusion that zeroing is permissible – indeed, it is 
necessary – when applying the alternative, average -to-transaction comparison methodology, if th at 
"exceptional" comparison methodology is to be given any meaning. This conclusion follows from a 
proper application of the customary rules of interpretation of public international law. This conclusion 
also accords with and is the logical extension of th e Appellate Body's findings in previous disputes 
relating to the use of zeroing in connection with the comparison methodologies provided in the first 
sentence of Article 2.4.2 of the AD Agreement. And this is the conclusion reached by one 
Appellate  Body me mber in US – Washing Machines . 
 
39. In its opening statement at the first panel meeting and in response to certain of the Panel's 
questions, Canada addresses the U.S. arguments related to zeroing. The United States takes the 
opportunity in this submission to reply to Canada's new arguments. Where appropriate, rather than 
repeating arguments made in the U.S. first written submission, we respectfully refer the Panel to 
the relevant portions of the U.S. first written submission that address Canada's arguments.  
 
1. The U.S. Interpretive Analysis of the Second Sentence of Article 2.4.2 of 
the AD Agreement Remains Unrebutted  
 
40. The U.S. first written submission presents an interpretive analysis of the second sentence of 
Article 2.4.2 of the AD Agreement that app lies the customary rules of interpretation of public 
international law. The U.S. first written submission also directly addresses findings related to the 
interpretation of the second sentence of Article 2.4.2 in prior Appellate Body reports and identifies 
a number of errors in those findings.  
 
41. Canada has made no attempt to rebut the U.S. arguments. Instead, Canada simply reiterates 
its assertion that the findings in prior Appellate Body reports are correct, and does not engage at all 
with the U.S. argu ments.  
 
42. For example, Canada asserted in its opening statement at the first substantive meeting that 
"the findings in [the US – Washing Machines Appellate Body] report are consistent with both the 
text of the Agreement and more than 17  years of Appellat e Body jurisprudence on zeroing." The 
U.S. first written submission demonstrates that the Appellate Body majority incorrectly interpreted 
the second sentence of Article 2.4.2 of the AD Agreement, and the Appellate Body majority's findings 
not only departed  from the findings of one Appellate Body member in US – Washing Machines , but 
the majority's findings cannot be reconciled with findings related to zeroing in prior Appellate Body 
reports. Canada has made no attempt to respond to these U.S. arguments.  
 WT/DS534/R/Add.1  
 
- 47 - 
 
  43. Furthermore, despite Canada's suggestion to the contrary, before US – Washing Machines , 
the Appellate Body had never previously made findings concerning the use of zeroing in connection 
with the alternative, average -to-transaction comparison methodology s et forth in the second 
sentence of Article 2.4.2. That is clear from reading prior Appellate Body reports discussing zeroing. 
Prior to US – Washing Machines , the Appellate Body had found zeroing impermissible in the context 
of the average -to-average and tr ansaction -to-transaction comparison methodologies, which are to 
be used "normally" under the first sentence of Article 2.4.2. The Appellate Body also had found 
zeroing impermissible in the context of the U.S. application of an average -to-transaction compar ison 
methodology in administrative reviews, in a situation where the conditions set forth in the second 
sentence of Article 2.4.2 were not established.  
 
44. The Appellate Body had never found, however, that zeroing is impermissible in the context of 
the application of the average -to-transaction comparison methodology when the conditions set forth 
in the second sentence of Article 2.4.2 have been established. The Appellate Body had not even 
confronted that situation in any prior dispute.   
 
45. Accordingly , the permissibility of zeroing under the alternative, average -to-transaction 
comparison methodology provided in the second sentence of Article 2.4.2 was an issue of first 
impression for the Appellate Body in US – Washing Machines . At this point , only two Appellate Body 
members have ever found zeroing to be prohibited in connection with the alternative, average -to-
transaction comparison methodology.  
 
46. Canada asserts that " zeroing is inconsistent with the terms 'dumping' and 'margin of 
dumping' ." However, that is not what the Appellate Body majority found in US – Washing Machines , 
nor has the Appellate Body ever found that the terms "dumping" and "margin of dumping" are 
themselves the source of the prohibition on zeroing. If that were the case, the Appellate Body could 
have made that clear long before US – Washing Machines , but the Appellate Body carefully avoided 
making any such finding.  
 
47. The Appellate Body majority in US – Washing Machines does refer to the terms "dumping" 
and "margins of dumping". The U.S. first written submission explains why the findings in the US – 
Washing Machines Appellate Body report cannot be reconciled with findings in prior Appellate Body 
reports concerning the concept of "product as a whole". The Appellate Body m ajority in US – Washing 
Machines prescribed a new alternative methodology for addressing targeted dumping that explicitly 
does not account for all transactions and cannot credibly be called a margin of dumping for the 
"product as a whole." In the words of the Appellate Body majority: " dumping and margins of 
dumping under the [average -to-transaction] comparison methodology applied pursuant to the 
second sentence of Article  2.4.2 are to be determined by conducting a comparison between normal 
value and 'patter n transactions', without having to take into account  'non-pattern transactions'." 
Thus, the Appellate Body majority's approach literally requires that a margin of dumping be 
determined not for the product as a whole, and in a manner that explicitly does not take into account 
all export transactions. The Appellate Body majority's finding cannot be reconciled with the reasoning 
in prior Appellate Body reports.  
 
48. Canada's assertion concerning the terms "dumping" and "margin of dumping" is thus 
unavailing an d fails to rebut the U.S. arguments.  
 
49. Canada further asserts that " it was entirely consistent with their past reasoning when in US – 
Washing Machines , the Appellate Body found that transaction specific intermediate results in the W -
T methodology are not margins of dumping." The United States has demonstrated that the findings 
in the US – Washing Machines Appellate Body report cannot be reconciled with findings in prior 
Appellate Body reports. Additionally, the United States does not argue here that "transaction specific 
intermediate results in the W -T methodology" are themselves "margins of dumping". Canada is 
making a straw man argument. The United Sta tes argues that the results of intermediate 
comparisons may be evidence  of dumping and that such evidence of dumping can be masked by 
higher -priced sales that are above normal value. The U.S. view, in this regard, is consistent with the 
logic underlying th e findings in the US – Washing Machines  Appellate Body report.  
 
50. In responses to questions from the Panel, Canada also refers to the terms "pattern" and 
"individual export transactions". Canada does not engage in any interpretive analysis of those terms , 
however. Canada merely asserts, for example, that "the text of the second sentence of Article 2.4.2 
allows an investigating authority to focus on 'individual export transactions' when it is conducting WT/DS534/R/Add.1  
 
- 48 - 
 
  the comparison of export prices to a weighted average  normal value." Canada makes no attempt to 
explain why this is so. Canada just reiterates its support for the findings in the panel and 
Appellate  Body reports in US – Washing Machines .  
 
