WT/DS464/R/Add.1  
 
11 March 2016  
(16-1425)  Page: 1/109  
  Original: English  
 
  UNITED STATES – ANTI-DUMPING AND COUNTERVAILING MEASURES 
ON LARGE RESIDENTIAL WASHERS FROM KOREA 
REPORT OF THE PANEL 
Addendum 
This addendum  contains Annexes A to D to the Report of the Panel to be found in document 
WT/DS464/R. 
 
 
_______________ 
 
 
 WT/DS464/R/Add.1 
 
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  LIST OF ANNEXES 
ANNEX A 
WORKING PROCEDURES OF THE PANEL 
Contents Page 
Annex A-1 Working Procedures of the Panel (as amended) A-2 
Annex A-2 Additional Working Procedures on Business Confidential Information A-7 
ANNEX B 
ARGUMENTS OF KOREA 
Contents Page 
Annex B-1 Executive summary of the first written submission of Korea B-2  
Annex B-2 Executive summary of the second written submission of Korea B-11 
Annex B-3 Executive summary of the opening oral statement of Korea at the 
First Substantive Meeting B-21 
Annex B-4 Executive summary of the closing oral statement of Korea at the 
First Substantive Meeting B-26 
Annex B-5 Executive summary of the opening oral statement of Korea at the 
Second Substantive Meeting B-29 
Annex B-6 Closing oral statement of Korea at  the Second Substantive Meeting B-34 
ANNEX C 
ARGUMENTS OF THE UNITED STATES 
Contents Page 
Annex C-1 Executive summary of the first written submission of the United States C-2  
Annex C-2 Executive summary of the second written submission of the United States C-10 
Annex C-3 Executive summary of the opening oral statement of the United States at the 
First Substantive Meeting C-18 
Annex C-4 Closing oral statement of the United States at the First Substantive Meeting C-23 
Annex C-5 Executive summary of the opening oral statement of the United States at the 
Second Substantive Meeting C-25 
Annex C-6 Closing oral statement of the United States at the Second Substantive Meeting C-29 
ANNEX D 
ARGUMENTS OF THE THIRD PARTIES 
Contents Page 
Annex D-1 Executive summary of  the arguments of Brazil D-2 
Annex D-2 Executive summary of the arguments of Canada D-6 
Annex D-3 Executive summary of the arguments of China D-10  
Annex D-4 Executive summary of the arguments of the European Union D-14 
Annex D-5 Executive summary of the arguments of Japan D-19  
Annex D-6 Executive summary of the arguments of Norway D-23 
Annex D-7 Executive summary of the arguments of Thailand D-26  
Annex D-8 Executive summary of the arguments of Turkey D-27 
Annex D-9 Executive summary of the arguments of Viet Nam D-30  
 
 WT/DS464/R/Add.1 
 
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  ANNEX A 
WORKING PROCEDURES OF THE PANEL 
Contents Page 
Annex A-1 Working Procedures of the Panel (as amended) A-2 
Annex A-2 Additional Working Procedures on Business Confidential Information A-7 
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  ANNEX A-1 
UNITED STATES – ANTI-DUMPING AND COUNTERVAILING MEASURES ON  
LARGE RESIDENTIAL WASHERS FROM KOREA 
(DS464)  
WORKING PROCEDURES OF THE PANEL (AS AMENDED) 
1. In its proceedings, 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 shall apply. 
General 
 2. The deliberations of the Panel and the document s submitted to it shall be kept confidential. 
Nothing in the DSU or in these Working Procedures shall preclude a party to the dispute (hereafter 
"party") from disclosing statements of its own positions to the public. Members shall treat as confidential information submitted to the Panel by another Member which the submitting Member 
has designated as confidential. Where a party submits a confidential version of its written 
submissions to the Panel, it shall also, upon request of a Member, provide a non-confidential summary of the information contained in its submissions that could be disclosed to the public. 
Non-confidential summaries shall be submitted no later than ten days after the date of a request 
from a Member, or the date the written submission in question is submitted to the Panel, whichever is later, unless a different deadline is established by the panel upon written request of a party showing good cause. 
3. The parties shall treat business confidential information in accordance with the procedures 
set forth in the Additional Working Procedures of the Panel Concerning Business Confidential Information. 
4. The Panel shall meet in closed session. The parties, and Members who have notified their 
interest in the dispute to the Dispute Settlement Body in accordance with Article 10 of the DSU 
(hereafter "third parties"), shall be present at the meetings only when invited by the Panel to 
appear before it.  
5. Each party and third party has the right to determine the composition of its own delegation 
when meeting with the Panel. Each party and third party shall have the responsibility for all the members of its own delegation and shall ensure that each member of its own delegation acts in 
accordance with the DSU and these Working Procedures, particularly with regard to the 
confidentiality of the proceedings an d the submissions of the parties.  
Submissions 
 
6. 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. Each party sha ll 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 Panel.  
7. A party shall submit any request for a prelimin ary ruling at the earliest possible opportunity 
and in any event, no later than in its first written submission to the Panel. If Korea requests such a 
ruling, the United States shall submit its response to the request in its first written submission. If the United States requests such a ruling, Korea 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. Exceptions to this procedure shall be granted upon a showing of good cause. 
8. Each party shall submit all factual evidence to the Panel no later than during the first 
substantive meeting, except with respect to ev idence necessary for purposes of rebuttal and WT/DS464/R/Add.1 
 
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  answers to questions or comments on answers prov ided by the other party. Exceptions to this 
procedure shall be granted upon a showing of good cause. Where such exception has been 
granted, the Panel shall accord the other party a period of time for comments, as appropriate, on any new factual evidence submitted after the first substantive meeting.  
9. Where the original language of an exhibit is not a WTO working language, the submitting 
party or third party shall simultaneously submit a translation of it into a WTO working language. The Panel may grant reasonable extensions of ti me for the translation of such exhibit upon a 
showing of good cause. Any objection as to the accu racy of a translation should be raised promptly 
in writing, preferably no later than the next filing 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 of objection and an alternative translation.  
10. 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 exhibits throughout the course of the dispute. For example, exhibits  submitted by Korea could be numbered KOR-1, 
KOR-2, etc. If the last exhibit in connection with the first submission was numbered KOR-5, the 
first exhibit of the next submission thus would be numbered KOR-6. 
Questions 
 
11. The Panel may at any time pose questions to the parties and third parties, orally or in writing, including in writing prior to each substantive meeting.  
Substantive meetings  
 
12. Each party shall provide to the Panel the list of members of its delegation in advance of each 
meeting with the Panel and no later than 5.00 p.m. the previous working day.  
13. The first substantive meeting of the Panel wi th the parties shall be conducted as follows: 
a. The Panel shall invite Korea 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, through the Panel Secretary. Each party shall make available to the Panel and the other 
party the final version of its opening statement as well as its closing statement, if any, 
preferably at the end of the meeting, and in  any event no later than 5.00 p.m. on the 
first working day following the meeting. 
b. After the conclusion of the statements, the Panel shall give each party the opportunity to 
ask each other questions or make comments, through the Panel. Each party shall then have an opportunity to answer these questions orally. Each party shall send in writing, 
within a timeframe to be determined by the Panel, any questions to the other party to 
which it wishes to receive a response in writing. Each party shall be invited to respond in writing to the other party's written questions within a deadline to be determined by the Panel. 
c. The Panel may subsequently pose questions to the parties. Each party shall then have an 
opportunity to answer these questions orally. The Panel shall send in writing, within a timeframe to be determined by it, any questions to the parties to which it wishes to 
receive a response in writing. Each party shall be invited to respond in writing to such 
questions within a deadline to be determined by the Panel. 
d. Once the questioning has concluded, the Panel shall afford each party an opportunity to 
present a brief closing statement, with Korea presenting its statement first.  
14. The second substantive meeting of the Panel wi th the parties shall be conducted as follows: WT/DS464/R/Add.1 
 
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  a. The Panel shall ask the United States if it wi shes to avail itself of the right to present its 
case first. If so, the Panel shall invite the Un ited States to present its opening statement, 
followed by Korea. If the United States chooses not to avail itself of that right, the Panel shall invite Korea to present its opening statement first. 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, through the Panel Secretary. Each 
party shall make available to the Panel and the other party the final version of its 
opening statement, and should make available the final version of its closing statement if that statement was prepared in writing prior to being presented at the meeting, preferably at the end of the meeting, and in  any event no later than 5.00 p.m. of the 
first working day following the meeting. 
b. After the conclusion of the statements, the Panel shall give each party the opportunity to 
ask each other questions or make comments, through the Panel. Each party shall then 
have an opportunity to answer these questions orally. Each party shall send in writing, 
within a timeframe to be determined by the Panel, any questions to the other party to which it wishes to receive a response in writing. Each party shall be invited to respond in 
writing to the other party's written questions within a deadline to be determined by the 
Panel. 
c. The Panel may subsequently pose questions to the parties. Each party shall then have an 
opportunity to answer these questions orally. The Panel shall send in writing, within a 
timeframe to be determined by it, any questions to the parties to which it wishes to 
receive a response in writing. Each party shall be invited to respond in writing to such questions within a deadline to be determined by the Panel. 
d. Once the questioning has concluded, the Panel shall afford each party an opportunity to 
present a brief closing statement, with the party that presented its opening statement 
first, presenting its closing statement first.  
Third parties 
 15. The Panel shall invite each third party to transmit to the Panel a written submission prior to the first substantive meeting of the Panel with the parties, in accordance with the timetable 
adopted by the Panel.  
16. Each third party shall also be invited to presen t its views orally during a session of this first 
substantive meeting set aside for that purpose. Each  third party shall provide to the Panel the list 
of members of its delegation in advance of this session and no later than 5.00 p.m. the previous 
working day.  
17. The third-party session shall be conducted as follows: 
a. All third parties may be present during the entirety of this session.  
b. The Panel shall first hear the arguments of the third parties in alphabetical order. Third 
parties present at the third-party session and intending to present their views orally at that session, shall provide the Panel, the parties and other third-parties with provisional 
written versions of their statements before they take the floor. Third parties shall make 
available to the Panel, the parties and other third parties the final versions of their statements, preferably at the end of the session, and in any event no later than 
5.00 p.m. of the first working day following the session.  
c. After the third parties have made their statements, the parties may be given the 
opportunity, through the Panel, to ask the third parties questions for clarification on any 
matter raised in the third parties' submissions or statements. Each party shall send in 
writing, within a timeframe to be determined by the Panel, any questions to a third party 
to which it wishes to receive a response in writing.  WT/DS464/R/Add.1 
 
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  d. The Panel may subsequently pose questions to the third parties. Each third party shall 
then have an opportunity to answer these questions orally. The Panel shall send in writing, within a timeframe to be determined by it, any questions to the third parties to which it wishes to receive a response in writing. Each third party shall be invited to 
respond in writing to such questions within a deadline to be determined by the Panel. 
Descriptive part 
 
18. The description of the arguments of the partie s and third parties in the descriptive part of 
the Panel report shall consist of executive summari es provided by the parties and third parties, 
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 pa rties and third parties in the Panel's examination 
of the case.  
19. Each party shall submit executive summaries of the facts and arguments as presented to the 
Panel in its written submissions, other than in re sponses to questions, and its oral statements, in 
accordance with the timetable adopted by the Panel. Each executive summary of a written 
submission shall be limited to no more than 10 pages, and each executive summary submitted by 
each party of opening and closing statements presented at a substantive meeting shall be limited 
to no more than 5 pages each. The Panel will not summarize in the descriptive part of its report, or 
annex to its report, the parties' responses to questions. 
20. Each third party shall submit an executive summary of its arguments as presented in its 
written submission and statement in accordance with the timetable adopted by the Panel. This 
summary may also include a summary of response s to questions, where relevant. The executive 
summary to be provided by each third party shall not exceed 6 pages.  
21. The Panel reserves the right to request the parties and third parties to provide executive 
summaries of facts and arguments presented by a party or a third party in any other submissions 
to the Panel for which a deadline may not be specified in the timetable.  
Interim review 
 
22. 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.  
23. In the event that no further meeting with the Panel is requested, each party may submit 
written comments on the other party's written reques t 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.  
24. 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 
 25. The following procedures regarding service of documents shall apply: 
a. Each party and third party shall submit all documents to the Panel by filing them with 
the DS Registry (office No. 2047).  
b. Each party and third party shall file 4 paper copies of all documents it submits to the 
Panel. However, when exhibits are provided on CD-ROMS/DVDs, 2 CD-ROMS/DVDs and 
2 paper copies of those exhibits shall be filed. The DS Registrar shall stamp the documents with the date and time of the filing. The paper version shall constitute the 
official version for the purposes of the record of the dispute. 
c. Each party and third party shall also provide an electronic copy of all documents it 
submits to the Panel at the same time as the paper versions, preferably in Microsoft WT/DS464/R/Add.1 
 
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  Word format, either on a CD-ROM, a DVD or as an e-mail attachment. If the electronic 
copy is provided by e-mail, it should be addressed to DSRegistry@wto.org, with a copy 
to XXXXXX. If a CD-ROM or DVD is provided, it shall be filed with the DS Registry. 
d. Each party shall serve any document submitted to the Panel directly on the other party. 
Each party shall, in addition, serve on all third parties its written submissions in advance 
of the first substantive meeting with the Panel. Each third party shall serve any document submitted to the Panel directly on the parties and all other third parties. Each 
party and third party shall confirm, in writing, that copies have been served as required 
at the time it provides each document to the Panel. 
e. Each party and third party shall file its do cuments with the DS Registry and serve copies 
on the other party (and third parties where appropriate) by 5.00 p.m. (Geneva time) on 
the due dates established by the Panel. A party or third party may submit its documents 
to another party or third party in electronic format only, subject to the recipient party or third party's prior written approval and provided that the Panel Secretary is notified. 
f. The Panel shall provide the parties with an electronic version of the descriptive part, the 
interim report and the final report, as well as of other documents as appropriate. When the Panel transmits to the parties or third parties both paper and electronic versions of a 
document, the paper version shall constitute the official version for the purposes of the 
record of the dispute. 
26. The Panel reserves the right to modify these procedures as necessary, after consultation 
with the parties. 
 
  
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  ANNEX A-2 
UNITED STATES – ANTI-DUMPING AND COUNTERVAILING MEASURES ON 
LARGE RESIDENTIAL WASHERS FROM KOREA 
(DS464) 
ADDITIONAL WORKING PROCEDURES ON BUSINESS CONFIDENTIAL INFORMATION 
1. These procedures apply to any business confidential information (BCI) that a party wishes to 
submit to the Panel that was previously treated by the U.S. Department of Commerce as 
confidential or proprietary information protected by Administrative Protective Order in the course 
of the anti-dumping and countervailing duty procee dings at issue in this dispute, entitled Large 
Residential Washers from the Republic of Korea (A-580-868 and C-580-869). However, these procedures do not apply to any information that is available in the public domain. In addition, 
these procedures do not apply to any BCI if the entity which provided the information in the course 
of the aforementioned investigations agrees in writing to make the information publicly available. 
2. If a party considers it necessary to submit to the Panel BCI as defined above from an entity 
that submitted that information in one or both of the investigations 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 to the other party. The authorizing letter from the entity shall 
authorize both Korea and the United States to subm it in this dispute, in accordance with these 
procedures, any confidential information submitted by that entity in the course of those investigations. 
3. No person may have access to BCI except a member of the Secretariat or the Panel, an 
employee of a party or third party, and an outsid e advisor for the purposes of this dispute to a 
party or third party. However, an outside advisor is not permitted access to BCI if that advisor is an officer or employee of an enterprise engage d in the production, export, or import of the 
products that were the subject of the investigations at issue in this dispute. 
4. 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 authorization letter referred to in paragraph 2. Each 
party shall encourage any entity in its territory that is requested to grant the authorization 
referred to in paragraph 2 to grant such authorization. If an entity refuses to grant the authorization referred to in paragraph 2, a party may bring the situation to the attention of the Panel. 
5. A party or third party having access to BCI shall treat it as confidential, i.e., shall not 
disclose that information other than to those persons authorized to receive it pursuant to these procedures. Each party and third party shall have responsibility in this regard for its employees as 
well as any outside advisors used for the purpos es of this dispute. BCI obtained under these 
procedures may be used only for the purpose of providing information and argumentation in this dispute and for no other purpose. 
6. The 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 "Contains Business 
Confidential Information" at the top of the page. 
7. Where a party submits a document containing BCI to the Panel, the other party or any 
third party referring to that BCI in its documents, including written submissions and oral 
statements, shall clearly identify all such informat ion in those documents. All such documents shall 
be marked 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 WT/DS464/R/Add.1 
 
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  will contain BCI, and the Panel will ensure that only persons authorized to have access to BCI 
pursuant to these procedures are in the room to hear that statement. 
8. The Panel will not disclose BCI, in its report or in any other way, to persons not authorized 
under these procedures to have 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 opportun ity to review the report to ensure that it does 
not contain any information that the party has designated as BCI. 
9. Submissions containing BCI will be included in  the record forwarded to the Appellate Body in 
the event of an appeal of the Panel's Report. 
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  ANNEX B 
ARGUMENTS OF KOREA 
Contents Page 
Annex B-1 Executive summary of the first written submission of Korea B-2  
Annex B-2 Executive summary of the second written submission of Korea B-11 
Annex B-3 Executive summary of the opening oral statement of Korea at the 
First Substantive Meeting B-21 
Annex B-4 Executive summary of the closing oral statement of Korea at the 
First Substantive Meeting B-26 
Annex B-5 Executive summary of the opening oral statement of Korea at the 
Second Substantive Meeting B-29 
Annex B-6 Closing oral statement of Korea at  the Second Substantive Meeting B-34 
 WT/DS464/R/Add.1 
 
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  ANNEX B-1 
EXECUTIVE SUMMARY OF THE FIRST WRITTEN SUBMISSION OF KOREA 
I. INTRODUCTION 
1. This dispute concerns the protectionist and unlawful conduct of the USDOC in its final 
anti-dumping and countervailing duty determinations in the proceedings entitled Large Residential 
Washers from Korea  (Washers ) and in other measures of general and prospective application by 
which the USDOC applies anti-dumping duties to imported products. The Washers  anti-dumping 
measure at issue in this dispute is one of many so-called "targeted dumping" determinations that 
the USDOC has issued in recent years. The sudden and dramatic increase in the USDOC's resort to 
the second sentence of Article 2.4.2 of the Anti-Dumping Agreement is designed to circumvent the recommendations and rulings of the DSB prohibiting the use of "zeroing" in the calculation of 
dumping margins. The USDOC also misinterpreted and misapplied the relevant provisions of the 
SCM Agreement in its simultaneous countervailing duty investigation.  
II. STANDARD OF REVIEW 
2. This Panel is required to apply the standard of review set forth in Article 11 of the DSU. In 
conducting its assessment, the Panel must interpret the relevant provisions of the GATT 1994, the Anti-Dumping Agreement, and the SCM Agreement in  accordance with the principles codified in 
Articles 31 and 32 of the Vienna Convention on the Law of Treaties and determine whether the 
USDOC's actions are consistent with the relevant provisions of the covered agreements. The Panel is also required to review the factual components of the USDOC's determination. In doing so, the Panel must conduct a "critical and searching" analysis and an "in depth" examination of the 
USDOC's determination.  
III. THE EVOLUTION OF THE USDOC'S INTE RPRETATION AND APPLICATION OF THE 
SECOND SENTENCE OF ARTICLE 2.4. 2 OF THE ANTI-DUMPING AGREEMENT 
3. The most significant aspect of the evolution of the USDOC's approach to the interpretation 
and application of the second sentence is the inextricable linkage between the USDOC's approach to "targeted dumping" and the history of "z eroing" in WTO dispute settlement. When the 
United States first implemented Article 2.4.2 in U.S. law following the completion of the Uruguay 
Round Agreements, it adopted an approach to "targeted dumping" and the interpretation of 
Article 2.4.2 that in important respects was faithful  to that provision. However, after the Appellate 
Body's successive rulings that the USDOC's use of zeroing was WTO inconsistent, the 
United States radically changed its approach to "t argeted dumping". This change was an effort to 
avoid the effect of the Appellate Body's zeroing jurisprudence.  
IV. THE UNITED STATES ACTED INCONSISTE NTLY WITH ARTICLES 2.4 AND 2.4.2 OF 
THE ANTI-DUMPING AGREEM ENT BOTH "AS SUCH" AND "AS APPLIED" IN THE 
WASHERS  INVESTIGATION BY APPLYING "ZEROING" IN W-T COMPARISONS 
A. Introduction 
4. By disregarding the results of intermediate W-T price comparisons when calculating the 
aggregated margin of dumping for the product as a whole and for the exporter, the USDOC runs afoul of the basic principles of the Anti-Dumpi ng Agreement and of the GATT 1994, such as the 
definitions of "dumping", "margin of dumping", "p roduct", and "injury", as interpreted in numerous 
panel and Appellate Body reports. These decisions dispositively hold that zeroing is not permitted 
in the context of any anti-dumping proceeding, regardless of the particular price comparison methodology that is applied to calculate the margin of dumping for the product as a whole and for 
each exporter. This is because the Appellate Bo dy has conclusively interpreted the concept of 
"dumping", which by virtue of Article 2.1 applies with the same meaning to the entire Anti-Dumping Agreement, as a product-wide and exporter-specific concept. The Appellate Body 
has found ample contextual support for this interpreta tion in Articles 2.4, 2.4.2, 3.1, 5.8, 6.10, 9.3 WT/DS464/R/Add.1 
 
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  and 9.5 of the Anti-Dumping Agreement, and has ca tegorically rejected the contrary interpretation 
that dumping could ever occur at the transaction-specific level.  
B. The Concepts of "Dumping" and "Mar gins of Dumping" Are Product-Wide and 
Exporter-Specific, and Apply Cons istently throughout the Entire 
Anti-Dumping Agreement 
5. The USDOC considers that recourse to the W-T comparison methodology provided for under 
the second sentence of Article 2.4.2 somehow permits the inference that dumping may occur at 
the transaction-specific level. This untenable position allows the USDOC to disregard non-dumped 
transactions when aggregating intermediate comparison results for the purposes of calculating the weighted average margin of dumping for each product and exporter. The transaction-specific construct applied by the United States when margins of dumping are calculated with recourse to 
the W-T comparison methodology finds no basis in the Anti-Dumping Agreement, as interpreted in 
previous panel and Appellate Body reports. The Appellate Body has specifically addressed – and 
categorically rejected on numerous occasions – the argument that the concepts of "dumping" and 
"margin of dumping" could possibly occur at the transaction-specific level. The Appellate Body has 
conclusively ruled that the terms "dumping" and "margins of dumping" are exporter-specific and 
product-wide concepts, and they must be interpreted in a consistent and coherent fashion 
throughout the entire Anti-Dumping Agreement.  
C. Articles 2.4.2 and 2.4 Require Aggreg ation of All Result s of Intermediate 
Comparisons when Calculating the Margin of Dumping 
6. While it is permissible to undertake multiple comparisons between normal value and export 
price at an intermediate stage, the Appellate Bo dy has found that Articles 2.4.2 and 2.4 of the 
Anti-Dumping Agreement require that investigating authorities aggregate the results of all such intermediate comparisons when calculating the product-wide and exporter-specific margins of 
dumping, regardless of the comparison methodology that is being applied. Thus, the use of zeroing 
in W-T comparisons under the second sentence of Article 2.4.2 is inconsistent with the requirement that the results of all intermediate comparisons be aggregated when the investigating 
authority establishes the margin of dumping for the product as a whole and for each exporter. It is 
also inconsistent with the "fair comparison" requirement of Article 2.4, because it artificially inflates the margins of dumping.  
D. The Appellate Body Has Rejected the USDOC's Contention that Zeroing is 
Permissible under the W-T Comparison Methodology  
7. The Appellate Body has consistently rejected the USDOC's position that dumping may 
somehow occur at the transaction-specific level whenever the comparison methodology at issue 
calls for a comparison between normal value and the prices of individual export transactions in 
US – Softwood Lumber V (Art. 21.5 – Canada) , US – Zeroing (EC) , US – Zeroing (Japan) , US – 
Stainless Steel (Mexico)  and US – Continued Zeroing . The Appellate Body conclusively found that 
the application of zeroing under the W-T comparison methodology in administrative reviews was 
inconsistent with Article 9.3 of the Anti-Dumpi ng Agreement and Article VI:2 of the GATT 1994, 
because it led to the assessment of duties in exce ss of the amount of the anti-dumping margin for 
the product as a whole.  
E. Nothing in the Text of the Second Sentence of Article 2.4.2 Suggests that 
Dumping Is a Transaction-Specific Concept  
8. The second sentence of Article 2.4.2 allows investigating authorities to compare "a normal 
value established on a weighted-average basis" to "prices of individual export transactions" when 
three cumulative conditions are met. First, the in vestigating authority must identify "a pattern of 
export prices". Second, the investigating authority must identify a pattern of export prices that 
"differs significantly among purchasers, regions or time periods". Third, the investigating authority 
must provide an "explanation … as to why differences in export prices cannot be taken into account appropriately" by the two symmetrical co mparison methodologies that an investigating 
authority must "normally" apply under the first sentence of Article 2.4.2 (the W-W and T-T 
comparison methodologies). These textual elements suggest that, just like elsewhere in the 
Anti-Dumping Agreement, a margin of dumping cannot be established at the transaction-specific WT/DS464/R/Add.1 
 
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  level, and the results of intermediate comparisons may not be disregarded when establishing the 
margin of dumping.  
F. The Use of Zeroing in W-T Comparisons Is "As Such" Inconsistent with 
Articles 2.4 and 2.4.2, Second Sentence, of the Anti-Dumping Agreement 
1. The Use of Zeroing in W-T Comparisons under the Second Sentence of 
Article 2.4.2 Is a Measure Challengeable "As Such" 
9. The USDOC's use of zeroing in the W-T comparison methodology under the second sentence 
of Article 2.4.2 is attributable to the United States; it has the precise content as evidenced in 
numerous original investigations and administrative reviews by the USDOC; and finally, the USDOC has consistently and systematically applied zeroing whenever calculating margins of dumping with recourse to the methodology provided for under the second sentence of Article 2.4.2 
of the Anti-Dumping Agreement. 
2. The Use of Zeroing in W-T Comparisons Is "As Such" Inconsistent with 
Articles 2.4.2 and 2.4 of the Anti-Dumping Agreement 
10. The use of zeroing invariably results in the USDOC disregarding or artificially reducing to 
zero the results of W-T comparisons when aggregat ing those results for the purposes of calculating 
the margin of dumping for the product as a whol e and for each individual exporter or foreign 
producer. For this reason, it is "as such" inconsistent with the second sentence of Article 2.4.2 of 
the Anti-Dumping Agreement, and as a consequence is also "as such" inconsistent with Articles 2.1 of the Anti-Dumping Agreement, and Article VI:1 of the GATT 1994.  
11. Moreover, Article 2.4 of the Anti-Dumping Agr eement requires investigating authorities to be 
"impartial, unbiased, and even-handed" when comp aring normal value and export price. The use 
of the zeroing methodology invariably leads to the results of intermediate W-T comparisons being disregarded or artificially reduced to zero, thus  increasing the resulting margins of dumping and 
making an affirmative dumping determination more likely. For this reason, just like in the context 
of any other anti-dumping proceeding, the use of zeroing is "as such" inconsistent with Article 2.4 of the Anti-Dumping Agreement.  
12. The USDOC also systematically applies the zeroing methodology when calculating margins of 
dumping for the product and exporter in the co ntext of administrative reviews, where those 
administrative reviews entail the use of the W-T comparison methodology under the second sentence of Article 2.4.2. To that exte nt, the USDOC systematically levies anti-dumping 
duties in excess of the margin of dumping properly established under Article 2 of the 
Anti-Dumping Agreement. For this reason, the use of zeroing in administrative reviews is "as such" inconsistent with Article 9.3 of the Anti-Dumping  Agreement, and Article VI:2 of the GATT 1994.  
G. The Application of the Zeroing Methodology in the Original Washers  
Determination and in Subsequent Connected Stages of Washers  Is 
Inconsistent with Articles 2.4.2 an d 2.4 of the Anti-Dumping Agreement 
13. The USDOC's use of zeroing in its final anti-dumping duty determination in the Washers  
investigation resulted in the USDOC disregarding or artificially reducing to zero the results of W-T comparisons undertaken at the intermediate stag e when establishing the margin of dumping 
applicable for the product under consideration for each investigated exporter. The USDOC's final 
anti-dumping duty determination in Washers is inconsistent "as applied" with Articles 2.4 
and 2.4.2, second sentence, of the Anti-Dumping Agreement. As a consequence, the application of the zeroing methodology in Washers  is also inconsistent "as applied" with Article 2.1 of the 
Anti-Dumping Agreement and Article VI:1 of the GATT 1994. 
14. Korea also challenges the USDOC's use of zeroing in subsequent connected stages of the 
Washers proceedings, as ongoing conduct. Any such use of zeroing by the USDOC will be 
inconsistent with Article 2.4, Article 2.4.2, Article 2.1, and Article 9.3 of the 
Anti-Dumping Agreement, as well as Articles VI:1 and VI:2 of the GATT 1994. WT/DS464/R/Add.1 
 
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  V. THE USDOC'S METHODOLOGIES FOR INVOKING THE SECOND SENTENCE OF 
ARTICLE 2.4.2 OF THE ANTI-DUMPING AG REEMENT ARE INCONSISTENT WITH THE 
OBLIGATIONS SET FORTH IN THAT PROV ISION, BOTH "AS APPLIED" IN THE 
WASHERS  INVESTIGATION AND AS "ONGOING CONDUCT" OR "AS SUCH" IN 
RESPECT OF THE CURRENT "DIFFERENTIAL PRICING" METHODOLOGY 
A. Overview of the Obligations for Invoki ng the Second Sentence of Article 2.4.2 
of the Anti-Dumping Agreement  
15. A normal value calculated on a weighted average basis may be compared to prices of 
individual export transactions if the investigating authority find that there are "export prices which differ significantly", and that those differing export  prices constitute "a pattern", and explain why 
applying either one of the comparison methodologie s set forth in the general rule would not permit 
such differences to be "taken into account appropriately". The text and context of Article 2.4.2 
make clear that if all three of these conditions are satisfied in a given case, the exception is to be applied only to those transactions that have met the criteria for application of the W-T comparison 
methodology. 
B. The USDOC's Methodology for Invoking the Second Sentence of Article 2.4.2 
of the Anti-Dumping Agreement in the Washers  Investigation Failed to 
Comply with the Requirements of that Provision 
1. The USDOC Acted Inconsistently  With the Second Sentence of 
Article 2.4.2 in the Washers  Investigation by Relying Solely on 
Quantitative Criteria to Invoke the Exception to Article 2.4.2  
16. As the term, "a pattern", is used in the second sentence of Article 2.4.2, the significantly 
differing prices found to exist in sales to a purchaser, or in a given region or time period must not be the result of some random or exogenous cause, but rather in fact must reflect what reasonably 
can be inferred to be targeting conduct. This conclusion is reinforced by the requirement in 
Article 2.4.2 that the prices differ not only by customer, region or time period, but also that they differ "significantly". Outside the context of Article 2.4, it can be seen that when the 
Anti-Dumping Agreement uses the word "significant" or "significantly", it does so with the intent of 
conveying a meaning that is qualitative as well as, or instead of, quantitative. 
17. Contrary to the ordinary meaning of the terms "pattern" and "significantly", and contrary to 
its own analysis in its initial implementation of the second sentence of Article 2.4.2, in the 
"targeted dumping" analysis applied in Washers , the USDOC applied its so-called "pattern test" 
and "gap test" as purely quantitative tests. The USDOC applied these tests mechanically, and then it analysed only the quantitative differences among those average prices; the USDOC never 
examined the reasons for the alleged "pattern" of "significant" price differences that it found to 
exist.  
2. The USDOC Acted Inconsistently  With the Second Sentence of 
Article 2.4.2 in the Washers  Investigation by Failing to Provide an 
Adequate Explanation  
18. It is important to note the high standard  for justifying the use of a W-T comparison 
methodology: the second sentence requires a determination that the W-W and T-T comparison 
methodologies cannot  take into account appropriately the relevant pattern of significantly different 
prices. In other words, the W-T comparison methodology is not permitted if there is any way in which the W-W or T-T comparison methodology can produce a dumping margin calculation in 
which the pattern of significantly differing prices to the purchaser (or region, or time period) in 
question can be taken into account appropriately.  
19. In Washers , the USDOC made no pretence of meet ing this explicit requirement of the 
second sentence of Article 2.4.2. After finding the existence of "targeting" through a mechanical 
application of its "pattern test" and "gap test ", the USDOC compared the respondents' dumping 
margins using the W-W comparison methodology (without any zeroing) and the W-T comparison methodology (with zeroing). Because this comparison yielded what the USDOC considered to be a 
"material difference" or a "meaningful difference", it concluded that it must apply the WT/DS464/R/Add.1 
 
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  W-T comparison methodology to all sales for both respondents. These "explanations" are facially 
inadequate to meet the high standard that the se cond sentence of Article 2.4.2 imposes. Indeed, 
the USDOC's statements are wholly conclusory and provide no explanation at all. 
3. The USDOC Acted Inconsistently with Article 2.4.2 in the Washers  
Investigation by Applying the W-T Comparison Methodology to All of 
the Respondents' Sales  
20. The structure and language of Article 2.4.2 co nfirm that the limited exception set forth in the 
second sentence only authorizes the applicatio n of the W-T comparison methodology to those 
transactions determined to have met the criteria for invocation of the exception, and not to all 
export transactions.  
21. By using the mandatory term "shall", the general rule articulated in the first sentence of 
Article 2.4.2 reflects a clear and strong preference for the use of either the W-W or T-T comparison 
methodologies in every anti-dumping investigation. In contrast, by using the term "may", the exception set forth in the second sentence of Arti cle 2.4.2 is never mandatory. Rather, it merely 
provides investigating authorities with the discretion to apply the W-T comparison methodology, 
assuming all three conditions for invoking it have been established.  
22. It naturally follows from this structure that th e exception in Article 2.4.2 should be limited in 
application to those transactions that have justified its use, while the remainder of the export 
transactions at issue, which have not met those conditions, should be subject to one of the two symmetrical methodologies that otherwise would apply to all export transactions under the general rule established by the first sentence of Article 2.4.2. Indeed, a contrary interpretation 
would be tantamount to granting investigating authorities unbridled discretion that could lead to 
the exception swallowing the rule.  
C. The Repetition of These Same Three Errors in Subsequent Connected Stages 
of the Washers  Investigation Is Ongoing Conduct that Is Inconsistent with 
Article 2.4.2 of the Anti-Dumping Agreement 
23. The USDOC continues to commit the same three errors identified above in the application of 
its so-called "differential pricing" methodology. The Appellate Body has established that Members 
may challenge, as ongoing conduct, the repetiti on of the same WTO-inconsistent behaviour in 
successive determinations by which duties are calculated and maintained over time. Although the original anti-dumping determination in the Washers investigation was based on the USDOC's 
application of its Nails II  test, the USDOC's application of its differential pricing methodology in 
subsequent connected stages of the Washers proceedings will result in a repetition of the same three errors. Accordingly, Korea challenges as on going conduct the repetition of the same three 
errors described above in subsequent connected stages of the Washers  proceedings. Any such 
repetition of these errors by the USDOC will be inconsistent with Article 2.4.2 of the 
Anti-Dumping Agreement for the same reasons as set forth above. 
D. The Differential Pricing Methodology Is Inconsistent, As Such, with the 
Second Sentence of Article 2.4.2 of the Anti-Dumping Agreement 
1. The Differential Pricing Methodology Is a Rule or Norm of General and 
Prospective Application 
24. The differential pricing methodology is not only a measure challengeable in WTO dispute 
settlement "as applied" or as "ongoing conduct", but also a measure that can be challenged "as 
such", because the differential pricing methodology is a rule or norm of general and prospective 
application. The differential pricing methodology is expressed in several determinations in written 
form. Furthermore, the USDOC made public the SAS  Code for the differential pricing methodology 
and even requested public comments on it. These de velopments in written form clearly show that 
the differential pricing methodology is a rule or norm of general and prospective application. Even 
if these developments are considered not to be expressed in the form of a written document, the 
differential pricing methodology is a rule or norm of general and prospective application that can be challenged "as such". WT/DS464/R/Add.1 
 
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  2. The Differential Pricing Methodol ogy Enshrines the Same Unlawful 
Interpretations of Article 2.4.2 as the USDOC Applied in the Washers 
Investigation 
25. The differential pricing methodology relies solely on quantitative criteria to determine 
whether there exists a pattern of export prices wh ich differ significantly by purchaser, region or 
time period. By refusing even to consider resp ondents' proffered reasons for the observed price 
differences, and by relying exclusively on a mathematical analysis, the USDOC policy of invoking 
the second sentence of Article 2.4.2 under the differential pricing methodology without properly 
determining whether the mathematical differences in  prices constitute a "pattern" of prices that 
differ "significantly" is inconsistent "as such" with Article 2.4.2 of the Anti-Dumping Agreement.  
26. The USDOC employs the differential pricing methodology without providing an adequate 
explanation. As was true in Washers , the "explanation" that the USDOC provides under the 
differential pricing methodology as to why the pattern of significant price differences "cannot be taken into account appropriately" by the use of either the W-W or T-T comparison methodologies 
is facially inadequate. Under the differential pricing methodology, if a sufficient number of sales 
pass the numerical thresholds including the "Cohen's d test" and "ratio test", the USDOC concludes 
without any further analysis or explanation that the W-W comparison methodology cannot take 
into account the observed pattern of significan tly different prices whenever the respondent's 
dumping margin using the W-W comparison methodology (without zeroing) and the W-T comparison methodology (with zeroing) yields what the USDOC considers to be a "meaningful difference". 
27. The differential pricing methodology, like the methodology applied in Washers , also leads 
the USDOC to apply the exceptional W-T comparison methodology to sales that do not meet the criteria for invoking the exception. Unlike the Nails II  test applied in Washers , however, which had 
no threshold, the USDOC now applies the exception to all U.S. sales in any instance where more 
than 66 percent of the U.S. sales have been found  to constitute a pattern of prices that differ 
significantly by purchaser, region or time period under the Cohen's d test.  
3. The Differential Pricing Methodolog y Does Not Identify "a Pattern of 
Export Prices Which Differ Signific antly Among Different Purchasers, 
Regions or Time Periods"  
28. The differential pricing methodology does nothing more than measure the amount of price 
variation that can be found within an exporter's sales. An amount of price variation, however 
measured, does not serve to reveal "a pattern of export prices which differ significantly among different purchasers, regions or time periods". The differential pricing methodology does not 
identify patterns of significant price differences that might exist among different purchasers, 
regions or time periods. In fact, notwithstanding its name, the differential pricing methodology bears essentially no relationship to any concept of "patterns" of export prices which "differ" among 
"different" purchasers, regions, or time periods.  Instead, it aggregates random, unrelated price 
differences of every possible type and combination, and simply asserts that the accumulated price variation constitutes a "pattern".  
29. For example, the ordinary meaning of the second sentence indicates that a "pattern of prices 
which differ significantly" may arise among diff erent purchasers, among different regions, or 
among different time periods. It may not arise among combinations  of purchasers, regions or time 
periods. Such "cross-category" combinations bear no relationship whatsoever to the requirement 
of a "pattern" of export prices which "differ significantly" among "different" purchasers, regions or 
time periods. 
4. The "Systemic Disregarding" in the Differential Pricing Methodology Is 
Inconsistent with the Anti-Dumping Agreement  
30. The use of "systemic disregarding" in the result of the W-W comparison, where the USDOC 
"set total dumping margin to zero" in the W-W comparison subset if the absolute value of the sum of the negative dumping margin is larger than the sum of the positive dumping margin, is also 
inconsistent with the Anti-Dumping Agreement and the GATT 1994. As opposed to the "fair 
comparison" obligation under Article 2.4 of Anti-Dum ping Agreement, this "systemic disregarding", WT/DS464/R/Add.1 
 