51. Canada also asserts that "[b]y using the words 'pattern' and 'ind ividual export transactions' 
the text explicitly provides for a focus on those transactions." The use of those terms does not make 
that explicit  at all. Canada's assertion simply is not credible.  
 
52. Finally, Canada asserts that "[t]he text of the second sentence prohibits zeroing." Again, 
Canada suggests that the source of such a prohibition is the terms "pattern" and "individual export 
transactions". The United States notes that elsewhere Canada suggests that zeroing is prohibited 
throughout the AD Agree ment by the terms "dumping" and "margin of dumping". Canada has made 
no attempt to reconcile its conflicting assertions and explain precisely what in the AD Agreement 
establishes a prohibition – or multiple prohibitions – on the use of zeroing.  
 
53. The U. S. first written submission explains why the interpretations of the terms "pattern" and 
"individual export transactions" in the US – Washing Machines Appellate Body report do not follow 
from a proper application of the customary rules of interpretation of public international law, and 
the U.S. first written submission also points to specific internal logical inconsistencies in the 
Appellate  Body report. Canada has not responded to the U.S. arguments, which remain unrebutted.  
 
54. In sum, Canada still has n ot presented the Panel with an interpretive analysis of the second 
sentence of Article 2.4.2 of the AD Agreement. Canada persists in simply summarizing or referencing 
various findings in prior Appellate Body reports without engaging or responding to the U. S. 
arguments that have identified errors in those reports. In approaching this dispute as it has, Canada 
has failed to help the Panel discharge its function under the DSU, which requires the Panel to make 
its own "objective assessment of the matter before it". Such an objective assessment involves an 
objective assessment of "the applicability of and conformity with the relevant covered agreements," 
and necessarily includes an interpretive analysis of any of the provisions of the relevant covered 
agreements "in accordance with customary rules of interpretation of public international law". The 
United States has demonstrated that such an analysis leads to the conclusion that zeroing is 
permissible – indeed, it is necessary – under the alternative, average -to-transaction comparison 
methodology set forth in the second sentence of Article 2.4.2.  
 
2. The U.S. Arguments Concerning Mathematical Equivalence Remain 
Unrebutted  
 
55. The U.S. first written submission demonstrates that if zeroing  is prohibited under both the 
average -to-average and average -to-transaction comparison methodologies, then both 
methodologies, when applied to the same set of transactions, will always yield ide ntical results, with 
respect to the total amount of all comparison results, the total amount of dumping, and the weighted 
average dumping margin , which would render the second sentence of Article 2.4.2 of the 
AD Agreement inutile , contrary to the principle  of effectiveness . The U.S. first written submission 
establishes this using hypothetical examples as well as the actual data from the softwood lumber 
antidumping investigation.  
 
56. Canada briefly addressed the U.S. argument during the first substantive p anel meeting, 
suggesting that the United States "ignores" findings related to mathematical equivalence in prior 
Appellate Body reports. On the contrary, the U.S. first written submission discusses the 
Appellate  Body's prior consideration of mathematical eq uivalence at length, demonstrating that 
those findings neither support nor compel the Panel's rejection of the mathematical equivalence 
argument in this dispute.  Canada has ignored the U.S. arguments and made no attempt to rebut 
them.  
 
57. Canada further a sserts that the United States " also ignores the fact that the United States 
itself has acknowledged during the Appellate Body hearing for US – Washing Machines  that 
calculating a margin of dumping focused only on pattern transactions would lead to a mathem atically 
different result." The position of the United States during the Appellate Body hearing on this issue 
hardly seems relevant. The Appellate Body majority expressly made that very finding in the US – 
Washing Machines  Appellate Body report. The U.S. f irst written submission directly addresses why 
that finding is not responsive to the mathematical equivalence argument.  
 WT/DS534/R/Add.1  
 
- 49 - 
 
  58. To summarize, by finding that the second sentence of Article 2.4.2 requires the application of 
the average -to-transaction  comparis on methodology to a subset of transactions  while also 
prohibiting the use of zeroing , the Appellate Body majority found, in effect , that the application of 
the average -to-average  comparison methodology to that subset of transactions  (without zeroing) is 
what actually  is contemplated by the second sentence of Article 2.4.2. The Appellate Body majority 
effectively rewrote  the second sentence of Article 2.4.2, changing it from allowing the application of 
the average -to-transaction  comparison methodology under certain circumstances to allowing the 
application of the average -to-average  comparison methodology to a subset of transactions  under 
certain circumstances. The Appellate Body majority invented an entirely new methodology for 
calculating a margin of dumping  that is divorced from the text of the second sentence of Article  2.4.2, 
and which does not appear to have been contemplated by any WTO Member previously, neither 
during the Uruguay Round negotiations nor at any time after. Ultimately, the Appellate Body m ajority 
read the average -to-transaction  comparison methodology out of the second sentence of Article 2.4.2 
of the AD Agreement altogether, contrary to the principle of effectiveness. The Appellate Body 
majority did all of this in a rather awkward – but fut ile – attempt to avoid the problem of 
mathematical equivalence.  
 
59. Canada  has ignored the U.S. arguments and made no attempt to rebut them.  
 
60. Finally, the Panel asked Canada whether it agrees "that if the W -T and the W -W methodologies 
are applied to the same set of export transactions, the dumping margin obtained under these two 
methodologies would be mathematically equivalent". Canada responded, "No." However, Canada 
obfuscates by qualifying its response, explaining that, "[w]hen the two m ethodologies are applied 
correctly, they yield mathematically different results", and "the W -W and the W -T methodologies, 
as described in the Anti -Dumping Agreement, properly interpreted, cannot be applied to the same 
set of export transactions." Thus, Can ada has avoided answering the question that the Panel asked. 
Canada has not demonstrated that the United States is incorrect about the fact of mathematical 
equivalence.  
 
61. Even the Appellate Body majority in US – Washing Machines acknowledged the reality  of 
mathematical equivalence, referring to "the fact that the application of the [average -to-transaction]  
comparison methodology to [the] pattern of export prices leads to equivalent results as the 
application of the [average -to-average]  comparison methodo logy to the same pattern". The panels 
in US – Washing Machines and US – Anti-Dumping Methodologies (China)  also recognized the fact 
of mathematical equivalence. No WTO panel, nor the Appellate Body, has ever found that the 
United  States is incorrect that t he average -to-average comparison methodology (without zeroing) 
and the average -to-transaction comparison methodology (also without zeroing) yield the same 
mathematical result when applied to the same set of export transactions . 
 
62. The United States continues to respectfully request that the Panel make a factual finding that, 
if zeroing is prohibited under both the average -to-average and average -to-transaction comparison 
methodologies, then those two methodologies, when applied to the same set of tran sactions, will 
yield mathematically equivalent results in all cases, including in the challenged antidumping 
investigation. This fact remains unrebutted.  
 
3. The U.S. Arguments Concerning the  Negotiating History of the AD 
Agreement Remain Unrebutted  
 
63. The U.S. first written submission demonstrates that the n egotiating history of the 
AD Agreement confirms that zeroing is permissible when applying the asymmetrical, alternative, 
average -to-transaction comparison methodology set forth in the second sentence of Article 2.4.2 of 
the AD Agreement.  
 
64. In its opening statement at the first panel meeting, Canada argued that "negotiating history 
is a supplemental means of treaty interpretation that can only be relied upon where the meaning of 
the text is unclear."  Canada is incorrect. As explained in the U.S. first written submission, Article 32 
of the Vienna Convention has been recognized by the Appellate Body as reflecting a customary rule 
of interpretation of public international law. The United States has not s uggested that the meaning 
of the second sentence of Article 2.4.2 is unclear. Rather, the meaning of that provision – specifically 
that zeroing is permissible when applying the comparison methodology set forth in that provision – 
can be confirmed through r ecourse to documents from the negotiating history of the AD Agreement.  
 WT/DS534/R/Add.1  
 
- 50 - 
 
  65. Japan, in its responses to the Panel's questions, likewise argues that "[t]he negotiating history 
confirms  that the second sentence of Article 2.4.2 was indeed aimed at addressing the issue of 
targeted dumping." Japan appears to agree with the principle under the customary rules of 
interpretation that negotiating history documents can be used by a treaty inter preter to confirm the 
meaning that results from the application of Article 31 of the Vienna Convention.  
 
66. The U.S. first written submission discusses particular documents from the negotiating history 
of the second sentence of Article 2.4.2 of the AD Ag reement as well as the consideration of those 
documents in the US – Washing Machines Appellate Body report. Canada has made no effort to 
respond to the substance of the U.S. arguments.  
 
67. The U.S. argument – that the correct understanding of the negotiat ing history confirms the 
interpretation of the second sentence of Article 2.4.2 of the AD Agreement proposed by the 
United  States – remains unrebutted.  
 
4. Canada's Claim that the Use of Zeroing in Connection with the Application 
of the Alternative, Avera ge-to-Transaction Comparison Methodology is 
Inconsistent with Article 2.4 of the AD Agreement Lacks Merit  
 
68. The U.S. first written submission demonstrates that Canada's claim that the use of zeroing in 
connection with the application of the alternative,  average -to-transaction comparison methodology 
is inconsistent with Article 2.4 of the AD Agreement lacks merit.  
 
69. Canada has made no new arguments in support of its claim under Article 2.4 in its statements 
during the first substantive meeting, nor in  its responses to the Panel's questions. Canada simply 
reiterated its support for the findings in prior Appellate Body reports without addressing the U.S. 
arguments that those findings are erroneous and contain logical inconsistencies.  
 
70. For example, C anada asserts that, "in the context of both W -W and T -T, the Appellate Body 
found that zeroing altered certain transactions or treated them as less than their actual value. 
Relying on these prior interpretations, the Appellate Body concluded that the same reasoning applies 
to the W -T methodology", and "[t]he Appellate Body was also relying on its prior interpretations 
when it found that zeroing inflates the magnitude of dumping and makes positive determinations 
more likely when sales above normal value exce ed those below normal value."  
 
71. The United States has explained that the "exclusion of 'non -pattern transactions' from the 
establishment of dumping and margins of dumping" is, in reality and effect, essentially the same as 
zeroing. Following, for argume nt's sake, the logic of the Appellate Body majority in US – Washing 
Machines , the "exclusion of 'non -pattern transactions'" "does not take fully into account the prices 
of all comparable export transactions." There has never been any suggestion that non -pattern 
transactions are somehow not comparable to corresponding normal value transactions. Thus, 
applying the methodology and logic of the Appellate Body majority would mean that not all 
comparable export transactions would be taken into account. Indeed, th e Appellate Body majority 
itself described the methodology it prescribed in US – Washing Machines in the following terms: 
"dumping and margins of dumping under the [average -to-transaction] comparison methodology 
applied pursuant to the second sentence of A rticle 2.4.2 are to be determined by conducting a 
comparison between normal value and 'pattern transactions', without having to take into account  
'non-pattern transactions'."  
 
72. Additionally, the so -called non -pattern export transactions that are to be excluded under the 
methodology prescribed by the Appellate Body majority would be, following the majority's logic, 
higher -priced export transactions. Thus, the "exclusion of 'non -pattern transactions'" would mean 
that the margin of dumping determined under  the majority's methodology would be higher, and a 
positive determination of dumping would be more likely in circumstances where the "non -pattern" 
export prices are above normal value and the "pattern transactions" are below normal value.  
 
73. The Appellate Body majority treated nearly identical factual situations differently, deeming 
one (zeroing) to be unfair  while deeming another (the Appellate Body majority's own prescription 
for addressing targeted dumping) to be fair. There is no textual o r logical support for the 
Appellate  Body majority's finding.  
 
74. Canada has not responded to the U.S. arguments, and they remain unrebutted.  WT/DS534/R/Add.1  
 
- 51 - 
 
   
75. Another serious concern highlighted by Canada's statements is that, as Canada notes, the 
Appellate Body major ity was "relying on [the Appellate Body's] prior interpretations" when it made 
its findings in US – Washing Machines , rather than applying the customary rules of interpretation 
and then taking into account findings in prior adopted reports. The danger in u ndertaking an 
interpretive analysis by relying on prior interpretations – aside from that being contrary to the 
customary rules of interpretation – is that doing so leaves the adjudicator further and further 
removed from the treaty text being interpreted, making it more likely that an erroneous 
interpretation will result.  
 
76. Finally, Canada suggests that, "[i]n the present dispute, it could not be clearer that the 
Appellate Body was correct", asserting that "[a] company that on average sold for a higher p rice in 
the United States finds itself subject to an anti -dumping order because of zeroing." That could just 
as well be true under the approach prescribed by the Appellate Body majority in US – Washing 
Machines , depending on the data. This is no indication  that the approach taken by the USDOC was 
somehow not "fair" within the meaning of Article 2.4 of the AD Agreement, and it tells one nothing 
about the proper interpretation of the AD Agreement.  
 
77. As the United States has explained, the second sentence of Article 2.4.2 of the AD Agreement 
provides Members a means to "unmask targeted dumping" in "exceptional" situations. It is "fair" to 
take steps to "unmask targeted dumping" by faithfully applying the comparison methodology in the 
second sentence of Arti cle 2.4.2, when the conditions for its use are met. Doing so is entirely 
consistent with the obligation that an investigating authority be impartial, even -handed, and 
unbiased, as one Appellate Body member agreed in US – Washing Machines . 
 