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  similar to the original zeroing, unlawfully inflates the dumping margin and makes a positive 
determination more likely, by ignoring the negative dumping margins. This "systemic disregarding" method also contravenes the "product as a whole"  concept of dumping margins. Furthermore, this 
unreasonable inflation through the "systemic disregarding" runs afoul of the object and purpose of 
the second sentence of Article 2.4.2.  
VI. THE USDOC'S FINAL SUBSIDY DETERMIN ATION FOR SAMSUNG IS INCONSISTENT 
WITH THE SCM AGREEMENT AND WITH ARTICLE VI:3 OF THE GATT 1994 
31. As with its erroneous determination in the parallel anti-dumping investigation of Washers,  
the USDOC also misinterpreted and misapplied the relevant provisions of the SCM Agreement. The 
USDOC not only misunderstood the Korean Government's legitimate policy tools, but also misconstrued the relevant provisions of SCM Agreement. Overall, the USDOC disregarded relevant 
factors that are essential to determine the existence of a countervailable subsidy, as well as the 
proper calculation of countervailing duty margins.  
A. The USDOC's Finding that Samsung Received a "Disproportionately Large 
Amount" of the Total Benefit that the Government of Korea Provided under 
RSTA Article 10(1)(3) Is Inconsistent with Articles 1.2 and 2.1(c) of the 
SCM Agreement 
32. RSTA Article 10(1)(3) provides that a Korean company can earn – and Samsung received – 
a tax credit equal to 40 percent of the amount by  which its R&D expenditures during the tax year 
exceeded the average of its R&D expenditures in the four previous years. While Samsung claimed 
on its 2011 tax return a larger amount of the tax credit than the average amount claimed by other 
Korean companies, the amount of the credit that Samsung earned for that year was automatically 
determined by using one of the two statutory formulas available to all Korean companies to determine their Article 10(1)(3) tax credits. 
33. Nonetheless, the USDOC found that the tax credit that Samsung claimed on its 2011 tax 
return under RSTA Article 10(1)(3) was specific to Samsung. In this process, the USDOC relied exclusively on the third of four factors that Ar ticle 2.1(c) enumerates as possible bases for a 
finding of de facto  specificity – namely, "the granting of disproportionately large amounts of 
subsidy to certain enterprises." This determination was based solely on the fact that the tax credit claimed by Samsung on its 2011 tax return constituted a larger percentage of the total RSTA Article 10(1)(3) credit than the average credit claimed by each other Korean company. 
34. As was made clear by the Appellate Body in previous disputes, Article 2.1(c) requires an 
inquiry as to "whether a subsidy, although not apparently limited to certain enterprises from a review of the relevant legislation or express acts of a granting authority, is nevertheless allocated 
in a manner that belies the apparent neutrality of the measure." Here, the USDOC made no such 
inquiry into whether the amount of tax credits received by Samsung differed from the allocation "that would be expected to result if the subsidy were administered in accordance with the 
conditions for eligibility for that subsidy."  
35. Indeed, there was never any issue as to whether "the conditions for eligibility" under RSTA 
Article 10(1)(3) were properly applied to Samsung. To the contrary, the record shows – and the USDOC has never contested – that Samsung calculated the amount of its tax credit for tax 
year 2010 in the manner required by the methodology and criteria of RSTA Article 10(1)(3).  
36. The USDOC had no evidence of a difference between the tax year 2010 credit amount that 
Samsung calculated and the amount that "would be [calculated] if the subsidy were administered 
in accordance with the conditions for eligibility for that subsidy as assessed under Article 2.1(a) 
and (b)." This constitutes a clear violation of the United States' obligations under the SCM Agreement. 
37. The evidence on the record shows that Samsung received a "proportionate" amount of the 
tax credit because it determined the amount of the credit that it earned using the same calculation 
formula available to all other Korean companies. The fact that its credit, in an absolute sense, was larger in amount than the average credit amount received by all other Korean companies did not WT/DS464/R/Add.1 
 
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  render it disproportionate in light of the much larger investments that it made that generated its 
credit. 
38. The USDOC's determination is further invalidated by the USDOC's failure to address the two 
mandatory factors in the third sentence of Article 2.1(c). 
B. The USDOC's Finding that Samsung Failed To "Tie" the Tax Credits that It 
Received under RSTA Articles 10(1)(3) and 26 to Subject and Non-Subject Merchandise Is Inconsistent with Article VI:3 of the GATT 1994 and 
Article 19.4 of the SCM Agreement  
39. Despite the requirement of Article VI:3  of the GATT 1994 and Article 19.4 of the 
SCM Agreement that countervailing duties be limite d to the amount of subsidies provided on the 
production and sale of LRW, the USDOC improperly attributed a significant portion of the tax 
credits that Samsung received on products other than LRW to LRW. The proper calculation of 
Samsung's subsidy margins for both the Article 10(1)(3) and Article 26 tax credits should have used Samsung's tax credit received on digital appliances, including LRW, for the numerator and 
Samsung's sales of digital appliances, including LRW,  as the denominator, in order to calculate the 
margin for the product under investigation.  
40. The USDOC, however, calculated Samsung's subsidy margin based on the company's sales 
of all products and on tax credits bestowed on all of Samsung's products. The USDOC's margin 
calculation, therefore, relied overwhelmingly on credits earned by Samsung for eligible expenditures that benefitted the production and sa le of products other than digital appliances, 
including LRW. The result was a dramatic inflation of the subsidy margins.  
41. The USDOC's stated reason for refusing to receive, let alone examine or verify, Samsung's 
data and documentation showing that only a tiny portion of its total Article 10(1)(3) and Article 26 tax credits were earned and claimed on the production of digital appliances, including LRW, was its 
rule that it would allocate a subsidy to one or more specific products only upon a showing that the 
subsidy was "tied" to the production or sale of such products. The USDOC's use of a "tying" requirement is simply impermissible where, as here, data and documentation are submitted to 
demonstrate that the subsidy in fact benefited the production or sale of a particular product or 
category of products.  
42. The evidence on the record shows that the USDOC had at its disposal information that would 
have enabled it to determine the amount of tax cred it that benefited the production and sale of the 
merchandise subject to the investigation. Its refusal to consider that information, and to use it to 
calculate the proper numerator and denominator in determining Samsung's subsidy margin, constitutes a clear violation of Article VI:3 of the GATT 1994 and Article 19.4 of the 
SCM Agreement. 
C. The USDOC's Finding that the Tax Credits that Samsung Received Under RSTA 
Article 10(1)(3) Benefited Only the Products that It Produced and Sold in 
Korea Is Inconsistent with Article VI:3 of the GATT 1994 and Article 19.4 of 
the SCM Agreement 
43. In its final determination in the Washers  investigation, the USDOC, reversed its previous 
rulings and determined for the first time that the alleged subsidy benefitted only Samsung's 
domestic production. This reasoning of the USDO C, however, simply misconstrues the nature of 
the Article 10(1)(3) tax credits.  
44. The core issue is whether the benefit of in -Korea R&D activity accrues to the company's 
worldwide production and sales. In the case of R&D activity, the resulting benefit is not limited to 
the location where the R&D is conducted. Rather, the results of R&D will normally benefit all operations of the company, wherever located, as Samsung demonstrated to the USDOC. The 
USDOC's reference to an absence of any "application and/or approval documents" does not fit the 
facts of the Article 10(1)(3) process.  
45. The USDOC's limitation of the denominator to Korean sales was impermissible because: (a) 
it was based on a presumption not authorized by the SCM Agreement; (b) the USDOC failed to WT/DS464/R/Add.1 
 
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  make an objective assessment of this issue based on positive evidence; (c) the reasons given by 
the USDOC are demonstrably inaccurate and thus fail the requirement of an adequate explanation of its determination; and (d) to the extent th at the USDOC relied on its presumption, that 
presumption was fully rebutted by Samsung, both by  showing that the results of its R&D (which 
gave rise to the tax credit) in fact benefited its worldwide sales and production and by showing 
that the USDOC had previously analysed this identical issue on two separate occasions and had determined on each occasion that the Article 10(1)(3) tax credits benefitted Samsung's worldwide 
sales and production. 
46. The determination of the USDOC on this issu e, therefore, constitutes a clear violation of 
Article VI:3 of the GATT 1994 and Article 19.4 of the SCM Agreement. 
D. The Tax Credits that Samsung Received Under RSTA Article 26 Do Not 
Constitute Specific Subsidies within  the Meaning of Article 2 of the 
SCM Agreement 
47. The USDOC's determination that the tax credits were specific to a geographical region is 
erroneous and inconsistent with the United States' obligations under Article 2 of the 
SCM Agreement. In all respects, RSTA Article 26 is a legitimate policy tool pursued by the Korean government, as essentially a zoning measure, to address the particular social problems associated 
with the overconcentration of growth in the Seoul metropolitan area. RSTA Article 26 does not in 
any way attempt to distort trade. 
48. The RSTA Article 26 eligibility criteria are fully consistent with the principles of 
non-specificity in Article 2.1(b) of the SCM Agreem ent. The eligibility criteria are neutral, and do 
not favour some enterprises over others. The criteria are clearly spelled out and are objective. The 
amount of the subsidy is also objectively calculated. Eligibility is automatic, and there is strict adherence to the eligibility criteria. As the operation of RSTA Article 26 fully meets the 
requirements of Article 2.1(b) of the SCM Agreement, the tax credits are not specific. 
49. Furthermore, the tax credits provided in Arti cle 26 are not "limited to certain enterprises 
located within a designated geographical region",  either by the terms of Article 26, or in its 
application. Rather, the credits are generally available to any enterprise that meets the 
qualifications of that Article, without regard to  where the enterprise is located. An enterprise 
located anywhere in Korea, including within the "overcrowding control region" of the Seoul Metropolitan Area, is entitled to the tax credit for any qualifying investment made by that 
enterprise anywhere else in Korea.  
50. Even if the USDOC had determined that RSTA Article 26 imposes limitations on eligibility 
based on the enterprise's location in a designated geographical region, the determination of 
regional specificity in this case fails under Article 2.2.The RSTA Article 26 tax credits are generally 
available to all enterprises in that geographical re gion and, therefore, are not limited to "certain 
enterprises". It is particularly inappropriate to  define a "designated geographical region" that 
constitutes 98% of a Member's total territory. This constitutes no identifiable demarcation between 
the "designated geographical region" and the broa der jurisdiction of the granting authority. 
51. Therefore, the tax credits provided under Arti cle 26 are not specific under the principles of 
Articles 2.1(a) and 2.1(b) of the SCM Agreement an d do not constitute subsidies limited to certain 
enterprises located within a designated geographical  region within the meaning of Article 2.2 of the 
SCM Agreement. The USDOC determination to the contrary constitutes violation of these provisions of the SCM Agreement. 
E. The Imposition and Maintenance of Countervailing Duties on Imports of 
Washers Produced by Samsung Are Incons istent With Articles 10 and 32.1 of 
the SCM Agreement 
52. The USDOC's imposition of countervailing duties on Samsung is also inconsistent with 
Article 10 of the SCM Agreement. Moreover, the imposition of countervailing duties on Samsung 
also violates Article 32.1 of the SCM Agreement.  
 WT/DS464/R/Add.1 
 
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  ANNEX B-2 
EXECUTIVE SUMMARY OF THE SECOND  WRITTEN SUBMISSION OF KOREA 
I. USDOC'S WTO INCONSISTENT "ZEROING" METHODOLOGY 
A. Past Appellate Body Report s Apply Equally In This Case 
1. Korea submits that the nine prior AB report s addressing the USDOC's zeroing methodology, 
properly understood, are largely dispositive of the question of whether zeroing is permitted in any 
context of any anti-dumping proceeding, regardless of the particular price comparison 
methodology. Although the Appellate Body may no t have ruled on the specific scenario of the 
application of the second sentence yet, the logic of the prior AB rulings – that "dumping" margins 
must reflect the product as a whole, and must reflect all of the exporter's prices whether or not they are below normal value – applies with equal force under the second sentence. Indeed, the 
Appellate Body has also explicitly rejected the contention that zeroing is permissible under the 
W-T comparison methodology. 
2. The USDOC's zeroing methodology has nothing to do with choosing a comparison 
methodology; rather, the USDOC's zeroing methodol ogy is employed as the very last step of 
calculating the overall dumping margin. The second sentence says nothing about calculating the ultimate dumping margin, and therefore cannot justify the zeroing methodology. 
3. Although the United States argues that the second sentence is an exception, this provision's 
character as an exception does not justify the use of zeroing. There is simply no authority in the Anti-Dumping Agreement or the AB rulings to su pport the U.S. argument that an "exception" 
allows the use of zeroing. The second sentence allows the use of the W-T comparison method, and 
says nothing about zeroing. Everything about th e second sentence – indeed, everything about 
Article 2.4 as a whole, including Article 2.4.2 – deals exclusively with the intermediate comparison 
stage of calculating a dumping margin. 
B. There Is No "Mathematical Equivalence"  
4. The Appellate Body has already rejected the mathematical equivalence argument twice, for 
the reason of the logical flaw in the U.S. argume nt – the reliance on assumptions that create the 
equivalent results. If one simply changes those assumptions made by the United States, the 
equivalence collapses and the two comparison methods yield different results. The U.S. assertion that the W-W and W-T comparison methods will always yield identical results is therefore simply not factually correct.  
5. In further support of these prior AB findings, Korea has provided an expert affidavit by 
Professor Thomas J. Prusa, provided as exhibit KOR-93. His affidavit explains why the alleged mathematical equivalence is completely a construct of the narrow U.S. view about how to calculate 
dumping margins under the exceptional method. Importantly, Professor Prusa also specifically 
disproves the U.S. argument that mathematical equivalence can be seen in the specific facts of the  
Washers  original investigation. Korea has therefore established conclusively that, as a factual 
matter, there is no mathematical equivalence. 
6. Korea has also demonstrated how and why the U.S. legal argument to justify zeroing fails. 
The U.S. legal argument of the need to "unmask" rests on several false premises. First, the U.S. 
argument implicitly assumes the second sentence is about obtaining higher dumping margins. That 
assumption is simply wrong. The zeroing meth odology as employed by the USDOC does not 
contribute to "unmasking" targeted dumping, because zeroing is not used to determine whether there is a "pattern of prices which differ significantly." Next, the U.S. argument assumes that 
without zeroing, the W-T comparison has no purpose. Again, this assumption is simply wrong 
because there is no mathematical equivalence and because the USDOC assumes the only purpose of a W-T comparison is to focus on how the "individual export transactions" are aggregated into a 
single dumping margin. To the contrary, there are other reasons the authority would use the WT/DS464/R/Add.1 
 
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  W-T comparison to allow more careful consideration of the export prices that differ significantly. 
Once the authority is considering individual export transactions, a different form of weighted average normal value might well make sense. For example, the authority might switch from an 
annual average normal value to a monthly average normal value. 
7. Finally, the U.S. argument that Article 2.4. 2 requires an investigating authority to adopt 
identical basis for calculating normal value between W-W and W-T is simply wrong. Article 2.4.2 does not tie the hands of the investigatin g authority in the manner suggested by the 
United States. There are legitimate reasons why an investigating authority might wish to change 
its approach to normal value. 
8. As importantly, the Appellate Body has effect ively already rejected the U.S. argument that 
the W-W and the W-T comparison methodology have to utilize the exact same normal value. 
Indeed, when offered the explicit chance to rule that the calculation of normal value was required 
to be the same under W-W and W-T (when applyi ng the second sentence), the Appellate Body 
declined to do so in two different cases. 
C. There Is No Need To Turn To Negotiating History  
9. The U.S. argument that the negotiating history supports the use of zeroing when 
implementing the second sentence should also be rejected. First, because the terms of 
Article 2.4.2 are unambiguous, resort to negotiating history is not needed. Second, although the 
United States asserts that this provision is a "compromise," the United States has not provided any evidence that the second sentence was adopted as a compromise. Indeed, the real compromise 
was to put the term "fair comparison" into the Anti-Dumping Agreement, not "zeroing." If the 
drafters of the Anti-Dumping Agreement had intended to allow the use of zeroing in the 
second sentence, they would have included the term in the text or more clearly expressed this wish. The U.S. FWS suggests that, during the nego tiations, Japan supported the concept of zeroing 
when implementing the second sentence. Japan flatly rejects the notion that Japan supported the 
use of zeroing in the implementation of the second sentence. The same can be said of Hong Kong's position. 
II. USDOC'S WTO-INCONSISTENT USE OF ARTICLE 2.4.2  
A. The United States Has Misi nterpreted The Pattern Clause 
10. The text requires the analysis to be based on the actual "export prices" themselves. It is the 
"export prices" that must "differ significantly," not the averages of those export prices. There is no 
textual basis to disregard certain differences as "meaningless," while focusing on other differences 
as somehow being "meaningful." The U.S. approach creates bias in the conclusions being drawn by 
understating the variance.  
11. The text also requires the analysis to consider the export prices "among different 
purchasers, regions or time periods." These three ca tegories are each analytically distinct, and are 
separated by the disjunctive "or." Moreover, the purpose of these categories is not simply to 
accumulate differences into an undifferentiated gr oup, but rather to identify price differences 
within each category that might constitute a "pattern" of such differences within that category. That "dumping" requires consideration of the product as a whole does not mean that price differences can be combined into an undifferentiated group.  
12. Pursuant to the second sentence, the proc ess to determine whether the price differences 
really are "significant" and actually constitute a "pattern" should be both qualitative and quantitative. The USDOC never actually tests any aspect of the prices other than their magnitude 
– whether they are "large" price differences, rather than whether the differences are meaningful or 
notable price differences. Prices do not differ "significantly" if the differences are simply the natural and completely expected reactions to normal commercial considerations. Korea is not arguing that 
the authority must consider the exporter's subjec tive intent. Rather, the issue is whether price 
differences are "significant" in the specific context of a particular industry and particular market situations.  WT/DS464/R/Add.1 
 
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  13. The text also requires that the export prices that differ significantly within each category 
must collectively constitute "a pattern." The frequenc y of export prices that "differ" is the starting 
point but not the ending point of a proper analysis  of "pattern." There have to be enough prices 
that "differ significantly" to reasonably preclude the possibility of random price differences. In this 
regard, the factual context, such as normal commercial conditions, does matter. A better 
description of what the USDOC does is to test fo r the number of prices that differ. Another problem 
is the U.S. argument that both higher and lo wer prices can be part of the "pattern." The 
United States allows a "pattern" to be any collecti on of differing prices that exceeds some minimal 
threshold based on the number of transactions.  
1. Inconsistencies in the Washers  original investigation 
14. There are several problems in the Washers  original investigation. First, the USDOC 
calculated standard deviations based on average export prices, not the actual "export prices" 
themselves. Second, the USDOC improperly found th e export prices to "differ significantly" by 
using the average prices, which necessarily made the standard deviations smaller, arbitrarily 
increasing the possibility of finding a pattern. Third, the USDOC made no effort to consider the 
reasons for price differences, instead dismissing such arguments. Fourth, the USDOC improperly found the "pattern" to include all sales, and app lied the exceptional method even to non-patterned 
sales.  
15. To document these errors in more detail, Korea has provided an expert affidavit by 
Professor Prusa explaining and confirming these problems. First, the affidavit stresses that the Nails test is "biased towards finding evidence of targeted dumping." Second, the affidavit 
documents the effect of this bias. If the biased approach was corrected in the Washers  original 
investigation, the USDOC could not have found the "pattern" because about 98% of the export sales had prices that did not differ significantly.  
16. In addition, there is no evidence that the USDOC actually tested for a "sufficient volume" in 
any of its calculations in the Washers  original investigation. The USDOC never explicitly found or 
explained why it deemed so few export  sales to be "sufficient volume." 
2. Inconsistencies in the differential pricing methodology 
17. The differential pricing methodology is also inconsistent with the second sentence. First, the 
USDOC improperly ignores the necessary distinctions among the groups, combining them all into an undifferentiated group. Second, the USDOC improperly finds the export prices to "differ 
significantly," making no effort at all to consider the reasons for price differences, instead 
dismissing such arguments out of hand. Third, th e USDOC improperly finds the "pattern" to include 
all sales whenever more than 66% of the transa ctions pass the threshold test, and therefore 
applies the exceptional method to all sales in that situation. Finally, the USDOC finds prices to 
"differ significantly" relying on a misuse of the Cohen's d test, without reflecting the actual 
distribution in the prices – that Professor Cohe n himself and other scholars have warned against. 
18. To be clear, although the USDOC is trying to create the illusion of statistical validity, the 
Cohen's d test simply measures and standardizes the size of a difference between two mean 
values. The Cohen's d test is not a measurement of significance. Professor Cohen himself and a 
generation of scholars have stressed the importance  of context and avoiding "mindless rigidity" in 
using the Cohen's d test. The United States has extensively studied the market for large residential 
washers. There is nothing "significant" in this market – nothing that is meaningful or noteworthy – about prices that vary over time, across customers, and across regions in this particular industry. 
Nor is there anything significant about prices being lower during a well-known holiday season sale 
period.  
B. The United States Has Misint erpreted the Explanation Clause 
19. Merely showing the difference of the result s between W-W (without zeroing) and W-T (with 
zeroing) does not meet the textual obligation of "explanation." The investigating authority must provide the specific reason and "explain" why it must resort to the exceptional comparison method, and why it was not possible at all to account for these differences using the normal 
comparison methods. The use or non-use of zero ing cannot constitute a permissible "explanation" WT/DS464/R/Add.1 
 
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  because even a comparison between W-W with zeroing and W-W without zeroing will produce 
different results, even if the sale s in both groups were the same.  
20. The text also specifies that the authority "c annot" use the normal comparison methods. That 
using the normal comparison method might be more  burdensome does not matter; rather, it must 
not be possible to use the normal comparison methods. The authority must explain why the 
normal methods are not sufficient to allow "appropriate" use of those methods.  
21. The term "appropriate" requires the explanation to address why in a particular case the 
particular price differences are such that they cannot "be taken into account appropriately" 
through this normal comparison method. This phrase  also requires some qualitative assessment of 
the objective circumstances of a particular produc t and industry. The text of the second sentence 
adds the term "appropriately" because even after all the adjustments for price comparability have 
been made, there still might be circumstances where price differences can be taken into account 
"appropriately" without the need to resort to the exceptional W-T comparison method.  
22. The United States also ignores the express obligation to provide an "explanation" with 
reference to both of the normal comparison me thods. The last part of the second sentence 
explicitly references the use of either W-W or T-T comparisons, requiring the authority to address 
both methods. 
1. Inconsistencies in the Washers  original investigation 
23. The United States has confirmed that its "explanation" in the Washers  original investigation 
consisted entirely of its findings that the ov erall dumping margins differed between W-W without 
zeroing and W-T with zeroing. There are two problems. First, the USDOC made no effort to explain 
why any differences could not be taken into account "appropriately.. Rather, the USDOC assumed 
without any explanation that if there was a difference in the overall margin, then the difference necessarily could not be taken into account. Second, the United States also argues that the 
"differences resulted in a change from a determination of no dumping to an affirmative 
determination of dumping." These differences are really just the difference between a margin based on zeroing and a margin not based on zeroing. 
2. Inconsistencies in the differential pricing methodology 
24. Under its differential pricing methodology, the USDOC continues to look exclusively to the 
differences in the margin and considers no other factors. The USDOC applies the same 25% threshold in every case regardless of the facts and regardless of how small the change in the 
margin might be. Even tiny shifts in the margin will be considered meaningful if they are larger 
than this fixed 25% threshold. Again, the USDOC continues to ignore the requirement to address 
the T-T comparison method in its explanations.  
C. The United States Has Misinter preted The Scope of The Exception 
25. The United States incorrectly argues that no matter how few transactions meet the 
conditions, the exception can apply to all transactions. First, it ignores the logical relationship 
between a basic rule and an exception. Second, it ignores the textual reference to "such 
differences." Third, the Appellate Body in US-Zeroing (Japan)  definitely stated that the phrase 
"individual export transactions" refers "to the transactions that fall within the relevant pricing pattern. This universe of export transactions would necessarily be more limited." The U.S. 
interpretation ignores this key finding. 
1. Inconsistencies in the Washers  original investigation 
26. There is no dispute that the USDOC applied the W-T comparison method with zeroing to all 
of the sales by both of the Korean respondents, de spite the fact that in the final determination in 
the Washers  original investigation, the USDOC confirmed that the vast majority of the transactions 
– more than 90% – were found not to be "targeted." WT/DS464/R/Add.1 
 
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  2. Inconsistencies in the differential pricing methodology 
27. Under the differential pricing methodology, the USDOC also does not properly limit the 
application of the W-T comparison method to those transactions found to meet the conditions. In the differential pricing methodology, if more than 66% of the sales pass the Cohen's d test, then 
the USDOC subjects all sales to the W-T comparison method with zeroing. This feature is part of 
the measure – the differential pricing test – that is used consistently in every USDOC original investigation and administrative review. 
D. The United States Improperly Engages In Systemic Disregarding 
28. Under the differential pricing methodology, the USDOC often creates subsets, applying a 
W-W comparison without zeroing to one subset an d a W-T comparison with zeroing to the other 
subset. The USDOC sets any such negative margins in the W-W subset equal to zero, and ignores 
them when determining the overall margin of dumping. This systemic disregarding necessarily 
inflates the overall dumping margin, contrary to  the concepts of "product as a whole." This 
systemic disregarding of negative margins is essentially a new form of WTO-inconsistent zeroing. 
The generic SAS code for differential pricing shows this methodology. And, the SAS code used in 
the preliminary determination in the Washers  administrative review confirms the use of this 
generic SAS code. 
E. Korea Has Properly Challenged The Differential Pricing Methodology 
29. "As Such": Korea has summarized the substant ial amount of evidence already provided to 
this Panel to demonstrate both (1) the precise content and (2) the general and prospective 
application of the differential pricing methodology. The evidence of the measure's general and 
prospective application thus occurred between March 2013 and December 2013, and then 
continued throughout all of 2014 and into early 2015. The evidence continues to accumulate to this day. Nothing in the Appellate Body decisions indicates that this Panel must ignore evidence of 
continuing application of a measure during the pendency of a dispute. If this Panel accepts the 
U.S. logic that since a measure might change it cannot be challenged, the Panel would make virtually it impossible to challenge any WTO-inconsistent measure "as such" or more generally. 
Such an approach would limit panels to the pa st application of a measure, and preclude any 
challenge to the ongoing measure. It makes no sense to open such a "back door" to allow WTO-inconsistent measure to escape meaningful review that might prevent the occurrence of 
future disputes.  
30. The United States confuses the key distinction between applying the same differential 
pricing methodology in every instance, and what remedy is applied in each particular case given 
the results of the application of the methodolog y. The best analogy is the WTO dispute over 
zeroing. The fact that zeroing does not always show up in the results does not mean there is no 
zeroing methodology that may be challenged "as such." To the contrary, zeroing was challenged 
and found to be inconsistent "as such" with the Anti-Dumping Agreement. The same logic applies 
here. 
31. "Ongoing Conduct": Korea raised an "ongoing  conduct" claim because Korea knew that the 
differential pricing methodology would be applied to the Korean exporters in the first 
administrative review of the anti-dumping order. Precisely as Korea anticipated, the USDOC 
applied the differential pricing methodology in exactly the same manner in the preliminary 
determination recently announced in the Washers  administrative review in March 2015. Korea is 
not seeking to challenge the differential pricing methodology as a future measure that has not yet 
occurred. Rather, this challenge is to the well-defined and consistently applied differential pricing 
methodology that already exists.  
32. "As Applied": Korea's point about the preliminary determination in the Washers  
administrative review being subject to challenge "as applied" simply notes that the differential 
pricing methodology has in fact been applied yet again. First, the application occurred in the context of the very anti-dumping order that is th e subject to this dispute. Although the USDOC has 
not yet published its final determination, that fina l determination will occur during the pendency of 
this dispute, before the Panel has to issue any findings. Second, the differential pricing 
methodology was very much subject to the consultations. The United States does not claim that WT/DS464/R/Add.1 
 
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  the differential pricing methodology applied in the preliminary determination in the Washers  
administrative review was in any way different. Third, although it is true that the differential pricing methodology does not yet have the same long, drawn-out history that the zeroing 
methodology has had in the WTO, as the United States notes in its argument, it is precisely these 
long, drawn-out disputes that Korea seeks to avoid. It would be contrary to Article 3.3 of the DSU 
and the principle of the "prompt settlement"  of disputes to avoid the issue now.  
III. THE USDOC'S CVD DETERMINATION IS  INCONSISTENT WITH THE GATT 1994 AND 
THE SCM AGREEMENT 
A. The USDOC's "Disproportionately Larg e Amount" Analysis Is Inconsistent 
With Article 2.1(c) of the SCM Agreement 
33. The USDOC's continuing reliance upon the fact that Samsung received 24% of the total tax 
credit amounts to the mere conclusion that it received both a "large" amount and a "large 
proportion" of the total amount. The United States contends that the mere size of Samsung's credit compared to the size of the credit received by other companies speaks for itself because the 
size is "significant." However, size alone cannot be the measure of disproportionality, especially 
where the benefit is directly proportionate to the amount of the eligible investment.  
34. The United States refuses to say what a "proportionate" amount would have been or what 
would have been expected under all the circumstances, which is a strong indication of the 
fundamental infirmity in its position. The United States also fails to explain why the USDOC would have expected the tax credits to be distributed "more evenly across the program's 11,764 recipients." In this regard, it wrongly equa tes an expected distribution with a more level 
distribution among all recipients. 
35. In U.S. – Large Civil Aircraft (2nd complaint) , the United States contended that it was not 
possible to determine whether a subsidy was larger than it should be without first determining the 
relationship of the relative size of the subsidy compared to the total subsidy awarded to other 
recipients, i.e., the "first ratio," to some other measure of relative importance or significance. This relational concept requires use of a "second ratio." The United States stated that, "the numerator 
of the second ratio must consist of some information about Boeing, such as its size as measured 
by annual revenue, while the denominator must consist of comparable information about the group of recipients of the alleged subsidy as a whole."  
36. The United States in EC and certain member States – Large Civil Aircraft  continued to 
maintain its position that disproportionality could only be measured by use of a second ratio. The 
Appellate Body agreed with the United States that  disproportionality could only be evaluated using 
a second ratio. Although, the Appellate Body reje cted the second ratio that the United States 
proposed, the Appellate Body insisted on the need fo r an appropriate ratio before it could find that 
a subsidy was not disproportionately large. However, the USDOC failed to provide in the Washers  
case the type of evidence that both the Appellate Body and a Panel have found is essential in order 
to evaluate the issue of disproportionality.  
37. The United States next contends that Korea has incorrectly asserted that RSTA 
Article 10(1)(3) provides tax credit benefits pursuant to a common formula. However, the United States impermissibly conflates the formula that a company uses to calculate the tax credit 
that it earns in a particular year with the amount that a company may claim on its tax return. The 
latter amount may be affected by tax planning considerations, including the effects of carry forward provisions and minimum tax requirements. However, these unrelated tax law provisions 
do not affect the amount of the Article 10(1)(3) tax credit that a company earns in a particular 
year, which is calculated using a formula that is common to all taxpayers. Moreover, there is no evidence that Korea designed or enacted this program to benefit large companies generally or 
Samsung specifically. Rather, Article 10(1)(3) benefits every company in the same way that 
invests in R&D activities, regardless of its size.  
38. A WTO Panel found that the requirement in the final sentence of Article 2.1(c) is not 
dependent upon whether an interested party raised the relevance of the two factors - "length of 
time" and "diversification." Moreover, there is no question that Samsung raised the "length of WT/DS464/R/Add.1 
 
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  time" and "diversification" issues, but the USDOC failed to respond to them in its I&D 
Memorandum or in any other document, as required by WTO jurisprudence. 
39. The United States' reliance on the findings in its redetermination upon remand from the U.S. 
Court of International Trade must also fail because, inter alia, the amount that a particular 
company claims on its tax return as a credit under Article 10(1)(3) is, in significant part, a function 
of tax planning. In fact, the percentage amount of the tax reduction that Samsung derived from Article 10(1)(3) is integrally related to the amount of tax credits that it earned and claimed on a 
wide variety of unrelated programs.  
B. The USDOC Was Able To Tie Samsung's  Tax Credits To Washer Production 
40. The fatal flaw in the USDOC's calculation of the countervailing duties attributable to the tax 
credit benefits that Samsung received under Article 10(1)(3) and Article 26 is that it calculated the 
tax credit benefit that Samsung received on all of the products that it produced, not just the large 
residential washers that it produced, and then allocated a pro rata portion of that benefit to washers. As a result, the USDOC violated Article VI:3 and Article 19.4 by not calculating the tax 
credit that Samsung earned that was attributable solely to the washers that it produced in its 
Digital Appliance Division. Had the USDOC complied with its WTO obligations, it would have determined that the tax credits that Samsung received on its production of washers provided a 
de minimis benefit of less than 1% ad valorem . 
41. Thus, the USDOC made no effort "to ascertain the precise amount of subsidy attributable to 
the imported products under investigation" as required by the Appellate Body. Nor did it "take all necessary steps to ensure" that the countervailing duty did not exceed the amount of the benefit 
that the tax credit conferred on Samsung's washers. Nor did it "actively seek out pertinent 
information."  
42. The USDOC instead chose to remain passive based on an irrebuttable presumption that the 
tax credits could not be tied to a particular product category unless the intended uses of the tax 
credits "were known to the subsidy giver (in this case, the GOK) and so acknowledged prior to or concurrent with the bestowal of the subsidy." Under Korea's tax credit laws, it was impossible for 
Samsung to satisfy this requirement, which made  the USDOC's presumption irrebuttable. This is 
because the government of Korea chose not to require taxpayers to identify in their tax returns the amount of any particular expenditure that pertained to any particular product. However, the Appellate Body in US – Countervailing Measures on Certain EC Products  has stated that an 
irrebuttable presumption may not be used in an investigation. 
43. The very same types of records that the USDOC relied upon in the Refrigerators  and 
Washers  anti-dumping investigations formed the basis for Samsung's calculation of the eligible 
expenditures that entitled it to claim tax credits under Articles 10(1)(1), 10(1)(2) and 10(1)(3). It 
is clear from these records that Samsung could tie its eligible expenditures directly to the Digital Appliance Division.  
44. Even if the USDOC's requirement does not constitute an impermissible and irrebuttable 
presumption, ample evidence shows the WTO-inconsistency of the USDOC's refusal to allow Samsung to demonstrate that it could tie its Article 10(1)(3) and Article 26 tax credits to the eligible expenditures made by its Digital Appliance Division. First, on the date that Samsung filed 
its tax return for tax year 2010, Korea's National Tax Service had the legal ability to know exactly 
which tax credits were earned on those investments made by Samsung's Digital Appliance Division. There is no dispute that Samsung maintained these records, which the USDOC refused to 
examine when Samsung presented them at the verifi cation of its questionnaire responses. There is 
also no dispute that the Korean tax authorities could have examined these records at any time, 
either before or after Samsung filed its tax retu rn. Second, the United States cannot articulate 
what purpose would have been served by requiring Samsung to submit these records to the 
Korean tax authorities, or a summary of them, at the same time as it filed its tax return. Third, when Samsung did submit evidence of its "tying" of expenditures under Articles 10(1)(1) and 10(1)(2), which showed that the expenditures were made on R&D activities other than those 
related to washers, the USDOC refused to examine that evidence.  WT/DS464/R/Add.1 
 
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  45. The United States nevertheless asserts that the SCM Agreement does not require it to "trace 
which portions of the total subsidies were related to underlying expenditures in Samsung's Digital Appliance business unit." However, the USDOC's analysts in fact had traced R&D expenditures on digital appliance products to the books and re cords of the Digital Appliance Division on 
two separate occasions. Accordingly, all of th ese circumstances meant that the USDOC could not 
ignore the evidence Samsung provided and offered to provide, which allowed the tying that Article VI:3 and Article 19.4 require.  
C. The Calculation of the Denominator Sh ould Include The Sale s Value Of Global 
Production, Not Just Production In Korea 
46. In its countervailing duty investigation in the Refrigerators  case, the USDOC used Samsung's 
global sales value, not the value of its sales within Korea, in order to calculate the ad valorem  
benefit of the Article 10(1)(3) tax credit. In contrast, in the Washers  investigation, the USDOC 
reversed its position and found, without any factual basis, that the very same types of R&D investments and resulting tax credits benefited only Samsung's local production and sales. 
47. The United States' claim that "Korea offers no evidence of these supposed overseas effects" 
is contradicted by the USDOC's own findings in the Refrigerators  subsidy investigation, where the 
USDOC found that R&D activities had effects on overseas production both with respect to R&D tax 
credit programs and R&D grant programs. The United States should not be allowed to escape the 
consequences of its own inconsistent findings. 
48. The United States contends that Article 19. 4 of the SCM Agreement and Article VI:3 of the 
GATT 1994 "do not require Members to take into  account products manufactured outside the 
territory of a subsidizing Member when calculating subsidy rates." This assertion is simply wrong 
because it violates the matching principle and, for this reason, the United States is unable to 
identify any investigation or administrative review in which the USDOC has held that the benefits 
of a countervailable subsidy may never benefit overseas production. Moreover, if the 
United States' position were correct, then the denominator that it would use to calculate the subsidy margin for any particular program could never be a company's worldwide sales of its 
global production. However, as noted above, in the Refrigerators  subsidy investigation, the USDOC 
used Samsung's global sales, not its local sales, on numerous occasions.  
49. The United States argued in its FWS that it would have been too burdensome for the USDOC 
to trace the effects of R&D subsidies. This argument is contradicted by the USDOC's use in the 
Refrigerators  subsidy investigation of the global sales denominator, as well as by the USDOC's 
findings in both the Washers  and Refrigerators  anti-dumping investigations that the R&D activities 
that Samsung conducted in Korea benefited worldwide production and sales. 
D. The Tax Credits That Samsung Received Under RSTA Article 26 Do Not 
Constitute Specific Subsidies Within The Meaning Of Article 2.2 Of The SCM Agreement 
1. It is without dispute that RSTA Article 26 does not impose limitations 
on the location of the enterprises receiving the subsidies 
50. RSTA Article 26 subsidies are available to enterprises located anywhere in Korea. The 
provisions of Article 26 and the Enforcement Decree do not specify, either de jure  or de facto , any 
limitations on the location of the enterprises rece iving the subsidy. The enterprises earning the tax 
credits may be located anywhere in Korea. 
2. The United States seeks to improp erly expand the scope of Article 2.2 
of the SCM Agreement  
51. Article 2.2 of the SCM Agreement is not in tended to be a broad "catch all," as the 
United States would have it, but rather, is narrowly concerned with geographical limitations on the 
location of the enterprises that are eligible to receive the subsidy. Other types of limitations are 
addressed by Article 2.1, which covers a different range of circumstances that could lead to a finding of specificity. Article 2.2 is very precise in defining the type of limitations that it addresses. Unlike Article 2.1 which broadly addresses limitations on the enterprises receiving the subsidy, WT/DS464/R/Add.1 
 
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  Article 2.2 is specifically and exclusively concerned with limitations on the location of the 
enterprises. Article 2.2 is further narrowed by specif ying that the limitations must be related to the 
geographical location of the enterprises.  
52. The Appellate Body interpreted the term "enterprise" to mean "[a] business firm, a 
company." The United States appears to rely on the compound term, "certain enterprises," and the 
definition of this term provided in the chapeau of  Article 2.1. However, the fact that the drafters 
expressly referred to aggregate forms of enterprises in the definition of "certain enterprises" but 
did not refer to sub-divisions of such enterprises,  strongly suggests that they did not intend the 
term to be expansive, as argued by the United St ates. In addition, Article 6.1(c) indicates that the 
term "enterprise" refers to a business organization that maintains its own accounting and reports its own operating profits and losses. Such description would not be fitting for facilities or 
investments. Moreover, paragraph (e) of the Illustrative List of Export Subsidies refers to the 
"exemption, remission or deferral specifically related to exports, of direct taxes or social welfare charges paid or payable by industrial or commercia l enterprises." The use of the term "enterprise" 
in this context also denotes an operating business organization. Indeed, this paragraph indicates 
that an enterprise is an entity capable of directly paying taxes and social welfare charges.  
53. Importantly, the SCM Agreement draws an express distinction between "enterprises" and 
"facilities." Article 8.2(c) is specifically addresse d to "assistance to promote adaptation of existing 
facilities to new environmental requirements." The drafters, therefore, used the term "facilities" when they intended to refer to particular operatio ns or manufacturing plants that belonged to an 
enterprise. Article XVII of the GATT 1994 also uses the term "enterprise" to refer to the broader 
business organizations maintained or established by States. The reference is to the overall 
business organization and not to particular operations or investments of such enterprise.  
3. The United States fails to demonstrate that RSTA Article 26 
"designates" a geographical region where enterprises receiving the 
subsidy must be located 
54. RSTA Article 26 does not designate or affirmat ively identify a geographical region within the 
jurisdiction of the granting authority. To the extent that Article 26 designates any geographical 
region, it designated the region where investments will not be granted a subsidy.  
55. Even if it were possible to designate the geog raphical region by implication -- a conclusion 
that is difficult to reconcile with the ordinary meaning of "designate" -- no such geographical 
region is designated by Article 26. The area outs ide the overcrowding control region of the Seoul 
Metropolitan Area constitutes 98% of Korea's land mass. The area essentially overlaps with the jurisdiction of the granting authority. It has no physical or natural features, or character, that 
distinguishes it as a "geographical region." 
56. Korea is not putting forward a "size" defense as the United States inaccurately describes it. 
Rather, Korea's point is that, where there is no identifiable demarcation between the area in which 
a subsidy may be used and the broader jurisdiction of the granting authority, and where the 
degree of overlap between the two is almost total,  there is effectively no limitation as to the 
geographical location of the enterprises. 
4. The United States does not adequately respond to the policy concerns 
raised by Korea 
57. Under the U.S. interpretation, subsidies provided for any investment made anywhere in the 
vast majority of a country's territory would be considered to be regionally specific. The U.S. 
position is too extreme, runs completely counter to the concept of "specificity," and yields 
outcomes that could not have been intended  by the drafters of the SCM Agreement.  
58. RSTA Article 26 is essentially a zoning regulation, and any sensible reading of the 
SCM Agreement would not support a conclusion that turns a capital city zoning regulation into an 
illegal subsidy. The U.S. approach to Article 2.2 would constrain WTO Members from pursuing policies to relieve over-congestion and income disparity in large urban areas, a problem that is common to most developing, and some developed, countries. Such limitations could not have been WT/DS464/R/Add.1 
 
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  intended by the drafters and would have a "chilling effect" on what are sensible and increasingly 
necessary policies given the growing number of megacities.  
59. The circumvention concerns raised by the United States are also unjustified. Where a 
program allows investments essentially throughout the complete jurisdiction of the granting 
authority, there is effectively no limitation on the recipients of the subsidy. A further safeguard 
against circumvention is that eligibility under such  programs would have to be subject to objective 
criteria, like RSTA Article 26. Any express limitations that do not meet the requirements of 
Article 2.1(b) of the SCM Agreement could give rise to a finding of de jure  specificity under 
Article 2.1(a). Similarly, any indication that a program is de facto  specific could be examined under 
Article 2.1(c). Accordingly, the circumvention concerns alluded to by the United States do not arise.  
5. The U.S. position is internally inconsistent 
60. The United States has argued that Article 2.2 does not require that the subsidy be limited to 
a subset of enterprises located with the desi gnated geographical area. In its FWS, the 
United States simply chose to ignore the term "certain" from Article 2.2, as well as the definition of 
"certain enterprises" in the chapeau of Article 2. 1, and instead argued that the subsidy that is 
available to all enterprises within a designated geographical region is nonetheless specific. 
61. Yet, in responding to the Panel's questions, the United States relies heavily on "certain 
enterprises" in Article 2.1 and applies it to Article 2.2. The chapeau of Article 2.1 defines the term "certain enterprises" as "an enterprise or industry or group of enterprises or industries." As defined 
in Article 2.1, the term "certain enterprises" necessarily refers to a subset of enterprises. 
Otherwise, subsidies provided to all enterprises would be specific under Article 2.1(a). 
62. Thus, if the United States relies on the defini tion of "certain enterprises" in Article 2.1 to 
interpret Article 2.2, then it must accept the full implications that flow from the application of that 
definition. In particular, the United States must accept that transposing the definition of "certain 
enterprises" from Article 2.1 to Article 2.2 necessarily means that only subsidies that are limited to a subset of enterprises located within a designated geographical region are specific for purposes of 
Article 2.2.  
 