78. For these re asons, the USDOC's use of zeroing in connection with the application of the 
alternative, average -to-transaction comparison methodology in the softwood lumber antidumping 
investigation is not inconsistent with Article 2.4 of the AD Agreement.  
 
D. Canada's Consequential Claims under Articles 1 and 2.1 of the AD Agreement 
and Articles VI:1 and VI:2 of the GATT 1994 Lack Merit  
 
79. The U.S. first written submission demonstrates that Canada offered no support for its claims 
under Articles 1 and 2.1 of the AD Ag reement and Articles VI:1 and VI:2 of the GATT 1994 beyond 
suggesting that breaches of those provisions follow as a consequence of breaches of Articles 2.4 
and 2.4.2 of the AD Agreement . As the United States has established, Canada's claims that the 
United  States has acted inconsistently with Articles 2.4 and 2.4.2 of the AD Agreement lack merit, 
and thus Canada's claims under under Articles 1 and 2.1 of the AD Agreement and Articles VI:1 
and VI:2 of the GATT 1994 are equally without merit. Canada made no f urther reference to its 
consequential claims, neither in its opening statement at the first substantive meeting nor in 
response to the Panel's questions.  
 
IV. CONCLUSION  
 
80. For the reasons set forth above, along with those set forth in other U.S. written filings and 
oral statements, the United States respectfully requests that the Panel reject Canada's claims.  
 
 
_______________  
 
 
 
 
 
 
 WT/DS534/R/Add.1  
 
- 52 - 
 
  ANNEX C  
ARGUMENTS OF THE THI RD PARTIES  
Contents  Page  
Annex  C-1 Integrated executive summary of the arguments of Brazil1 53 
Annex C -2 Integrated executive summary of the arguments of China2 55 
Annex  C-3 Integrated executive summary of the arguments of the European Union  57 
Annex  C-4 Integrated executive summary of the arguments of Japan  59 
 
 
                                                
1 Brazil submitted the text of the oral statement as its integrated executive summary.  
2 China submitted the text of the oral statement as its integrated executive summary.  WT/DS534/R/Add.1  
 
- 53 - 
 
  ANNEX C -1 
INTEGRATED EXECUTIVE  SUMMARY OF THE ARGU MENTS OF BRAZIL  
Mr. Chair, distinguished Members of the Panel,  
 
1. Brazil appreciates the opportunity to appear before you as a third party in the current 
proceedings. This oral statement will focus on two issues of systemic importance: first, Brazil would 
like to express its views on the relevance of prior Appellate Body reports in the settlement of 
subsequent disputes in volving similar matters; and second, Brazil would like to elaborate on the 
proper interpretation of Article 2.4.2 of the Anti -Dumping Agreement.  
 
2. In this dispute, Canada claims that the United States has acted inconsistently with the 
Anti-Dumping Agreement in two manners. First, the United States Department of Commerce 
(USDOC) has resorted to a weighted -average -to-transaction (W -T) comparison methodology without 
fulfilling the requirements provided for in the second sentence of Article 2.4.2 of the  
Anti-Dumping  Agreement. Second, in calculating the margin of dumping, the United States 
Department of Commerce (USDOC) has also inflated the results by applying "zeroing". According to 
Canada, both conducts by the United States have already been found to be inconsistent with WTO 
law in previous disputes, as confirmed by the Appellate Body Report in US – Washing Machines . 
 
3. In response, the United States argues that the panel must make its own assessment of the 
matter, regardless of what was decided in US – Washing Machines , because the text of Article 3.2 
of the DSU does not expressly attribute any interpretative value to previous reports of the 
Appellate  Body. In addition, the United States argues that, if the panel were to interpret Article 2.4.2 
of the  Anti-Dumping Agreement according to the customary rules of interpretation of public 
international law, it would find that both the choice by the United States Department of Commerce 
(USDOC) to apply the weighted -average -to-transaction (W -T) methodology and the introduction of 
"zeroing" in the calculation were consistent with the covered agreements.  
 
Relevance of Prior Appellate Body reports  
 
4. Brazil would first like to address the United States' argument that the Appellate Body findings 
in US – Washing M achines  should not influence the resolution of this dispute, because, according to 
the DSU, previous reports adopted by the DSB are not binding for future panels. Brought to its limits, 
this argument appears to be quite a broad refutation of the interpreta tive value of prior panel and 
Appellate Body reports in the WTO dispute settlement mechanism as a whole.  
 
5. In order to support its argument, the United States refers to a portion of Article 3.2 of the 
DSU according to which, in clarifying the meaning of the covered agreements, panels are required 
to apply the "customary rules of interpretation of public interna tional law."1 The underlying 
implication seems to be that, because precedents of the Appellate Body are not expressly listed as 
a criterion for legal interpretation in the DSU, panels are free to disregard their content when making 
their rulings on similar  matters. It is noteworthy that, immediately after making this argument, the 
United States seeks to validate its own interpretation of Article 3.2 by referring to an Appellate Body 
finding in US- Gasoline .2  
 
6. In US – Oil Country Tubular Goods Sunset Rev iew, the Appellate Body noted that "following 
the Appellate Body's conclusions in earlier disputes is not only appropriate, but is what would be 
expected from panels, especially where the issues are the same."3 It seems to Brazil, however, that 
the expecta tion that panels will not disregard previous case law is not exclusive to the 
Appellate  Body; it is, rather, shared by the Membership and supported by both law and practice.  
 
7. From a legal perspective, Article 3.2 of the DSU, refers to the entire dispute  settlement 
system, which includes the panel and appellate stages, as being a central element in providing 
security and predictability to the multilateral trading system. Therefore, one could conclude that, 
                                                
1 United States' First Written Submission, para. 23.  
2 Ibid.  
3 US – Oil Country Tubular Goods Sunset Reviews , Appellate Body Report, para. 188.  WT/DS534/R/Add.1  
 
- 54 - 
 
  according to Article 3.2, both panels and the App ellate Body play a shared role in providing security 
and predictability to the multilateral trading system.  
 
8. Brazil considers that a system in which different panels are free to issue conflicting versions 
of what they consider to be the correct interpre tation of a single provision, especially when the issues 
are the same, would offer less security and predictability than a system in which adjudicators strive 
to interpret WTO law in a consistent manner.  
 
9. From a practical perspective, it is an irrefuta ble fact that Members resort to prior reports of 
the Appellate Body in their submissions quite frequently, and in doing so reveal a very clear 
expectation that those precedents will influence panels' decisions. A glance at the "tables of cases" 
that appear  on the first pages of all Member's submissions confirms this to be the case. This practice 
does not indicate that Members consider adopted Appellate Body reports to be authoritative 
interpretations or amendments to the covered agreements. They simply beli eve that the application 
of the customary rules of interpretation of public international law to the agreed texts should yield 
consistent, rather than erratic, results.  
 