 WT/DS464/R/Add.1 
 
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  ANNEX B-3 
EXECUTIVE SUMMARY OF THE OPENIN G ORAL STATEMENT OF KOREA  
AT THE FIRST SUBSTANTIVE MEETING 
1. The U.S. Department of Commerce ("DOC") has been using its new targeted dumping 
methodologies to circumvent WTO rulings that pr ohibit the zeroing methodology for all purposes. 
The DOC also applied the SCM Agreement arbitrarily and misunderstood the Korean government's legitimate policy tools.  
2. The issues of zeroing and targeted dumping ar e closely related, but distinct issues. The U.S. 
has tried to blur these two issues, by arguing that since the second sentence of Article 2.4.2 of the 
Anti-Dumping Agreement ("the second sentence") is  an exception, the use of zeroing is somehow 
the inevitable and exclusive remedy for targeted dumping. The U.S. has basically two arguments. 
First, the Appellate Body ("AB") has never before ruled on the application of W-T pursuant to the 
second sentence. Second, because of mathematical  equivalence, the second sentence must allow 
zeroing. 
3. Although the AB may not have ruled on this specific scenario yet, the logic of prior AB 
rulings – that "dumping margins" must reflect the product as a whole, and must reflect all of the 
exporter's prices, both dumped and non-dumped, a pplies with equal force to the second sentence. 
The use of zeroing in the context of targeted dumping ignores the same basic principles the AB has 
repeatedly applied to find zeroing WTO-inconsistent in all other contexts. The U.S. has provided no explanation of how the need to "unmask" allegedly targeted dumping in any way changes these basic principles.  
4. The basic mechanism of zeroing is the same in all three comparison methods – W-W, T-T, 
and W-T – and thus, zeroing under all three of th ese comparison methods has been found to be 
WTO-inconsistent. There is no basis in the text of Article 2.4 or the AB interpretation of that 
provision to support the "exception" argument by the U.S. government.  
5. The U.S. argues that W-T is an exceptio n to W-W and T-T, and therefore, by logical 
extension, W-T should "lead to results that are systemically different." This argument seriously 
misconstrues the AB's findings. The AB has never said that the results of the symmetrical 
comparison methods (W-W and T-T) and the unsymme trical comparison method (W-T) have to be 
different. Rather, the AB was merely addressing th e logic of certain interpretative arguments made 
by the parties in those earlier disputes.  
6. The U.S. further argues that without system ically different results, the second sentence 
cannot unmask targeted dumping and would thus be inutile. W-T is a different method, but that does not mean the outcome must be different. The outcome may or may not be different, 
depending on the facts and assumptions used. Also, the fact that W-T is a different method does 
not mean that the method necessarily needs to include the use of zeroing. The comparison methods employed in both T-T and W-T are basicall y identical in the sense that individual export 
prices are compared in both methods. Thus, if the use of zeroing is prohibited in the 
T-T comparison method that focuses on individual export prices, the use of zeroing in the W-T comparison method that also focuses on indivi dual export prices must be prohibited as well. 
7. Although the U.S. devotes much of its argument to mathematical equivalence, this 
argument has repeatedly been rejected by the AB. The U.S. makes specific assumptions that yield 
equivalence. But if one simply changes those assumptions, the equivalence collapses and the two comparison methods yield different results. Korea provides two expert opinions and actual 
examples from the Washers  investigation that support the AB's findings. 
8. Professor Thomas J. Prusa explains why the alleged mathematical equivalence is based 
wholly on assumptions the U.S. makes about how to apply the second sentence. He then gives 
several examples of alternative methods that do not yield equivalent AD margins. He also 
disproves the U.S. argument of equivalence in the specific facts of the Washers  investigation. 
Professor Prusa and Ms. Anya Naschak show, using actual Washers  price data, that once U.S. 
assumptions on calculating margins under different scenarios are changed, the equivalence 
disappears. The results confirm that under the same set of assumptions that the DOC consistently WT/DS464/R/Add.1 
 
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  uses in its standard administrative review methodology, the margins in the Washers  investigations 
were different under the tw o comparison methods.  
9. Even if the two comparison methods led to the same margin, the second sentence still does 
not become inutile. The exception in the second sentence allowing use of the "prices of individual 
export transactions" can also be given meaning through more detailed adjustments to ensure price 
comparability pursuant to the overarching obligation of "fair comparison" under Article 2.4.  
10. The U.S. argues that the past AB decisions do not apply to this dispute, mainly because the 
DOC had never applied W-T in the context of the second sentence. But these prior AB findings in 
no way depend on the DOC having actually applied the second sentence. Again, the AB stated that 
the principles that "dumping margins" must reflect the product as a whole and must reflect all of the exporter's prices apply with equal forc e to the entire Anti-Dumping Agreement. 
11. With respect to targeted dumping issue, Arti cle 2.4.2, the second sentence requires three 
conditions. First, the investigating authority must find a "pattern" based on actual export prices that differ "significantly," not just a finding that  export prices differ in some way that does not 
amount to a "pattern" and is not "significant." Se cond, the investigating authority must provide an 
"explanation" of why the W-T method is necessary, not just a statement that the result is different. Third, the investigating authority must limit the W-T comparison method to those sales 
that have actually met the conditions for invoking this exceptional method. The DOC violated all of 
these conditions in both its old Nails test and the current differential pricing test. 
12. Both the Nails and differential pricing tests apply a purely mechanical and unfair 
methodology, contrary to the correct interpretation  of the terms "pattern" and "significant." Such 
mechanical and overbroad tests are clearly inconsistent with the second sentence as well as 
Article 2.4. 
13. Prices may "differ" but these differences do not constitute a "pattern" and do not differ 
"significantly" if the differences simply reflect normal commercial considerations such as price 
fluctuations of raw materials. The proper inquiry therefore must involve both qualitative and quantitative aspects, unlike the fixed quantitative methodology that is employed by the U.S. in its 
Nails and differential pricing tests. For example, in its Nails test, the DOC compressed the actual 
prices into a handful of average prices, and then ignored the actual export prices themselves. By 
doing so, the DOC found a pattern that did not exist at all because it was not reflective of actual prices. To explain this error, Korea submitted a second affidavit by Professor Prusa.  
14. The U.S. claims that it does consider qualitative aspects. In reality, however, the 
U.S. attempts to identify small differences in prices as being "significant" without providing any meaningful reasons to support its claim. Contrary to U.S. arguments, Korea is not suggesting that 
the investigating authority must consider the exporter's subjective intent in setting prices. The 
issue under the second sentence is the pattern of prices that differ significantly and what those differences mean. If the prices differ for normal commercial reasons, then those prices do not 
constitute a "pattern" of prices that "differ significantly" within the meaning of the 
second sentence. 
15. The DOC did not and still does not provide any meaningful explanation pursuant to the 
second sentence. The main U.S. argument is that the DOC has fulfilled the obligation of 
explanation by simply comparing the result of the W-T comparison method with zeroing and the 
result of the W-W method without zeroing. However, selective application of the zeroing methodology does not fulfill the obligation of "explanation." The investigating authority must 
provide the specific reason why it must resort to the "exception," as well as why it was not 
possible at all to account for these differences using the normal comparison methods. Korea emphasizes that the DOC has made no effort whatsoever to explain why the use of a 
T-T comparison cannot appropriately take into account such price differences.  
16. There is no textual basis for the DOC to puni tively apply the W-T comparison with zeroing to 
all of the transactions, whether or not they met the conditions under the second sentence. To defend its flawed interpretation of the term "patte rn," the U.S. twists the issue by saying that a 
"pattern" necessarily involves all of the transactions, including those with higher prices and lower 
prices. In Washers , the DOC found about 90% of the sales by the Korean exporters not to satisfy 
the criteria for imposing the W-T comparison, but still imposed both the W-T comparison and the 
zeroing remedy to all the sales. However, the AB in US-Zeroing (Japan)  clearly stated that it read 
"the phrase 'individual export transactions' in that sentence as referring to the transactions that fall within the relevant pricing pattern."  WT/DS464/R/Add.1 
 
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  17. The differential pricing test artificially raised the possibility of finding a pattern by combining 
the purchasers, place, and time periods. This appr oach violates the plain language of the second 
sentence, which explicitly sets the categories with  the conjunction "or": the pattern must exist for 
either purchasers, or for regions, or for time periods. Contrary to what the second sentence 
instructs, the DOC accumulates price differences fr om each category even when individually they 
would not meet the second sentence. The DOC then aggregates all three categories to create the 
appearance of meeting the second sentence criteria even when, in fact, they have not been met.  
18. Furthermore, the DOC has invented a new type of zeroing when using the W-W comparison, 
which Korea refers to as "Systemic Disregarding." In the differential pricing test, the DOC disregards the negative margin of the W-W comparison and assigns a zero instead, when transactions fall between 33% and 66%. The negative margin comes from transactions not 
meeting the criteria of the second sentence. 
19. The differential pricing test is a mandatory measure that is inconsistent "as such" with the 
second sentence. Korea showed how this measure m eets each of the three elements identified by 
the AB. To further prove its claim, Korea provides an expert opinion by Ms. Anya Naschak, a 
former DOC official, on the nature and application of the new differential pricing test that confirms its precise content and consistent application in every case since its adoption. It specifically 
addresses and debunks the U.S. argument that the SAS code for the test may change from case to 
case.  
20. Moreover, Korea has presented more than just a string of cases that coincidentally repeat 
the same actions. Korea is providing Exhibit KO R-95 showing all DOC decisions after the adoption 
of the new differential pricing test in March 2013. There were 138 proceedings where DOC had any 
need to test U.S. prices and thus had any reason  to apply the test. Of those 138 proceedings, the 
DOC applied the test in all 138 proceedings – in 100 percent of those instances. 
21. The U.S. confuses the distinction between, first, applying the same differential pricing test in 
every instance and, second, what remedy is applied in each particular case given the results of the 
application of the test. What remedy is applied may vary from case to case, but the test itself is 
identical in every case and is applied without exception or variation when the DOC determines that 
there are prices to be tested.  
22. The differential pricing test also constitutes ongoing conduct that should be reviewed by this 
Panel. Korea's panel request specifically identified this test as one of the measures subject to the 
dispute, and also specifically included among its claims a challenge to the "ongoing practice" 
concerning targeted dumping and differential pricing.  
23. Turning to the subsidy claims, Korea submits that the DOC's finding that Samsung received 
a "disproportionately large" amount of the total benefit under RSTA Article 10(1)(3) is inconsistent 
with Articles 1.2 and 2.1(c) of the SCM Agreement. While Samsung claimed on its 2011 tax return a larger amount of the tax credit than the average amount claimed by other Korean companies, 
the amount of the credit that Samsung received  was solely determined based on the statutory 
formula. The U.S. approach replaces Article 2.1(c)'s "disproportionality" analysis with an absolute size analysis. However, the subsidy was proportionate to the amount of its investment. Any other company that made a similar sized investment woul d have received the same tax credit benefit. 
Therefore, the subsidy cannot be disproportionate. 
24. Moreover, as was made clear by the AB in US – Large Civil Aircraft , an investigating 
authority conducting a "disproportionately large amount" analysis under Article 2.1(c) must 
compare the actual  allocation of the subsidy to what would otherwise be expected  if the statutory 
scheme were to be followed as it is stipulated. In  its investigation, the DOC failed to conduct the 
inquiry that the AB has required. The test articulated by the AB in US – Large Civil Aircraft  requires 
the investigating authority to compare the allocation against a second ratio reflecting the expected 
distribution of the subsidy as determined by the conditions of eligibility. The U.S. strongly contended in that case that a second ratio was required, but here the U.S. has abandoned the very test that it sought in Large Civil Aircraft . Furthermore, the DOC also failed to conduct the economic 
diversification and duration of the program analyses that are mandatory under Article 2.1(c).  
25. Article VI:3 of the GATT 1994 and Article 19.4 of the SCM Agreement both require that 
countervailing duties be limited to offsetting the amount of subsidies provided to the product 
subject to investigation . The DOC simply disregarded this clear requirement. As a result, the DOC 
improperly attributed to washers a portion of the tax credits that Samsung received which were attributable to investments benefiting the production of products other than washers.  WT/DS464/R/Add.1 
 
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  26. An accurate calculation of Samsung's subsidy margin for both the Article 10(1)(3) and 
Article 26 tax credits should have used Samsung's tax credit received on its Digital Appliance investments, including its large residential washers ("LRW") investments, in the numerator and Samsung's sales of Digital Appliances, including LRW, in the denominator, in order to calculate the 
ad valorem margin for the product under investigation. Because all of the information was readily 
available during the investigation, an accurate calculation would have been easy and simple. The DOC, however, refused to examine the detailed do cumentation of all of Samsung's R&D expenses 
and facilities investments. Instead, it calculated Samsung's ad valorem  subsidy margin using the 
tax credits bestowed on all of Samsung's products in the numerator and its sales of all products in 
the denominator. The DOC's final margin calculatio n, therefore, assigned to subject merchandise a 
substantial amount of the tax credits earned by Samsung for eligible expenditures that benefitted 
the production and sale of products other than  digital appliances. 
27. The DOC's stated reason for refusing to receive, let alone examine or verify, Samsung's data 
and documentation was that it would allocate a subsidy to one or more specific products only upon 
a showing that the subsidy was "tied" to the production or sale of such products. Korea finds it 
ironic that the U.S. takes the position that it must be able to tie a subsidy to a particular product while at the same time it refuses to examine evidence that such tying can be made. 
28. The DOC's finding that the Article 10(1)(3) tax credits benefited only the products that 
Samsung produced and sold in Korea is also inconsistent with Article VI:3 of the GATT 1994 and Article 19.4 of the SCM Agreement. It is common sense that the results of R&D will normally 
benefit all operations of a company, wherever located, as Samsung demonstrated to the DOC. 
Before the Washers  Final Determination, the DOC had determined that the R&D activities which 
rise to the Article 10(1)(3) tax credits benefited Samsung's worldwide sales and production. The DOC then changed its position wi th no supporting rationale.  
29. Where, as here, it is determined that a su bsidy is granted to a manufacturer to develop a 
particular product, the numerator in a countervailing duty investigation of that product would be the full amount of the subsidy. To calculate the ad valorem  margin, that numerator would be 
divided by the total value of the recipient's sales of that product, regardless of where the product 
was produced or manufactured, and regardless of where the product was sold (the denominator). If the denominator were to consist only of some subset of the company's total sales of that product, the use of such a smaller denominator, relating to a different universe of sales than the 
universe included in the numerator, would artificially inflate the subsidy margin.  
30. As regards regional specificity, the tax credits that Samsung received under RSTA Article 26 
do not constitute specific subsidies within the me aning of Article 2.2 of the SCM Agreement. By the 
plain language of Article 2.2, in order for a subsidy to be specific, access to the subsidy must be 
"limited." In addition, this limitation must concern the location of the enterprises that are eligible to receive the subsidy, and the location must be a geographical region that is designated. RSTA 
Article 26 does not meet any of these requirements . RSTA Article 26 does not impose any type of 
limitation. It offers tax benefits to "domestic corporation[s]" across numerous industries. All such Korean enterprises have access to RSTA Article 26 subsidies, and these enterprises may be located 
anywhere in Korea's territory, and would still be eligible to receive RSTA Article 26 subsidies. 
31. The accompanying Enforcement Decree identifies the "investments" that are eligible for the 
tax benefits as "business assets" that are located outside of the "overcrowding control region." Thus, to the extent that RSTA Article 26 incorporates a limitation, it is on the investments  that 
give rise to the tax credits, not the location of the enterprise  that benefits from the subsidy.  
32. Korea further notes that Article 2.2 refers to  "a designated geographical region within the 
jurisdiction of the granting authority." A "geogr aphical region" is a subpart or subdivision of a 
larger, territorial unit. In considering the relevant "geographical region," one must take care to 
ensure that the subdivision at issue does not encompass the broader territorial unit of which it is a part. While there is necessarily overlap between th e two, there will be a point in which the two 
may be so co-extensive that one can no longer reasonably refer to them as two units. It is also 
important to note that the "geographical region" under Article 2.2 must be a "designated" region. 
Designation is an act of identification by the granti ng authority. And it is done affirmatively, not by 
implication or suggestion.  
33. The territory outside the overcrowding contro l region of the Seoul Metropolitan Area cannot 
constitute a "designated geographical region with in the jurisdiction of the granting authority" 
because it constitutes 98 percent of Korean total landmass. Not only is this not a limitation 
pursuant to Article 2.2 of the SCM Agreement, but there is also no identifiable demarcation WT/DS464/R/Add.1 
 
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  between this geographical region and the broader ju risdiction of the granting authority. The degree 
of overlap is almost total and, thus, there is effectively no distinction between the area in which qualifying investments may be made and the jurisdiction of the granting authority of the tax credit program. RSTA Article 26 is essentially a zoning regulation, and any sensible reading of the 
SCM Agreement would not support a conclusion that turns a capital city zoning regulation into an 
illegal subsidy.  
34. Korea further notes that Article 2.2 states that a subsidy must be "limited to certain 
enterprises" to be specific. While the U.S. sugge sts that the interpretative issues surrounding the 
term "certain enterprises" have been definitively resolved, the fact is that previous disputes have been determined under completely different sets  of facts and the AB has not yet examined the 
type of issue Korea raises. 
35. Finally, Korea submits that the imposition and maintenance of countervailing duties on 
imports of washers produced by Samsung are in consistent with Articles 10 and 32.1 of the 
SCM Agreement.  
 
 WT/DS464/R/Add.1 
 
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  ANNEX B-4 
EXECUTIVE SUMMARY OF THE CLOSIN G ORAL STATEMENT OF KOREA  
AT THE FIRST SUBSTANTIVE MEETING 
Madame Chair and Distinguished Members of the Panel,  
1. We would like to thank the Panel for a prod uctive two days of meetings. We hope our 
answers today have helped clarify the issues and we look forward to your further questions. In closing, we would like to highlight a few key points. 
2. On the issue of zeroing, we note the U.S. still has not addressed the overarching principles 
of the AB jurisprudence on zeroing. Instead, th e U.S. focuses on drawing what it calls "logic 
extensions" from certain isolated statements. But in doing so, the U.S. argument ignores the important overarching principles the AB has applied. That is precisely why so many third parties 
agree with Korea that the logic of prior AB rulings condemning zeroing in all other contexts also 
applies to condemn zeroing in the context of the second sentence.  
3. We also note that the U.S. has not and cannot prove mathematical equivalence. The 
U.S. agrees mathematical equivalence is "critical," and that the U.S. must show that it applies "in 
all cases." What these admissions mean is that when mathematical equivalence fails, the entire U.S. interpretative argument also fails. The AB  has already found repeatedly that equivalence 
depends on the assumptions made. The U.S. has tried to defend those assumptions, but the 
U.S. arguments are based entirely on arguments about what an authority might reasonably choose. But those choices by the authority are no t required by the text of Article 2.4.2. The 
authority could – consistently with Article 2.4.2 – make other choices and that is the point. The 
U.S. cannot show that Article 2.4.2 explicitly precludes these other choices, and so any 
equivalence based on those choices must fail. Korea has shown just that point, both in general and 
in the context of the Washers  investigation. 
4. Based on these arguments, we believe that the Panel must conclude that the DOC's use of 
zeroing is inconsistent with the Anti-dumping Agreement. The Panel should also conclude that the DOC's interpretation and application of the second sentence, apart from zeroing is also, 
inconsistent with the Anti-dumping Agreement. 
5. The one point on which all parties agrees is that this case represents the very first time a 
WTO panel will render a decision concerning the actual application of the second sentence. It is for this reason that Korea urges the Panel to reach a clear decision on this issue, and when doing so 
to base its analysis on the actual text of the second sentence. Korea is forced to reiterate this 
obvious legal point because the U.S. interpretati on ignores key terms of the second sentence. 
6. Take the term "significantly." The U.S. adop ts a purely quantitative interpretation. Indeed, 
under the U.S. approach as long as a particular category of prices is more than some portion of a 
standard deviation from the average selling price, the second sentence has been met. However, the actual meaning of the word "significantly" in all three languages makes clear that the analysis 
require more than application of a numerical criterion. Context is absolutely required. Prices in the 
fourth quarter of the year may actually be more than one standard deviation below those of earlier 
in the year, but such difference is not significant for the purposes of the second sentence if prices 
for the raw materials used to produce the merchandise decreased by an even greater amount. In 
its opening statement the U.S. stated emphatically th at the reason for the difference in prices does 
not matter. Such an interpretation of the second  sentence is contrary to the very meaning of 
"significantly" and therefore cannot be sustained. 
7. Turning now to the subsidies issues, we can confidently state that the oral remarks of the 
U.S. yesterday failed to undermine any of Korea's claims.  
8. On the issue of whether Samsung received a disproportionately large amount of the 
Article 10(1)(3) subsidy, the U.S. incorrectly continues to rely solely on the fact that Samsung WT/DS464/R/Add.1 
 
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  received a much larger amount of the subsidy th an any other Korean company. This is the "size 
defense" of the U.S., not Korea. The problem with this defense is that the U.S. is forced to ignore the position it took in US – Large Civil Aircraft  where the U.S. stated the following: 
the fact that a company receives more of the subsidy because it engages in more 
eligible activity cannot amount to a finding that this company has received 
disproportionately large amounts of subsidy.
1 
9. In the Large  Civil Aircraft  case, Boeing and Spirit had received over 60 percent of the total 
industrial revenue bond subsidy awarded to all recipients. Yet, the U.S. contended that this was 
not a disproportionately large amount. The AB agreed, stating that the issue of disproportionality could only be evaluated by comparing the relative size of the subsidy to a "second ratio". This is 
what the AB meant when it said that the issue of disproportionality is a "relational" concept. In 
other words, the relative size of a subsidy must be related to something else before one can 
decide if the subsidy is proportionate or disproportionate. 
10. Yet, in its oral statement yesterday, the U.S.  failed to acknowledge that the AB endorsed the 
original U.S. interpretation of Article 2.1(c). Inst ead, the U.S. has been compelled to ignore that 
interpretation. The Panel should recognize that the AB's ruling is dispositive. For this reason, the Panel should find that the DOC's finding of disproportionality lacked the type of evidentiary support 
that the AB has required. No amount of stacked up automobiles can overcome this fatal flaw. 
11. On the tying issue, the U.S. ignores two critical points. First, it ignores the AB's holding that 
an investigating authority has an affirmative obligation to ascertain the precise amount of the subsidy on the investigated product.
2 Second, the U.S. ignores the fact that Samsung maintained 
and presented to the DOC records that showed the precise amount of R&D expenditures on digital 
appliances, including washers. All expenses are aggregated at the Digital Appliance level, but Samsung's R&D expenses are first collected on a project-specific basis.  
12. The 200 pages of documentation that Samsung presented, but that the DOC's analysts 
refused to examine, listed every single R&D proj ect conducted by the Digital Appliance division. 
Had the DOC's analysts examined those records, they would have easily been able to determine 
that none of the projects pertained to products produced outside the Digital Appliance Division. 
This was not a difficult task, despite the U.S. contention to the contrary, which it fails to support with any evidence. Rather, it is the type of task that the DOC routinely performs.  
13. But, by failing to examine Samsung's deta iled records, the U.S.  violated the AB's 
requirement that an investigating authority can impose countervailing duties on only those 
subsidies that benefit the product under investigation. As noted by the Panel in China – Broiler 
Products , an investigating authority "must actively seek out pertinent information and may not 
remain passive in the face of possible shortcomings in the evidence submitted."
3 
14. On the denominator issue, the U.S. position defies logic and common sense. When Samsung 
conducts R&D in Korea, it does not limit the results of the R&D to its Korean production facilities. 
No rational company would ever restrict the benefits of its efforts to its local facilities when it 
produces the very same products in overseas facili ties. Equally important, the DOC itself stated in 
the antidumping case on refrigerators that Samsung made in Mexico that: 
As the Department explained in the Preliminary Determination, the R&D expenses 
incurred by SEC {in Korea} benefitted Samsung's production {in Mexico} of the 
merchandise under consideration.  
15. In light of the DOC's direct acknowledgement that Digital Appliance division R&D expenses 
incurred in Korea benefit digital appliance producti on in Mexico, the U.S. had no factual basis in 
the Washers  case for claiming that such benefits should not be allocated to both domestic and 
overseas sales. The DOC's own finding that the R&D projects that Samsung conducted in Korea 
benefited its overseas production flatly contradicts the position that it has taken in this dispute. 
                                               
1 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 185.  
2 Appellate Body Report, US – Countervailing Measures on Certain EC Products , para. 139. 
3 Panel Report, China – Broiler Products , para. 7.261. WT/DS464/R/Add.1 
 
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  16. Finally, Korea has argued that RSTA Article 26 benefits do not meet the regional specificity 
standard in Article 2.2 because the benefits are not limited "by reason of the geographical location of the beneficiaries."
4 The U.S. has conceded that the eligibility requirements for Article 26 concern 
the use of the investment and are not tied to the location of the enterprises receiving the benefits.  
17. The U.S. incorrectly attempts to portray Korea's claim as involving issues that have already 
been resolved. However, Article 26 could not be more different from the measure that was found to be regionally specific in US – Antidumping and Countervailing Duties (China) . In that case, 
eligibility was limited to enterprises located within a small industrial park. Article 26 does not have 
any limitations on the location of the enterprises receiving the subsidy.  
18. Even if one considers the limitations on the use of the investment, the contrast could not be 
sharper. Contrary to what the U.S. suggests, Article 26 does not designate or even identify "any … 
tract of land". Article 26 simply excludes investments in a minuscule area representing no more 
than 2% of Korea's total land mass. Any notion th at the area excluded should be treated the same 
way as the area designated for eligibility is simply wrong. 
19. The legal theory put forward by the U.S. is  too extreme. Under that theory, should the 
U.S. provide subsidies to enterprises making investments anywhere in its territory, but for Washington, D.C., the subsidies would be considered to be specific under Article 2.2. Korea does 
not believe that this is the outcome intended und er Article 2.2. Article 2.2 does not constrain 
WTO Members from pursuing policies to relieve over-congestion and income disparity in large urban areas, a problem that is common to most developing, and some developed, countries. 
20. That completes Korea's statement, and we thank the Panel for its attention. 
 
 
                                               
4 Appellate Body Report, U.S. – Anti-Dumping and Countervailing Duties (China) , para. 413. WT/DS464/R/Add.1 
 
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  ANNEX B-5 
EXECUTIVE SUMMARY OF THE OPENIN G ORAL STATEMENT OF KOREA  
AT THE SECOND SUBSTANTIVE MEETING 
I. ANTI-DUMPING ISSUES 
A. The U.S. Has Improperly Reintr oduced WTO-Inconsistent Zeroing 
1. The Appellate Body has repeatedly condemned zeroing in W-W, T-T and specifically  
W-T comparisons as contrary to Articles 2.4, 2. 4.2, 9.3 and 11.3 of the AD Agreement. There is 
nothing in the language of the second sentence that suggests that zeroing should be allowed in 
that context, when the Appellate Body has found  zeroing to violate the AD Agreement under all 
three comparison methodologies. 
2. Korea agrees that the second sentence is an exception to the first sentence of Article 2.4.2. 
But that exception, by its terms, has to do only with comparison methodologies – that is, the 
W-T comparison methodology is an exception to the "normal" methodologies of W-W and T-T comparisons.  
3. The U.S. tries to stress the "limited nature" of  prior Appellate Body decisions, and constructs 
"logical extensions" from some specific bits of language in those decisions. But under repeated Appellate Body decisions, any finding of "dumping " must be based on the product as a whole for 
an exporter, and cannot be based on price differenc es at the level of intermediate comparisons. 
That is why zeroing is not allowed under any comparison method – including W-T comparisons – because zeroing takes a price difference at the intermediate level out of the context of the product as a whole. That a specific price might be lower than some threshold is not "dumping" and zeroing 
cannot make it into dumping. The U.S. never explains why or how the application of the 
W-T methodology in the context of the second se ntence overcomes these general principles for 
finding zeroing to be WTO-inconsistent.  
4. Even assuming that the purpose of the second  sentence is to "unmask" lower export prices 
charged to certain purchasers or in certain regions or during certain time periods, the second sentence explicitly does so by the W-T comparison method. The "unmasking" is to be 
achieved by the second sentence undertaking a more detailed examination of individual export 
prices.  
5. The application of W-T without zeroing does not always produce the same result  as 
W-W comparisons without zeroing. The Appellate Body has made this point twice, and the 
U.S. efforts to distinguish these cases fail. Korea noted that specifically in the case of Washers , a 
different result would be produced if different, na mely, monthly, normal values had been used in 
the W-T comparisons. We also noted that changing  other assumptions, such as using individual 
transaction adjustments rather than average adju stments, can also produce different results. 
Finally, Korea reinforced these Appellate Body findings with an expert affidavit by a noted scholar of anti-dumping measures. Moreover, we note that the U.S. argument about mathematical 
equivalence ignores T-T comparisons, which would not be equivalent in virtually all cases.  
6. There is nothing in the language of the se cond sentence of Article 2.4.2 that remotely 
suggests that, as an exception, the provision should lead to "systemically" different results. The U.S. essentially extrapolates from a single statement from one Appellate Body decision (in 
Softwood Lumber V ) to infer a meaning that is not in the Appellate Body's statement itself.  
7. The U.S. seems to argue that even if the use of the W-T methodology in the second 
sentence of Article 2.4.2 can produce different results, if it does not do so "systemically" then it is 
rendered inutile . To be inutile , a provision must always and everywhere have the same effect as 
some other provision. By conceding that there are some cases in which a W-T methodology can produce a different result from a W-W methodolog y without zeroing, the U.S. effectively admits 
that the second sentence cannot be inutile . 
8. The purpose of the second sentence of Article 2.4.2 is not to create larger dumping margins, 
but to examine a pattern of differing prices individually, so as to determine whether those WT/DS464/R/Add.1 
 
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  individual transactions are further below normal value than the average taken as a whole. The 
U.S. discussed the margin results from the preliminary determination in the Washers  
administrative review. Under certain assumptions there may be equivalent results, but that does not establish that equivalence always occurs. That is why the second sentence is not inutile , even 
without zeroing. 
9. Negotiating history is recognized as a very limited tool for interpreting the provisions of a 
treaty, and thus, it cannot  be used to contradict the plain meaning of a provision or to supply a 
meaning that is not even implicit in the treaty's terms. The negotiating history cited by the U.S. 
does not present a clear statement of the intent of the negotiating parties. What Hong Kong and Japan meant by their statements is far from clear and is not evidence that there was agreement by all members.  
10. The language of the second sentence of Article 2.4.2 is clear on its face. It establishes an 
alternative methodology, namely, W-T, for examining "dumping" where a pattern of significantly differing prices exists. The Appellate Body has repeatedly held, however, that the 
W-T methodology does not permit zeroing becaus e it is contrary to the requirement that 
"dumping" be found for the product as a whole. The ambiguous, limited negotiating history cannot be used to permit a methodology that is contrary to the very definition of dumping as set forth in 
the AD Agreement.  
B. The Second Sentence Can Be Invoke d Only When Certain Conditions Have 
Been Met 
11. In the Washers  case – even using the biased Nails test – only about 13 percent of the export 
prices were found to differ at all. An even fewer two percent of export prices would have differed 
under an unbiased test based on actual export prices. So few export sales and so little explanation does not properly establish a "pattern" of prices that "differ significantly". 
12. The U.S. argues that the second sentence do es not require the focus to be on individual 
prices. This approach is not difficult to administer, since the DOC currently uses Korea's approach in its differential pricing test. There is nothing "logical" about using average prices that obscure 
rather than reveal any "pattern". The U.S. tries to dismiss Professor Prusa's affidavit, but this 
affidavit is in fact credible "evidence" on which the Panel can rely. The U.S. has provided no other reason to reject this expert statement. Moreover, the U.S. has provided no alternative expert statement. Korea is very confident that any WTO statistician would quickly and easily validate 
Professor Prusa's basic points and his reliability as an expert on this issue. If the authority chooses 
to use a standard deviation, it must do so in a manner that makes sense. Ignoring the individual prices and calculating the standard deviation based on average prices makes no sense, as 
Professor Prusa's expert affidavit explains at some length.  
13. Moreover, the Nails test addresses only the size of the price differences and disregards the 
reasons for the price differences. An authority cannot find differences to be "significant" based 
solely on quantitative criteria with no consideration at all of the qualitative factual context – the 
reasons why prices might be differing.  
14. In the Washers  case, the DOC relied exclusively on the difference in the results between 
W-W and W-T, and provided no other explanation as to why the W-W comparison would not work. 
The DOC did not even use the word "appropriately" in its determination, let alone explain why the 
W-W method could not be used – other than to say the margins were different. And the DOC failed to consider the T-T comparison method at all. The failure to do so ignores the express requirement 
of the second sentence. The proper reading of the second sentence is that both options must be 
considered and included as part of the explanation. 
15. The U.S. approach renders the "explanation" requirement meaningless. The requirement is 
not whether W-W and W-T yield different results. The requirement is to "explain" why the 
W-W method "cannot" take differences into account  appropriately. The authority must have some 
reason other than the effect of zeroing to show that the W-W or T-T comparison cannot address the pattern of prices that differ significantly. It would be circular to allow zeroing itself to justify 
the use of zeroing. 
16. The DOC's application of the exception to be overbroad, since it applies the exception to all 
transactions and not just to those transactions fo und to meet the requirements of the exception. 
Having found alleged targeting for about 10% of the sales, the DOC applied the exceptional WT/DS464/R/Add.1 
 
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  W-T comparison method to all sales, including the almost 90% of the transactions not found to be 
targeted in any way. The U.S. arguments continue to ignore the text of the second sentence and 
clear Appellate Body guidance.  
C. The Differential Pricing Methodology Is A Measure 
17. The U.S. seems to believe that by changing ce rtain aspects of its policy every few years, the 
U.S. can forever evade any meaningful WTO review. The Appellate Body, however, has recently confirmed that the scope of measures that can be challenged is "broad," and rejected artificial 
limitations on the scope of challengeable measures.  
18. The differential pricing methodology can be challenged "as such". Korea has demonstrated 
the precise content and general and prospective application of the differential pricing policy. Korea has documented the existence of this measure ex tensively, providing the standard SAS code that 
the DOC applies to every case without change, citing hundreds of cases that applied the new 
policy, and confirming these facts with the DOC's own description of its new policy and with expert 
testimony. The U.S., on the other hand, has provided no contrary evidence.  
19. The differential pricing should be reviewed as "ongoing conduct" precisely because the 
differential pricing methodology had been adopted,  was being applied by the DOC in every case, 
and Korea knew that this methodology would be a pplied to any Korean exporters participating in 
the administrative review process. 
20. Korea challenges the differential pricing methodology that has now been applied in the 
first administrative review "as applied". That meth odology existed at the time of the panel request, 
and has been exhaustively documented.  
D. The Differential Pricing Methodolog y Also Ignores the Key Conditions for 
Invoking the Exceptional Comparison Method Under the Second Sentence 
21. Under the differential pricing methodology, the DOC continues the key WTO inconsistencies 
from the Nails test. The DOC does not properly find a "pattern" of "significant" price differences, 
relies exclusively on a difference in the size of the dumping margins, and applies the remedy too broadly. 
22. The DOC has made the pattern test even worse: nowcollecting random price differences and 
then deeming them to be a "pattern" without indicating a pattern of what. Differences by purchaser, by region, by time period are accumulated into an undifferentiated mass.  
E. It Is Also WTO-Inconsistent To Disregard the Negative Margins When 
Combining the Separate Results 
23. "Systemic disregarding" is a particularly egregious violation. Indeed, the preliminary 
determination in the Washers  administrative review provides the most extreme example. For the 
product as a whole, LG would have had no dumping margin, even when using W-T comparisons 
and even with the application of zeroing for the W-T comparisons. Yet by ignoring the negative 
margin for those products subject to the W-W comparisons – setting that potential offset to zero – 
the DOC has created a "dumping margin" that should not exist.  
II. SUBSIDY ISSUES 
A. Samsung Did Not Receive a Disproportionately Large Amount of Tax Credit 
24. Samsung received a large amount of the total tax credit. The credit that Samsung received 
was proportionate to the amount of the investment that it made in eligible R&D activities. That is 
how the tax credit program works; meaning that th e more a company spends, the larger the credit 
that it receives. 
25. The U.S. denies that Samsung earned a proportionately large credit, but if it is going to take 
that position, then it must at least be able to explain the conceptual difference between a proportionately large tax credit amount and a disproportionately large tax credit amount.  
26. In both  US – Large Civil Aircraft and EC – Large Civil Aircraft , the U.S. stated that an 
absolute precondition under Article 2.1(c) to finding that a company had received a disproportionately large amount of a subsidy was the use of a second ratio that would allow the WT/DS464/R/Add.1 
 
- B-32 - 
 
  investigating authority to determine whether a seemingly large subsidy amount was in fact 
disproportionate to what would be expected. The Appellate Body agreed that disproportionality could not be evaluated without the calculation of two ratios. 
27. The Appellate Body found that the first ratio only provides a basis to investigate further the 
issue of disproportionality so long as the amount of a company's benefit has been calculated in 
accordance with the conditions of eligibility, which is indisputably the case for Samsung. In the Washers  case, the DOC relied solely on its first ratio calculation, and the U.S. continues to 
maintain that position here.  
28. The U.S. also contends that the large amount of the subsidy that Samsung received 
"deviated from what would be expected." Yet, the U.S. continues to be unable to articulate what 
should have been expected, and the record contai ns no evidence as to what would be expected 
other than what Samsung actually received.  
B. The DOC Failed to Consider Evidence that Tied Samsung's Investments 
29. The fundamental principle that underlies Korea's position is that an investigating authority 
may only countervail the benefits that a government confers on the merchandise that is the 
subject of an investigation. 
30. Samsung's Digital Appliance Division regards the investments that it makes as equally 
benefitting all of the products that it produces, and the DOC agreed that the proper way to 
attribute R&D costs to washers is to treat the Digital Appliance Division's R&D costs as benefitting washers and all other products within the Digital Appliance Division on a pro rata  basis. 
31. Samsung made a prima facie  showing of its tying ability, which then triggered the DOC's 
obligation to examine the accuracy of the representations that Samsung made. 
32. Nevertheless, the DOC chose to invoke an  irrebuttable, and therefore impermissible, 
presumption that, in order to tie a subsidy to a particular product, the "intended use" of the 
subsidy must be known to the subsidy giver and "so acknowledged prior to or concurrent with the 
bestowal of the subsidy."  
33. However, the supporting examples of prior kn owledge that the DOC provided in its Issues 
and Decision Memorandum pertained solely to grants and loans, not tax credits. Unlike grants and 
loans, prior knowledge cannot exist in a tax credit situation where the subsidy giver decides to bestow the benefit automatically when the tax return is filed. In addition, the requirement that Korean taxpayers maintain the tying information, which is available at all times both before and 
after the tax return is filed, is a completely suitable alternative to the DOC's filing requirement. By 
focusing solely on what Korea's National Tax Service might constructively, not actually, have known on the date of bestowal, the U.S. impermissi bly seeks to avoid its obligation to examine the 
evidence that supported the tying claim.  
C. The Correct Denominator Should Be Samsung's Worldwide Production 
34. The R&D activities in which a company engages benefit the production of the merchandise to 
which the activities apply, no matter where that production occurs. It would be illogical for a 
company to confine the results and benefits of its R&D activities to its Korean facility and withhold those same benefits from its othe r facilities around the world.  
35. The U.S., in a publicly released Issues and Decision Memorandum in the Refrigerators  
antidumping investigation, stated that Samsung's "Digital Appliance business' related 
R&D activities benefitted all of its subsidiaries that also produced and sold its digital appliance products." This statement constitutes a conclusive and unqualified statement by the 
U.S. government that the R&D activities that Sa msung conducted in Korea benefited its production 
in all of its worldwide facilities.  
36. The U.S. speculates about a difficult, if not impossible, "tracing exercise" as a practical bar 
to the use of a worldwide sales denominator. Yet, the DOC did in fact conduct this tracing by 
concluding that R&D benefits, as it found in the Refrigerators  antidumping case as well, extended 
to all production facilities around the world.  WT/DS464/R/Add.1 
 
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  D. The Article 26 Tax Credit Is No t a Regionally Specific Subsidy 
37. The existence of limitations on the location of  the enterprises eligible to receive the subsidy 
is a necessary element of a finding under Article 2.2. Article 26 imposes no such limitations. The affirmative identification of a geographically distin ct area where the enterprises eligible to receive 
the subsidies must be located is another necessary element, which again is not met by Article 26.  
38. Where there is no identifiable demarcation between the area in which a subsidy may be used 
and the broader jurisdiction of the granting auth ority, and the degree of overlap between the two 
is almost total, there is no "designation" of a geographical region and there is effectively no 
limitation as to the geographical location of the enterprises.  
39. The term "enterprises" refers to a business firm or company, and not to its facilities. Where 
the drafters intended to refer to facilities, they did so explicitly, as they did in Article 8.2(c).  
40. If an "enterprise" exists everywhere that a recipient has facilities, investments, or local 
production, then any Korean company that has a sales office or a bank account in Seoul is an enterprise "located" in Seoul and, thus, is ineligible for RSTA Article 26 credits. That is, of course, 
absurd. RSTA Article 26 does not deny subsidies to an enterprise on the basis of its location.  
41. Any express limitations that do not meet the requirements of Article 2.1(b) of the 
SCM Agreement could give rise to a finding of de jure  specificity under Article 2.1(a). Similarly, 
any indications that a program is de facto  specific could be examined under Article 2.1(c). Thus, 
the circumvention concerns alluded to by the U.S. simply do not arise.  
42. Any sensible reading of the SCM Agreement would not support a conclusion that turns a 
capital city zoning regulation into an illegal subsidy. A subsidy available for investments made 
anywhere in a country's territory, except for a nati onal park, would be regionally specific according 
to the U.S.. Such an extreme outcome could neve r have been intended by the drafters of the 
SCM Agreement. 
 
 WT/DS464/R/Add.1 
 
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  ANNEX B-6 
CLOSING ORAL STATEMENT OF KOREA AT THE SECOND SUBSTANTIVE MEETING 
1. Madame Chair, distinguished members of the Panel, members of the Secretariat, Korea 
would like to thank you for the time and attention that you are devoting to assisting the parties in 
resolving this dispute. Korea would also like to thank our colleagues on the U.S. delegation. We 
hope to continue working together to find a prompt resolution to this matter.  
2. Korea believes that this meeting has been very helpful in clarifying the issues raised under 
the AD Agreement. Korea has raised issues under  the SCM Agreement that are equally important 
and looks forward to the opportunity to further clarify the issues through the written questions. 
3. In our concluding remarks, Korea would like to emphasize a couple of points. This dispute 
involves the proper interpretation of key treaty provisions. Korea believes that the 
U.S. interpretations of the AD and SCM Agreemen ts are not permissible interpretations. If the 
DOC's determinations are to be permitted by the WTO, the seasonal Black Friday sales could be 
found to be a targeted dumping; a legitimate policy tool of preventing urban sprawl could be found 
to be a regionally-specific government subsidy. These kinds of WTO-inconsistent measures by a 
WTO Member are particularly problematic, because legitimate commercial practices are allowed to that Member's domestic industries, but not to fo reign exporters, resulting in the distortion of 
international trade. 
4. Concerning the antidumping issues, I recognize that there has already been a lot of 
discussion. However, I want to make a few additional observations. 
5. In its Opening Statement the U.S. side spent quite a bit of time attempting to discredit the 
integrity of Professor Tom Prusa. This is not right. Professor Prusa is the Chairman of the 
Economics Department of a major U.S. university whose expertise is the economics of international trade regulation. Professor Prusa has repeatedly been invited by the WTO to speak at 
different conferences. Professor Prusa is truly an  expert in these matters. Moreover, a very major 
conclusion that Professor Prusa offered to the Panel about DOC's antidumping practice was previously published by Professor Prusa long before  he was asked to assist in this case. We are 
happy to debate with the U.S. side about the legal significance of the factual findings set forth in 
two Professor Prusa Affidavits offered to the Panel. However, we do not believe it is proper to cast aspersions on Professor Prusa's integrity.  
6. In my view, the lasting image about antidu mping issues over the last two days was the 
discussion yesterday afternoon about the Nails test. Notwithstanding that for virtually every other 
question, the U.S. side was ready with a quick reply, when asked to defend one aspect of the Nails 
test, the U.S. side was rendered utterly speechless. We agree that it is impossible to defend the 
validity of the Nails test under the AD Agreement. 
7. Korea's last comment about antidumping issu es concerns the increasing frequency of the 
DOC's application of the second sentence. As the U.S.  side itself admitted, such change in the U.S. 
approach is a conspicuous attempt to circumvent the WTO rulings prohibiting the zeroing 
methodology. No other reason can sufficiently explain the change from the reasonable regulation promulgated in 1997 to the new methodologies applied by the DOC that automatically examine the existence of targeted dumping in all antidump ing allegations made by the U.S. domestic 
industries, and do so in a biased way designed to find targeted dumping in a larger percentage of 
cases.  
8. This is not right. And Korea is not the only WTO Member to be concerned. As evident by the 
number of third parties that are participating, Korea believes many other Members are also 
concerned with this Panel's decision. The mechanical and quantitative-only approach claimed by the U.S., if allowed to take hold, will initiate a new period of repeated WTO-litigation. WT/DS464/R/Add.1 
 
- B-35 - 
 
  Korea believes there is a shared systemic concern to minimize the risk of further burdening the 
system with another decade of WTO litigation over zeroing.  
9. With respect to the subsidy issues, Korea would make only the following brief points in order 
to demonstrate that the U.S. has failed to support any of the four determinations that Korea has 
challenged. 
10. First, on the disproportionately large amount issue, the U.S. has once again demonstrated 
that it remains either unable or unwilling to describe what a proportionately large amount of the 
Article 10(1)(3) tax credit would have been for Sa msung. It remains equally unable or unwilling to 
describe what amount of the tax credit should have been expected for Samsung. Also, it continues to misread the Appellate Body's decision in US – Large Civil Aircraft . If the U.S. reading is correct, 
then the Appellate Body would have stopped its analysis and found disproportionality once it found 
that Boeing had received 69% of the total Wichita, Kansas bond subsidy. The fact that it went 
much further by discussing the merits of the second ratios that the parties proposed necessarily means that much more is required under Article 2.1(c) than the mere 24% calculation that the 
DOC relied upon in Samsung's case.  
11. Moreover, the U.S. has impermissibly atte mpted to shift the burden to Samsung to 
demonstrate what the second ratio should have been. However, the DOC had the burden to 
demonstrate disproportionality, which it failed to do. Moreover, the DOC never asked Samsung for 
any evidence concerning the second ratio, so Samsung cannot be criticized for failing to submit required evidence. 
12. Second, on the tying issue, it is absolutely clear that Samsung has always had the ability to 
tie its tax credits to the products that its Digita l Appliance Division produced. But, the DOC refused 
to examine the tying evidence that Samsung subm itted even though, in the antidumping context, 
the DOC said that the Digital Appliance Division's R&D pertained equally to all digital appliance 
products. It is astonishing to Korea that the U.S. would now ignore its own directly relevant 
findings in a published, non-confidential document that remains a highly relevant administrative precedent, just like any other case preceden t upon which a party is entitled to rely. 
13. Third, on the denominator issue, the Openin g Statement of the U.S. deliberately ignored the 
factual finding that the DOC itself made in its Issues and Decision Memorandum in Refrigerators  
antidumping case. The DOC said there that, "[Samsung's] Digital Appliance business' related activities benefitted all of its subsidiaries that also produced and sold it digital appliance 
products". The Panel should regard this statement as dispositive of the denominator issue because 
it compels the conclusion that R&D tax credits, just like the R&D activities that generate those credits, pertain to worldwide production, not just local production in Korea. 
14. Finally, on the regional specificity issue, the U.S. alleges that Korea misconstrues the text of 
Article 2.2. However, the reality is the inverse and it is the DOC that has failed to adhere to the 
requirements expressly set out in Article 2.2. In its Opening Statement, the U.S. recognized that 
Article 2.2 expressly makes the existence of limitation s on the location of the enterprises eligible to 
receive the subsidy a necessary condition for a finding of regional specificity. While the U.S. claimed in its Opening Statement that the DOC's finding met this requirement, the inescapable fact is that it did not.  
15. Korea invites the Panel to review the DOC's finding on regional specificity in the Issues and 
Decision Memorandum. As the Panel will confirm, the DOC did not identify specific limitations imposed on the location of the enterprises receiv ing the RSTA Article 26 subsidies, much less make 
a finding that such limitations were a condition for Samsung to have received the tax credits. 
Thus, the DOC determination fails to meet the requ irements of Article 2.2 even under the overly 
expansive interpretation of "enterprise" put forw ard by the U.S., which, in any case, finds no 
support in the SCM Agreement.  
16. The U.S. has described Korea's interpretation of "enterprises" as "untenable".
1 Yet, the 
interpretation advocated by Korea closely matches the definition that the U.S. has consistently 
                                               
1 U.S. Opening Statement at the Second Panel Meeting, para. 56. WT/DS464/R/Add.1 
 
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  included in its free trade agreements, where "enterprise" has been defined as an "entity 
constituted or organized under applicable law…, including any corporation, trust, partnership, sole proprietorship, joint venture, association, or similar organization". The U.S. has included this definition of the term "enterprises" in at least 12 free trade agreements, as indicated in 
Exhibit KOR-133. Thus, the interpretation of "enterprises" put forward by the U.S. in this case is 
not only contradicted by the text and context of Arti cle 2.2, it is also contrary to U.S. practice.   
17. The U.S. cites approvingly the Panel Report in US – Upland Cotton  and that panel's 
conclusions that the assessment of specificity must be made on a case-by-case basis and that, at 
some point, "a subsidy would cease to be specific because it is sufficiently broadly available throughout an economy as not to benefit a particular limited group of producers of certain products."
2 Korea recalls that Article 26 tax credits were available to all enterprises wherever 
located making any investments throughout 98 percent of the Korean landmass. The facts of this 
case therefore clearly show that the tax credits provided under Article 26 were broadly available 
and did not benefit a particular limited group of producers of certain products. Consequently, 
Article 26 tax credits are not specific under the approach articulated by the US – Upland Cotton  
panel and endorsed by the U.S. in this dispute. This conclusion is entirely reasonable. By contrast, the interpretation of Article 2.2. put forward by th e U.S. is extreme as illustrated by the examples 
that Korea has posited and that U.S. simply refuses to address.   
18. In conclusion, Korea reiterates its apprecia tion to the Panel and the Secretariat and looks 
forward to your written questions. Korea would like to wish everyone a safe journey home.   
 
_______________ 
  
 
 
                                               
2 Panel Report, US – Cotton (Panel) , para. 7.1142; U.S. First Written Submission, para. 375 and U.S. 
response to Panel Question 3.11, para. 155. WT/DS464/R/Add.1 
 
- C-1 - 
 
  ANNEX C 
ARGUMENTS OF THE UNITED STATES 
Contents Page 
Annex C-1 Executive summary of the first written submission of the United States C-2  
Annex C-2 Executive summary of the second written submission of the United States C-10 
Annex C-3 Executive summary of the opening oral statement of the United States at the 
First Substantive Meeting C-18 
Annex C-4 Closing oral statement of the United States at the First Substantive Meeting C-23 
Annex C-5 Executive summary of the opening oral statement of the United States at the 
Second Substantive Meeting C-25 
Annex C-6 Closing oral statement of the United States at the Second Substantive Meeting C-29 
 WT/DS464/R/Add.1 
 
- C-2 - 
 
  ANNEX C-1 
EXECUTIVE SUMMARY OF THE FIRST WRITTE N SUBMISSION OF THE UNITED STATES 
I. INTRODUCTION 
1. This dispute presents novel questions of lega l interpretation that have not previously been 
considered by the Appellate Body or any WTO panel. In its first written submission, Korea 
proposes interpretations of the AD Agreement an d the SCM Agreement that are divorced from the 
customary rules of interpretation of public international law. The Panel should find that all of 
Korea's proposed interpretations of the covere d agreements simply are not supported by the 
ordinary meaning of text of those agreements, in co ntext, and in light of the object and purpose of 
the agreements. Accordingly, all of Korea's lega l claims lack merit, and should be rejected. 
II. RULES OF INTERPRETATION, STANDARD OF REVIEW, AND BURDEN OF PROOF 
2. Article 3.2 of the DSU provides that the di spute 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 accord ance 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. Pe r 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." It is a "generally-accepted canon of evidence" that "the burden of proof 
rests upon the party, whether complaining or defend ing, who asserts the affirmative of a particular 
claim or defence." Accordingly, Korea, as the complaining party, must establish a prima facie  case 
before the United States, as the defending party, has the burden of showing consistency with that 
provision. 
III. KOREA'S CLAIMS UNDER THE AD  AGREEMENT ARE WITHOUT MERIT 
3. When and how a Member may utilize the methodology described in the second sentence of 
Article 2.4.2 of the AD Agreement are questions of first impression for the Panel. Article 2.4.2, by 
its express language, describes a particular set of circumstances in which it may be appropriate for 
an investigating authority to employ the alternative, average-to-transaction comparison methodology to, in the words of the Appellate Bo dy, "unmask targeted dumping." Through its "as 
applied" and "as such" challenges in this dispute,  Korea seeks nothing less than to read the second 
sentence of Article 2.4.2 out of the AD Agreem ent. The Panel should not countenance Korea's 
efforts in this regard.  
Korea's "As Applied" Claims Related to the Washers Antidumping Investigation  
4. 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 methodol ogies. The Appellate Body has observed that 
"there is no hierarchy between them" and "it would be illogical to interpret" them "in a manner 
that would lead to results that are systematically different." 
5. 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 period s" 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 me thodology is an "exception." As an exception, 
the third comparison methodology, logically, should  "lead to results that are systematically WT/DS464/R/Add.1 
 
- C-3 - 
 
  different" from the two "normal" comparison methodologies when the conditions for its use have 
been met.  
The "Pattern Clause" 6. The "pattern clause" in the second sentence of Article 2.4.2 requires finding 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. An investigating authority examining whether a "pattern of export prices which differ significantly" exists should 
employ rigorous analytical methodologies and view the data holistically. 
7. Korea argues that, because of the qualitative connotations of the terms "pattern" and 
"significantly," the differences in export prices "must not be the result of some random, or exogenous cause, but in fact reflect what reasonably can be inferred to be targeting conduct." 
However, a qualitative analysis, to the extent that the particular facts suggest that such an 
analysis is relevant, would be employed to assess how the export prices differ from each other, not 
why the export prices are different. That latter question is not germane to an application of the 
"pattern clause." Additionally, Korea's reasoning is unsound. "'[L]ow' prices of sales," if they are 
below normal value, still constitute evidence that would support an affirmative finding of dumping, regardless of the intention of the exporter. The "reason" for the low prices changes nothing.  
8. Korea argues that the USDOC acted inconsistently with the second sentence of Article 2.4.2 
in the washers antidumping investigation because it "evaluated whether the prerequisites for invoking [the alternative comparison methodology] had been met exclusively through the use of a computational analysis of the difference in exporters' prices." The USDOC was not obligated to 
examine why there were significant differences in export prices, and the USDOC did not act 
inconsistently with Article 2.4.2 of  the AD Agreement by not doing so. 
9. In the washers antidumping investigation, the USDOC applied a two-part test – the Nails 
test – to determine whether a pattern of export prices that differed significantly among different 
purchasers, regions, or time periods existed. In doing so, the USDOC used analytically sound methods that relied upon objective criteria and verified factual information submitted by Samsung 
and LG. As reflected in the discussion in the final issues and decision memorandum, the USDOC 
undertook a rigorous, holistic examination of the exporters' 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 between different purchasers, regions, or time 
periods. In addition to explaining its anal ytical approach, the USDOC addressed numerous 
arguments raised by interested parties concerning the methodology applied in the examination of the existence of a pattern of export prices. Accord ingly, the USDOC did not act inconsistently with 
the requirements of the "pattern clause" in Article 2.4.2. 
The "Explanation Clause" 10. The second condition in the second sentence of Article 2.4.2, the "explanation clause," 
provides that an investigating authority may utilize the alternative comparison methodology only 
"if an explanation is provided as to why such differences cannot be taken into account appropriately by the use of a weighted average-to-weighted average or transaction-to-transaction comparison." The "explanation clause" requires a reasoned and adequate statement by the 
investigating authority that makes clear or intelligible or gives details of the reason that it is not 
possible in the dumping calculation or computation to deal or reckon with export prices which differ significantly in a manner that is proper, fitting, or suitable using one of the normal 
comparison methodologies set forth in the first sentence of Article 2.4.2. Since an investigating 
authority may choose between the average-to-average and transaction-to-transaction comparison methodologies, and since they yield systematically  similar results, there would be no purpose in 
requiring an investigating authority to discuss the both the average-to-average and transaction-to-
transaction comparison methodologies in the "explanation" provided under Article 2.4.2.  
11. In the washers antidumping investigation, the USDOC considered whether observed price 
differences could be taken into account using the average-to-average comparison methodology. 
The USDOC evaluated the difference between what the weighted average dumping margin would 
have been as calculated using the average-to-average comparison methodology and the average-WT/DS464/R/Add.1 
 
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  to-transaction comparison methodology. The USDOC concluded that the average-to-average 
method does not take into account such price differences because there is a meaningful difference in the weighted-average dumping margins when ca lculated using the average-to-average method 
and the average-to-transaction method. The USDOC provided a reasoned and adequate statement 
that makes clear or intelligible or gives details of the reason that it is not possible to deal or reckon 
with export prices which differ significantly in a manner that is proper, fitting, or suitable using one of the normal comparison methodologies set fo rth in the first sentence of Article 2.4.2. 
Accordingly, the "explanation" that the USDOC provided in the washers antidumping investigation 
is not inconsistent with Article 2.4.2. 
Application of the Average-to-Transaction  Comparison Methodology to All Sales  
12. Korea's claim that the USDOC acted inconsistently with Article 2.4.2 by "apply[ing] the 
[average-to-transaction] comparison methodology to all of LG's and Samsung's sales, not merely 
to those transactions which it found to constitute a pattern of export prices that differed among 
purchasers, regions and periods of time" lacks me rit. When the conditions for the use of the 
exceptional comparison methodology are met, nothing in the second sentence of Article 2.4.2 
suggests that the use of the alternative methodology is constrained as Korea proposes. The Appellate Body did not definitively declare in US – Zeroing (Japan)  that Article 2.4.2 limits an 
investigating authority's application of the average-to-transaction methodology only to those 
transactions found to have been priced significantly lower than other transactions.  
13. Korea's proposed interpretation of Article 2.4.2 is at odds with the Appellate Body's 
recognition that the alternative methodology provides Members a means to "unmask targeted 
dumping." "Masked" or "targeted dumping" involv es both sales below normal value, which are 
evidence of dumping, as well as sales above normal value, which may mask such dumping. 
"Targeted dumping" is "unmasked" by also applying the average-to-transaction comparison 
methodology to those higher-priced sales, and by ensuring that the higher-priced sales do not 
offset dumping that properly should be evidenced by the lower-priced sales when the conditions for using the exceptional, average-to-transaction comparison methodology are met.  
Zeroing in Connection with the Average-to -Transaction Comparison Methodology  
14. Korea's claims that the USDOC acted inconsistently with Articles 2.4.2 and 2.4 of the 
AD Agreement by using zeroing in connection with the average-to-transaction comparison 
methodology are without merit. Prior Appellate Body reports are not "dispositive of the question of 
whether zeroing is permitted." The Appellate Body has never found 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 are met.  
15. 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  that "exceptional" comparison methodology is 
to be given any meaning. This accords with and is the logical extension of the Appellate Body's 
findings relating to zeroing in previous disput es. That the average-to-transaction comparison 
methodology is an exception to the comparison meth odologies, and that it can be used to "unmask 
targeted dumping" is strong contextual support for the proposition that the rules that apply to the 
average-to-transaction comparison methodology are different from the rules that apply to the 
normal comparison methodologies. 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 interpretation would not be consistent with the customary rules of interpretation of public 
international law, in particular the "principle of effectiveness." 
16. If zeroing is prohibited in both the av erage-to-average and average-to-transaction 
comparison methodologies, then both methodologies will always yield identical results. This is true 
because, for both methodologies, all of the normal  value and export price data that are fed into 
the calculations and all of the calculations that are performed are identical. The mathematical operations simply are conducted in a differe nt order under the two methodologies. Those WT/DS464/R/Add.1 
 
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  mathematical operations can be rearranged to reveal that the two calculation methodologies, 
without zeroing, actually are identical. Three mathematical principles underlie the mathematical equivalence argument: the associative, commutative, and distributive principles. Mathematical equivalence can be demonstrated using hypothetical examples, but the problem is not merely 
hypothetical. Even with all of the complexities  of weighted averaging, numerous models, and 
various adjustments to ensure price comparability, the actual result in the washers antidumping investigation, if zeroing is prohibited under both methodologies, would be that the average-to-
average and the average-to-transaction comparison methodologies would yield mathematically 
equivalent results. The Appellate Body has considered the "mathematical equivalence" argument in previous disputes, but the factual situations of those disputes can be distinguished from the factual situation here, and the Appellate Body's prior consideration of the argument neither supports nor 
compels rejection of the argument in this dispute. 
17. The meaning of the second sentence of Arti cle 2.4.2 can be confirmed through recourse to 
documents from the negotiating history of the AD Agreement, which reflect that Contracting 
Parties on both sides of the asymmetry/zeroing/ targeted dumping issue understood that the three 
issues were linked and that zeroing was underst ood to be a key feature of the asymmetrical 
comparison methodology, and essential for its application to address masked dumping. 
18. Korea also claims that the USDOC's use of zeroing in connection with the application of the 
alternative, average-to-transaction comparison methodology is inconsistent with Article 2.4. Korea overstates the Appellate Body's findings in previous disputes related to zeroing and Article 2.4. The Appellate Body has not found that zeroing breaches Article 2.4 without having first found a breach 
of another provision. The Panel should recognize the limited nature and application of the 
Appellate Body's previous findings. Furthermore, there is no basis for finding that the use of 
zeroing in connection with the alternative, average-to-transaction comparison methodology is not 
"fair." It is "fair" to take steps to "unmask target ed 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. 
Korea's "As Such" Claims Related to Zeroing  19. Korea's "as such" claims related to zeroing rely on the same arguments that Korea advances 
in support of its "as applied" claims. For the reasons given above, those arguments are without 
merit. Korea's claims under Articles 1, 2.1, and 9.3 of the AD Agreement and Articles VI:1 
and VI:2 of the GATT 1994 are dependant upon or consequential of its claims under Article 2.4.2 and 2.4, and thus also should be rejected. 
Korea's "As Such" Claims Related to th e "Differential Pricing Methodology" 
20. Korea seeks to "establish that the differential pricing methodology is a measure 
challengeable in WTO dispute settlement, 'as such'." Korea's effort fails. The evidence Korea 
adduces to support its claim is insufficient. Korea is inviting the Panel, contrary to the admonition 
of the Appellate Body, simply to divine the existenc e of a measure in the abstract on the basis of a 
string of cases, or repeated action. The Panel should decline Korea's invitation. 
21. Assuming arguendo  that the Panel accepts Korea's claim that the "differential pricing 
methodology" is a measure that exists and can be subject to an "as such" challenge, for Korea to 
succeed in its "as such" claim against the alleged "differential pricing methodology" measure, Korea must demonstrate that the "differential pricing methodology" necessarily causes a breach of 
Article 2.4.2 of the AD Agreement. Korea has failed to do so. Korea has provided no basis to 
conclude that a differential pricing analysis breaches Article 2.4.2 because it has turned an exception into a "rule," and Korea's contentions are belied by the facts. At the time Korea 
submitted its panel request, the USDOC had actually used the exceptional, average-to-transaction 
methodology only about 11 percent of the time as a result of the application of a differential 
pricing analysis. 
22. Korea advances two groups of complaints abou t the "differential pricing methodology." First, 
Korea contends that the "differential pricing methodology" is inconsistent with Article 2.4.2 of the 
AD Agreement, "as such," for the same reasons th at it argues that, in the washers antidumping WT/DS464/R/Add.1 
 
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  investigation, the USDOC acted inconsistently with Article 2.4.2, on an "as applied" basis. For the 
same reasons given above, Korea's arguments lack merit. 
23. Second, Korea sets forth a number of criticisms that it argues are specific to the "differential 
pricing methodology." However, Korea has failed to present legal arguments and evidence 
sufficient to make a prima facie case of a breach of Article 2.4.2 of the AD Agreement. Korea 
premises its arguments exclusively on hypothetical scenarios. Korea makes no reference to any actual evidence. Accordingly, Korea has failed to adduce evidence sufficient to make out a 
prima facie  case that the "differential pricing methodology" breaches Article 2.4.2 of the 
AD Agreement, "as such." 
Korea's "Ongoing Conduct" Claims  24. Korea's "ongoing conduct" claims are with out merit. The purported "ongoing conduct" 
"measure" cannot be subject to WTO dispute settlement because it appears to be composed of an 
indeterminate number of potential future measures. Measures that are not yet in existence at the time of panel establishment cannot be within a panel's terms of reference under the DSU. 
Additionally, the facts in this dispute do not suppo rt the conclusion that the challenged practices 
"would likely continue to be applied in succe ssive proceedings." Not even one administrative 
review of the washers antidumping order has been completed. Thus, it is impossible for Korea to 
establish the "string of determinations, made sequ entially. . . over an extended period of time" 
that would be required to support its claims related to alleged "ongoing conduct," as that concept has been elaborated by the Appellate Body. 
Korea's Claim under Article 1 of the AD Agreement 
25. None of the antidumping measures challenged by Korea in this dispute is inconsistent with 
Article VI of the GATT 1994 or any provision of th e AD Agreement. Accordingly, the Panel should 
deny Korea's request for a finding that the chal lenged U.S. measures are inconsistent with 
Article 1 of the AD Agreement. 
IV. KOREA HAS FAILED TO ESTABLISH THAT THE USDOC' S COUNTERVAILING DUTY 
DETERMINATION WAS INCONSISTENT WITH THE SCM AGREEMENT OR GATT 1994 
26. Korea asserts that the USDOC incorrectly found that subsidies under RSTA Article 10(1)(3) 
were de facto  specific – despite overwhelming evidence that Samsung received disproportionately 
large amounts of these subsidies. Korea's second claim – i.e., that RSTA Article 26 subsidies are 
not specific – fares no better. This subsidy program falls squarely within Article 2.2 of the 
SCM Agreement, and is limited to a designated geographical region.  
27. In addition, Korea challenges the method by which Samsung's subsidy rate was calculated. 
Korea attempts to introduce obligations into the SCM Agreement and GATT 1994 that are not set 
out in the text. There is nothing in these agreements that requires an investigating authority to 
treat subsidies as "tied" to a product, based on how a recipient chooses to "use" the benefit that it receives and any alleged effects of that use on a product. And the agreements do not require 
authorities to apply this use and effects inquiry to include offshore manufacturing.  
RSTA Article 10(1)(3)  
28. The USDOC's findings are fully consistent with the text of Article 2. Korea errs in asserting 
that the specificity determination is somehow at odds with the Appellate Body's approach in US – 
Large Civil Aircraft . Two companies received a substantial share of all benefits disbursed under a 
subsidy program. The absence of any restrictions on eligibility means that benefits would have been expected to be distributed more evenly across the program's 11,764 recipients. Thus, there 
was a significant disparity between the expected di stribution of subsidy based on those conditions 
of eligibility and the actual distribution. 
29. Equally groundless is Korea's assertion that the subsidies were "proportionate" because they 
were calculated using the same formula available to all Korean companies. Use of a common 
formula could indicate "objective criteria or conditions," but an indication of non-specificity under WT/DS464/R/Add.1 
 
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  Article 2.1(b) does not preclude a finding of de facto  specificity. At most, the exercise of discretion 
would be relevant to a different analysis under Article 2.1(c).  
30. Likewise, there is no merit to Korea's suggestion that the distribution of benefits reflects the 
fact that Samsung is a large company, and that an y tax credit reflects a large company's research 
and human resources development activities. Korea's hypothesis is unsupported by evidence. The 
fact that a company is large does not mean that, where it receives a subsidy that is larger, in relative and absolute terms, than that received  by other recipients, such a subsidy inherently 
cannot be found specific under Article 2.1(c). The USDOC found that to accept such an argument 
would "undermine the purpose" of the disproportionality inquiry. 
31. Here, neither of the two factors identified in  the third sentence of Article 2.1(c) has any 
bearing on the specificity inquiry. The considerable age of this subsidy program eliminates certain 
complications that can arise with new programs. And the USDOC was aware of the publicly known 
fact that Korea is one of the wealthiest and most diversified economies in the world – a fact that Korea neither raised nor contested. 
32. The USDOC's remand redetermination supplements and reaffirms these findings. The 
USDOC drew upon newly-obtained information to address Samsung's argument that its share of the tax credits merely reflected the large size of the company. Even among other large companies, 
Samsung's use of the program was "overwhelming[ly] disproportionate." 
RSTA Article 26 33. The USDOC's specificity determination is a straightforward application of Article 2.2 of the 
SCM Agreement. The RSTA Article 26 program is expressly limited to investments in facilities 
located in a designated region – i.e., the territory of Korea that falls outside the Seoul 
overcrowding area.  
34. To evade these findings, Korea attempts to rely on legal theories that have been rejected by 
WTO panels. Korea asserts that RSTA Article 26 subsidies are available to all enterprises located 
within the designated region . The panel in EC – Large Civil Aircraft  refused to accept this 
argument, which would require specificity "on a double basis" within Article 2.2. As the panel 
observed, this interpretation would render Articl es 2.2 and 8.2(b) redundant. More recently, the 
panel in US – Anti-dumping and Countervailing Measures (China)  rejected the "double basis" 
interpretation of Article 2.2. 
35. Equally deficient is Korea's argument that a finding of non-specificity under Article 2.1(b) 
trumps a finding of regional specificity under Article 2.2. This interpretation has no grounding in 
the text of Article 2 and would make Article 8.2(b) redundant.  
36. Korea attempts to re-characterize the RSTA Ar ticle 26 subsidies. But this program does not 
address the "use" of a subsidy, and instead ties eligibility to the geographic location of facilities. 
The fact that the restriction in RSTA Article 26 is addressed to the location of the facilities, as 
opposed to the head office of the recipient, is of no moment. Article 2.2 does not impose a "head 
office" test or similar restriction. 
37. Likewise, Article 2.2 does not require that any geographic region be designated "explicitly," 
as Korea suggests. Nor is there any basis for Ko rea's apparent attempt to limit Article 2.2 to 
situations of de jure  specificity. It is of no moment that the language of the relevant law 
designates a geographical region through language of inclusion or exclusion. 
38. There is also no basis for Korea's assertion that larger regions (which are subject to 
"exclusions" such as the Seoul overcrowding area ) should be exempted from the disciplines of 
Article 2.2. Article 2.2 does not depend on the relative proportion of land mass covered or 
excluded by a region. Although Korea suggests that  large regions with "sensible exclusions" do not 
distort trade, the inquiry under Article 2.2 is not one of trade distortion; that comes into play in 
the context of a panel's adverse effects analysis or an investigating authority's injury analysis. To 
provide an exemption for geographically limited programs would invite circumvention of the subsidy disciplines of the SCM Agreement. And the alleged "exception" at issue here – the Seoul overcrowding region – is hardly a negligible exclusion that should be overlooked.  WT/DS464/R/Add.1 
 
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  39. Korea falls back on "policy" arguments, but essentially concedes that RSTA Article 26 is a 
regional assistance program. The RSTA Article 26 program falls squarely within the regional 
specificity provisions of Article 2.2. 
The Calculation of Samsung's Subsidy Rate 
40. Korea challenges the method by which Samsung's countervailable subsidy rate was 
calculated. But its arguments are not well-founded in any specific obligation, and it points to no error in the calculation of that rate. Nor has any previous panel or Appellate Body report endorsed 
the interpretations put forward by Korea.  
Korea Seeks to Create Rules that Are Not Set Out In the Agreements 
41. Korea hinges its claims on finding specific obligations in Article VI:3 of the GATT 1994 and 
Article 19.4 of the SCM Agreement on how a Member should allocate the numerator and 
denominator when calculating CVD ratios. Yet these provisions do not dictate precisely how the 
rate of subsidization is to be calculated.  
42. In determining whether and what amount of subsidy has been bestowed on the production, 
manufacture, or export of a product, the facts rela ting to the granting authority's bestowal of the 
subsidy are a key consideration. A Member may examine a subsidy and determine that it is appropriate to treat that subsidy as essentially "untied" for attribution purposes. Alternatively, a 
Member may examine a subsidy and determine that there is a product-specific "tie." The Member 
may allocate the subsidy entirely to that product and divide the benefit by only the sales of the product that it views as "tied" to that subsidy.  
43. The use of both approaches is reflected in  Annex IV of the SCM Agreement, which informs 
serious prejudice analysis. The Informal Group of Experts ("IGE") established by the Committee on 
Subsidies and Countervailing Measures developed recommendations to address when a subsidy is 
"tied" for purposes of paragraph 3. One acceptable method is to determine whether "the intended 
use of a subsidy is known to the giver, and so acknowledged, prior to or concurrent with the 
subsidy's bestowal." The IGE report also recommends that research and development subsidies presumptively be treated as untied. Other relevant context suggests the appropriateness of an 
approach that looks to the conditions of the granting of the subsidy.  
Attribution of Subsidies On A "Tied" Basis 44. According to Korea, in apparently every ca se, a Member must analyze the actual use and 
effects of a subsidy in connection with a particular product, and apply a "tied" attribution 
methodology. But the terms of the SCM Agreemen t and the GATT 1994 do not impose a specific 
test for determining when a subsidy is "tied" to the production or sale of a particular product – 
either the approach employed by the USDOC or alternatives.  
45. Korea's approach may yield results that are speculative and arbitrary. Adoption of Korea's 
use/effects approach could impose significant administrative burdens, and may be difficult or impossible to implement in a meaningful way.  
46. Korea also relies on inapposite jurisprudence to support its position. Here, there are no 
allegations of pass-through or privatization, and it is undisputed that the RSTA subsidies at issue exist and benefit the products.  
47. It was appropriate for the USDOC to employ an  untied approach on the facts of this case. 
The design, structure, and operation of these RSTA programs do not suggest a product-specific tie. 
To the extent that the RSTA programs induce investment ex ante  (i.e., by encouraging companies 
to invest in anticipation of receiving tax credits) they would not do so at the product level. Indeed, 
companies only receive credits for a percentage of their aggregate investment costs. The 
aggregate tax credits received by the company are more appropriately viewed as fungible, benefitting the entire company. Even if Samsung maintained underlying records to support the 
expenses it claimed in its return, in case the Korean authorities decided to conduct an audit, the 
Korean authorities did not receive or review these underlying documents in connection with the bestowal of the subsidies, and did not acknowledge any product-specific tie.  WT/DS464/R/Add.1 
 
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  Sales of Products Manufactured Outside Korea 
48. Equally, there is no basis for Korea's assertion that the USDOC was required to include in 
the denominator the sales value of products manufactured outside Korea . Article 19.4 of the 
SCM Agreement and Article VI:3 of the GATT 1994 do not require Members to take into account 
products manufactured outside the territory of th e subsidizing Member when calculating subsidy 
rates. Members generally grant subsidies to generate benefits within their borders.  
49. The USDOC explained that it was not appropriate to attribute subsidies to overseas 
production. There was no evidence that the granting Member intended to subsidize overseas 
production, and no connection between the structure and operation of the subsidy program and overseas production. 
50. Korea asserts that the USDOC failed to "match" the elements in the numerator and 
denominator. This "matching" argument rests on a flawed premise – namely, that the inquiry 
hinges on the possible indirect effects of subsidies overseas. But even if an investigating authority were required to consider effects-based considerations for purposes of attribution, Korea offers no 
evidence of these supposed overseas effects. 
51. Korea wrongly criticizes the USDOC for its alleged use of a presumption in favor of 
attributing subsidies to domestic sales. WTO pane ls and the Appellate Body have endorsed the use 
of presumptions where they are reasonable an d rebuttable. Here, the USDOC will examine any 
relevant evidence and can draw the opposite co nclusion. The record was devoid of evidence 
establishing that the grant of subsidy was intended to benefit overseas production.  
52. Finally, Korea fails to account for the administrative burden associated with its overseas 
effects theory. Taken to its logical conclusion, Korea's theory would mean that Members would 
have to evaluate which sales of goods produced overseas were linked in some way to the subsidy, on a country-by-country basis, to determine the denominator in the subsidy ratio.  
Korea's Claims Under Articles 10 and 32.1 of the SCM Agreement 
53. Korea has failed to establish that the USDOC's specificity determinations and subsidy rate 
calculations are inconsistent with Article VI:3 of the GATT 1994 or Articles 1.2, 2 and 19.4 of the 
SCM Agreement. Accordingly, the USDOC's determin ation is not inconsistent with Articles 10 
or 32.1 of the SCM Agreement. 
V. CONCLUSION 54. For the foregoing reasons, the United States respectfully requests that the Panel reject 
Korea's claims. 
 