10. Moreover, it may be useful to recall that, when interpreting the covered agreement s, the 
Appellate Body is held by the exact same standards as panels. This means that the Appellate Body 
is also required to apply "customary rules of interpretation of public international law" and, as a 
result, its reports offer guidance on precisely the same analysis that panels are expected to conduct.  
 
Interpretation of Article 2.4.2 of the Anti -Dumping Agreement  
 
11. Brazil will now comment briefly on the proper interpretation of Article 2.4.2 of the 
Anti-Dumping Agreement. Brazil notes that the partie s seem to be in agreement with the fact that 
the two symmetrical methods - weighted -average to weighted -average and transaction to 
transaction (W -W and T -T) - provided for in the first sentence of Article 2.4.2 are normally to be 
used first in order to cal culate the margin of dumping. Thus, the third method - weighted -average -
to-transaction (W -T) - is clearly an exception, to be used exclusively as a means to counteract the 
practice of "targeted dumping" and only in the presence of certain requirements.  
 
12. In this context, the panel should first analyze whether the requirements for the recourse to 
the weighted -average -to-transaction (W -T) methodology were present in the investigation at hand. 
To this end, the panel should verify whether United States Depar tment of Commerce (USDOC) was 
able to detect a "pattern of export prices which differ significantly among different purchasers, 
regions or time periods" and also whether the investigating authority was able to explain why the 
symmetrical comparison methodo logies could not appropriately take into account such identified 
"pattern".  
 
13. If the panel is satisfied that the United States Department of Commerce (USDOC) resorted 
legitimately to the weighted -average -to-transaction (W -T) comparison methodology, it m ust then 
establish whether the margins of dumping were properly calculated. In this second stage of the 
analysis, it is important for the panel to determine whether the exceptional methodology was applied 
exclusively to the sales that presented the "patter n" of "targeted dumping" and also whether the 
actual calculation observed mathematical standards consistent with the Anti -Dumping Agreement.  
 
14. Mr. Chair, distinguished members of the Panel, this concludes Brazil's statement. Thank you 
for your attention . 
 
 
 WT/DS534/R/Add.1  
 
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  ANNEX C -2 
INTEGRATED EXECUTIVE  SUMMARY OF THE ARGU MENTS OF CHINA  
1. Mr. Chairman, Members of the Panel. China welcomes this opportunity to present its views in 
this dispute.  
 
2. Today, w e will focus on two critical issues in relation to Canada's claims on the USDOC's use 
of differential pricing methodology ("DPM"): (i) the identification of a pattern; and (ii) the 
permissibility of zeroing, under the second sentence of Article 2.4.2 of the Anti -dumping Agreement 
("ADA").  
 
3. As the Panel is aware, this case is not the first one regarding how WTO disciplines shall apply 
to the use of the "weighted average -to-transaction" ("W -T") comparison methodology in 
anti-dumping investigations. In this regard , China believes that the previous panel and 
Appellate  Body reports adopted by the DSB have provided clear guidance for addressing issues 
raised in this dispute.   
 
4. First, with respect to the proper identification of a pattern in the second sentence of A DA 
Article 2.4.2 , China notes that this is a key condition to be satisfied before resorting to the 
asymmetrical W -T comparison methodology to "determine the existence of margins of dumping" . 
We believe that the exceptional nature of the W -T methodology, as  consistently held by the 
Appellate  Body1 and agreed by the parties to this dispute2, warrants a strict interpretation of the 
pattern requirement.  
 
5. Pursuant to ADA Article 2.4.2, when employing the W -T methodology, an investigating 
authority shall iden tify a "pattern" of export prices that "differ significantly among  different 
purchasers, regions or time periods" (emphasis added). The Appellate Body fo und that while the 
conjunction "or" may be exclusive or inclusive, the word "among" require s that each category be 
considered on its own, in the sense that a pattern of prices among different purchasers must be 
found within purchasers, as between particular purchasers and other purchasers (with the same 
applying to regions and time periods, respectivel y).3 The combined use of the words "or" and 
"among" in that phrase means that different categories cannot be considered cumulatively to find 
one single pattern.4 
 
6. However, according to Canada5, in applying the DPM , the USDOC has done the opposite by 
aggregating the results of comparisons of export prices to purchasers, regions and time periods to 
identify the pattern. In our view, such a practice cannot be compatible with the plain language of 
the second sentence of ADA Article 2.4.2 .  
 
7. Second, zeroin g is not permissible even when the strict criteria of W -T methodology have been 
met. WTO panels and the Appellate Body have consistently held that the use of zeroing is 
inconsistent with ADA under any of the three comparison methodologies, i.e. "weighted a verage -to-
weighted average" ("W -W"), "transaction -to-transaction" ("T -T") or W -T methodology, as 
contemplated in ADA Article 2.4.2.6  
 
8. In the recent US – Anti-Dumping Methodologies (China)  and US – Washing Machines (Korea)  
cases, the panel and Appellate  Body reaffirmed the inconsistency of the use of zeroing in the W -T 
                                                
1 Appellate Body Report, US – Washing Machines, para.  5.18; see a lso Appellate Body Report, US – 
Softwood Lumber V (Article 21.5 Canada), para. 55; Appellate Body Report, US – Stainless Steel (Mexico), 
para. 48.  
2 See e.g. Canada’s first written submission to the Panel, para. 37 ; United States ’ first written 
submission to the Panel, para.  115.  
3 Appellate Body Report, US – Washing Machines , para.  5.31. 
4 Ibid. para.  5.33. 
5 Canada’s first written submission to the Panel, paras. 40 -42. 
6 See, e.g., Appellate Body Reports, US – Softwood Lumber V (Article  21.5 – Canada) , para. 123; US – 
Continued Zeroing , paras.  314-316; US –Stainless Steel (Mexico) , paras.  133-134; US – Zeroing (EC) , 
paras.  263(b); US – Zeroing (Japan) , paras.  121-129 and 190; US – Washing Machines , paras.  6.9-6.11. WT/DS534/R/Add.1  
 
- 56 - 
 
  methodology scenario.7 In China's view, any  contrary position would be inconsistent with the 
foundational "exporter -specific" and "product -related" conception of dumping.8 
 
9. The mathemat ical equivalence argument of the United States has also been carefully 
considered and consistently rejected by the Appellate Body in various disputes.9 Mathematical 
equivalence only holds under a specific set of assumptions. If the assumptions are varied, W -T and 
W-W will generally yield different results.10 
 
10. The US mathematical equivalence argument also fails to grapple with the relevance of the 
T-T methodology. T -T methodology will generally yield results that are different from both W -W and 
W-T methodology, even though zeroing is not permissible under the T -T methodology.11 
 
11. In conclusion, DPM has been ruled "as such" inconsistent with the WTO co vered agreements.12 
China sees no "cogent reason" for the Panel to depart from the previous panel and Appellate Body 
reports adopted by the DSB.  
 