 
 
 WT/DS464/R/Add.1 
 
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  ANNEX C-2 
EXECUTIVE SUMMARY OF THE SECOND WRITTE N SUBMISSION OF THE UNITED STATES 
I. INTRODUCTION 
1. Korea continues to offer the Panel highly charged rhetoric rather than sound legal reasoning. 
Korea also continues to propose interpretations of the covered agreements that are untenable and 
inconsistent with the customary rules of interpretation of public international law. The U.S. first written submission demonstrates why Korea's claims fail. Statements and written filings Korea 
has made since filing its first written subm ission have not improved Korea's case.  
II. KOREA'S CLAIMS UNDER THE AD AGREEMENT ARE WITHOUT MERIT 2. The U.S. first written submission explains why the Panel should conclude that the measures 
challenged by Korea are not inconsistent with Article 2.4.2 of the AD Agreement or any other 
provisions of the covered agreements. Korea's legal arguments remain fatally flawed. 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. Korea's proposed interpretations, 
on the other hand, are untenable, in particular because they would read the second sentence of 
Article 2.4.2 out of the AD Agreement entirely. 
3. While Korea and a number of the third parties attack the Nails test applied by the USDOC in 
the washers antidumping investigation, as well as the differential pricing analysis applied by the 
USDOC in the preliminary results of the first administrative review of the washers antidumping order, neither Korea nor any of those third parties describes how, in their view, an investigating authority should discern whether there exists a pattern of export prices which differ significantly 
among different purchasers, regions, or time periods.  
Korea's Arguments Related to the "P attern Clause" Are without Merit 
4. When the USDOC undertook analyses pursuant to the "pattern clause" in the washers 
antidumping investigation, it took into account all of the "actual export prices" reported. Korea 
simply is incorrect when it suggests that the USDOC did not "evaluate actual export prices." Korea also is incorrect when it contends that the "pattern clause" requires investigating authorities to 
examine export prices on an individual basis. The text of the second sentence of Article 2.4.2 of 
the AD Agreement actually supports the opposite proposition.  
5. Korea likewise is incorrect when it argues  that the use of average prices rather than 
so-called "actual prices" "ignored basic principles of data analysis and common sense." The USDOC 
did not look to price variance ( i.e., as quantified by the standard deviation) at the 
transaction-specific level because the second sentence of Article 2.4.2 is concerned with export prices that "differ significantly among  different purchasers, regions or time periods." Using 
weighted-average export sales prices allows the USDOC to disregard variations within  a purchaser 
(or region or time period) and focus instead on uncovering a pattern of export prices which differ 
significantly among groups. Korea's proposed transaction-based variance calculation would not 
only be difficult to administer in most cases (if not impossible), but it also is at odds with the text 
of the second sentence of Article 2.4.2. 
6. Korea objects to the USDOC's alleged "misuse of the standard deviation in the Nails test," 
and, in addition, Korea advances a numbers of statistics-based arguments. Korea's statistical 
arguments are without merit. The "pattern clause" does not require the use of any specific type of 
statistical analysis, and the USDOC has not misused standard deviations. Further, although the USDOC did, in a generic sense, analyze certain statistics, i.e., weighted-average export prices, in 
the washers antidumping investigation, the "pattern clause" does not require the use of formal 
statistical techniques. WT/DS464/R/Add.1 
 
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  7. The premises of Korea's statistical arguments are flawed. As a legal matter, the term 
"significantly" in the second sentence of Article 2.4.2 of the AD Agreement does not require investigating authorities to utilize statistical analyses when examining export prices to determine whether there exists "a pattern of export prices that differ significantly among different 
purchasers, regions or time periods." The basic logical premise of Korea's arguments is equally 
flawed. Korea contends that the Nails test applied by the USDOC in the challenged antidumping 
investigation is not suitable to perform a particular type of statistical analysis. However, the Nails 
test does not involve the type of statistical analysis discussed by Korea. Korea's statistical criticism 
of the Nails test simply is inapposite. Korea seeks to replace the USDOC's balanced approach with 
one of the extremes noted by the USDOC in its determination, namely that only prices at the very bottom of the price distribution ( i.e., outliers that are more than two standard deviations from the 
average market price of all of an exporter's tran sactions) are sufficient to distinguish the alleged 
"target" from others. The sole justification for this extreme approach is Korea's insistence on the use of a particular type of statistical analysis, which the AD Agreement does not require.  
8. Korea's argument that the USDOC's examination of a "pattern" in the washers antidumping 
investigation is inconsistent with the "pattern clause" because the USDOC did not examine what Korea terms "qualitative aspects" continues to lack merit. In Korea's view, even after the 
investigating authority has found a pattern, the investigating authority must then conduct a 
second, independent investigation of what those differences mean and why they exist. Nothing in the text of the "pattern clause" requires an investigating authority to conduct a separate examination of why export prices differ significantly. Korea's proposed interpretation is untenable.  
Korea's Arguments Related to the "Exp lanation Clause" Are without Merit  
9. In its statements at the first panel meeting and in its responses to the Panel's questions, 
Korea offers the Panel no compelling reason to find that the USDOC's explanation in the washers 
antidumping investigation is inconsistent with the "explanation clause." It is not the case that the 
investigating authority must explain why it is not possible at all to take into account significantly 
differing export prices using one of the two normal comparison methodologies. Rather, the 
investigating authority must explain why the significant differences in export prices cannot be 
taken into account in a manner that is "proper," "fitting", or "suitable" using one of the normal comparison methodologies. Additionally, the term  "appropriately" does not alter the meaning of 
the terms of the "pattern clause." Korea's proposed  reading of the term "appropriately" simply is 
nonsensical. 
10. Korea makes clear its view that "whatever their trends or variations" and "regardless of the 
size of the price differences," the normal comparison methodologies can take into account 
"appropriately" any "pattern of export prices wh ich differ significantly among different purchasers, 
regions, or time periods." This plainly is yet anot her attempt by Korea to read the second sentence 
of Article 2.4.2 out of the AD Agreement entirely, using the term "appropriately" as leverage to do 
so. Korea's proposed interpretation is untenable. 
11. Korea argues that "[t]he term 'appropriately' indicates that an adjustment of the 
W-W method might be sufficient to allow the W-W method to take differences into account with the W-W method, without the need to resort to the W-T comparison method." Korea offers no 
explanation, however, for why the presence of the term "appropriately" in the second sentence of 
Article 2.4.2 should be read as altering the application of the comparison methodologies set forth in the first sentence of Article 2.4.2.  
12. Korea argues that the USDOC "does not make any effort to consider particular 
circumstances." Korea's contention is baseless. Th e USDOC, based on information provided by the 
respondents, determined what the margins of dumping would have been for LG and Samsung, 
both using the normal average-to-average comparison methodology and the alternative, 
average-to-transaction comparison methodology.  The USDOC compared the results and discerned 
that there was a "meaningful difference" in the ma rgins of dumping calculated using the different 
methodologies. In this way, the USDOC explained why, within "the factual context of a particular 
case," i.e., the washers antidumping investigation, the average-to-average comparison 
methodology could not take into account appropriately the pattern of export prices that differ significantly. WT/DS464/R/Add.1 
 
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  13. Korea continues to argue that "the authority must always consider the possibility of a 
[transaction-to-transaction] comparison." Nothing in the text of Article 2.4.2 supports Korea's proposed interpretation.  
Application of the Average-to-Transaction  Comparison Methodology to All Sales  
14. Korea offers little new argumentation to support its claim that the United States has 
breached the second sentence of Article 2.4.2 as a result of the USDOC's application of the alternative average-to-transaction comparison methodology to all sales in the washers 
antidumping investigation. Korea appears to argue for the application of the alternative, 
average-to-transaction comparison methodology on ly to certain types or models of the product 
under investigation. However, applying the al ternative, average-to-transaction comparison 
methodology on such a model-specific basis would appear to be directly contrary to what the 
Appellate Body said about the so-called "targeted dumping" provision in EC – Bed Linen .  
Zeroing in Connection with the Average-to -Transaction Comparison Methodology  
15. The Appellate Body has never found 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 are met. The Appellate Body's findings in previous disputes 
neither support rejection of the "mathematical eq uivalence" argument nor compel its rejection. 
The Panel should recognize the limited nature an d application of the Appellate Body's previous 
findings related to zeroing and the "fair comparison " language in Article 2.4 of the AD Agreement. 
The logical extension of the Appellate Body's reason ing that the alternative, average-to-transaction 
comparison methodology is an exception to the two comparison methodologies that an 
investigating authority must use "normally" – each of which, the Appellate Body has explained, 
logically should not "lead to results that are systematically different" – is that the alternative 
comparison methodology should  "lead to results that are systematically different," when the 
conditions for its use have been met .  
16. When the Appellate Body has found prohibitions on zeroing in the past, while it has 
discussed contextual elements that support its inte rpretations, those interpretations, on a basic 
level, are rooted in the text of Article 2.4.2 of the AD Agreement. Specifically, 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 compar ison 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 comparison' in the singular" and the term "basis." 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 met.  
17. The U.S. first written submission demonstrates "mathematical equivalence," using both 
hypothetical scenarios and the actual data from the washers antidumping investigation. It also is the case that the actual preliminary result in the first washers antidumping administrative review, if zeroing is prohibited under both methodologies, would be that the average-to-average and the 
alternative, mixed comparison methodologies would yield mathematically equivalent results. This 
is further evidence of the veracity of mathemat ical equivalence. Korea's arguments do not leave 
mathematical equivalence "broken."  
Korea's Claims Regarding the "Differentia l Pricing Methodology" Are without Merit 
18. Korea has given the Panel no reason to find that any so-called "differential pricing 
methodology" – or any measure in which the USDOC applied a differential pricing analysis – is 
inconsistent with Article 2.4.2. As we have de monstrated, no "differential pricing methodology" 
measure exists, and thus no such measure can be found inconsistent with Article 2.4.2, either "as such" or as "ongoing conduct." Additionally, we have shown that the preliminary results of the first administrative review of the washers antidumping order are not within the Panel's terms of 
reference, so those results, too, cannot be found inconsistent with Article 2.4.2, "as applied." 
Nevertheless, we address Korea's substantive arguments. WT/DS464/R/Add.1 
 
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  19. The differential pricing analysis the USDOC applied in the first administrative review sought 
to identify a "pattern," but did not require a "targe t." A "target" is just one example of a "pattern." 
While the second sentence of Article 2.4.2 has been described as a provision that addresses "targeting" or "targeted dumping," that is a shorthand reference to the terms of the 
second sentence of Article 2.4.2. The terms "tar geting" and "targeted dumping" are not present in 
Article 2.4.2 or anywhere else in the AD Agreement. 
20. Under the "targeted dumping" approach that  the USDOC applied in the washers antidumping 
investigation, the "target" concept focused only on lower-priced export sales. However, 
Article 2.4.2 does not require this particular approach to a "pattern" analysis. The differential pricing analysis that the USDOC applied in the preliminary results of the first administrative review looked for export prices to a purchaser, region, or time period which are either significantly higher 
or significantly lower than the export prices to other purchasers, regions, or time periods. The 
conceptual framework of that analysis is consiste nt with the terms of the "pattern clause" of the 
second sentence of Article 2.4.2, which calls upon the investigating authority to find "export prices 
which differ significantly," but which does not require a focus either on lower-priced or 
higher-priced export sales.  
21. The legal premise of Korea's vertical variation argument is flawed. 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." Korea is incorrect when it suggests that the USDOC did not evaluate " all of the exporter's export prices 
for the product under investigation." In the preliminary results of the first administrative review, 
after making comparisons between different purchasers, regions or time periods on a 
model-specific basis, the USDOC aggregated the results of these model-specific comparisons to 
establish that 47.12 percent of LG's export sales passed the Cohen's d test and that this supported 
the conclusion that there existed conditions indica tive of a pattern of export prices that differed 
significantly among different purchasers, regions, or time periods. Aggregating the results of the 
model-specific comparisons among different purchasers, regions, or time periods ensured that the 
"pattern" identified was for the product under investigation as a whole and was based on the 
exporter's overall pricing behavior in the U.S. market. 
22. Korea contends that the USDOC's differential pricing analysis improperly combines price 
variation across different purchasers, regions and/or  time periods to identify a pattern. However, 
there is no textual support in Article 2.4.2 for Ko rea's contention. To identify "a pattern" for the 
exporter and product as a whole, it may be appropriate for an investigating authority to consider all of that exporter's export prices to discern wh ether significant differences in the export prices 
are exhibited collectively among different purchasers, or different regions, or different time 
periods. In other words, the text of the "pattern  clause" contemplates a holistic analysis of the 
exporter's pricing behavior for the product as a whole, or, in other words, the very "horizontal" 
analysis to which Korea objects.  
23. Korea's argument related to so-called "cross-category" variation fails for the same reason 
that its "horizontal" variation argument fails. Nothing in the text of the "pattern clause" suggests that the significant export price differences among purchasers (or regions or time periods) cannot 
be cumulated with the significant differences in export prices among other categories ( i.e., 
purchasers, regions, or time periods) when assessing whether there exists "a pattern of export prices which differ significantly among different purchasers, regions or time periods." The USDOC 
undertakes a similar process when measuring the amount of dumping. Specifically, the USDOC 
makes comparisons between normal values and export prices for comparable merchandise, and then aggregates those intermediate comparison results to determine the amount of dumping for 
that exporter and for the product as a whole. In this way, the use of the Cohen's d and ratio tests 
as part of the USDOC's differential pricing analysis is in accord with prior findings of the Appellate Body elaborating on the obligations set forth in Article 2.4.2. 
24. Korea's "systemic disregarding" contention just amounts to another phrasing of Korea's 
argument that zeroing is always impermissible. However, zeroing is permissible – indeed, it is 
necessary – when applying the alternative comp arison methodology, if that "exceptional" 
comparison methodology is to be given any meaning. Additionally, because the use of zeroing in 
connection with the application of the alternative,  average-to-transaction comparison methodology 
to all sales is permissible, there is no basis for finding that what Korea calls "systemic disregarding" is impermissible. Nothing in the text of the second sentence of Article 2.4.2 supports WT/DS464/R/Add.1 
 
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  Korea's claim. When the results of the two comparison methodologies used in a mixed application 
are aggregated, it is necessary to ensure that th e results of the average-to-transaction comparison 
methodology are not masked or offset by the results of the average-to-average comparison 
methodology, and the USDOC ensures that that does not happen by not offsetting a positive 
comparison result of the average-to-transacti on comparison methodology with a negative 
comparison result of the average-to-average comparison methodology.  
III. KOREA HAS FAILED TO DEMONSTRATE TH AT THE USDOC'S COUNTERVAILING DUTY 
DETERMINATION IS INCONSISTENT WITH THE SCM AGREEMENT AND THE 
GATT 1994 
25. Korea has failed to demonstrate that the USDOC's CVD determination is inconsistent with 
U.S. obligations under the GATT 1994 and SCM Agreement. Korea's first claim – i.e., that RSTA 
Article 10(1)(3) subsidies are not de facto  specific – is legally and factually untenable, and its 
second specificity claim is equally flawed.  
26. Likewise, there is no merit to Korea's assertion that the USDOC should have calculated the 
subsidy ratios for RSTA Article 10(1)(3) and 26 subsidies using a novel variation of the "tied" 
approach to attribution. Korea's expense-driven theory has nothing to do with the bestowal of 
subsidies , and fails as a consequence. Korea's belated attempt to introduce materials from 
separate antidumping investigations cannot rescue this theory.  
27. Equally without merit is Korea's assertion th at the USDOC should have incorporated revenue 
from overseas manufacturing into the denominator of the subsidy ratio for RSTA Article 10(1)(3). Here, again, Korea relies on a theory that has no basis in the bestowal of subsidies. 
The USDOC's Disproportionality Determination Is Consistent With Article 2.1(c) Of The 
SCM Agreement 
28. Korea asserts that, in US – Large Civil Aircraft , the Appellate Body "endorsed" and "implicitly 
agreed with" the argument that a panel must base its determination on a "second ratio reflecting 
the expected distribution of the subsidy." Korea mischaracterizes the Appellate Body's findings.  
29. The Appellate Body found that it would have expected a "wider distribution" of benefits, 
given open eligibility criteria and notwithstanding the fact that not every company would be in a 
position to take advantage of the program. Having found that there was "reason to believe that the IRB subsidies were granted in disproportionate ly large amounts," the Appellate Body turned to 
the explanations offered by the parties. The Appellate Body found that the European Communities' 
"second ratio" was not relevant, as it was not an explanation for the distribution. The Appellate 
Body also could not accept the United States' explanation based on qualifying investments. The Appellate Body considered the United States' final explanation, which was predicated on the 
significance of Boeing and Spirit to the Wichita economy, but rejected this defense. The Appellate 
Body did not "endorse" or even suggest that a di sproportionality analysis must include a "second 
ratio."  
30. Korea also continues to cling to arguments that the USDOC appropriately considered and 
rejected. Korea points to the fact that the "amount of the credit that Samsung received was solely determined based on the statutory formula," and argues that as a result its "subsidy is proportionate to the amount of its investment." This "common formula" argument reflects a 
misreading of Article 2.1. The disproportionality  inquiry cannot be reduced to the question of 
whether subsidies are distributed automatically, with out the exercise of discretion. Korea's position 
distorts the inquiry under Article 2.1(c) and would invite ready circumvention of subsidy 
disciplines. Here, as well, RSTA Article 10(1)(3) does not even contain a single "common formula."  
31. Equally groundless is Korea's continued reliance on its "size defense." The fact that Samsung 
and LG are "large" companies does not explain the skewed distribution evident here. Nor can large 
size shield recipients from scrutiny under Article 2.1(c) of the SCM Agreement.  
32. This was the extent of Samsung's "size defense" before the USDOC – i.e., that, in general, 
"large" companies will "typically" invest more in research and human resources development than "smaller" companies. To the extent that Samsung was attempting to establish a "second ratio"  WT/DS464/R/Add.1 
 
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  that would explain the disproportionate subsidy distribution found by the USDOC, it failed to do so. 
The USDOC also found that this theory was fundamentally at odds with the purpose of the disproportionality inquiry.  
33. Here, again, the US – Large Civil Aircraft  dispute is instructive. The fact that Boeing and 
Spirit were "large" companies with larger investments in commercial and industrial property than 
"smaller" companies was not found to explain the disparate distribution and could not avert a disproportionality finding. The Appellate Body did not accept a "size defense" in that case, and the 
Panel should not do so here. And even assuming some connection between size and R&D activity, 
this general correlation would not explain the extent  of the disparity evident here.  
34. Nor does the relative size of participants in the RSTA Article 10(1)(3) program explain this 
disparity. Korea has offered extra-record evidence on Samsung's size relative to the next largest 
company in Korea, but does not compare participants in the Article 10(1)(3) program. The only 
known RSTA 10(1)(3) participants for which there is  information on the record regarding size are 
the two companies under investigation – Samsung and LG. Throughout the 2007-2009 period, 
Samsung and LG both received very large amounts of subsidy. But this information shows a 
disparity that cannot be explained by relative size . And the disparity in subsidy distribution cannot 
be explained by the amounts of eligible investments.  
35. Other record evidence confirms that this pattern – i.e., the concentration of subsidy benefits 
in a very small number of recipients – is long-standing. The distribution with respect to RSTA Article 10 is consistent with a broader pattern of concentration of tax benefits in the top "chaebol."  
36. In its redetermination, the USDOC further confirmed that Samsung's status as a "large" 
company cannot explain the distribution of RSTA Article 10(1)(3) subsidies. Korea dismisses the 
USDOC's redetermination, apparently based on th e assertion that the USDOC's findings did not 
constitute a "second ratio." But the Appellate Bo dy did not require a "second ratio." Korea falls 
back on the argument that data in the redetermin ation, which is based on taxable income and tax 
savings, is "irrelevant," because it may reflect a company's tax planning strategy. But this does not render the data irrelevant, particularly at the level of an aggregate comparison between 
Samsung and the other 99 companies.   
37. Finally, in its first written submission, the United States observed that Korea had failed to 
make a prima facie  case with respect to the final sentence of Article 2.1(c) of the SCM Agreement. 
Korea has failed to cure the deficiencies in its ca se. Korea asserts that "there is no evidence" that 
the USDOC took into account the diversification of the Korean economy. To the extent that Korea 
is asserting that this factor must be addressed explicitly, Korea is incorrect. It is a "publicly-known fact" that Korea is one of the wealthiest, most diversified economies in the world. And because of 
limitations in the evidence that the GOK provided, the extent of diversification of the economy was 
not at issue.  
The USDOC's Determination That  RSTA Article 26 Subsidies Were Regionally Specific 
Was Consistent With Article 2.2 Of The SCM Agreement 
38. Korea also failed to establish that the USDOC's specificity determination with respect to 
RSTA Article 26 subsidies is inconsistent with Article 2.2 of the SCM Agreement.  
39. Korea offers a narrow, results-driven interpretation of the term "enterprise" in Article 2.2. 
Yet when the term "certain enterprises" is read in context with Article 2.2, it is clear that a firm, 
industry, or group thereof may be "located" in a variety of places, including the site of a head office, branch, manufacturing facility , or other asset or investment.  
40. Korea casts a wide net, hoping to find support for its interpretation in other provisions of the 
SCM Agreement and the GATT 1994. This effort fail s. The sharp distinction that Korea seeks to 
draw between "enterprise" and "facility" defies logi c. It is unclear where an enterprise would be 
located, if not in facilities of some kind. Manufacturing and production does not occur in a vacuum, 
but instead is undertaken by enterprises in manufacturing facilities.  
41. Korea asserts that the Article 26 program "does not impose any limitation on the location of 
the enterprise that receives the subsidy." But th e geographic limitation in the RSTA Article 26  WT/DS464/R/Add.1 
 
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  program is imposed with respect to the location of "facilities" in which investments are made. The 
fact that a company such as Samsung has multiple locations – that fall both within and without a designated region – is of no moment. And Korea's interpretation would create a major loophole in subsidy disciplines.  
42. In addition, Korea continues to rely on failed legal theories that have no basis in the text of 
Article 2.2. Korea clings to its "double basis" theory, yet two panels that have addressed this theory rejected it. Korea also asserts that a geographic region under Article 2.2 must be 
designated "affirmatively, not by implication or suggestion." But Article 2.2 does not contain the 
word "explicit," and does not require that a region be "affirmatively" designated. Here, RSTA Article 26 incorporates an express geographic limitation.  
43. Korea's continued reliance on its "large region" defense is equally without merit. Article 2.2 
does not operate on a sliding scale or allow panels to overlook geographic limitations where 
regions are large. And it would be particularly in appropriate to overlook the geographic limitation 
imposed here.  
44. Finally, Korea's resort to "policy" arguments also cannot avert a finding of specificity. In fact, 
these policy arguments confirm that the RSTA Article 26 program is regionally specific. 
The USDOC Appropriately Treated RSTA Subsid ies As "Untied" When Calculating Subsidy 
Ratios  
45. Korea criticizes the USDOC's calculation of the subsidy ratios for RSTA Articles 10(1)(3) 
and 26. Yet Korea's claim is legally untenable. There can be no doubt that the R&D and facilities subsidies at issue are not "tied" to particular products. 
46. Korea distances itself from its previous "retroactive use" theory, but fails to offer a coherent 
alternative. Korea's attribution theory hinges on expenditures  that were incurred by the subsidy 
recipient. Although Korea grounds its theory in ex penditures that it says "benefit" production, it 
uses this term in a way that has no basis in Ar ticle 1.1(b) of the SCM Agreement. To the extent 
that Korea is using the term "benefit" as a short-hand reference to the effect of an expenditure, 
this too would be inconsistent with the SCM Agreement. Treating expenses as synonymous with 
subsidies is also inappropriate here, given the stru cture, architecture, and design of the subsidies 
at issue.  
47. Korea relies heavily on Samsung's internal expense records, which it argues allow Samsung 
to "'tie' the tax credits that it received to the washers that it produced in its Digital Appliance 
Division." Korea's focus on record-keeping is misplaced, however, as the attribution of subsidies is 
not a function of the effect of expenses, but rather the bestowal of the subsidies. So the internal records of these expenses would not provide a basis for calculating subsidy ratios.  
48. The record-keeping requirements for RSTA Article 10(1)(3) also do not support Korea's view. Korea admitted that companies are not required to file a form or report as part of their tax return that shows how expenses eligible for Article 10(1)(3) tax credits are associated with particular 
merchandise. Korea points to Korea's Basic Act on National Taxes, which requires all taxpayers to 
"prepare and keep faithfully books and documentary evidence related to all transactions." But this is a cross-cutting requirement, applicable to all taxpayers in all contexts. 
49. Moreover, Samsung did not submit any records – internal or otherwise – to the granting 
authority, the Government of Korea ("GOK"), that would have shown which expenses were 
allegedly spent in connection with a particular product. Korea has conceded that even the "detailed breakdown" of expenses that it touted in its first written submission was never presented to the 
GOK. Likewise, it is undisputed that the "200 page document" (which Korea says the USDOC 
should have reviewed) was never submitted to the GOK, and did not inform the bestowal of the subsidies. Korea asserts that such a product-spec ific breakdown would not be possible because of 
the way Samsung does business. But, if this is so, even Samsung is unable to provide what Korea 
argues is required  to be analyzed under Article VI:3 of the GATT 1994 and Article 19.4 of the 
SCM Agreement.  WT/DS464/R/Add.1 
 
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  50. Finally, even if Samsung had submitted a product-by-product breakdown in its tax return to 
the GOK, this would not necessarily be a sufficien t basis for finding that the RSTA Article 10(1)(3) 
and 26 subsidies were "tied" to particular products. There is no merit to Korea's assertion that the USDOC's treatment of subsidies under RSTA Articles 10(1)(1) and 10(1)(2) as "untied" was 
somehow "inconsistent" with its treatment of RSTA Article 10(1)(3) subsidies – which were also 
treated as untied. The USDOC found that there was no evidence in the tax returns themselves to 
indicate that RSTA Article 10(1)(1) and 10(1)(2) subsidies were tied to specific products.  
51. Korea attempts to buttress its expense-driv en tying theory by adducing materials from 
two separate antidumping investigations. Yet the veri fication reports and verification exhibits that 
Korea submitted from these proceedings were ne ver a part of the washers CVD record. These 
materials are also irrelevant on their face, as they do not refer to or address the RSTA 
Article 10(1)(3) subsidy program. Moreover, Korea attempts to rely on these documents to 
support a legal theory the United States has previously explained is erroneous. Cost accounting principles used in antidumping proceedings are an inappropriate basis for attributing subsidies.  
52. Finally, Korea offers a flawed and incomplete description of the USDOC's cost accounting in 
these AD investigations. Korea fails to mention that the USDOC presumptively follows the 
investigated company's books and records in carrying out this calculation. Korea likewise fails to 
mention that U.S. courts have imposed a substantial evidentiary hurdle and strict requirements for 
departing from an investigated company's books and records.  
Korea's Overseas Effects Theory Is Groundless 
53. Equally, there is no merit to Korea's argument that the USDOC should have incorporated 
overseas manufacturing into the denominator of the subsidy ratio for RSTA Article 10(1)(3). The 
obligations that Korea grounds its claim in – Article VI:3 of the GATT 1994 and Article 19.4 of the SCM Agreement – do not support its theory, and focus exclusively on domestic production. Nor do 
these provisions support an effects-based attribution theory.  
54. In addition, Korea's approach is at odds with the facts here, which confirm that Korea 
bestowed RSTA Article 10(1)(3) subsidies on domestic production – not overseas manufacturing. 
Korea impugns the USDOC for alleged inconsistency in its approach. But the alleged "change in 
position" between the USDOC's preliminary and fi nal determination reflected the correction of 
Samsung's misreported data.  
55. Korea argues that "[i]t is common sense that the results of the R&D will normally benefit all 
operations of a company, wherever located." Korea fails to support this conclusory assertion with 
any evidence.  
56. Korea further argues that, for the USDOC to attribute subsidies to domestic production, it 
must prove that the effects of R&D "were limited to washer production in Korea." Korea's approach 
would distort the provisions on which it grounds its claims. Korea also fails to address the troubling implications of its approach, which would inject an overseas dimension into subsidy attribution, 
with potentially far-reaching consequences.  
57. Korea again takes refuge in antidumping proceedings. But these involved a different product 
and different jurisdiction, and have no bearing on the attribution of RSTA Article 10(1)(3) subsidies. In fact, Korea's reliance on a royalty payment made by Samsung undercuts its overseas 
attribution theory.  
IV. CONCLUSION 58. 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 Korea's claims. 
  
 WT/DS464/R/Add.1 
 
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  ANNEX C-3 
EXECUTIVE SUMMARY OF THE OPENING ORAL  STATEMENT OF THE UNITED STATES  
AT THE FIRST SUBSTANTIVE MEETING 
Madame Chairperson, members of the Panel: 
1. This dispute places before the Panel a number of important questions concerning the proper 
interpretation and application of the AD Agr eement, the SCM Agreement, and the GATT 1994. 
Resolving this dispute will require the Panel to di scern the meaning of various provisions of these 
agreements through the application of the customary rules of interpretation of public international 
law pursuant to Article 3.2 of the DSU. Korea proposes interpretations of the AD Agreement and the SCM Agreement that are divorced from those rules.  
I. KOREA'S CLAIMS UNDER THE AD AGREEMENT ARE WITHOUT MERIT 
A. Zeroing Is Necessary for the Alternat ive, Average-to-Transaction Comparison 
Methodology To Have Any Effect 
2. The Appellate Body has explicitly stated that it "has so far not ruled on the question of 
whether or not zeroing is permissible under the comparison methodology in the second sentence 
of Article 2.4.2." Of course, the United States recognizes that a number of Appellate Body and 
panel reports include findings that bear on the in terpretive questions before the Panel. None of 
those findings compels the Panel to find agai nst the United States. On the contrary, when 
understood in the context in which they were made, the logical extension of the Appellate Body's zeroing findings is that zeroing is permissible – indeed, it is necessary – under the alternative, average-to-transaction comparison methodology. 
3. The second sentence of Article 2.4.2 describes a particular set of circumstances in which it 
may be appropriate for an investigating authority to employ the alternative, average-to-transaction comparison methodology to , in the words of the Appellate Body, "unmask 
targeted dumping." The Appellate Body has found th at Members must offset positive and negative 
comparison results when using the "normal" comparison methodologies, and must calculate an aggregate margin of dumping for an exporter for the product as a whole. However, in a situation 
where a pattern of significantly different export prices is observed among different purchasers, 
r e g i o n s ,  o r  t i m e  p e r i o d s ,  s u c h  o f f s e t t i n g  m a y  " m a s k "  w h a t  h a s  b e e n  r e f e r r e d  t o  a s  " t a r g e t e d "  dumping. Unmasking such dumping requires not offsetting the lower-priced export sales with the higher-priced export sales; that is, it requires zeroing. The Appellate Body has further observed 
that the third methodology is an "exception" to the comparison methodologies that "normally" are 
to be used. As an exception, the third 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.  
4. The concept of mathematical equivalence is critical to the resolution of the interpretive 
questions before the Panel because, if a prop osed interpretation of a provision of the 
AD Agreement would lead to the alternative comparison methodology set forth in the second 
sentence of Article 2.4.2 yielding, in all cases, results that are identical to the results of the 
average-to-average comparison methodology, th en that proposed interpretation cannot be 
accepted. Such an interpretation would render the second sentence of Article 2.4.2 ineffective, 
which would be inconsistent with the customary rules of interpretation. That is precisely what 
would happen under Korea's proposed interpretation s. If the use of zeroing is impermissible in 
connection with the alternative, average-to-transaction comparison methodology, then that 
methodology will always yield results that are no different from the results of the 
average-to-average comparison methodology. In th at case, the alternative, average-to-transaction 
comparison methodology is no exception at all. 
5. Japan, China, and Korea suggest that th e Appellate Body has already rejected the 
mathematical equivalence argument in the past. The Appellate Body's prior consideration of the WT/DS464/R/Add.1 
 
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  mathematical equivalence argument neither supports nor compels rejection of the mathematical 
equivalence argument in this dispute.  
6. Japan, China, and Korea further suggest that  the mathematical equivalence argument must 
fail because it rests on particular "assumptions." With respect to export prices, limiting the 
application of the alternative, average-to-transac tion methodology only to the "targeted" export 
sales raises at least two potential concerns. First, doing so in a way that would exclude entirely from the dumping calculation other "non-targeted" sales would result in the calculation of even 
higher dumping margins. Second, applying the al ternative, average-to-transaction comparison 
methodology to the "targeted" sales while applying the "normal" average-to-average comparison methodology to the remaining sales, without zeroing, would also lead to a result that is mathematically equivalent to the application of the average-to-average comparison methodology 
to all export sales. The identification of this assumption is no answer to the mathematical 
equivalence argument. 
7. Likewise, identifying an assumption about the calculation of normal value does not mean 
that the mathematical equivalence argument fails. There is no reason why a weighted average 
normal value would be calculated any differently when applying the average-to-average comparison methodology pursuant to the first sentence of Article 2.4.2 and when applying the 
average-to-transaction comparison methodology pursuant to the second sentence of Article 2.4.2. 
Neither Japan nor China explains why manipulation or adjustment of the calculation of normal 
value, which is based on sales prices in the home  market, would be appropriate to address a 
potential issue where there is a pattern of prices that differ significantly in the export  market. The 
lower-price export  sales are "masked" by other higher-price export  sales. How would calculating 
normal value  differently help "unmask targeted dumping"? Logically, using different normal values 
would not help "unmask targeted dumping" at all, and the identification of the normal value 
assumption is no response to the mathematical equivalence argument. 
B. If Application of the Alternative,  Average-to-Transaction Comparison 
Methodology Is Limited Only to Lower- Priced Sales, then the Exceptional 
Methodology Would Have No Effect  
8. If zeroing is prohibited, then it does not matter whether the average-to-transaction 
comparison methodology is applied to all or just some export sales. If zeroing is prohibited, then, after the intermediate calculations are aggregated, the mathematical result will be the same as it 
would be if the "normal" average-to-average comparison methodology had been used. Assuming 
that zeroing is permissible, then it must also be permissible to apply the average-to-transaction 
comparison methodology not only to the export sales that are at significantly lower prices, but also 
to the higher-priced export sales that may "mas k" the dumping evidenced by the lower-priced 
export sales. 
C. The "Pattern Clause" 
9. The conclusion that flows from an analysis in accordance with the customary rules of 
interpretation is that the "pattern clause" requires a finding of a regular and intelligible form or sequence of export prices that are unlike in an important manner or to a significant extent among different purchasers, regions, or time periods. An investigating authority examining whether a 
"pattern of export prices which differ significantly" exists should employ rigorous analytical 
methodologies and view the data holistically. As we have demonstrated, that is precisely what the U.S. Department of Commerce ("Commerce") did in the washers antidumping investigation.  
10. Korea urges that an analysis pursuant to the "pattern clause" must take into account the 
qualitative, in addition to the quantitative sign ificance of any observed differences. Korea means 
that the differences in export prices must "reflect  what reasonably can be inferred to be targeting 
conduct." However, a qualitative analysis, to the extent that the particular facts suggest that such 
an analysis is relevant, would be employed to assess how the export prices differ from each other, 
not why the export prices are different. The "reason" for the low prices changes nothing. WT/DS464/R/Add.1 
 