12. Mr. Chairman, Members of the Panel, thank you for your attention. China also wishes to thank 
the Secretaria t team for their hard work. We look forward to your questions.  
 
 
 
                                                
7 Panel Report, US – Anti-Dumping Methodologies (China) , paras.  7.201 -7.209; Appellate Body Report, 
US – Washing Machines , paras.  6.9-6.11.   
8 See, e.g., Appellate Body Report, US – Stainless Steel (Mexico) , para. 94.  
9 See e.g.,  Appellate Body Reports,  US – Softwood Lumber V  (Article 21.5 – Canada),  paras. 97 -100; 
US – Zeroing (Japan),  paras. 135 -136; US – Stainless Steel (Mexico),  paras. 126 -127; and US – Continued 
Zeroing, para. 298.  
10 Appellate Body Report, US – Washing Machines , paras. 5.125 -5.128.  
11 Appellate Body Report, US – Softwood Lumber V (Article 21.5 Canada) , para. 88.  
12 Appellate Body Report, US – Washing Machines , paras.  6.3.b, 6.4.c, 6.9.a, 6.10.a, and 6.11.a.  WT/DS534/R/Add.1  
 
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  ANNEX C -3 
INTEGRATED EXECUTIVE  SUMMARY OF THE ARGU MENTS OF THE EUROPEAN UNION  
1. This executive summary integrates comments made by the European Union at the Third Party 
Hearing on 13 September and its replies to the Panel's questions to Third Parties of 
27 September  2018. The European Union considers that the present case raises impor tant systemic 
questions, in particular on the role of prior Appellate Body Reports and on the interpretation and 
application of the Agreement on the Implementation of Article VI of the General Agreement on Tariffs 
and Trade 1994 ("Anti -Dumping Agreement"). The European Union's submissions focussed on those 
systemic questions, without taking a definitive position on the facts of the case.  
 
I. The role of prior Appellate Body Reports  
 
2. Concerning the United States' argument contesting the releva nce of the Appellate Body's 
findings in US – Washing Machines , it is standing case -law that adopted Appellate Body Reports 
create legitimate expectations amongst Members as to the interpretations of WTO law contained 
therein. Thus, the legal interpretation  embodied in adopted panel and Appellate Body reports 
becomes part and parcel of the acquis of the WTO dispute settlement system. Ensuring "security 
and predictability" in the dispute settlement system, as contemplated in Article 3.2 of the DSU, 
implies th at, absent cogent reasons, an adjudicatory body will resolve the same legal question in 
the same way in a subsequent case.1 
 
3. The creation of the Appellate Body by WTO Members to review legal interpretations developed 
by panels shows exactly that the ent ire WTO Membership recognized the importance of consistency 
and stability in the interpretation of their rights and obligations under the covered agreements. 
Consistency and stability ensure legal certainty. In turn, legal certainty provides an indispensab le 
condition for international trade to flow smoothly, and must therefore not be jeopardized.  
 
4. An important nuance must be made between legal interpretations and the application of the 
law to the facts. While the application of a provision may be regard ed as confined to the context in 
which it takes place, the relevance of clarification contained in adopted Appellate Body reports is not 
limited to the application of a particular provision in a specific case. Interpretations of the law by the 
Appellate Bo dy should thus not change depending on the case at hand. T he possibility of 
authoritative interpretations under Article IX:2 of the WTO Agreement does not diminish the value 
of interpretations by the Appellate Body.  
 
II. Article 2.4.2 of the Anti -Dumping A greement  
 
5. The Appellate Body has clarified that the asymmetrical W -T comparison methodology in the 
second sentence of Article 2.4.2 of the Anti -Dumping Agreement may be used if the following two 
conditions are met: first, "the authorities find a pattern  of export prices which differ significantly 
among different purchasers, regions or time periods"; and, second, "an explanation is provided as 
to why such differences cannot be taken into account appropriately by the use of a weighted 
average -to-weighted a verage or transaction -to-transaction comparison.2  
 
6. The Appellate Body explained that the "pattern" must be understood as a regular and 
intelligible form or sequence of export prices which differ significantly.3 Hence, a pattern  must be 
identified as co nsisting of prices that differ significantly  among different purchasers, regions or time 
periods. There must be regularity to the sequence of "export prices which differ significantly" and 
this sequence must be capable of being understood. The Appellate Bo dy stressed that the word 
"intelligible" excludes the possibility of a pattern merely reflecting random price variation.  
 
7. In reply to a question from the Panel, the European Union considers that the differences in 
prices  have to be significant, either i n quantitative or qualitative sense. Hence, the starting point is 
                                                
1 Appellate Body Report, US – Stainless Steel (Mexico), paras. 158 -161. 
2 Appel late Body Report, US – Washing Machines , para. 5.16, referring to Appellate Body Report, US – 
Softwood Lumber V (Article 21.5 – Canada) , para. 86; and US – Zeroing (Japan) , para. 131.   
3 Appellate Body Report, US – Washing Machines, para. 5.27.  WT/DS534/R/Add.1  
 
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  the comparison of the prices of export transactions, not a comparison in export volumes. The 
European Union does not exclude that export volumes could be relevant to assess the significance 
of a price difference, but that would depend on specific facts of the case.  
 
8. The Appellate Body has explained that in order to ascertain whether there is a "pattern" an 
investigating authority may, starting from the set of all export transactions attrib utable to an 
investigated producer/exporter, select for further consideration a sub-set, which must consist of all 
that producer's/exporter's export transactions to a particular purchaser  (as opposed to other 
purchasers) or to a particular region  (as oppos ed to the remainder of the territory of the importing 
Member) or during a particular time period  (as opposed to the remainder of the investigation 
period).4 The so -selected prices of transactions within the sub -set of transactions (grouped according 
to pur chaser, region, or time period) are then compared with the prices of all transactions.  
 
9. A pattern must pertain to all the export transactions to one particular category  (a purchaser, 
region or time period). Related purchasers and adjacent regions or tim e periods are considered as 
a single category. For the purposes of finding a pattern, it is not possible to combine  export 
transactions from different purchasers, different regions, or different time periods. Nor is it possible, 
for the purposes of finding  a pattern, to combine  export transactions from one of the three types of 
possible category with export transactions from another  one of the three types of category.5 
 
10. The Appellate Body has also clarified that for there to be a pattern, the export pri ces in the 
sub-set (considered as a whole) must be lower  than the export prices outside the sub -set (considered 
as a whole); a sub -set of higher  export prices is not a relevant pattern for the purposes of the second 
sentence of Article 2.4.2 of the Anti -Dumping Agreement.6 
 
11. The W -T comparison methodology may only be applied to the export transactions constituting 
the relevant pattern, and not to the export transactions that fall outside the sub -set constituting the 
pattern.7 Therefore, if the investigating authority has decided to rely on the W -T comparison 
methodology under the conditions of Article 2.4.2 of the AD Agreement to address targeted dumping, 
it cannot include the transactions outside the pattern in the numerator for calculating the dumping 
margin.  
 
12. Finally, the Appellate Body has also rightly found that in applying the W -T comparison 
methodology to the transactions in the sub -set constituting the pattern zeroing is not permitted. The 
fact that in US – Washing Machines , one member has provided a separate opinion in this regard 
does not diminish the value of the adopted Appellate Body Report or of the legal interpretation 
contained therein.  
 
13. Thus, all export transactions in the sub -set must be fully taken in to account irrespective of 
whether they are above or below normal value. When combining intermediate results of comparisons 
between a weighted average normal value and individual export transactions, export transactions 
above normal value must be treated a s having been made at the price at which they were actually 
made, and the results of such intermediate comparisons must not be set to zero before determining 
the dumped amount for the targeted sub -set as a whole.8 
 
14. As set out above, if the conditions o f Article 2.4.2 are met, the investigating authority is 
permitted to establish a dumping amount for the transactions that are part of the pattern and thus 
to disregard the transactions that are not part of the pattern. There is nothing in the text of 
Article 2.4.2 that would permit an investigating authority to do more, and disregard further certain 
transactions that are part of the sub -set (namely those for which the export price is above the 
average normal value). Thus, apart from the specificities provid ed for in Article 2.4.2, the normal 
rules for calculating dumping margins apply, and with them, the general prohibition of zeroing as it 
has now been established in decades of prior case -law, for all types of dumping and all types of 
determinations.  
 
 
                                                
4 Appellate  Body Report, US – Washing Machines , para. 5.29.  
5 Appellate Body Report, US – Washing Machines , paras. 5.30 -5.34. 
6 Appellate Body Report, US – Washing Machines , para. 5.29.  
7 Appellate Body Report, US – Washing Machines , paras. 5.50 -5.55. 
8 Appellate Body Report, US – Washing Machines , paras. 5.151 -5.160.  WT/DS534/R/Add.1  
 
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  ANNEX C -4 
INTEGRATED EXECUTIVE  SUMMARY OF THE ARGU MENTS OF JAPAN  
I. The USDOC's Methodology Does Not Meet the "Pattern" Requirement  
 
1. The second sentence of Article 2.4.2 of the Agreement on Implementation of Article VI of the 
General Agreement on Tariffs and Trade 1994  (the " Anti-Dumping Agreement " or the " Agreement ") 
mandates that, before investigating authorities may apply the "exceptional" W -T comparison 
methodology, they must identify "a pattern of export prices which differ signif icantly among different 
purchasers, regions or time periods", rather than to find merely "export prices which differ 
significantly".1 The "differential pricing methodology" ("DPM") used by the United States Department 
of Commerce ("USDOC") is inconsistent with this "pattern" requirement in the following three 
respects.  
 
A. A "Pattern" Must Help Unmask Targeted Dumping  
 
2. First, the DPM examines both lower and higher export prices to establish the presence of 
export prices which differ significantly.2 This approach is inconsistent with the "pattern" requirement.  
 
3. As the Appellate Body has explained, and the United States appears to agree3, a "pattern" 
means "[a] regular and intelligible form or sequence discernible in certain actions or situations".4 A 
"regular and intelligible form or sequence" must be capable of being understood, which means that 
random price variations do not constitute a "pattern".5 However, the USDOC's evaluation of both 
lower and higher export prices by a methodo logy that relies exclusively on numerical benchmarks6 
will only reveal  such random variations – that is, the mere presence , or absence, of export prices  
which differ significantly – rather than a pattern of export prices which differ significantly.7 
 
4. Also, because the function of the second sentence of Article 2.4.2 is to identify and address 
"targeted dumping", the relevant  "pattern" can only comprise prices that are significantly lower  than 
other export prices among different purchasers, regions or tim e periods.8 
 
B. A "Pattern" Must Consist of Prices that "Differ Significantly", Both 
Quantitatively and Qualitatively  
 
5. Second, by employing a purely quantitative threshold that is applied to all cases for the 
determination of targeted  dumping, the DPM fails to satisfy the precondition set forth in the second 
sentence of Article 2.4.2 that the relevant pattern must be one o f export prices that "differ 
significantly." The Appellate Body has found that the term "significantly" "has both quantitative and 
qualitative dimensions."9 Even limiting the definition of the term "significantly" to mean "to a 
significant extent"10, as the  United States does, the assessment of whether significant price 
differences are present must include consideration of certain qualitative factors, such as the 
"circumstances regarding the nature of the product under consideration, the industry at issue, t he 
market structure, or the intensity of competition in the markets at issue, depending on the case at 
hand."11  
 
                                                
1 United States'  first written submission, para. 68.  
2 United States'  first written submission, paras. 68, 74.  
3 United States'  first written submission, paras. 49, 52; Appellate Body Repor t, US – Washing Machines , 
fn. 108 . 
4 Appellate Body Report, US – Washing Machines , para. 5.25.  
5 Appellate Body Report, US – Washing Machines , para. 5.25.  
6 United States'  first written submission, para. 77.  
7 United States'  first written submission, paras . 68, 74.  
8 Appellate Body Report, US – Washing Machines , para. 5.29.  
9 Appellate Body Report, US – Washing Machines , paras. 5.6 3, 5.66. 
10 United States' first written submission, para. 49. 
11 Appellate Body Report, US – Washing Machines , para. 5.6 6. See also Appellate Body Report, US – 
Washing Machines , para. 5.63 .  WT/DS534/R/Add.1  
 
- 60 - 
 
  C. A "Pattern" Cannot Transcend Categories  
 
6. Third, in applying the  DPM, the USDOC aggregates all the price differences among different 
purch asers, region s, or time periods. This aggregation is inconsistent with  the concept of a "pattern" 
as used in the second sentence of Article 2.4.2.  The terms "among" and "or" in the second sentence 
of Article 2.4.2, along with the definition of the term "pa ttern", call for the identification of a pattern 
of export prices which differ significantly among  different purchasers, or among  different regions, or 
among  different time periods.12 Japan agrees with  the Appellate Body 's reasoning that  "[a] single 
'patter n' comprising prices that are found to be significantly different from other prices across  
different categories would effectively be composed of prices that do not form a regular and intelligible 
sequence ."13 
 
7. The United States contends that the DPM does not aggregate random and unrelated price 
variations, because a respondent's pricing behavior cannot be described as "random".14 But this logic 
would lead to the incorrect conclusion that any jumble of export sales by a respondent comprises a 
"pattern". The United States fails to explain how a respondent's pricing behavior towards a purchaser 
A is related to its pricing behavior to wards region B, or time period C as a general matter. Without 
demonstrating a link between these pricing behaviors, the existence of a pattern or regular sequence 
of export prices cannot be found. This, in turn, means that the precondition for the aggregat ion of 
all the alleged price differences has not been met.  
 