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  D. The "Explanation Clause" 
11. The "explanation clause" requires a reasoned and adequate statement by the investigating 
authority that makes clear the reason that it is not possible in the dumping calculation to deal or reckon with export prices which differ significantly in a manner that is proper, fitting, or suitable 
using one of the normal comparison methodologies se t forth in the first sentence of Article 2.4.2. 
Since an investigating authority may choose between the average-to-average or the transaction-to-transaction comparison methodologies, and since they yield systematically similar 
results, there would be no purpose in requiring an investigating authority to discuss both the 
average-to-average and the transaction-to-transaction comparison methodologies in the "explanation" provided under Article 2.4.2.  
12. In the washers antidumping investigation, Commerce evaluated the difference between what 
the weighted-average dumping margin would have been as calculated using the 
average-to-average comparison methodology and the average-to-transaction comparison methodology. The "explanation" that Commerce provided in the washers antidumping investigation 
is not inconsistent with Article 2.4.2 of the AD Agreement. 
E. Korea's "As Such" Claims Related to the "Differential Pricing Methodology" 
13. Korea has failed to adduce evidence sufficient to support its claims regarding the alleged 
"differential pricing methodology." While the United States does not agree that there is any validity 
to Korea's claims with respect to the so-called "d ifferential pricing methodology," we continue to 
consider that Korea has not made a prima facie  case of inconsistency. 
II. KOREA'S CLAIMS UNDER THE SCM AGREEMENT AND GATT 1994 ARE WITHOUT 
MERIT 
14. Korea's challenge to Commerce's countervailing  duty determination is equally without merit. 
Contrary to the rhetoric in Korea's submissions, Commerce's findings were thoughtful, reasoned, 
and grounded in the evidence. It is Korea who has pushed the envelope in this dispute, offering 
strained, results-driven interpretations of the relevant obligations and Appellate Body guidance, while presenting a distorted picture of the factual record. The Panel should decline Korea's 
invitation to import new obligations into the SCM Agreement or GATT 1994, and to substitute its 
own assessment of the facts for that of the investigating authority.  
A. The Department of Commerce's Fi ndings on Disproportionality Were 
Reasoned and Adequate, and Supp orted by Positive Evidence  
15. Turning to Korea's first claim, the evidence amply supports Commerce's determination that 
subsidies conferred on Samsung under RSTA 10(1)(3) were de facto  specific. Samsung received a 
large percent of all subsidies distributed in 2010, out of nearly 12,000 participants. By comparison, 
the average recipient obtained a very small perc entage. Commerce found that this disparity was 
contrary to what would be expected, and indicated disproportionality – an approach that is fully 
consistent with the text of Article 2.1(c) of the SCM Agreement and the Appellate Body's findings 
in the US – Large Civil Aircraft  dispute.  
16. Korea's primary argument – i.e., its "size" defense – has no basis in law or fact. Commerce 
observed that, even if Samsung's size argument were factually accurate, it would still not apply this standard because to do so would "undermine the purpose" of the disproportionality inquiry.  
17. Korea has submitted a copy of a redetermination that the Department of Commerce 
conducted pursuant to remand from a domestic court. While that redetermination occurred well after this Panel was established, it nonetheless further supports the conclusion that Commerce's 
specificity findings were not in error.  
B. Subsidies Conferred Under RSTA Article 26 are Regionally Specific 
18. Equally, there is no basis for Korea's assertion that the significant amount of facilities 
subsidies received under RSTA Article 26 should avoid scrutiny under the SCM Agreement. 
Eligibility is expressly limited to investments located in a designated geographic region – the area WT/DS464/R/Add.1 
 
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  falling outside the Seoul overcrowding area. Korea's claim rests on legal theories that have no 
grounding in the text of the SCM Agreement, and have been repeatedly rejected by WTO panels.  
19. Korea falls back on the argument that subsidies limited to large designated regions are not 
regionally specific. But Article 2.2 does not privilege or exempt certain categories of region. 
Article 2.2 does not operate on a sliding scale or allow panels to overlook geographic limitations 
where regions are large. And it would be particularly inappropriate to overlook such geographic limitations here. The area excluded from eligibility includes Seoul, the capital of Korea and site of a 
large proportion of Korea's economy and population.  
C. Commerce Appropriately Found that RSTA Subsidies Were Not "Tied" to 
Particular Products, and Calculated the Subsidy Ratio Accordingly  
20. Likewise, there is no basis for Korea's criticism of the ratios calculated with respect to 
subsidies received by Samsung under RSTA Articles 10(1)(3) and 26.  
21. Korea attempts to ground its preferred ap proach in Article VI:3 of the GATT 1994 and 
Article 19.4 of the SCM Agreement. These provis ions do not support Korea's arguments, but 
instead undermine them because they do not spec ify particular attribution methodologies, much 
less Korea's.  
22. Absent rules on applying specific methodologies, an investigating authority must determine 
an appropriate approach. As explained in the U. S. first written submission, an investigating 
authority may derive guidance from certain provisions. Article VI:3 of the GATT 1994 and footnote 36 of the SCM Agreement confirm that in determining whether and what amount of 
subsidy has been bestowed on the production, manufacture, or export of a product, the facts 
surrounding the Member's "bestowal" of the subsidy will be a key consideration. Annex IV of the 
SCM Agreement indicates that both "tied" and "untie d" approaches to attribution are, in principle, 
compatible with the SCM Agreement. The Informal Group of Experts ("IGE") report to the 
Committee on Subsidies and Countervailing Measures is instructive, although not binding. 
Commerce's determination was consistent with these sources, and grounded in the facts relating to the bestowal of subsidies on Samsung.  
23. Korea nonetheless argues that Commerce should have adopted a novel variation of the 
"tied" approach to attribution, based on the "retroactive" use and effect of the subsidy. And Korea criticizes Commerce for declining to accept and review accounting records that it says would have helped Commerce implement this approach by quantifying the amount of underlying expenses with 
some connection to washers. These arguments fail, for several reasons. 
24. First, Korea has offered no basis in the SCM Agreement to consider that investigating 
authorities are compelled to calculate subsidy ratios based on how a portion of the benefit is 
"used."  
25. Second, the structure, architecture, and design of the RSTA subsidy programs do not reflect 
a product-specific tie. Samsung submitted an aggregate  pool of expenses, and received an 
aggregate  pool of tax credits based on formulas that related to aggregate  and average  expenses 
for the corporation as a whole . It is not meaningful to attempt to trace a given KRW of tax credit 
received to any KRW of underlying expens e, much less to a particular product.  
26. Third, even aside from the legal flaws in Korea's argument, it also rests on a flawed factual 
premise. RSTA tax credits do not "retroactively" reduce expenses, much less those related to a 
particular product.  
27. Finally, the documents that Korea refers to have nothing to do with the "bestowal" of the 
subsidy. It is undisputed that the granting authority, Korea, was not presented with these 
documents when it bestowed the tax credits. And even under Korea's theory, these documents would not enable Commerce to derive a meaningful subsidy ratio that carves out expenses and 
sales information for washers – as opposed to the entire Digital Appliances unit, which includes a 
range of product lines, such as refrigerators. Even Korea is unable to undertake the kind of forensic analysis that it suggests is needed for a "retroactive" approach. All of this confirms that Korea's preferred approach is not a more "precise" way to attribute subsidies.  WT/DS464/R/Add.1 
 
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  D. Korea's Overseas Effects Theory  Has No Basis In Law or Fact 
28. Korea's final attempt to impugn Commerce's a ttribution methodology fares no better than its 
earlier attempts. Korea argues that the denominator in the subsidy ratio for RSTA 10(1)(3) should have included sales of merchandise produced outside Korea.  
29. This argument has no legal basis. Consistent with Article VI:3 of the GATT 1994 and 
Article 19.4 of the SCM Agreement, Commerce attributed subsidies based on the way in which they were bestowed on Samsung. Korea argues that Commerce instead should have calculated the 
subsidy ratio based on the possible knock-on effects of subsidies on overseas manufacturing. But it 
is unclear why this effects-based investigation is required to ensure that the elements in the 
numerator "match" those in the denominator. Korea's proposed effects-based inquiry would also impose a considerable administrative burden on investigating authorities, with no apparent 
advantage. Needless to say, neither the Appellate Body nor any WTO panel has ever imposed the 
requirement that Korea suggests.  
30. It is significant that Korea does not challenge Commerce's attribution of RSTA Article 26 
facilities subsidies to domestic production. Korea asserts that "R&D" subsidies are different, and 
that they "normally" benefit overseas production. This argument has no basis in the bestowal of the subsidy. But even on a purely effects-based reasoning, Korea's argument is unsupported and 
untenable. 
III. CONCLUSION 31. As we have demonstrated in the U.S. first written submission and again this morning, 
Korea's claims are without merit, and the United States respectfully requests that the Panel reject 
them. 
 
 WT/DS464/R/Add.1 
 
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  ANNEX C-4 
CLOSING ORAL STATEMENT OF THE UNITED STATES AT THE FIRST SUBSTANTIVE MEETING 
Madame Chairperson, members of the Panel: 
1. In light of the late hour, the United States will limit ourselves to offering just a few short 
closing comments. This dispute, like all WTO disputes, is about the meaning of the covered 
agreements and the content of the obligations that  WTO Members have accepted and agreed to in 
those agreements. Korea seeks to alter the meanin g of the covered agreements by departing from 
the accepted rules of treaty interpretation and by  inventing obligations found nowhere in the text 
of any covered agreement, including, inter alia , by reading out of the AD Agreement an entire 
sentence. 
2. During the course of this proceeding thus far, including in its first written submission, in its 
opening statement, and when pressed today during the back-and-forth of the question and answer 
session, Korea has utterly failed to offer the Panel anything that approaches a plausible interpretation of the second sentence of Article 2. 4.2 of the AD Agreement; one that is rooted in 
the ordinary meaning of the terms of that provision,  in their context, and in light of the object and 
purpose of the AD Agreement. Korea nowhere even suggests that the prohibition on zeroing it asks the Panel to impose on the second sentence of Ar ticle 2.4.2 could be based on the terms of that 
provision itself. Korea attacks the U.S. application of, inter alia , the terms "pattern," "significantly," 
and "explanation," all in an effort, not to give meaning to the terms of the second sentence of 
Article 2.4.2, but to deprive it of any meaning whatsoever. 
3. Korea's claims under the SCM Agreement are equally without merit. We could not help 
noticing this morning that not one of the third parties offered any comments on the subsidy issues 
in this dispute during the third party session. The issue of zeroing obviously is quite charged and can perhaps overshadow the other issues in a disput e such as this one. We appreciate the Panel's 
questions this afternoon and the careful attention the Panel has already given to the important 
questions at issue in this dispute under the SCM Ag reement. At stake is the ability of Members to 
address massive amounts of injurious subsidization to what Korea itself agrees is the largest 
company in Korea. Just like the antidumping issues, the resolution to Korea's subsidy claims will 
come from a proper application of the customary rule s of interpretation; it will not be found in an 
argument made by the United States in a previo us dispute, which was rejected by the Appellate 
Body. When the Panel undertakes the interpretive analysis for itself, it will find that Korea's 
proposed interpretations of the SCM Agreement are strained and results-driven, and when the 
Panel examines the facts, it will find that Korea's presentation of the factual record is distorted.  
4. Pursuant to the DSU, this Panel's charge is  to make an objective assessment of the matter 
before it and to clarify the existing  provisions of the covered agreements in accordance with 
customary rules of interpretation of public international law. At the beginning and at the end of the panel's analysis is the text of the covered agre ements. The terms. We agree with and appreciate 
the interventions of the third parties this morn ing that the terms of the agreement are what 
matters, not characterizations of the terms or even generally accepted notions about the purpose of provisions. Common words and phrases that have been used widely, like "zeroing," "masking," and "targeted dumping," may be helpful in enhanc ing understanding of the terms, but they also 
could prove a distraction. It will be critical for the Panel to ground its own interpretive analysis and 
its legal findings in the terms of the agreements themselves. 
5. The United States recognizes that the Panel is only at the beginning of its work, and we 
hope that our first written submission and our presentation over these past two days have been 
helpful for the Panel. We look forward to rece iving the Panel's written questions and we will 
endeavor to provide responses that bring clarity and understanding to the many complex issues in 
this dispute. Ultimately, we seek to aid the Panel in arriving at the correct conclusions, based on 
proper interpretations of the covered agreements. We are confident that, if we are successful in 
that effort, the Panel will find in our favor and dismiss Korea's claims. WT/DS464/R/Add.1 
 
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  6. Once again, the United States thanks the Panel members, and the Secretariat staff, for their 
time and attention to this matter. 
 WT/DS464/R/Add.1 
 
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  ANNEX C-5 
EXECUTIVE SUMMARY OF THE OPENING ORAL  STATEMENT OF THE UNITED STATES  
AT THE SECOND SUBSTANTIVE MEETING 
Madame Chairperson, members of the Panel: 
1. The United States has demonstrated that Korea has failed to establish any breach of any 
provision of any of the covered agreements. In th is statement, we draw to the Panel's attention 
and correct a number of the misstatements made by Korea during these proceedings.  
1. Korea Misstates the Appellate Bo dy's Previous Zeroing Findings 
2. From the outset, Korea has misstated the nature and extent of prior Appellate Body findings 
relating to the use of zeroing in connection with the alternative, average-to-transaction comparison methodology. We are confident the Panel will agree that the question of whether 
zeroing is permissible in connection with the alternative, average-to-transaction comparison 
methodology, applied pursuant to the second sentence of Article 2.4.2, is a novel one; one that has not been decided by the Appellate Body previously, either explicitly or implicitly. 
2. Korea Fails to Identify Anything in the Text of the Second Sentence of 
Article 2.4.2 of the AD Agreement that Prohibits the Use of Zeroing  
3. Korea distorts the findings of the Appellate Body because it can find no support for its 
argument in the text of the second sentence of Ar ticle 2.4.2. The prohibitions on zeroing that the 
Appellate Body has found in the past are rooted firmly in the text of the first sentence of Article 2.4.2. The Appellate Body has found that  its textual interpretations are supported by 
contextual analysis of other provisions of the AD Agreement, including, inter alia , the terms 
"dumping" and "margin of dumping." But the obligat ions – the prohibitions on zeroing that the 
Appellate Body has found – are in the text of the first sentence of Article 2.4.2. 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 met. 
3. Korea Has Not "Broken" Mathematical  Equivalence, and the United States 
Has Not Abandoned that Argument 
4. Rather than being broken, mathematical eq uivalence has been confirmed by Korea's own 
paid consultant. As Korea's consultant demonstrates, everything else being equal, mathematical equivalence results if the average-to-average comparison methodology and the 
average-to-transaction comparison methodology (without zeroing) are applied to the data from the 
washers antidumping investigation, and also using hypothetical data. 
5. Korea suggests that the United States has abandoned the mathematical equivalence 
argument, and goes as far as characterizing certain passages of the U.S. responses to the Panel's 
questions as an "abrupt change in the U.S. posi tion." Korea has misunderstood the U.S. responses 
to the Panel's questions. When the U.S. argume nts are examined, it is evident that Korea is 
asserting that the U.S. arguments convey the o pposite of their actual meaning by selectively 
quoting U.S. statements, divorced from their context.  
6. The dispute at this point is not about math. The parties agree on the math. The dispute is 
about so-called "assumptions" about the calculation of normal value, the export transactions used 
in the different comparison methodologies, and whether different adjustments may or should be 
made to export prices. The United States does not see why an investigating authority would calculate normal value differently, examine a diffe rent universe of export transactions, or make 
the kinds of adjustments that Korea proposes. In any event, these are questions of legal 
interpretation, and such questions are for the Panel to resolve itself. Korea's consultant has inadvertently waded into legal interpretation wate rs that are beyond the depth of his expertise. WT/DS464/R/Add.1 
 
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  4. Korea Misrepresents the U.S. Arguments Relating to the Negotiating History 
of the AD Agreement  
7. Documents from the negotiating history of  the AD Agreement confirm that the use of 
zeroing is permissible under the alternative, average-to-transaction comparison methodology set 
forth in the second sentence of Article 2.4.2 of the AD Agreement. Korea misrepresents the U.S. 
arguments related to the negotiatin g history of the AD Agreement. 
8.  Korea suggests that the United States "maintain[s] that Japan and Hong Kong approved the 
use of the zeroing practice when implementing the second sentence." This distortion of the U.S. 
position is plainly contradicted by what the United States actually argued in the U.S. first written submission. What is established by the negotiat ing history documents is that the concern about 
and opposition to asymmetrical comparisons and zeroing were connected. Neither Japan nor 
Hong Kong mentioned "zeroing" in their proposed  changes to the Antidumping Code. One view of 
the negotiating history is that neither viewed doing so as necessary. That is, they could have considered it sufficient that the revised Code require the use of symmetrical comparisons, which 
would, by necessity, in their view, preclude the use of the zeroing methodology about which they 
had expressed concerns.  
9. The cited negotiating history documents are consistent with the view that the use of zeroing 
is impermissible in connection with the application of the symmetrical comparison methodologies, 
but its use is allowed in connection with the application of the alternative, asymmetrical comparison methodology. The compromise is evidenced on the face of Article 2.4.2, and is confirmed by reference to documents from the negotiating history.  
5. Korea's Statistical Arguments Rest on Flawed Premises and 
Mischaracterizations of what Commerce Actually Did 
10. Korea has recognized that "there is no single 'right way' to determine a 'pattern'" and that 
"[t]he text does not specify any specific method ." This recognition, however, has not prevented 
Korea from elaborating rigid, specific requirements that it contends Article 2.4.2 of the AD Agreement imposes on an investigating authorit y's assessment of the existence of a pattern of 
export prices which differ significantly. The obligations Korea asks the Panel to find simply are not 
supported by the text of the second sentence of Article 2.4.2, and Korea's arguments are based on flawed premises and mischaracterizations of Commerce's analysis. 
11. The "pattern clause" of Article 2.4.2 of th e AD Agreement does not require the use of any 
particular formal statistical techniques. There are any number of ways that an investigating 
authority might examine export prices and identify  a "pattern" within the meaning of the "pattern 
clause." Korea mischaracterizes the Nails test, which does not involve the type of statistical 
analysis discussed by Korea. Korea also incorrectly alleges that Commerce "ignores actual market 
prices." Commerce most certainly does not ignore actual market prices. Commerce's analysis is based on an examination of all of the actual export prices reported by the respondents. 
6. Korea's Arguments Related to the "Explanation Clause" Are Aimed at 
Depriving the Second Sentence of Article 2.4.2 of any Meaning 
12. Korea's arguments related to the "explanation  clause" would again read the second sentence 
of Article 2.4.2 out of the AD Agreement, contrary to the principle of effectiveness, and are at odds 
with the Appellate Body's recognition that the second sentence provides Members a means to 
"unmask targeted dumping" in "exceptional" situatio ns. Korea openly invites the Panel to find that 
such exceptional situations simply never would arise. The Panel should decline Korea's invitation. 
7. Korea Has Failed to Establish the Ex istence of any So-Called "Differential 
Pricing Methodology" Measure 
13. Korea has failed to establish the existenc e of any "differential pricing methodology" 
measure, and thus Korea's "as such" claims relating to such a purported measure must fail. Korea 
seeks to minimize the U.S. arguments, suggesting th at the lone basis for the U.S. position is that 
"Korea cannot challenge the differential pricing methodology in general because there is always WT/DS464/R/Add.1 
 
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  some chance the USDOC might change the policy in  the future." Korea again misunderstands and 
misstates the U.S. arguments, which speak for themselves. 
14. Korea has presented the Panel with little more than a "string of cases, or repeat action" in 
support of its claim that a measure exists that can be challenged "as such," but the Appellate Body 
has warned that panels may not simply divine the existence of a measure in the abstract on the 
basis of such a string of cases, or repeated ac tion. In light of Korea's characterization of the 
measure it seeks to challenge, the Appellate Bo d y ' s  a n a l y s i s  i n  t h e  z e r o i n g  d i s p u t e s  o f  t h e  
evidence necessary to establish the existence of a measure of this nature would appear to be most 
apt. Unfortunately for Korea, Korea has failed to adduce evidence here that is comparable to the 
evidence presented in the zeroing disputes.  
8. Korea's Criticisms of the Cohen's d Test Are Exaggerated 
15. In its second written submission, Korea contends that Commerce's use of the Cohen's d test 
as part of its differential pricing analysis reflects the use of "arbitrary benchmarks" with "little inherent value." As with its other arguments, Korea overstates what the evidence on the record of 
this dispute actually supports. Despite Korea's suggestion that "the Cohen's d t e s t  i s  n o t  a n  
accepted measure of 'significance'," academic literature in fact recognizes the usefulness of effect 
size, which can be measured by the Cohen's d coefficient, in measuring significance. Moreover, the 
thresholds associated with the Cohen's d test have been "widely adopted" and "provide a good 
basis for interpreting effect size and for resolving disputes about the importance of one's results." 
9. Korea Also Misstates Prior Appella te Body Findings Related to the 
Disproportionality Analysis and Introduces a New, Largely Incomprehensible 
Argument 
16. Korea similarly misunderstands and misstates the Appellate Body report in US – Large Civil 
Aircraft (Second Complaint)  to support its claims under the SCM Agreement. Korea does not rely 
on the Appellate Body's findings in US – Large Civil Aircraft (Second Complaint)  so much as it 
relies on arguments the United States made in that dispute, arguments that the Appellate Body rejected. To be clear, the United States argued that the subsidy at issue was not de facto specific, 
and the Appellate Body upheld the panel's finding that the subsidy was de facto  specific. The U.S. 
arguments on which Korea relies were not successful. 
17. On facts very similar to those in this disp ute, the Appellate Body found that the subsidy 
challenged in US – Large Civil Aircraft (Second Complaint)  was de facto  specific because Boeing 
received a disproportionately large amount of the subsidy. On the basis of the Appellate Body's 
interpretation and application of Article 2.1(c) of  the SCM Agreement, the Panel should find that 
Commerce's determination that RSTA Article 10(1)(3) was de facto  specific because Samsung and 
LG received a disproportionately large amount of the subsidy is not inconsistent with Article 2.1(c).  
18. Korea also advances a puzzling new argument that is premised on mischaracterizations of 
the facts and U.S. arguments, and on a misreading  of Article 2.1(c). Korea now argues that the 
Panel should "focus upon" the amount of tax credits earned  during the period of investigation 
rather than the amount of tax credits granted . However, this does not align with Article 2.1(c) of 
the SCM Agreement, which refers to the granting  of disproportionately large amounts of the 
subsidy . Furthermore, the tax credit earned under RSTA Article 10(1)(3) in a given year is not the 
amount of subsidy granted. The amount of subsid y granted is the amount of revenue foregone by 
the Korean government. Korea mischaracterizes the facts of its own subsidy program and the argument of the United States. 
10. Korea Misconstrues the Text of Articl e 2.2 of the SCM Agreement and the U.S. 
Arguments Regarding RSTA Article 26 
19. Korea seeks to avoid the disciplines of the SCM Agreement by relying on irrelevant policy 
justifications and by advancing an overly restrictive – and ultimately untenable – interpretation of 
the term "enterprises." Korea suggests that the term "enterprises" in Article 2.2, which is collocated with the term "certain," somehow should not be read as "certain enterprises," which is defined for purposes of the SCM Agreement in Articl e 2.1 as "an enterprise or industry or group of 
enterprises or industries." Korea's suggestion si mply is not credible. The Panel should reject WT/DS464/R/Add.1 
 
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  Korea's approach and find that Commerce's regional specificity determination reflects a 
straightforward application of Article 2.2 of the SC M Agreement that is not inconsistent with that 
provision. 
11. Korea's Arguments against Commerce's Tying Analysis Rely Increasingly on 
Irrelevant Non-Record Eviden ce and Mischaracterizations 
20. Korea's arguments regarding Commerce's attribution of subsidies similarly rely on 
misstatements and extraneous evidence and arguments. First, Korea persists in its misguided 
effort to color this dispute with the introduction of non-record evidence from separate antidumping 
proceedings that were subject to rules that ar e distinct from those that govern Commerce's 
countervailing duty investigation of washers from Korea. Second, Korea is not taking a principled stand in support of a requirement that investigating authorities tie subsidies to a particular 
product. Korea is simply advocating a subsidy calc ulation at a level of generality (the corporate 
division level) that is somewhat lower than the level of generality of Commerce's subsidy calculation (the company level). Third, Korea asserts that Commerce was "passive" when 
presented with evidence allegedly germane to the tying analysis. In reality, Commerce did not act 
passively, but appropriately focused on evidence relevant to the issue at hand. Finally, Korea again misunderstands and misstates that Commerce's tying analysis in the washers countervailing duty 
investigation was an "irrebuttable presumption." Commerce's approach did not presume that the 
subsidies were tied or untied; it simply provided a means of classifying the programs based on the nature of the programs themselves. 
12. Korea Misstates the Facts Concerni ng Commerce's Determination of the 
Denominator Used to Calculate Samsung's Subsidy Rate 
21. Korea continues to misconstrue Commerce's determination in the refrigerators 
countervailing duty investigation. Commerce did not make an affirmative finding that RSTA 
Article 10(1)(3) benefits should be attributed to Samsung's global sales in the refrigerators 
investigation. Commerce simply made a mistake ba sed on Samsung's erroneous reporting of data. 
To demonstrate this, we are providing Exhibit US A-86, an excerpt of Samsung's response to the 
USDOC's initial questionnaire in the refrigerators countervailing duty investigation, which shows 
that Commerce instructed Samsung to "not include the volume and value of merchandise produced outside of Korea" in its reported sales data.  
22. Korea also asserts that Samsung raised the "royalty payment" issue with Commerce during 
the washers countervailing duty investigation. This is yet another mischaracterization of the record 
by Korea. During the washers investigation, neit her Samsung nor Korea argued that these royalty 
payments also supported a finding that RSTA Arti cle 10(1)(3) benefits should be attributed to 
global production, and Commerce had no reas on to consider them in that context. 
13. Conclusion 
23. The United States has set out in some detail in this statement numerous errors made by 
Korea in this proceeding, including interpretations that are divorced from the text of the 
agreements and misunderstandings, misstatements, or mischaracterizations of the facts and determinations made by Commerce, the arguments of the United States, and prior findings of the Appellate Body. 
24. As we have demonstrated in the U.S. writte n submissions, statements, and responses to the 
Panel's questions, all of Korea's claims are without merit, and the United States respectfully renews its request that the Panel reject them. 
 WT/DS464/R/Add.1 
 
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  ANNEX C-6 
CLOSING ORAL STATEMENT OF THE UNITED STATES AT THE SECOND SUBSTANTIVE MEETING 
Madame Chairperson, members of the Panel: 
 
1. You have heard extensive arguments from bo th sides in our written submissions and oral 
presentations. And you have told us that you have focused on those arguments and read our submissions numerous times. That certainly is reflected in the questions you have asked. Given 
that, we will not repeat the arguments we have already made. 
2. We would simply acknowledge that the legal and interpretative issues before you are 
challenging and complex. In particular, a short sentence in the AD Agreement
1 setting forth an 
alternative comparison methodology that may be used under certain conditions sits squarely in the 
middle of a broad landscape of interpretative anal yses by the Appellate Body concerning an issue 
that, to understate the matter, has been of great interest to WTO Members. Reconciling the terms, 
the purpose of that provision, and the object an d purpose of the AD Agreement itself, as well as 
the many relevant findings of the Appellate Body will be no small undertaking. The probing 
questions of the Panel over the past two days, as well as the set of questions the Panel posed in connection with the first panel meeting, indicate that you well understand the difficult task the 
parties have asked you to undertake. So, thank you for agreeing to take on that task.  
3. As the issues in dispute are novel, the Panel has the intellectually tantalizing opportunity, 
but also the weighty burden to be the first to reveal your solution to the puzzle presented by the second sentence of Article 2.4.2 of the AD Agreemen t. Of course, that solution must follow from an 
application of the customary rules of interpretation. That means, as the Panel well knows, a good 
faith reading of the ordinary meaning of the terms of  that sentence in their context and in light of 
the object and purpose of the AD Agreement.  
4. Additionally, the interpretative solution to the puzzle also must be a general solution, and a 
number of your questions recognize that. While this is a dispute between Korea and the United States in which Korea asks the Panel to make findings about certain U.S. measures (or 
alleged measures), the preliminary step for the Panel is to do that interpretative analysis to 
ascertain what the obligations are. 
5. As we have argued, the Panel should find that the text of the AD Agreement cannot be read 
as narrowly and rigidly as Korea proposes. Rather, the agreement text affords investigating 
authorities in all Members, around the world, quite a bit of flexibility to approach the analytical 
questions in a variety of ways.  
6. In that regard, I was struck by an observat ion by Dr. Cohen in the excerpt of the treatise 
that Korea has submitted to the Panel. In discussing the size conventions he developed, he noted 
that "the difference in size between apples and pineapples is of an order which hardly requires an approach via statistical analysis."
2  
7. The approaches to the application of th e "pattern clause" that the U.S. Commerce 
Department has developed over time are, admittedly, quite complicated. The complexity, though, is borne of an effort to deal with thousands of transactions in numerous investigations in an objective, transparent, predictable way. Commerc e has undertaken a good faith effort to grapple 
with the complexities that can arise from an analysis pursuant to the second sentence of 
Article 2.4.2, particularly in light of the Appellate  Body's many interpretative findings related to 
zeroing.   
8. Another investigating authority, though, might take a different, simpler approach. Perhaps 
that investigating authority handles antidumping investigations very rarely, or the investigations it handles involve far fewer imports. 
                                               
1 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 . 
2 Exhibit KOR-120, p. 13. WT/DS464/R/Add.1 
 
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  9. The interpretation of the second sentence of  Article 2.4.2 of the AD Agreement must provide 
space for both kinds of approaches, by both kinds of investigating authorities. 
10. As another observation about the interpretation  of the second sentence of Article 2.4.2, it 
will be useful for the Panel to determine for itself and keep firmly in mind what it is that the 
second sentence is attempting to accomplish. Yo u have our arguments on that. If you agree with 
us, and with the Appellate Body, that the purpose of the second sentence is to provide an investigating authority with the ability to unmask targeted or concealed dumping, then it is critical 
that the interpretation of that provision actually permits that to happen. It should not be the case 
that higher-priced export transactions, following an application of the second sentence, continue to obscure and mask lower-priced export transactions. 
11. If the Panel agrees with that premise, which we urge you to do, then that explains why the 
alternative, average-to-transaction comparison methodology operates as we argue it does. That 
explains why combining the results of the alternative and normal methodologies in a mixed approach operates the way we argue it does.  
12. Over the past two days, Korea's arguments have been exposed. Korea simply does not 
make sense of the second sentence of Article 2.4. 2. As we have shown, Korea's arguments and its 
proposed interpretations, in fact, read the second sentence of Article 2.4.2 out of the 
AD Agreement. Korea's proposed interpretations just are not tenable. 
13. For the reasons we have given, we again ask th e Panel to reject Korea's claims and find that 
the challenged antidumping measures are not inco nsistent with the provisions of the covered 
agreements.  
14. As we have not discussed Korea's SCM claims
3 during the question and response portion of 
this meeting, we will not touch on our arguments related to those claims. We would note again, though, that we appreciate the Panel's flexibility in terms of extending the schedule for responding 
in writing to the Panel's written questions on the SCM issues. We look forward to addressing the 
Panel's questions in an effort to help the Panel better understand those issues. 
15. In closing, the United States once again would like to thank the Panel members, as well as 
the Secretariat staff, for your time and for the careful attention you are giving to this matter. 
_______________ 
  
 
 
                                               
3 Claims made under the Agreement on Subsidies an d Countervailing Measures . WT/DS464/R/Add.1 
 
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  ANNEX D 
ARGUMENTS OF THE THIRD PARTIES 
Contents Page 
Annex D-1 Executive summary of  the arguments of Brazil D-2 
Annex D-2 Executive summary of the arguments of Canada D-6 
Annex D-3 Executive summary of the arguments of China D-10  
Annex D-4 Executive summary of the arguments of the European Union D-14 
Annex D-5 Executive summary of the arguments of Japan D-19  
Annex D-6 Executive summary of the arguments of Norway D-23 
Annex D-7 Executive summary of the arguments of Thailand D-26  
Annex D-8 Executive summary of the arguments of Turkey D-27 
Annex D-9 Executive summary of the arguments of Viet Nam D-30  
 
 WT/DS464/R/Add.1 
 
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  ANNEX D-1 
EXECUTIVE SUMMARY OF THE ARGUMENTS OF BRAZIL 
1. This dispute is the first one to directly challenge "zeroing" in situations where dumping is 
targeted to particular purchasers, regions or time periods. It is important to recognize that these 
situations are very specific factual situations the contours of which are far from being clear, not 
only because the text of the second sentence is concise but also because recourse to it by the majority of the WTO Members has be en relatively sparse so far. Considerable uncertainties exist as 
to when the second sentence of Article 2.4.2 could be invoked, how the comparison method 
provided in that sentence should be operated in practice and whether "zeroing" would be exceptionally permitted under the situation described in this second sentence. 
(i) The third method should be an exception 
2. A reading of Article 2.4.2 as a whole leads inevitably to the understanding that the 
third method is not expected to be routinely used. The adverb "normally" in the first sentence of this Article conveys an explicit instruction that th e use of the third method (W-T) should not be the 
first option of investigating authorities. It may be used only if the authorities find a pattern of 
export prices which may indicate targeted dumping and are able to explain why the differences in prices cannot be taken into account appropriately by the "normal" methods (W-W or T-T). This 
understanding is reinforced by the auxiliary verb "may" in the second sentence of Article 2.4.2 as 
opposed to "shall" in the first sentence of this Article. Investigating authorities "may" have recourse to the W-T comparison method, i.e. this method is a mere possibility, not an obligation, and is certainly not automatic, contrary to the recourse to the W-W and T-T methods, which "shall 
normally" be used. The Appellate Body has already pronounced itself in the sense that the use of 
the W-T should be an exception.
1 
(ii) Not all "pattern[s] of export prices which differ significantly" matter for the 
purposes of resorting to the third method 
3. With respect to the first condition for the use of the third method - that "the authorities find 
a pattern of export prices which differ significan tly among different purchasers, regions or time 
periods" - Brazil understands that it is not all "pattern[s]of export prices which differ significantly" 
that matter for the purposes of resorting to the third method. 
4. According to the United States, "[t]he relevant pattern at issue in the second sentence of 
Article 2.4.2 is that of export prices "which differ significantly…"2, and this pattern is interpreted as 
being "a regular and intelligible form or sequence of export prices, which are unlike in an 
important or notable manner, or to a significant extent, as between different purchasers, regions or time periods"
3. As Korea puts it, "[t]he focus […] is on any differences in pricing, irrespective of 
whether the pricing differences are above  or below  the average"4. Consistent with this 
interpretation, the USDOC, in its "Differential Pricing Methodology", considers not only low priced sales but also high priced sales when determining the comparison methodology to apply to the 
sales. In Brazil's view, the tests applied by the USDOC do not reveal a "pattern of export prices 
which differ significantly", as required by Articl e 2.4.2. They simply measure the percentage of 
sales that have passed the "Cohen's d" test and that, therefore, according to that methodology, 
are deemed to have a differential pricing. They do not consider whether the aggregate of those 
sales, i.e. the sales below the 0.8 and the sales abov e 0.8, form a pattern of export prices relevant 
for the purposes of the second sentence of Article 2.4.2. In addition, the tests seem to ignore the 
magnitude of the variations above and below 0.8.  
5. Although an important variation in prices, both above and below the average, may be taken 
into consideration in assessing why the regular comparison methodologies would not be able to 
                                               
1 Appellate Body Report, US – Zeroing (Japan) , para. 131. 
2 U.S. First Written Submission, para. 60. 
3 U.S. First Written Submission, para. 65. 
4 Korea's First Written Submission, para. 114. WT/DS464/R/Add.1 
 
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  unmask the dumping, the mere existence of such variations is not sufficient to meet the conditions 
required by Article 2.4.2. The patterns of price variations that matter for determining the margin 
of dumping in the situations foreseen in that provision are, in normal circumstances, only those that are significantly  below  the price for the tested purchaser, region or time period. Patterns of 
price variations above  that price should not be considered relevant , in principle, for the application 
of the third method, because in this case, no evidence of targeted dumping will normally have been found
5. To allow a pattern of higher than average export prices to trigger the application of 
the third method seems not only contrary to th e specific purpose of the second sentence of 
Article 2.4.2, which is to "unmask" "targeted dumping", but is also illogic in relation to the very purpose of the Anti-Dumping Agreement which is concerned with an specific price behavior that causes injury to the domestic industry of the importing country. It is important to recall that 
neither Article VI of the GATT 1994 nor the Anti-Dumping Agreement prohibit dumping "per se". In 
general, patterns derived from a subset of export prices whose average is higher than the overall 
average export price are not an issue in the Anti-Dumping Agreement, as the Agreement is 
concerned with such patterns of export price that a re below the normal value and that cause injury 
to the industry .  
6. Therefore any decision about the existence of "a pattern of export prices which differ 
significantly" for the purposes of the second senten ce of Article 2.4.2 must be based on criteria of 
analysis coherent with the object and purpose of the Anti-Dumping Agreement, which is to 
counteract dumping that causes injury. An interpre tation of the "pattern clause" consistent with 
the object and purpose of the Anti-Dumping Agreement is certainly not  one that mechanically 
considers patterns of price variations above  the average as relevant  for the application of the third 
method. 
(iii) What type of explan ation is to be provided? 
7. With respect to the second condition for th e use of the third method, Brazil interprets the 
requirement to provide "an explanation" as a centra l obligation in the context of Article 2.4.2 of 
the Anti-Dumping Agreement. This obligation must be understood as requiring from the authorities 
an elaboration on the reasons for the impossibility to use the symmetrical methods. It does not 
suffice to simply provide a reason without further explaining it and the "explanation" must have a "genuine explanatory value"
6.  
8. Brazil is not convinced that the explanations given in the investigation at issue in this 
dispute have this genuine explanatory value. The existence of high priced sales in the 
non-targeted group that "mask" the low-priced sales in the targeted group cannot per se  be the 
decisive factor for having recourse to the W-T method. Also, it is not even clear to Brazil that the 
W-W method will always conceal differences in export prices. On the contrary: the fact that 
Article 2.4.2 itself envisages the possibility that this method can take account of differences in 
export prices seems to deny this proposition. Simi larly, to justify the recourse to the third method 
in function of a specific result, i.e. a higher margin of dumping obtained with the use of the 
W-T when compared to the margin obtained with the W-W or T-T methods, seems to fall short of 
what is required by the second sentence of Arti cle 2.4.2. The use of the third method should be 
based on an analysis of the applicability of the symmetrical methods to a given factual situation 
and the corresponding conclusion that these methods cannot take into account the differences in 
                                               
5 Brazil would like to point out that it is possible to conceive, in theory, of a very specific set of factual 
circumstances that would justify the application of th e third method based on a pattern where the average 
export price of the subset of "targeted" transactions is higher than the export price for the whole set of 
relevant transactions. Such situation might arise, for instance, if the normal values varied significantly – one could think of products subject to stro ng price variations due to seasonal fluctuations in supply and/or demand. 
To provide a mathematical example, consider a product whose normal values, by trimester, were 100, 40, 40 and 40 and whose export prices were 70, 50, 50 and 50 (assuming one transaction per trimester and equal quantities). Even though the export price for the first tr imester is higher than the overall average export price 
in the example, the targeted dumping situation that migh t require, to be remedied, the application of the third 
methodology is the one manifested  in that very same trimester (because then the normal value is so much higher than the export price). This is clearly a very spec ific situation in the context of the application of a trade 
policy tool which is already exceptional in itself. Brazil makes this observation essentially to underline the importance of investigating authorities to proceed rigorously with respect to suspected "targeted dumping" 
situations, analyzing the specific set of facts of each of these situations and providing the corresponding 
explanations.  
6 China's Third Party Submission, para. 28. WT/DS464/R/Add.1 
 
- D-4 - 
 
  export prices. The results that would be obtained  using the different methods, in themselves, do 
not seem to authorize the use of one or another method.  
9. For Brazil, the adverb "appropriately" in the second sentence of Article 2.4.2 is linked 
contextually with the verb "taken into account", so that what should be assessed as "appropriate" 
is the application of the symmetrical methods to the concrete case and not the result of this 
application. In principle, the investigating authority should explain why the application of the symmetrical comparison methods was not appropriat e to the circumstances of the case at issue, 
independently  of the final margin of dumping  (the result).  
10. Brazil also thinks that the "explanation" to be provided must contemplate the reasons of why 
both symmetrical methods cannot be used. Had the drafters of the Anti-Dumping Agreement 
intended that an explanation be limited to only one of the symmetrical methods, they would have 
said so explicitly at the end of the second se ntence by stating, for example " by the use of one of 
the symmetrical methods". 
(iv) Operation of the third method in "targeted dumping" situations 
11. With respect to how the W-T method should operate in practice once the conditions for its 
use are met, there seems to be considerable uncerta inties in this regard. An interpretation of the 
second sentence of Article 2.4.2 that would limit the application of this method to the transactions 
within the pattern raises several doubts: how the results of the W-T (applied to the transactions 
within the pattern) and the W-W or T-T comparisons (applied to the rest of the transactions) would be combined for the purpose of calculating an overall dumping margin? Would it be possible to 
adjust the W-A normal values, so as to produce different mathematical results? The answers to 
these questions should be found on the basis of the text, object and purpose of the Anti-Dumping 
Agreement itself. In any case, this analysis should be subject to the provision governing fair comparison (Article 2.4), which emphasizes the need  to justify, at the outset, that the reason for 
invoking the second sentence of Article 2.4.2 is fully consistent with this provision.  
12. With respect to the adjustments that could be made in the W-A normal value to avoid 
mathematical equivalence of results between th e W-W and the W-T methods, Brazil understands 
that if the same normal value data is used in both methods, it would be difficult to discard this 
argument. The alternative suggested by the Appellate Body
7, in Brazil's view, could only be 
performed when the differences in export prices occur among time periods. When the differences 
in prices occur among purchasers or regions, uncertainty would arise on how or even if this 
approach could be followed. Even the use of the same monthly W-A normal value under both 
methods would not produce different results, since both would be based in the same time periods. To be even more precise, the monthly W-A normal values in both methods and the monthly 
W-A export price in W-W or the individual export  transactions in W-T would be weighted by the 
same quantities, what would produce the same result.  
(v) The "as such" claim against the "Differential Pricing Methodology" 
13. With respect to the Korean claim "as such" against the "Differential Pricing Methodology", it 
is well known that the legal standard for assessing the existence of an unwritten measure is firmly established and that panels "must not lightly assume the existence of a "rule or norm" constituting a measure of general and prospective application"
8.  That being said, Brazil recalls, firstly, that 
the distinction between "as such" and "as applied" claims was a jurisprudential development to 
facilitate the understanding of the nature of a meas ure at issue. It neither governs the definition of 
a measure for purposes of WTO dispute settlement, nor does it define exhaustively the types of 
measures that are susceptible to challenge in WTO dispute settlement9. Secondly, the criteria set 
out in US – Zeroing (EC)  must be assessed on a case-by-case basis, taking into consideration not 
only the characteristics and the nature of the measure that is being challenged but also the period 
of time that the measure has been in place . The amount of evidence that a complaining party must 
adduce against an unwritten measure that has been in place for several years is certainly not the 
                                               
7 US – Stainless Steel (Mexico) , AB report, para. 126. 
8 Appellate Body Report, US – Zeroing (EC) , para. 196. 
9 Appellate Body Report, US – Continued Zeroing , para. 179. WT/DS464/R/Add.1 
 
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  s a m e  a s  t h e  o n e  n e e d e d  i n  r e l a t i o n  t o  a  m e a s u r e  r e c e n t l y  p u t  i n  e f f e c t ,  a s  i s  t h e  c a s e  o f  t h e  
"Differential Pricing Methodology" that is being applied only since March 2013. 
14. Last, but not the least, Brazil reminds the Panel that, although claims against unwritten 
measures must be carefully analyzed, these claims  also "serve the purpose of preventing future 
disputes by allowing the root of WTO-inconsistent behavior to be eliminated"10. As they "seek to 
prevent Members ex ante  from engaging in certain conduct"11, these challenges are valuable in 
protecting the security and predictability needed to conduct future trade. "This objective would be 
frustrated if instruments setting out rules or norms inconsistent with a Member's obligations could 
not be brought before a panel"12 independently of how they are categorized by the complainants 
("as such", "as applied" or something else). 
15. With this principle in mind, Brazil hopes that it will not be necessary another decade to 
obtain clarification on the use of the third method and especially on the use of "zeroing" in 
targeted dumping situations, in light of the disciplines of the Anti-Dumping Agreement. 
(vi) The "systemic disregarding" in th e "Differential Pricing Methodology" 
16. Finally, with respect to what Korea calls th e "systemic disregarding" in the context of the 
"Differential Pricing Methodology", Brazil understands that this practice seems to share the same rationale as that of "zeroing", inasmuch as it zeroes a negative result in the W-W comparison 
subset that could be used to offset the positive result in the W-T subset. And the effect also 
appears to be the same as that of "zeroing", found to be inconsistent in so many WTO disputes: it inflates the overall margin of dumping. Considerin g that the United States has not "respond[ed] to 
the substance of Korea's arguments that are spec ific to the "differential pricing methodology"
13, it 
would be important that the Panel further enquiries the United States as to the exact nature and 
precise content of this methodology. If the "systemi c disregarding" is found to be like "zeroing", it 
would also not be consistent with the fair comparison requirement of Article 2.4 of the 
Anti-Dumping Agreement. 
  
 
                                               
10 Appellate Body Report, US – Corrosion-Resistant  Steel Sunset Review , para. 82. 
11 Appellate Body Report, US – Oil Country Tubular Goods Sunset Review , para. 172. 
12 Appellate Body Report, US – Corrosion-Resistant  Steel Sunset Review , para. 82, citing the Panel 
Report, US – Superfund , para. 5.2.2. 
13 United States' First Written Submission, para. 319. WT/DS464/R/Add.1 
 
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  ANNEX D-2 
EXECUTIVE SUMMARY OF THE ARGUMENTS OF CANADA 
I. THE USE OF ZEROING WHEN APPLYING AVERAGE-TO-TRANSACTION 
METHODOLOGY IS AS SUCH INCONS ISTENT WITH THE ANTI-DUMPING 
AGREEMENT 
1. Canada submits that the use of zeroing when applying the exceptional average-to-
transaction methodology is "as such" inconsistent with Articles 2.4.2 and 2.4 of the 
Anti-Dumping Agreement.  
2. When employing the average-to-transaction methodology, the USDOC calculates an 
intermediate result for each export transaction compared to the weighted average normal value. 
When aggregating these results, the USDOC does not offset the intermediate results of 
transactions for which the export price is lower than the normal value with intermediate results of 
transactions for which the export price is found  to exceed normal value. Aggregation without 
offsetting is commonly refe rred to as "zeroing".  
A. The use of zeroing violates the fair comparison requirement in Article 2.4  
3. The Appellate Body has found numerous times th at the practice of "zeroing" is inconsistent 
with the Anti-Dumping Agreement in the contex t of both the weighted average-to-weighted 
average ("average-to-average") and the transaction-to-transaction methodologies ( US – 
Zeroing (EC) ; US – Softwood Lumber V (Article 21.5 – Canada) ; and US – Zeroing (Japan) ). It 
also reached the same finding when considering the average-to-transaction methodology in the context of administrative reviews.  (US – Stainless Steel (Mexico) , and US – Continued Zeroing )  
4. The principles espoused in those decisions on zeroing demonstrate that zeroing is also not 
permissible even when an investigating authorit y employs the exceptional average-to-transaction 
methodology set out in Article 2.4.2 in the context of initial investigations.  
5. The definition of dumping contained in Arti cle 2.1 of the Anti-Dumping Agreement applies 
throughout the Agreement. When examining th e use of zeroing under the transaction-to-
transaction methodology, the Appellate Body foun d that the concepts of "dumping" and "margins 
of dumping" can only be found to exist in relation to a product. Because the individual comparisons 
only yield intermediate results and not margins of dumping, margins of dumping cannot be found to exist under any methodology at the transaction level.  (See US – Zeroing (Japan) , see also US – 
Stainless Steel (Mexico) , and US – Continued Zeroing )  
6. This means that even when an investigating authority is justified in using the exceptional 
weighted average-to-transaction methodology, the results of the individual comparisons must be 
aggregated to determine the margin of dumping in accordance with Article 2.4.2.  
7. The practice of zeroing during this aggregation is not only inconsistent with Article 2.4.2; it 
is also inconsistent with the obligation to make a "fair comparison" contained in Article 2.4. The chapeau of Article 2.4 requires that "[a] fair co mparison shall be made between the export price 
and the normal value". The introductory clause to Article 2.4.2 indicates that the dumping 
calculation methodologies set out therein are subject to the fair comparison obligation in Article 2.4. (See US – Softwood Lumber V (Article 21.5 – Canada))  
8. Disregarding the results of certain intermediate comparisons is inconsistent with the 
obligation to make a "fair comparison" under Article 2.4.  
9. The term "fair" has been interpreted by the Appellate Body to connote "impartiality, 
even-handedness, or lack of bias."  (US – Softwood Lumber V (Article 21.5 – Canada))  WT/DS464/R/Add.1 
 
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  10. The Appellate Body in US – Corrosion-Resistant Steel Sunset Review  stated that the use of 
zeroing can: 
In some instances, turn a negative margin of dumping into a positive margin of 
dumping. As the Panel itself recognized in the present dispute, "zeroing [...] may lead 
to an affirmative determination that dumping exists where no dumping would have 
been established in the absence of zeroing." Thus, the inherent bias in a zeroing methodology of this kind may distort not only the magnitude of a dumping margin, 
but also a finding of the very existe nce of dumping. (footnote omitted) 
11. When an investigating authority employs zeroing, it ignores the actual export price of a 
transaction made above normal value and rather, in effect, deems that the export price is equal to the normal value. The Appellate Body in US – Softwood Lumber V  similarly observed that the 
practice of zeroing effectively treats certain export prices as less than they actually are.  
12. Likewise, in this case, the USDOC practice  of zeroing while employing the average-to-
transaction methodology distorts certain facts related to an investigation and contains an inherent 
bias. It therefore cannot be described as "f air" in accordance with Article 2.4 of the 
Anti-Dumping Agreement.  
B. The relationship between zeroin g and mathematical equivalency  
13. Regarding zeroing and mathematical equivalency, the United States argues that zeroing is 
permissible when applying the average-to-transaction methodology because failing to do so would lead to results that are mathematically equivalent to those obtained through the standard methodologies.  
14. We note that the Appellate Body in US – Softwood Lumber V (Article 21.5 – Canada) has 
already rejected such reasoning. Moreover, it does not follow from the fact that a given methodology may yield a mathematical difference, that this methodology is permissible under the 
Anti-Dumping Agreement. This simple fact does not cure the deficiencies in the U.S. differential 
pricing methodology, including those we identify below. 
II. THE USDOC DIFFERENTIAL PRICING ME THODOLOGY IS INCONSISTENT WITH 
ARTICLE 2.4.2 OF THE ANTI-DUMPING AGREEMENT 
15. Canada submits that the USDOC differential pricing methodology is also "as such" 
inconsistent with Article 2.4.2 of the Anti-Dumping Agreement.  
A. Article 2.4.2 of the Anti-Dumping Ag reement only permits an investigating 
authority to rely on the average-to-t ransaction methodology in exceptional 
circumstances  
16. Article 2.4.2 provides, in relevant part, that: 
A normal value established on a weighted average basis may be compared to prices of 
individual export transactions if the author ities find a pattern of export prices which 
differ significantly among different purchasers, regions or time periods, and if an 
explanation is provided as to why such differences cannot be taken into account 
appropriately by the use of a weight ed average-to-weighted average or 
transaction-to-transaction comparison.  
17. This provision indicates that, in calculating a margin of dumping in an investigation, an 
investigating authority must normally employ eith er the average-to-average or the transaction-to-
transaction methodology. The Appellate Body has stated that "[t]he asymmetrical methodology in the second sentence is clearly an exception to the comparison methodologies which normally are 
to be used."
 (US – Zeroing  (Japan), see also US – Softwood Lumber V (Article 21.5 – Canada))  
18. Any methodology used to determine whether targeted dumping exists should be rigorous 
enough to reflect the fact that situations of targeted dumping are exceptional in nature. That 
methodology must also meet the criteria enunciated in the second sentence of Article 2.4.2.  WT/DS464/R/Add.1 
 
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  19. Canada addresses two significant problems with the U.S. differential pricing methodology. 
First, the overly mechanical approach of the di fferential pricing methodology does not identify a 
pattern of export prices which differ significan tly among different purchasers, regions or time 
periods. Second, no explanation is given for why such differences cannot be taken into account by 
one of the two symmetrical methodologies.  
B. The USDOC differential pricing method ology does not establish the requisite 
pattern of export prices which differ significantly 
20. In order to determine whether to apply the exceptional methodology in the second sentence 
of Article 2.4.2, the USDOC uses the Cohen's d test to identify transactions that have an effect size 
that is equal to or exceeds 0.8 or -0.8 on the Cohen's d scale and then applies a ratio test to 
determine the percentage of the overall value of  sales that those transactions represent. (See Less 
Than Fair Value Investigation of Xanthan Gum from the People's Republic of China: 
Post-Preliminary Analysis and Calculation Memorandum for Neimenggu Fufeng Biotechnologies Co., Ltd. and Shandong Fufeng Fermentation Co., Ltd. (March 4, 2013), (KOR-33))  
21. Canada submits that the application of the USDOC differential pricing methodology does not 
meet the requirement for a pattern contained in the second sentence of Article 2.4.2. The ordinary 
meaning of the word pattern includes, "[a] regular and intelligible form or sequence discernible in 
certain actions or situations". ( OxfordDictionaries.com)  This definition clearly implies a qualitative 
element.  
22. Under the differential pricing methodology, th e USDOC uses its ratio test to calculate the 
percentage of the volume of sales that have a Cohen's d result that equals or exceeds 0.8 or -0.8. 
If such percentage is greater than 33 percent the USDOC then concludes that there is a "pattern". 
(See Differential Pricing Analysis; Request for Comments, 79 Fed. Reg. 26720 (USDOC 
May 9, 2014))  
23.  To illustrate, let us consider a hypothetical investigation during which the differential pricing 
methodology is applied. Assume that three of the Cohen's d results calculated are 1.0, 2.1 and 
-1.5, and thus meet or exceed the "large effect" th reshold. If those results represent 33 percent or 
more of the total volume of sales, the USDOC wo uld find that there is a pattern of significant 
differences. But this not a pattern, it is merely a variance.  
24. The USDOC methodology therefore does not include a proper assessment as to whether the 
variance in export prices follows any discernible  sequence or "pattern" of price differences.  
25. Moreover, Article 2.4.2 only permits the us e of the average-to-transaction methodology 
when there is a demonstrated pattern of expo rt prices which differ significantly "among 
purchasers, regions or time periods". Given the us e of the disjunctive "or", these three categories 
are distinct. The USDOC, however, aggregates the results of its application of the Cohen's d test 
for all three categories before using this aggregated total to determine if the 33 percent and 66 percent thresholds are met. The use of this proc ess to justify the application of the exceptional 
average-to-transaction methodology ignores the requirement to identify a pattern among 
purchasers, regions, or time periods set out in Article 2.4.2.  
26. Consequently, the differential pricing methodology fails to identify a pattern  of export prices 
which differ significantly among purchasers, regions or time periods  and is therefore inconsistent 
with Article 2.4.2 of the Anti-Dumping Agreement. 
C. The differential pricing methodology do es not provide an explanation as to 
why one of the symmetrical methodologies cannot be used 
27. An investigating authority must also explain why a pattern of export prices which differ significantly among different purchasers, regions or time periods cannot be taken into account appropriately by one of the two symmetrical meth odologies before resorting to the average-to-
transaction methodology.  (See US – Zeroing (Japan) , see also  US – Softwood Lumber V 
(Article 21.5 – Canada)) WT/DS464/R/Add.1 
 
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  28. The USDOC provides no such explanation. Rather, it compares the dumping margins that 
would be obtained by using an average-to-average  methodology to those that would be obtained 
by using the average-to-transaction methodology; if the differential is greater than 25 percent or if using the latter methodology results in an above de minimis dumping margin while the use of the 
former would not, then the USDOC uses the average-to-transaction methodology.  (See Differential 
Pricing Analysis; Request for Comments , 79 Fed. Reg. 26720 (USDOC May 9, 2014), (KOR-25)) 
29. This so-called "meaningful difference test" only demonstrates that using the 
two methodologies yields a different result, not that the difference in export prices cannot be taken 
into account by one of the symmetrical methodologies.  
30. In addition, even if a mere difference could be  seen as an explanation of why the use of the 
exceptional methodology could be justified, the use of zeroing in those calculations would still 
invalidate that test.  
31. Korea has explained that the USDOC is using zeroing when applying its "meaningful 
difference test" pursuant to its differential pricing methodology. (Korea's first written submission, 
para. 197). This builds a bias into the system th at makes it more likely that there will be a 
difference between the margin calculated pursuant  to the average-to-transaction methodology and 
that calculated under the average-to-average methodology.  
32. Canada notes that where a product is sold at a wide variance of export prices, with some 
above and others below normal value, even comparing the results calculated using the average-to-average methodology without zeroing to thos e obtained using the average-to-average 
methodology with zeroing could yield a substantia l difference. Such a difference could exceed the 
25 percent threshold established by the USDOC or result in a dumping margin exceeding the 
de minimis  threshold in one case and no dumping in the other. This further demonstrates the 
inappropriateness of using zeroing in the "meaningful difference test".  
 
  WT/DS464/R/Add.1 
 
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  ANNEX D-3 
EXECUTIVE SUMMARY OF THE ARGUMENTS OF CHINA 
I. ANTI-DUMPING ISSUES  
A. Conditions on the Use of the Second Sentence of Article 2.4.2 
1. The authority must identify  a relevant pricing pattern 
1. Article 2.4.2 of the Anti-Dumping Agreement  establishes conditions that must be met before 
an investigating authority may resort to the exceptional W-T comparison methodology. "Normally" 
an authority must use one of the two symmetrical comparison methodologies (W-W or T-T) 
described in the first sentence of Article 2.4.2 in  order to determine "margins of dumping" during 
the investigation phase of anti-dumping proceedi ngs. The second sentence, however, allows an 
authority exceptionally to use the W-T comparison methodology if: (i) it establishes a "pattern of 
export prices which differ significantly among purchasers, regions or time periods"; and (ii) it 
provides "an explanation as to why such differences cannot be taken into account appropriately by use of a [W-W] or [T-T] comparison methodology". 
2. Article 2.4.2, second sentence, requires that  an investigating authority find a relevant 
pricing pattern of export prices which "differ significantly" among "different purchasers, regions or time periods". The individual export prices should not simply differ  per se , but rather must form a 
discernible and intelligible "pattern" that can be di stinguished from other prices falling outside the 
"pattern". Export prices in the pattern must differ " significantly ", i.e., must differ in an "important, 
notable or consequential" way, which may have "both quantitative and qualitative dimensions".
1 
The United States agrees that "significance" may have either quantitative or qualitative meaning. 
However, for the United States, it is enough for prices to differ on either basis to qualify as 
significantly different under Article 2.4.2. In other words, for the United States, large numerical differences satisfy this element even if they are not qualitatively significant, and conversely, 
qualitative differences pass even if they are numerically small. But this uni-directional approach to 
the question of "significance" is inconsistent with  the requirements of Article 2.4.2 because, under 
a proper reading of this provision, relevant price differences must be meaningful in both senses of 
the word "significantly".  
3. For China, seasonality , i.e., a regular and discernible cycle of prices over a period of time, is 
a qualitative dimension that must be taken into account by an authority. Numerically large differences in prices at different points in a seasonal cycle are not prices that "differ significantly" if 
the price difference is consistent with the regular fluctuation of the pricing cycle. This requirement 
of Article 2.4.2 finds support in Article 2.4 of the Anti-Dumping Agreement , which recognizes the 
fact that simply comparing market prices at different points in time can be an unfair comparison. 
The application of Article 2.4.2 is subject to Article 2.4. 
2. The authority must provide an adequate explanation 
4. Before using the W-T comparison methodology under the second sentence of Article 2.4.2, 
an authority must provide an explanation as to why a relevant pricing pattern cannot be taken into 
account appropriately through either a W-W or T-T comparison methodology. USDOC's brief acknowledgment in the Washers AD Determination  that high prices may offset low prices (and 
vice versa ), does not serve as an adequate explanation as to "why" both the W-W and T-T 
comparison methodologies cannot deal with the price differences identified. Rather, USDOC's 
explanation is devoid of explanatory content, fails to address the T-T methodology, and is a 
results-oriented justification of zeroing. As China explains below, zeroing is not permissible under 
the second sentence of Article 2.4.2. An explanation as to why zeroing is appropriate is thus not an 
explanation that accords with Article 2.4.2. 
                                               
1 Appellate Body Report, US – Large Civil Aircraft (2nd Complaint) , para. 1272. WT/DS464/R/Add.1 
 
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  B. Limitations on the application of the W-T comparison methodology 
1. Application to a limited group of sales within a "pattern" 
5. Article 2.4.2 of the Anti-Dumping Agreement  states that during the investigation phase, 
margins of dumping should "normally" be determin ed on the basis of the W-W or T-T comparison 
methodologies. Use of the W-T comparison methodology is exceptional . This means that the W-T 
comparison methodology may only be used on a limited basis. An investigating authority may only apply the W-T comparison methodology to those sales that comprise the relevant pricing pattern, 
with a "normal" comparison methodology used in relation to the remaining export sales. This is for 
several reasons. 
6. First, the express textual connection in Article 2.4.2 between the concepts of the "export 
prices which differ significantly" and "the prices of individual export transactions" denotes a 
"parallelism" between the scope of those transactions which fall into the relevant pricing pattern 
and the scope of application of the W-T comparison methodology. This was confirmed by the Appellate Body when it said that: 
We […] read the phrase "individual export transactions" in [the 
second sentence of Article 2.4.2] as referring to the transactions that fall within the relevant pricing pattern. This universe of export 
transactions would necessarily be more limited than the universe of 
export transactions to which the symmetrical comparison methodologies in the first sentence of Article 2.4.2 would apply. In order to unmask targeted dumping, an investigating authority may 
limit the application of the W-T comparison methodology to the 
prices of export transactions falling within the relevant pattern.
2 
Thus, in order to determine a "margin[] of dumping"  for the product as a whole, an authority first 
applies the W-T comparison methodology to the expo rt prices that make up the pattern, then it 
aggregates these intermediate comparison results with those obtained from the transactions to which one of the symmetrical methodologies was applied. 
7. Second , Article 2.4.2 limits the scope of applicat ion of the W-T comparison methodology to 
the extent necessary to "take into account appropriately" a relevant pricing pattern. The second sentence allows price differences to be taken into account "appropriately", and not in a generalized or excessive manner. Again, there is parallelism between the scope of the problem  (a relevant 
pricing pattern that cannot be taken into account "appropriately") and the exceptional remedy  
provided. This is consistent with the fact that all comparison methodologies are subject to the "fair comparison" requirement of Article 2.4. An excessive use of the alternative comparison 
methodology, in response to a limited deficiency in the application of the symmetrical comparison 
methodologies, would not meet the requirement of "fair comparison". 
8. Third, a general principle in WTO law is that an exception takes precedence over a general 
rule only to the extent of the conflict between the two provisions. Like other provisions of the 
covered agreements, Article 2.4.2 lays down a general rule that a symmetrical methodology should "normally" be used. The exception allowi ng use of the W-T methodology takes precedence 
over this general rule only to the extent necessary to "take[ ] into account appropriately" a 
relevant pricing pattern. For sales outside this patte rn (for example, sales to customers, regions or 
time periods other than those found to be targeted , or sales of models or types of the product for 
which no relevant pricing pattern has been found), no conflict between the first and 
second sentences of Article 2.4.2 exists, and th erefore, an authority must use a symmetrical 
comparison methodology. 
9. Finally , China notes that a "relevant pricing pattern" necessarily can only exist in a subset all 
total export sales. The process of discerning a pattern – i.e., a "regular or intelligible form or 
sequence"
3 – serves to distinguish  prices that fall within the pattern, on the one hand, from those 
that fall outside the pattern, on the other. Indeed, the United States' position that the pattern must include all sales because all sales are different from one another is at odds with the pattern 
                                               
2 Appellate Body Report, US – Zeroing (Japan) , para. 135.  
3 Definition of "pattern", Oxford Englis h Dictionary Online (http://www.oed.com). WT/DS464/R/Add.1 
 
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  of prices actually identified by the Nails Test applied by USDOC in the Washers AD Determination. 
Under the Nails Test , the identified pattern did not comprise instances of dumping together with a 
group of higher priced sales which served to "mask" the low priced sales; instead it identified a specific subset  of sales to certain customers, regions or time periods, within specific models of the 
product under investigation. 
10. For all these reasons, there is no basis for USDOC to apply the W-T comparison 
methodology to all sales of an exporter. 
2. Authorities cannot disregard or "z ero" any intermediate comparison 
results in determining a "margin of dumping" 
11. USDOC's practices of "zeroing" in conjunction with the W-T comparison methodology, and of 
the "systemic disregarding" of intermediate compar ison results when it aggregates the results of 
W-W and W-T comparisons under the "differential pricing" methodology, cannot be reconciled with 
the requirement to determine a "margin of dumping". "Dumping" is not a transaction-specific 
concept, meaning transaction-specific comparisons are not, in themselves, "margins of dumping". 
Rather, both the Anti-Dumping Agreement  and the GATT 1994 establish "dumping" as a 
"product-related " concept. The Appellate Body has thus concluded that "margins of dumping" may 
only be determined in relation to the product under investigation as a whole, encompassing all of 
the export transactions  by an exporter. 
12. Contrary to the United States' position, intermediate comparison results cannot constitute 
meaningful "evidence of dumping", because dumping only exists in the aggregate of all 
intermediate comparison results. The United States' analysis is fatally truncated. By focusing only 
on some  transaction-specific results, the United States fails to acknowledge that transaction-
specific comparison results in which export prices exceed  normal value are evidence of an absence  
of dumping. Whether or not there actually is du mping can only be determined by aggregating all 
intermediate results together. 
13. Thus, whatever method is used to calculate a margin of dumping, such a margin must be 
established for "the product  as a whole".
4 As the meaning of "margins of dumping" is consistent 
across the entire Anti-Dumping Agreement  (including, a fortiori , the two sentences of 
Article 2.4.2), all comparisons made between ex port price and normal value for individual subsets  
of the product subject to investigation must be aggregated in order to obtain a single margin of dumping. An authority is not permitted to disregard any comparison results by "zeroing" results 
where normal value exceeds  export price, because this fails to generate a margin of dumping for 
the product as a whole. This applies equally to "systemic disregarding", whereby negative intermediate W-W comparison results are disregarded when aggregated together with the results 
of W-T comparisons.  
14. The fact that the W-T comparison methodology is exceptional and only applies in limited 
circumstances does not provide a justification for the use of "zeroing". The second sentence of 
Article 2.4.2 provides an exception from the requirement, under the first sentence, to use a 
particular comparison methodology to determine the existence of "margins of dumping during the 
investigation phase". It thus allows use of a different means  to find dumping. It does not modify 
the meaning of "dumping" or "margins of dumping" that applies throughout the 
Anti-Dumping Agreement . 
15. Finally, a prohibition on the use of "zeroing" in conjunction with the W-T methodology does 
not, as the United States argues, reduce the seco nd sentence of Article 2.4.2 to inutility. Where 
the conditions under the second sentence are met, the authority is permitted to use the alternative 
methodology when otherwise it would not be so perm itted. Further, even if the second sentence is 
understood to require that there is a different result  as between the W-W and W-T comparison 
methodologies, it is possible to obtain mathematically different results by varying the assumptions 
used in respect of each methodology. For example,  if the temporal basis for the weighted average 
normal value is changed, mathematically different results generally arise. 
                                               
4 Appellate Body Report, US – Zeroing (EC) , para. 126. WT/DS464/R/Add.1 
 
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  II. C OUNTERVAILING DUTY ISSUES  
16. As to Korea's claim regarding the finding of de facto  specificity, China notes that in US – 
Large Civil Aircraft (2nd Complaint) , the Appellate Body stated that the question whether a subsidy 
is "disproportionately large" depends, first, on whether "the granting of the subsidy indicates a 
disparity between the expected distribution of that  subsidy, as determined by the conditions of 
eligibility, and its actual distribution"; and, second, on whether "the reasons for that disparity so as ultimately to determine whether there has been a granting of disproportionately large amounts 
of subsidy, in relational terms, to certain enterprises".
5 Thus, the question raised by Korea's claim 
regarding the finding of de facto  specificity in relation to RSTA Article 10(1)(3) is whether USDOC's 
finding that Samsung received disproportionate amounts of the subsidy rested on more than a simple finding that Samsung received a greater share than other recipients. In China's view, the 
assessment of de facto  specificity must be based on more than such a simplistic assessment. 
17. With respect to Korea's claim regarding the amount of subsidy for the production of a certain 
product, China notes that, contrary to the United States' position that an authority is generally not 
obliged to determine the precise amount of subsidy directly attributable to a product, the Appellate 
Body in US – Countervailing Measures on Certain EC Products  found that, subject to Article VI:3 of 
the GATT 1994, an authority must ascertain the precise amount of the attributable subsidy before 
imposing a countervailing duty. Therefore, USDOC was obliged to conduct a careful examination of 
all data submitted by the interested parties before determining a subsidy to be a "genuine and substantial cause" of a particular market effect observed for the product being investigated. 
18. As to Korea's claim that USDOC failed properly to match the numerator and the denominator 
in its calculation of the ad valorem  level of subsidy, China notes that the Appellate Body has 
expressly recognized that the elements taken into account in the numerator of a subsidy calculation must match those taken into account in the denominator.
6 An authority must base its 
determination on positive evidence. China is concerned that USDOC appears to have established a 
presumption that government subsidies benefit solely  domestic production when, in fact, this may 
not be the case. 
 
   
                                               
5 Appellate Body Report, US – Large Civil Aircraft (2nd Complaint) , para. 879. 
6 Appellate Body Report, US – Softwood Lumber IV , footnote 196 to para. 164. WT/DS464/R/Add.1 
 
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  ANNEX D-4 
EXECUTIVE SUMMARY OF THE ARGUMENTS OF THE EUROPEAN UNION 
I. T HIRD PARTY RIGHTS  
1. The EU requests that the rights of third parties be appropriately protected in this case. As 
notified to the DSB, the EU has a substantial interest  in the matters before the Panel, within the 
meaning of Article 10.2 of the DSU, and we request that our interests as a Third Party (and by extension the interests of the other Third Parties) be fully taken into account throughout the panel 
process. In particular, given that the DSU Appendix 3 Working Procedures have been modified in a 
manner that risks to diminish  the rights of the Third Parties as provided for in the DSU and the 
DSU Appendix 3 Working Procedures, we reques t that, at the same time, other appropriate 
modifications (outlined below) to the DSU Appendix  3 Working Procedures also be made in order 
to re-balance  the Working Procedures, so as to fully preserve  the rights of the Third Parties as 
provided for in the DSU and the DSU Appendix 3 Working Procedures. Consequently, given the 
introduction of such modification, in order to avoid the pronounced unfairness to the Third Parties 
that could otherwise result, the EU seeks the following re-balancing  measures: 
 Receipt by the Third Parties of submissions (i ncluding exhibits) to the Panel, that is, 
including first written submissions, rebuttals, preliminary or interim ruling requests 
and responses thereto, responses to questions and comments thereon and opening and closing oral statements. 
 In addition to the Third Party session at the first meeting, the presence of the 
Third Parties during the rest of the first meeting, as well as at the second meeting. 
 The opportunity to respond, orally or in writing, to any question the Panel might wish 
to address to all Third Parties or to the EU specifically, at the discretion of the Panel, 
and to indicate a desire to respond to a particular question addressed to a Party or 
other Third Party, subject to the Panel's agreement.  
II. BCI
 PROCEDURES  
2. The EU welcomes the adoption of BCI Proc e d u r e s  i n  t h i s  c a s e .  H o w e v e r ,  w e  h a v e  t h e  
following reservations about certain provisions. First, with reference to paragraph 2 of the BCI Procedures, we consider that a Member's right to submit information to a panel cannot be 
conditioned on the provision of such an authorising letter. Insofar as this rule represents an 
attempt to reflect Article 6.5 of the ADA, we po int out that that provision does not govern the 
question, which is rather governed by Article 18 of the DSU and Article 17.7 of the ADA. Under the 
confidentiality regime established by those provisions, a Member's right to submit information to a 
panel cannot be fettered by a panel conditioning it upon authorization from a private body. Under 
Article 17.7, confidential information is provid ed to the panel by the litigating Member. The 
provision refers to a "person, body or authority" on ly to reflect the fact that, pursuant to Article 13 
of the DSU, a panel may seek information from any individual or body it deems appropriate. 
Second, with reference to paragraph 1, we consider that designation is a matter, in the first place, for the Member providing the information. A Member  may be encouraged to follow the designation 
used in the municipal proceedings, but cannot be obliged to do so from the outset. Third, linked to 
the preceding observation, we consider that designation is ultimately a matter for the Panel, at least in case of disagreement, and cannot be absolutely delegated to the investigating authority or any interested party. We therefore consider that the rules should contain a challenge clause by 
which the other party can challenge the design ation proposed by the Member providing the 
information. Furthermore, in order to avoid a risk of over-designation in which neither party has a particular interest, the challenge clause should be open to both the Panel and Third Parties. WT/DS464/R/Add.1 
 
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  III. K OREA'S "AS APPLIED " CLAIMS AGAINST THE WASHERS ANTI-DUMPING DUTY ORDER 
3. The EU considers that the purpose of the fi nal sentence of Article 2.4.2 of the ADA, as 
reflected in the preparatory work, is to strike  a reasonable compromise between two different 
points of view. The first point of view is that whether or not dumping exists must be measured by 
taking into account the average pricing behaviour of an exporter, in both domestic and export 
markets, as well as average costs, irrespective, on the export side, of the purchaser, region or time period. Thus, for this purpose, the data universe includes all export transactions to all 
purchasers and regions and in all time periods of the investigation period, to the full value of all 
export transactions, whether they are less or more than the normal value. This is so whether the 
comparison methodology is weighted average-to-weighted average or transaction-to-transaction. The second point of view is that whether or no t dumping exists may be measured by comparing 
each export transaction with a normal value, and, if the export price exceeds the normal value, by 
recording a finding of zero dumping, that is, by not allowing any off-set between positive and negative results. The compromise, as enshrined in  Article 2.4.2 of the ADA is that normally the 
first rule applies; but that exceptionally, if target ed dumping by purchaser, region or time period is 
demonstrated to exist, a normal value establishe d on a weighted average basis may be compared 
to prices of individual export transactions. 
4. Thus, what the final sentence of Article 2.4.2 of the ADA does is to permit an investigating 
authority to unmask targeted dumping by purchaser, region or time that would otherwise be concealed. Thus, in the case of regional targeted dumping, a weighted average-to-weighted average comparison might lead to a determination of no dumping. However, a closer examination 
of one particular regional market within the importing Member might reveal that, in fact, the 
relatively low priced and dumped transactions are pouring into that region and devastating the local industry, and this is being off-set by relatively high priced transactions to other regions. In 
such a case, what the final sentence of Article 2.4.2 of the ADA does it to permit an investigating 
authority to respond to such a situation, by  unmasking the targeted dumping. Instead of 
determining the existence and amount of dumping by reference to the entire territory of the 
importing Member, it is entitled instead to determ ine the existence of a pattern of export prices 
which differ significantly among different regions, and unmask the targeted dumping accordingly. The same observation applies, mutatis mutandis , with respect to targeted dumping by purchaser 
or time period. 
5. In a normal anti-dumping calculation, that is, one that does not involve any determination of 
targeted dumping, an investigating authority is not required to assess the reason for which dumping is occurring. Rather, the determination of the existence and amount of dumping is based 
on an objective assessment of the data. If the ex port price is less than the normal value, then 
dumping exists. The EU fails to see why the situation should be any different under the final sentence of Article 2.4.2 of the ADA. In the case  of regional targeted dumping, for example, the 
objective question is whether or not the product is being dumped into a particular region, based on 
an objective examination of the data. The reason s for which the dumping might be occurring, and 
specifically the reasons for the existence of the pattern and the use of the weighted average-to-
transaction methodology, might be relevant to the explanation to be provided pursuant to the final 
sentence of Article 2.4.2 of the ADA, but such re asons are not relevant to the question of whether 
or not a pattern of relatively low priced exports by purchaser, region or time period, has been demonstrated to exist. We think that the terms "pattern" and "significantly" can be understood 
quantitatively; and we agree with the US' that the term can also be understood qualitatively. 
6. The matter before the Panel has not already been decided by the existing case law on 
zeroing. On the contrary, in our view, panels and the Appellate Body have exercised considerable 
caution and judicial restraint in this matter, confining themselves to resolving the particular 
disputes that have come before them. Specific cases have addressed specific types of comparison methodologies in specific types of proceedings. However, a targeted dumping case has not previously come before any panel, and panels and the Appellate Body have been careful not to 
prejudge the issues related to targeted dumping. Thus, at most, what Korea and the US appear to 
be arguing is that the basic underlying logic that  has been used to resolve previous disputes 
should be carried forward, in a systematic and co nsistent manner, in order to resolve the present 
dispute, and in such a way that Article 2.4 and pa rticularly Article 2.4.2 are interpreted and applied 
coherently. WT/DS464/R/Add.1 
 
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  7. The EU disagrees that the final sentence of  Article 2.4.2 requires that the existence and 
a m o u n t  o f  t a r g e t e d  d u m p i n g ,  i f  a n y ,  m u s t  b e  c a l c u l a t e d  o n l y  o n  t h e  b a s i s  o f  t h e  e x p o r t  transactions passing the pattern and gap tests, as opposed to all transactions to or in the particular purchaser, region or time period. We fail to see how this would comport with the basic 
objective of the targeted dumping provision, which, as we have outlined above, is to permit an 
investigating authority to unmask targeted dumpin g by purchaser, region or time that would 
otherwise be concealed. It is not clear to us how this can be achieved if the sole option open to an 
investigating authority would be to make a calculation only on the basis of the transactions that 
have passed the pattern and gap tests. The investigating authority must have the possibility of applying an appropriate methodology in order to address the targeted dumping, which can only mean that high priced export transactions to or in other purchasers, regions or time periods would 
not be allowed to offset the dumping amount.  
8. The EU agrees with Korea that the Appellate  Body has already decided that mathematical 
equivalence does not determine the matter, and th at the explanations in the measure at issue 
make no reference to the possible use of the transaction-to-transaction methodology. The EU 
submits that the consistency of the measure at issu e with the final sentence of Article 2.4.2 of the 
ADA should be assessed in that light. 
IV. K
OREA'S "AS SUCH " CLAIMS AGAINST THE NAILS II METHODOLOGY AND THE DIFFERENTIAL PRICING 
METHODOLOGY  
9. The EU understands Korea's position to be that the Differential Pricing Methodology came 
into existence on 4 March 2013. We further understand that, consequently, as of that date, the 
Nails II Methodology has no longer been applied, and in fact does not exist. This Panel was 
established on 22 January 2014. Consequently, as of a date preceding this Panel's establishment, it appears that the Nails II Methodology no long er existed. This understanding appears to be 
generally shared by the US. In these circumstance s, the EU considers that the Panel should not 
make any findings with respect to the Nails II Methodology.  
10. The EU considers that it results from the different descriptions of the two methodologies 
provided by Korea itself that there are si gnificant differences between them. In these 
circumstances, we consider that they are insufficiently similar to be treated as a single measure. 
11. With regard to Differential Pricing Methodology and the first flaw, we share the view that a 
targeted dumping determination must ultimately be made with respect to the product as a whole 
(in relation to a particular exporter). With respec t to the second flaw, we consider that, if there 
are, for example, 10 regions, and the relatively low priced transactions are distributed equally 
amongst them, there is no basis on which to find regional targeted dumping. However, if the 
relatively low priced transactions are in 2 adjacent regions, we consider that the transactions to 
the 2 regions may be cumulated for the purposes of determining whether or not there is a pattern of export prices which differ significantly among different regions. In effect, the 2 regions are 
treated as one. We would make the same remark with respect to related purchasers or adjacent 
time periods. With respect to the third flaw, we consider that it is difficult to understand the 
justification for combining data that are not generated on the basis of equivalent parameters. 
V. K
OREA'S CLAIMS UNDER THE SCM  AGREEMENT  
12. Korea argues that the USDOC miscalculated the amount of subsidisation with respect to the 
product concerned, and wrongly determined that th e tax credits received by Samsung pursuant to 
Articles 10(1)(3) and 26 of the Restriction of Special Taxation Act  (RSTA) were specific in 
accordance to Articles 1.2 and 2 of the SCM Agreement. 
A. Calculation of the amount of subsidisation 
13. The EU considers that Articles VI:3 of  the GATT 1994 and 19.4 of the SCM Agreement 
require Members to accurately determine the per unit subsidy amount found to exist with respect 
to the product under investigation and not impose countervailing duties exceeding that amount. The inclusion of amounts that have been bestowed on products other than the product under investigation in the calculation of the amount of subsidisation of the product concerned would 
necessarily result in a breach of those provisions.  WT/DS464/R/Add.1 
 
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  14. That being said, the EU further notes that, in practice, it may be very difficult to identify 
precisely the amounts that a company has received for the particular production or sale of the product concerned, especially when the company in question manufactures and sells a variety of 
products not covered by the investigation and which are made in the same production line. 
Likewise, when the subsidy found to exist is not granted on a product basis, but rather on a 
company basis, it may also be difficult to identify what portions were used by the company for manufacturing the product concerned as opposed to other products. In this respect, if the subsidy 
is clearly tied in law or in fact to the production or sale of a particular product, this may allow the 
investigating authority to allocate the amounts received by the company to those specific products and, thus, calculate the specific subsidisation for the product concerned. However, if the subsidy is not tied to any particular product (such as e.g. a tax reduction in the income tax of a company in a 
given year), it may be presumed that the company allocated this benefit across its entire 
production. 
15. A relevant question for the Panel to examine appears to be whether RSTA Articles 10(1)(3) 
and 26 confer a subsidy with respect to a single or a variety of different products or whether they 
are granted on a company basis, provided that certain activities (such as investments on R&D or business assets) are conducted. In the latter case, when a company manufactures several 
products in addition to the product concerned, the specific amounts granted to the product 
concerned from a subsidy that is contingent upon  certain activities conducted by that company 
may be more difficult to determine with precision. Indeed, since money is fungible and can be used to finance any cost incurred by the company, subsidies generally affecting the production or 
sales of any product may ultimately be used in the manufacturing or selling activities of many 
products. This is regardless of whether the subsidy covers costs relating to R&D activities already conducted or investments previously made. Likewi se, the Panel may find it relevant to examine 
whether the Article 10(1)(3) tax credits were in law or in fact limited to benefit production or sales 
carried out in Korea. Whilst it appears that the subsidy was granted with respect to R&D activities conducted in Korea, this does not necessarily means that the subsidy benefitted only Samsung's 
domestic production, as the results of those activities could materialise in Samsung's total 
production (thus including exports).    
B. Specificity 
16. The EU recalls that Article 2 of the SCM Ag reement has been the subject of clarifications 
provided by panels and the Appellate Body in recent cases, such as in US-Anti-Dumping and 
Countervailing Duties (China) , EC – Large Civil Aircraft , and US – Large Civil Aircraft . The EU 
suggests that the Panel consider the issues before it in light of the clarifications provided by these 
cases. 
17. In particular, with respect to Korea's allegations regarding RSTA Article 10(1)(3) tax credits, 
the EU considers that the Panel should identify the amounts of subsidy granted to Samsung 
pursuant to that provision since its entry into force. Then, the Panel should determine whether 
those amounts are "disproportionately large" relative to what the allocation would have been if the subsidy were administered in accordance with the conditions for eligibility for that subsidy as assessed under Article 2.1(a) and (b). If there is a disparity between the expected distribution of 
that subsidy, as determined by the conditions of eligibility, and its actual distribution, the Panel 
should also examine the reasons for that disparity so as ultimately to determine whether there has 
been a granting of disproportionately large amounts of subsidy to Samsung. If, ultimately, the 
reasons for Samsung to obtain more tax credits than other eligible Korean companies is 
determined by the conditions for eligibility (i.e. qualifying investments in R&D activities), this may indicate that Samsung did not receive disproportionally large amounts for the entire period. Since 
the amount of subsidisation was established by reference to a particular year (i.e. 2011), the Panel 
may also look into whether Samsung received disproportionally large amounts of tax credits in that year as compared to other eligible  Korean companies in the same period.  
18. Turning to Korea's allegation regarding RSTA Article 26 tax credits, the EU considers that the 
Panel should examine whether the eligibility criteria in question are objective and neutral. It 
appears that, whilst the list of qualifying sectors covers many sectors, this does not necessarily imply that the eligibility criteria are neutral or objective, in the sense described in footnote 2 of the 
SCM Agreement. This list, however, could be more relevant to determine whether the subsidy 
appears to be non-specific in accordance with Article 2.1(a) of the SCM Agreement. Finally, with respect to Article 2.2 of the SCM Agreement, the EU considers it relevant to determine who the WT/DS464/R/Add.1 
 
- D-18 - 
 
  granting authority is in this case. If the granting authority is the Government of Korea, then it 
would appear that companies located within the "overcrowding control region" of the Seoul Metropolitan Area and willing to make investments therein would be excluded from any tax credits pursuant to RSTA Article 26 and, thus, the subsidy would not be available to all enterprises within 
the jurisdiction of the granting authority. 
 