II. The USDOC's methodology does not meet the "explanation" requirement  
 
8. The USDOC also fails to meet another requirement under th e second sentence  of Article 2.4.2  
– namely, to provide an "exp lanation" as to "why such differences cannot be taken into account 
appropriately by the use of" the W -W or T -T comparison methodologies. "[S]uch differences " refer 
back to the phrase, "a pattern of export prices which differ significantly".15 In the DPM, th e USDOC 
just confirms that "there is a meaningful difference between the weighted -average dumping margin 
calculated using the [W -W] method and that calculated using […] the [W -]T method."16 This form of 
"explanation" merely identifies quantitative differenc es in the outcomes obtained through the 
application of the different comparison methodologies, and fails to explain why the pattern of prices 
that differ significantly cannot be taken into account appropriately by the W -W or T -T comparison 
methodology.  
 
9. Moreover, due to the USDOC's use of zeroing with respect to the W -T comparison methodology 
but not to the W -W (or T -T) comparison methodology, the quantitative impact of the W -T comparison 
is inflated, and the existence of a "meaningful difference" betwe en the margins calculated using the 
different comparison methodologies is all but guaranteed. In other words, that difference is 
exaggerated through the USDOC's W -T methodology that is WTO -inconsistent. An explanation based 
on such a flawed foundation cann ot suffice.  
 
III. The USDOC improperly applies the W -T methodology to the entire universe of export 
sales  
 
10. In certain instances the USDOC applies the W -T methodology to all export transactions, 
including both pattern and non -pattern sales. However, the application of the W -T comparison 
methodology to non -pattern sales is inconsistent with the second sentence of Article 2.4.2.  
 
11. Specifically, the universe of export transa ctions that comprise a "pattern" under the second 
sentence of Article 2.4.2 "would necessarily be more limited" than the "universe" of all export 
transactions under the first sentence.17 Further, in light of the function of the second sentence to 
address "t argeted dumping", Japan agrees with the Appellate Body that " the W -T comparison 
methodology should only be applied to those transactions that justify its use, namely, those 
transactions forming the relevant 'pattern'."18 
 
                                                
12 Appellate Body Report, US – Washing Machines , para. 5.33.  
13 Appellate Body Report, US – Washing Machines , para. 5.32 (emphasis original).  
14 United States'  first written submission, para. 78.  
15 Emphasis added.  
16 See Lumber Final I&D Memo, p. 56 (Exhibit CAN -01). 
17 Appellate Body Report, US – Zeroing (Japan) , para. 135.  
18 Appellate Body Report, US – Washing Machines , para. 5.55.  WT/DS534/R/Add.1  
 
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  IV. Zeroing Is Impermissible Under The Second Sentence of Article 2.4.2 of the 
Agreement  
 
12. The United States  further violates the second sentence of Article 2.4.2 of the Agreemen t by 
applying the "zeroing" procedures when calculating a margin of dumping pursuant to the W -T 
comparison methodology.  
 
13. It is well established through consistent WTO jurisprudence that zeroing is impermissible in 
the calculation of dumping margins in a ny context or proceeding in which such margins are 
calculated. The concepts of "dumping" and "margins of dumping" are the same throughout the 
Agreement , which establishes the basic principle that margins of dumping are established for the 
product under inv estigation "as a whole".19 On this basis, the Appellate Body concluded that 
"[z]eroing the negative intermediate comparison results within the pattern" is not "consistent with 
the establishment of dumping and margins of dumping as pertaining to the 'univers e of export 
transactions' identified under the second sentence of Article 2.4.2."20  
 
14. The United States attempts to justify the USDOC's  use of zeroing by raising the "mathematical 
equivalence" argument.21 However, this argument has already been thoroughly considered and 
repeatedly rejected by the WTO22, and the United States provides no reason for the Panel to 
reconsider it.  
 
15. The Unite d States nonetheless insists that there is no textual basis to exclude "non -pattern 
transactions" from the establishment of dumping and margins of dumping in W -T comparisons, which 
is "essentially the same as zeroing."23 However, the differences between the  exceptional W -T 
comparison methodology under the second sentence of Article 2.4.2 and the two methodologies 
under the first sentence result from the presence of targeted dumping, which is to be "unmasked" 
according to the purpose of the second sentence of  Article 2.4.2.24 "Such differences" in the pricing 
patterns will therefore justify the use of the exceptional W -T methodology when they cannot be 
appropriately taken into account by the methodologies under the first sentence (and as properly 
explained by t he investigating authority).  
 
16. On the other hand, zeroing the negative intermediate comparison results – whether within or 
outside the pattern – is not necessary to "unmask" "targeted dumping" among the "pattern 
transactions".25 To the contrary, zeroing  merely leads to the defect of unreasonably inflating the 
dumping margin, or creating a margin where one otherwise would not exist, which is inconsistent 
with the obligations established by Articles 2.4 and 2.4.2 of the Agreement . 
 
17. The United States al so tries to justify zeroing by referring to the comments on "asymmetrical" 
nature of the comparison methodology authorized by the second sentence of Article 2.4.2 in some 
decisions by the Appellate Body26 and the negotiating history of the Agreement.27 Howev er, these 
comments merely pointed out that the W -T comparison pursuant to the second sentence consisted 
of the weighted average price of all domestic sales, on the one hand, and individual export 
transaction prices, on the other hand, which were not "symme tric". 
 
__________  
 
                                                
19 Appellate Body Report, US – Washing Machines , paras. 5.90 -5.91, 5.145.  
20 Appellate Body Report, US – Washing Machines , para. 5.160.  
21 United States ' first written submission, paras.  122-160. 
22 Appellate Body Report, US – Washing Machines , para. 5.125.  
23 United States' first written submission, para. 196.  
24 Appellate Body Report, US – Zeroing (Japan) , para. 135. See also Appellate Body Report, US – 
Stainless Steel (Mexico) , para. 127.  
25 Appellate Body Report, US – Washing Machines , paras. 5.156, 5.160. 
26 United States ' first written submission, para. 179.  
27 United States' first written submission, paras. 183 -186.