 WT/DS464/R/Add.1 
 
- D-19 - 
 
  ANNEX D-5 
EXECUTIVE SUMMARY OF TH E ARGUMENTS OF JAPAN 
I. I NTRODUCTION  
1. Due to its systemic interest, Japan will a ddress the proper legal interpretation of the 
Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 
("Anti-Dumping Agreement") as well as the conduct of the United States Department of Commerce (the "USDOC") with respect to the applic ation of anti-dumping duties concerning Large Residential 
Washers from Korea . 
 II. T
HE USE OF ZEROING IS INCONSISTENT WITH THE ANTI-DUMPING AGREEMENT INCLUDING WHEN 
APPLYING THE SECOND SENTENCE OF ARTICLE 2.4.2 
2. The Appellate Body repeatedly found that zeroing is inconsistent with the relevant provisions 
of the Anti-Dumping Agreement. It emphasized th at the concepts of "dumping" and "margins of 
dumping" do not pertain to individual transactions, but to a product under investigation as a 
whole.1 Its decisions have been derived from the definition of "dumping" set out in Article 2.1 of 
the Anti-Dumping Agreement, which defines the determination of dumping in relation to "a product", as well as from Article VI:2 of the GATT 1994, which allows a Member and its authorities 
to levy anti-dumping duties with respect to "any [dumped] product" or "such product". The 
Appellate Body also clarified that the term "dumping" has the same meaning "in all provisions of the Agreement and for all types of anti-dumping proceedings, including original investigations, new shipper review, and periodic reviews",
2 and that the concepts of "dumping" and "margin of 
dumping" "should be considered and interpreted in a coherent and consistent manner for all parts 
of the Anti-Dumping Agreement."3 
 
3. While the second sentence of Article 2.4.2 permits an investigating authority to rely on a 
particular type of comparison methodology under exceptional circumstances, nothing in the provision allows the investigating authority to counteract the consistent interpretation of the 
Appellate Body that dumping and margins of dumping are product-wide/specific, and not 
transaction-specific concepts. The second sentence states: "A normal value established on a weighted average basis may be compared to prices of individual export transactions". It does not contain any language that allows for a departure from the definition of dumping and margins of 
dumping. In this regard, the permission of th e use of the asymmetric comparison methodology 
(W-T) as such by no means mandates or allows an investigating authority to apply zeroing. The Appellate Body clarified that the application of zeroing under the W-T methodology is inconsistent 
with Article 9.3 of the Anti-Dumping Ag reement and Article VI:2 of the GATT 1994.
4  
4. The USDOC's use of zeroing is also inconsistent with the fair comparison obligation under 
Article 2.4 of the Anti-Dumping Agreement. The Appellate Body stated that zeroing "cannot be 
described as impartial, even-handed, or unbiased" (i.e., "fair") in the sense of Article 2.4, because 
the use of zeroing "artificially inflates the magnitude of dumping, resulting in higher margins of dumping and making a positive determination of dumping more likely."
5 The Appellate Body found 
that zeroing in W-T comparisons in the context of  periodic reviews and new shipper reviews is, as 
such, inconsistent with Article 2.4.6 Nothing in the Anti-Dumping Agreement suggests that this 
well-established general proposition under Article 2.4 would not apply to the second sentence of Article 2.4.2. 
                                               
1 Appellate Body Report, US – Softwood Lumber V , paras. 92-93; Appellate Body Report, US – Zeroing 
(EC), para. 126; Appellate Body Report, US – Stainless Steel (Mexico) , para. 106. 
2 Appellate Body Report, US – Zeroing (Japan) , para. 109. 
3 Appellate Body Report, US – Stainless Steel (Mexico) , para. 94. 
4 Appellate Body Report, US – Stainless Steel (Mexico) , para. 133. 
5 Appellate Body Report, US – Softwood Lumber V (Art. 21.5 – Canada) , para. 142; Appellate Body 
Report, US – Zeroing (Japan) , para. 146. 
6 Appellate Body Report, US – Zeroing (Japan) , para. 169. WT/DS464/R/Add.1 
 
- D-20 - 
 
  5. As for the argument of mathematical equivalence, as the United States admits, it is 
premised on the assumption that "all of the norm al value and export price data that are fed into 
the calculations … are identical".7 This has no basis in the Anti-Dumping Agreement. The Appellate 
Body explained the U.S. argument in a previous dispute, stating it would apply only "under the 
specific assumptions of the hypothetical scenario".8 The Appellate Body suggested that an 
investigating authority may unmask targeted dumping by "focusing" on (i.e., establishing the margin of dumping based on) only export transact ions constituting a "pattern", stating that the 
"universe" of export prices in the second senten ce "would necessarily be more limited" than the 
"universe" in the first sentence.
9 In addition, an investigating authority could refer to different 
pools of home market transactions when calculatin g the normal values for the different comparison 
methodologies under the first and second sentences. In such case, the outcomes of the 
comparisons may be different because the groups of transactions making up the normal value may 
differ. In particular, the T-T comparison methodology under the first sentence will almost certainly never yield the same results as the W-T comparison methodology under the second sentence. As 
such, the pricing data considered under the fi rst and second sentences of Article 2.4.2 are 
systematically different, which makes the mathematical equivalence argument implausible. 
6. Further, the United States' argument that the negotiation history of the 
Anti-Dumping Agreement confirms that zeroing should be permissible under the second sentence 
is not convincing. The only conclusion that can be drawn from the evidence submitted by the United States is that some Members had serious concerns as to the use of zeroing in W-T comparisons. In any case, the views expres sed by some delegations hardly represent the 
common intention of WTO Members. 
III. T
HE USDOC  FAILS TO PROPERLY FIND A "PATTERN " AS REQUIRED UNDER THE SECOND SENTENCE 
OF ARTICLE 2.4.2 
A. The U.S. Methodologies Fail to Assess Qua litative Aspects of Differing Export Prices 
7. Turning to the first requirement for invoking  the second sentence of Article 2.4.2, the 
methodologies adopted by the USDOC to identify targeted dumping by finding a "pattern" suffer 
from fundamental flaws. The second sentence requir es an investigating authority to find a "pattern 
of export prices which differ significantly among different purchasers, regions or time periods". Since the words "pattern" and "significant" both have qualitative aspects,
10 a "pattern" of differing 
export prices must convey proper meaning  which reflects the purpose of the analysis to be 
conducted under the second sentence of Article 2.4.2. 
8. In this regard, the Appellate Body clarified that the role of the second sentence is to 
"capture pricing patterns constituting 'targeted dumping'"11 and to "unmask" such targeted 
dumping.12 It also explained that "there are three kinds of 'targeted' dumping, namely dumping 
that is targeted to certain purchasers, targeted to certain regions, or targeted to certain time 
periods".13 Because "dumping" by definition refers to sales made at lower (not to higher) prices, 
targeted dumping can be found when an investigating authority must show that export prices for 
certain purchasers, regions or time periods are significantly lower than those for other purchasers, regions or time periods , in a way that the former can be conceived as "targeted." In doing so, an investigating authority must qualitatively assess the significance of the observed deviation of a 
certain group from other groups of purchasers, regions or time periods with respect to the specific 
fact pattern. Such assessment is also required as a very basic rule of statistics.
14 Furthermore, in 
order to evaluate whether observed price differences are "significant", one needs to take into 
                                               
7 United States First Written Submission, para. 181. 
8 Appellate Body Report, US – Softwood Lumber V (Art. 21. 5 – Canada) , para. 99. 
9 Appellate Body Report, US – Zeroing (Japan) , para. 135. 
10 Korea First Written Submission, paras. 131 and 134-135. 
11 Appellate Body Report, US – Stainless Steel (Mexico) , para. 127; Appellate Body Report, US – Zeroing 
(Japan) , para. 133. See also the United States’ First Written Submission, at para. 176. 
12 Appellate Body Report, US – Zeroing (Japan) , para. 135. 
13 Appellate Body Report, EC – Bed Linen , para. 62. 
14 Lane, David et al., Online Statistics Education: A Multimedia Course of Study , 
(http://onlinestatbook.com/), pp. 11-12 and 648 (JPN-2); McFarland, Henry B., The U.S. Department of 
Commerce's Approach to Targeted Dumping: The Wrong Test and the Wrong Response  (June 25, 2014). p. 6. 
(JPN-3) WT/DS464/R/Add.1 
 
- D-21 - 
 
  account the characteristics of the relevant product and market, including the price variances of 
such a product in the market. 
9. The USDOC's methodologies suffer from a co mmon inconsistency with the second sentence 
of Article 2.4.2, as they adopt purely quantitative  benchmarks that are mechanically applied in all 
cases. Under the Nails test, the USDOC identifies a "pattern" through a two-step analysis 
consisting of the "pattern test",15 for which the USDOC bases its assessment solely on quantitative 
thresholds such as one standard deviation and 33% (of volume across all models) and the "gap 
test". Under the Differential Pricing Methodology, the USDOC employs the so-called Cohen's d test, 
for which it relies on purely quantitative and mechanical thresholds such as Cohen's d of plus or 
minus 0.8. There is no evidence that the USDOC assesses or interprets the meaning of the observed price variations or calculated statistics in a qualitative manner in order to determine 
whether certain purchasers, regions or time periods are "targeted". 
10. The shortcoming of the USDOC's methodolog ies of disregarding qualitative aspects is 
aggravated with respect to the Differential Pricing Methodology. The Differential Pricing 
Methodology also includes within the identified "pattern" those export transaction groups with 
higher weighted average prices than the normal value. It is hardly understandable how the 
Differential Pricing Methodology identifies targeted "dumping" by using a "pattern" which in fact 
consists of a disorderly mixture of higher and lower prices. 
B. The USDOC Fails to Take All Models into Account When Determining Whether 
Certain Purchasers (or Regions or  Time Periods) Are "Targeted" 
11. As the Appellate Body clarified, nothing in th e text of the second sentence of Article 2.4.2 
suggests that "models" or "types" of the same product under investigation can be considered as 
such categories.
16 The identification of a "pattern" pursuant to the second sentence cannot be 
completed at the level of certain price variations for individual models sold. Accordingly, in order to 
find that a certain purchaser, region or time peri od is "targeted", an investigating authority must 
show that export prices for the specific purchaser, region or time period are significantly lower across all models. 
12. The USDOC's methodologies fail to take all models into account when identifying a "pattern" 
of targeted dumping. Under the Nails test, the USDOC considers that the "pattern test" is satisfied 
if the weighted average prices for certain  models are below the "one standard deviation" standard 
and the aggregated transaction volume for such mo dels exceeds 33% of the entire volume sold to 
that purchaser (or region or time period) across all models. Under the Differential Pricing 
Methodology, the USDOC splits export transactions  for particular purchaser, region and time 
period by different models, and aggregates thos e model-specific transaction groups that passed 
the Cohen's d threshold of plus or minus 0.8.
17  
C. The Differential Pricing Methodology A ggregates Unrelated Variations Across 
Different Purchasers, Regions and Time Periods 
13. As explained by Korea, under the Differential Pricing Methodology, the USDOC aggregates 
unrelated price variations within the category of purchasers (or regions or time periods) in order to identify a "pattern".
18 In other words, it combines price irregularities "across" different purchasers 
(or regions or time periods), instead of examining the difference "among" these purchasers (or 
regions, or time periods). The USDOC also aggregates unrelated price variations across the distinct 
categories  of purchasers, regions and time periods.19 Such an aggregation turns the "or" in 
"different purchasers, regions or time periods" into an "and" without any legal basis. Thereby, the 
USDOC fails to properly identify a "pattern" of export prices which differ significantly " among  
different purchasers, regions or time periods" as required by the second sentence of Article 2.4.2. 
                                               
15 Korea’s First Written Submission, at para. 105. 
16 Appellate Body Report, EC – Bed Linen , para. 62. 
17 Korea’s First Written Submis sion, at paras. 204-208. 
18 Korea’s First Written Submis sion, at paras. 222-226. 
19 Korea’s First Written Submis sion, at paras. 227-233. WT/DS464/R/Add.1 
 
- D-22 - 
 
  IV. T HE USDOC  FAILS TO PROVIDE AN ADEQUATE "EXPLANATION " AS REQUIRED UNDER THE SECOND 
SENTENCE OF ARTICLE 2.4.2 
14. As Korea argues, the terms "explanation" and "why" require an investigating authority to 
provide clear and detailed reasons for or the purpose of the inability or impossibility to 
appropriately take into account a pattern of signif icantly different export prices by the use of a 
W-W or T-T comparison.20 Moreover, under the principle of effective treaty interpretation, the 
"explanation" clause must be interpreted in such a manner that it has a role separate and distinct 
from that of the "pattern" clause. 
15. The United States seems to argue that the expl anation requirement is fulfilled as soon as an 
investigating authority finds a difference between the margin of dumping calculated using the W-T comparison methodology and that calculated using the W-W comparison methodology.
21 This 
interpretative approach is circular; since the United States employs zeroing when using the 
asymmetrical comparison methodology exceptiona lly provided for in the second sentence of 
Article 2.4.2. As a consequence, the two calculation methodologies automatically yield different 
results. 
16. In order to understand the reason behind the explanation requirement, one needs to bear in 
mind that an exporter generally does not sell its product at a uniform price. Export prices usually 
vary because each export price is determined ba sed on various factors, including demand levels 
and scales of transactions that may vary among di fferent purchasers, regions and time periods, as 
well as behavior of consumers and other market participants. Given that it is perfectly normal to observe certain differences in export prices of a product in a given market, such variations are 
expected to be captured and appropriately considered by the methodologies pursuant to the first 
sentence, which the Members agreed shall "normally" be used. As such, an "explanation" has to be provided at least as to why observed variations in export prices are not a mere reflection of factors 
that normally exist in a given market or otherwise does not allow to establish an appropriate 
margin of dumping under the first sentence so as  to properly counteract dumping causing injury.  
V. T
HE APPLICATION OF THE SECOND SENTENCE OF ARTICLE 2.4.2  SHOULD BE LIMITED TO THOSE 
TRANSACTIONS THAT CONSTITUTE A "PATTERN " 
17. Under the Nails II  test, the USDOC uses the W-T comparison methodology and uses zeroing 
for all sales. 22 The same approach is employed under the Differential Pricing Methodology if 
certain conditions are met23 yet this expansive use of the W-T comparison methodology is 
contradicted by the second sentence of Article 2. 4.2. As explained by the Appellate Body, "[t]he 
emphasis in the second sentence of Article 2.4.2 is on a "pattern", namely a "pattern of export prices which differs significantly among different purchasers, regions, or time periods.""
 24 As such, 
the phrase "individual export transactions" in that sentence should be read "as referring to the 
transactions that fall within the relevant pricing pattern."25  
VI. C ONCLUSION  
18. Japan appreciates the Panel's consideration of Japan's views with regard to the 
interpretation of the provisions of the Anti-Dumping Agreement addressed above. 
  
                                               
20 Korea’s First Written Submission, at para. 156. 
21 United States First Written Submission, paras. 127-129. 
22 Korea’s First Written Submission, at para. 108. 
23 Korea’s First Written Submission, at paras. 198-200. 
24 Appellate Body Report, US – Zeroing (Japan) , para. 135; Also see Appellate Body Report, US – 
Stainless Steel (Mexico) , para. 127. 
25 Appellate Body Report, US – Zeroing (Japan) , para. 135; Also see Appellate Body Report, US – 
Stainless Steel (Mexico) , para. 127. WT/DS464/R/Add.1 
 
- D-23 - 
 
  ANNEX D-6 
EXECUTIVE SUMMARY OF THE ARGUMENTS OF NORWAY 
Madam Chair, Members of the Panel, 
 
1. Norway welcomes this opportunity to present its views on the issues raised in these panel 
proceedings. Norway did not present a written thir d party submission to the Panel. In this oral 
statement, I will therefore briefly set out Norway's  view on one of the legal issues raised: the use 
of zeroing when applying the exceptional "weighted-average-to-transaction" methodology referred 
to in the second sentence of Article 2.4.2 of the Anti-Dumping Agreement1.  
2. However, before I turn to this issue, Norway  would like to underline that the resort to this 
methodology is indeed an exception, to be applied only in very limited situations where the normal 
methodologies for calculating dumping margins are not appropriate. The criteria stated in the 
second sentence of Article 2.4.2 must be fu lfilled, and the methodology must comply with 
Article 2.4. As elaborated in more detail by Korea and a number of third parties, the United States' 
methodology disregards all the criteria for the application of Article 2.4.2.  
3. I now turn to the issue of zeroing. In line with the Appellate Body's consistent rulings in 
numerous previous cases, Norway holds that the use of all forms of zeroing, in all forms of 
proceedings under the Anti-Dumping Agreement is prohibited. This applies regardless of the 
comparison methodology employed to calculate the dumping margin, including the third comparison methodology of the second sentence of Article 2.4.2.  
4. The Appellate Body has repeatedly found that the practice of zeroing is inconsistent with the 
Anti-Dumping Agreement  in the context of both the "wei ghted-average-to-weighted-average" 
methodology and the "transaction-to-transaction" methodology. It has furthermore come to the 
same conclusion in terms of the third comparison methodology in the context of administrative 
reviews. As Norway will show, it is clear from the principles and interpretations laid down by the 
Appellate Body, that zeroing is also prohibited in terms of the third comparison methodology in the context of initial investigations.  
5. Based on Article 2.1 of the Anti-Dumping Agreement , and Article VI:1 of the GATT 1994
2, 
the Appellate Body has repeatedly found that "dumping" and "margins of dumping" must be 
established for the "product as a whole", as opposed to at the individual transaction level.3 
Furthermore, the Appellate Body has underlined th at the concepts of "dumping" and "margin of 
dumping" are exporter-specific,4 and that "a single margin of dumping is to be established for each 
individual exporter or producer investigated".5 The Appellate Body has further clarified that these 
two terms must have "the same meaning in all provisions of the Agreement  and for all types off 
anti-dumping proceedings".6 Norway points to the wording of Article 2.4.2, which explicitly refers 
to the "margins of dumping" and the comparison methodology used to determine the existence of 
these. Norway agrees with Korea that the cohesive  interpretation of these terms by the Appellate 
Body precludes an interpretation of "dumping" and "margins of dumping" to the effect that these 
may be considered on a transaction-specific basis, including under the second sentence of Article 2.4.2.
7 
6. Norway would furthermore like to highli ght that the Appellate Body has found that 
Articles 2.4.2 and 2.4 of the Anti-Dumping Agreement  require aggregation of all results of 
intermediate comparisons when calculating the dumping margin. In US – Softwood Lumber V , the 
                                               
1 The Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994.  
2 The General Agreement on Tariffs and Trade 1994 . 
3 Appellate Body Report, US – Zeroing (EC) , para 126, Appellate Body Report, US – Softwood Lumber V , 
paras. 92-93. 
4 Appellate Body Report, US – Stainless Steel (Mexico ), paras. 89-90, Appellate Body Report, US – 
Zeroing (EC) , para. 128. 
5 Appellate Body Report, US – Continued Zeroing , para. 283. 
6 Appellate Body Report, US – Zeroing (Japan),  para. 109. 
7 First Written Submission of Korea, para. 70. WT/DS464/R/Add.1 
 
- D-24 - 
 
  Appellate Body ruled that the individual comparisons only represent "intermediate values" that the 
investigating authority had to aggregate in order to arrive at the margin of dumping for the product as a whole. The investigating authority furthermore "necessarily has to take into account the results of  all those comparisons in order to establish margins of dumping for the product as a 
whole under Article 2.4.2".
8 Disregarding or artificially reducing  to zero the results of intermediate 
comparisons, through the application of zeroing, is thus at odds with this and inconsistent with Article 2.4.2.  
7. In this regard, Norway would like to underlin e that the Appellate Body has confirmed this 
interpretation, both in the context of the "transaction-to-transaction" methodology
9, as well as in 
the context of the "weighted-average-to-transaction" methodology in administrative reviews10. The 
Appellate Body has thus found that a comparison between normal value and the prices of 
individual export transactions does not detract from its coherent conclusion on this matter. 
8. Norway struggles to see that there is anythi ng in the wording of the second sentence of 
Article 2.4.2 that would allow a different interpreta tion in this regard. Furthermore, the object and 
purpose of the provision is to address dumping targeted at particular purchasers, region or time 
periods. These dumping situations reflects a pric ing strategy where the exporter dumps prices on 
specific purchasers, regions or time periods, while retaining higher prices for other sales. The very 
nature of targeted dumping thus necessitates a re ference to the overall pricing behavior of the 
exporter, in order to identify this type of dumpin g. It necessarily follows that dumping cannot take 
place at the level of each individual transaction.11 
9. Norway notes that the United States claims that the negotiation history of the 
Anti-Dumping Agreement  confirms that zeroing should be permissible under the second sentence 
of Article 2.4.2.12 A s  N o r w a y  u n d e r s t a n d s  i t ,  t h e  g i s t  o f  t h e  a r g u m e n t  s e e m s  t o  b e  t h a t  
communications of two delegations and minutes of a negotiating meeting can be read as proof that 
the asymmetrical comparisons, that is comparis ons between individual export transactions and 
weighted average normal value in anti-dumping investigations, and zeroing, were viewed as one and the same thing. Norway strongly disagrees with this assumption. In our opinion, the material 
only shows that some Members were concerned ab out the use of zeroing in "weighted-average-to-
transaction" comparisons. This is a far cry from deducting a permission of applying zeroing when 
using said comparison methodology. Furthermore, we note that the United States previously has described the negotiating history of Article 2.4.2 in quite a different way. In US – Softwood 
Lumber V , the United States argued that there we re two practices employed by Members to 
establish "margins of dumping" at the time of th e Uruguay Round negotiations that were relevant 
for the interpretation of Article 2.4.2. The fi rst practice consisted of making "asymmetrical" 
comparisons, while the second practice was zeroing. The United States asserted that, because the 
negotiators were able to agree only on the issue of "asymmetry", it would be reasonable to expect that, absent modified text in the Anti-Dumping Agreement  addressing zeroing, that practice would 
continue to be consistent with the Anti-Dumping Agreement .
13 In this case, the United States 
clearly saw these two practices as two separate issues.14 The Appellate Body did not agree with 
the United States in that proceeding. Similarly, the material at hand does not in any way prove that the negotiators intended to allow zeroing wh en applying the third comparison methodology. 
10. Moreover, the use of zeroing when applying this third comparison methodology is 
inconsistent with the obligation of Article 2.4 of the Anti-Dumping Agreement  t o  m a k e  a  " f a i r  
comparison" between the export price and the normal  value. The term "fair" has been interpreted 
by the Appellate Body to connote "imparti ality, even-handedness or lack of bias".
15 The Appellate 
Body has found that zeroing tends to inflate the margins calculated, and that it can, in some instances, turn a negative margin of dumping into a positive margin of dumping.
16 The Appellate 
                                               
8 Appellate Body Report, US – Softwood Lumber V , para. 98. 
9 Appellate Body Report, US – Softwood Lumber V (Art 21.5 – Canada) , paras. 85-124.  
10 Appellate Body Report, US – Stainless Steel (Mexico),  paras. 102-104. 
11 As held by the Appellate Body in US – Stainless Steel (Mexico) , para. 98 : "A proper determination as 
to whether an exporter is dumping or not can only be made on the basis of an examination of the exporter's 
pricing behaviour as reflected in all of its transaction over a period of time." 
12 First Written Submission of the United States, paras. 242-250. 
13 Appellate Body Report, US – Softwood Lumber V , para. 107. 
14 Appellate Body Report, US – Softwood Lumber V,  para. 108. 
15 Appellate Body Report, US – Softwood Lumber V (Art. 21.5 – Canada) , para. 138. 
16 Appellate Body Report,  US – Corrosion Resist ant Steel Sunset Review , para. 135. WT/DS464/R/Add.1 
 
- D-25 - 
 
  Body has thus emphasized that there is an "inherent bias" in zeroing,17 and that "this way of 
calculating cannot be described as impartial, even-handed or unbiased."18 As with the other two 
comparison methodologies, the use of zeroing while applying the "weighted-average-to-transaction" methodology distorts certain facts related to the investigation and contains an 
inherent bias, making a positive determination of dumping more likely. This is clearly in violation 
of the "fair comparison" oblig ation of Article 2.4 of the Anti-Dumping Agreement . 
11. In conclusion, Norway holds that "dumping" and "margins of dumping" cannot occur at the 
level of individual transactions. This is in line with consistent findings of the Appellate Body, which 
has emphasized that the concepts have the same meaning throughout the Anti-Dumping Agreement . All intermediate comparison results must be aggregated in order to 
establish the margin of dumping for the product as a whole and for each individual exporter. 
Furthermore, zeroing cannot be said to be impart ial, even-handed or unbiased. The use of zeroing 
when applying the exceptional "weighted-average-to-transaction" methodology is hence inconsistent with Articles 2.4.2 and 2.4 of the Anti-Dumping Agreement . 
Madam Chair, Members of the Panel, 
12. This concludes Norway's statement. I thank you for your attention. 
 
 
                                               
17 Appellate Body Report,  US – Corrosion Resist ant Steel Sunset Review , para. 135. 
18 Appellate Body Report, US – Softwood Lumber V (Art. 21.5 – Canada),  para. 142. WT/DS464/R/Add.1 
 
- D-26 - 
 
  ANNEX D-7 
EXECUTIVE SUMMARY OF THE ARGUMENTS OF THAILAND 
Madam Chair, distinguished Members of the Panel, 
 
1. Thailand appreciates the opportunity to present its view to the Panel in this dispute. 
 2.  In Thailand's view, the use of zeroing is not permitted when applying a comparison 
methodology of weighted average-to-transaction (W -T) under the second sentence of Article 2.4.2 
of the Agreement on Implementation of Articl e VI of the General Agreement on Tariffs and 
Trade 1994 ("Anti-Dumping Agreement").   
3. In previous disputes, the Appellate Body has held that whenever an investigating authority 
uses intermediate comparisons as a step to determine the overall dumping margin for the product, the investigating authority may not, in aggregating the results of those intermediate comparisons, 
"zero" the results of some of those comparisons. 
 4.  Although the Appellate Body has not yet considered the use of zeroing in the 
W-T methodology in cases of "targeted dumping" under the second sentence of Article 2.4.2, 
Thailand submits that the Anti-Dumping Agreement does not permit the use of zeroing in such case. We recall that the first sentence of Article 2.4 provides that "[a] fair comparison shall be 
made between the export price and the normal pric e", which, in Thailand's view, must apply to 
Article 2.4 as a whole, including both the first and second sentences of Article 2.4.2. Allowing the 
use of zeroing in the W-T methodology under targeted dumping while prohibiting it in all other instances would render the previous interpretations of "fair comparison" with regard to zeroing 
meaningless. 
 5.  The use of zeroing under any of the methodologies used to determine dumping and margins 
of dumping cannot be considered "fair" under Article 2.4 of the Anti-Dumping Agreement. In 
Thailand's view, therefore, the use of zeroin g when applying the W-T methodology under the 
second sentence of Article 2.4.2 of the Anti-D umping Agreement, is inconsistent with the 
Anti-Dumping Agreement. 
 
6. Thailand submits that the use of the W-T methodology provided for under Article 2.4.2, second sentence, is permitted only in exceptional circumstances, in which two requirements are 
satisfied: "the authorities find a pattern of export prices which differ significantly among different 
purchasers, regions or time periods", and "an expl anation is provided as to why such differences 
cannot [apply] the use of a weighted average-to-weighted average or transaction-to-transaction 
comparison." In this dispute, Thailand will not address the issue of how investigating authorities 
may identify in a WTO-consistent manner when these two exceptional circumstances exist. We simply request the Panel to reach conclusions on these issues that take into account the interests of both exporting Members and importing Members. We may address these issues in further detail 
in upcoming disputes in which these issues arise. 
 7. In conclusion, Thailand respectfully requests the Panel to find that the use of zeroing in the 
W-T comparison methodology in circumstances of "targeted dumping" under the second sentence 
of Article 2.4.2 is inconsistent with the Anti-Dumping Agreement.  
Madam Chair, distinguished Members of the Panel, thank you for your kind attention. 
  WT/DS464/R/Add.1 
 
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  ANNEX D-8 
EXECUTIVE SUMMARY OF THE ARGUMENTS OF TURKEY 
I. INTRODUCTION 
Mr. Chairman, Distinguished Members of the Panel 
 
1. The Republic of Turkey (hereinafter referred to as Turkey) would like to thank the Panel for 
the opportunity to share her viewpoint as a Third Party in the current proceedings. Turkey makes 
this oral submission due to her systemic interest in the correct and coherent interpretation of the 
Agreement on Implementation of Article VI of  GATT 1994 (hereinafter referred to as ADA or 
Anti-Dumping Agreement).  
2. In this context, Turkey has decided not to elaborate on the specific facts presented by the 
Parties and rather focus on the right legal interpreta tion of the second sentence of Article 2.4.2 of 
ADA.  
 
II. INTERPRETATION OF THE SECOND  SENTENCE OF ARTICLE 2.4.2  
3. Turkey understands that the dispute on th e legal boundaries of the second sentence of 
Article 2.4.2 concentrates on two primary questions:  a) What is the legal content of the conditions 
allowing the investigating authority to use of weighted average normal value - individual export prices comparison (hereinafter referred to as W-T comparison)? b) Does the W-T comparison, per se , necessarily lead to zeroing? 
 
4. As regards the first question, Article 2.4.2 stipulates one substantive and one procedural condition. Article 2.4.2 reads as follows: 
 
2.4.2 Subject to the provisions governing fair comparison in paragraph 4, the existence of margins of dumping during the investigation phase shall normally be 
established on the basis of a comparison of a weighted average normal value with a 
weighted average of prices of all comparable export transactions or by a comparison of normal value and export prices on a transaction to transaction basis. A normal value established on a weighted average basis may be compared to prices of 
individual export transactions if the authorities find a pattern of export prices which 
differ significantly among different purchasers, regions or time periods , and if an 
explanation is provided as to why such differences cannot be taken into account 
appropriately by the use of a weighted average to weighted average or transaction to 
transaction comparison . (emphasis added)  
5. In Turkey's understanding, the article, on its face, envisages two conditions
1 rather than 
three as asserted by the Republic of Korea (hereinafter referred to as Korea). The investigating 
authority has to a reach a conclusion that a pattern of export prices displaying a significant difference among purchasers, regions or time pe riods is present. In Turkey's view, every 
component used in this sub-sentence is legally, logically and grammatically linked to each other. 
The word "pattern", for instance, cannot be read individually without considering the fact that the 
"pattern" is established by export prices which sign ificantly differ in terms of purchaser, region or 
time. In that context, the words reflect the rational e of the drafters if they are construed together. 
 
6. Concerning the substantive condition, Korea und erlines that a "pattern", under Article 2.4.2, 
reflects an aggregated pricing behavior of the exporter which defines the totality of export sales 
and not individual transactions
2. The U.S. interprets the word "pattern" in a more contextual 
manner and underlines that a "pattern" shows a regular and intelligible form or sequence of export 
prices which significantly differ among purchasers, regions and time periods3. In Turkey's view, the 
                                               
1 United States' first written su bmission, para. 52; footnote 74. 
2 Korea's first written submission, para. 86. 
3 United States' first written submission, para. 55. WT/DS464/R/Add.1 
 
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  assessment whether a "pattern" exists requires the evaluation whether single transactions repeat 
themselves consistently during the investigation period and such repetition form a structure that significantly differ among purchasers, regions and time periods. As a matter of fact, such an evaluation puts weight equally on the transactions itself and the export sales as a whole to 
pinpoint whether the repeating lines in export sa les form a grouping or differing structure. We 
understand that this form or sequence should be observable and identifiable
4. 
 
7. As explicitly stipulated in the provision, such a pattern should not only differ among 
purchasers, regions and time periods but that differe nce must be significant in scale. We are in the 
same line with the case law that " significant " has a meaning of " notable, important or 
consequential "5. In light of this definition the investigating authority should have enough discretion 
to decide what constitutes a notable, important or consequential difference by considering the 
merits of the investigation and peculiarities of individual export transactions.  
8. Turkey does not support the legal interpretation that a " pattern of significant difference " 
should be necessarily an outcome of a specific intent to apply " targeted dumping " and that usual 
commercial practices are perfectly plausible if the differing export prices display a pattern in line 
with the expected results of these practices6. Neither from the reading of Article 2.4.2 nor from the 
examination of case law it is possible to conclude that the " usual commercial " practices are 
defenses to permit the act of targeted dumping7.  
9. The plain reading of the Article 2.4.2 shows that the W-T comparison acts as an exception 
and that the investigating authority can resort to the methodology only under certain conditions8. 
As an expected result of the due process requirem ent, diversion from the general rule requires an 
explanation on why normal methodologies, stipulated in the first sentence of Article 2.4.2, cannot be used appropriately. Turkey understands that this  explanation should be in such a context that it 
should not deprive the interested parties from using their right of presenting evidences they 
consider relevant in respect of the question. Thus, the base of the test controlling the adequacy of 
the explanation should be Article 6.1 of the Anti-Dumping Agreement. 
10. Concerning the second question, Turkey prefers not to present any comment on the specifics 
of the U.S. methodology and on mathematical equivalence argument at this stage of the 
proceedings. 
11. Nevertheless, Turkey highlights her previously underscored viewpoint that the second 
sentence of Article 2.4.2 operates as an exception to the first sentence part of the Article and that 
the rules and procedures to be followed differ in terms of legal obligations and burden of explanation.  
12. Turkey understands that the W-T comparis on methodology was designed to address a 
specific case, namely targeted dumping. In this  framework, it should be assessed carefully 
whether applying the legal discipline that was devised to mark the boundaries of the normal comparison methodologies of the first sentence of Article 2.4.2 can really fit the exceptional 
structure of the comparison methodology stipulated in the second half of the Article. As a matter 
of legal interpretation, Turkey would like to share her view that the application of the legal discipline envisaged for the first two methodologies shown in Article 2.4.2 may erode the 
effectiveness of the results expected from the W-T comparison methodology which is exceptional 
in nature and asymmetric in terms of comparison structure.  
III. CONCLUSION 13. Mr. Chairman, distinguished Members of the Pa nel, with these comments, Turkey would like 
to contribute to the legal debate of the parties in  this case, and express again its appreciation for 
this opportunity to share its points of view on this relevant debate, regarding the interpretation of Anti-Dumping Agreement.  
                                               
4 United States' first written submission, para. 73. 
5 US – Large Civil Aircraft (Second Complaint) (AB), para. 1272 (citing US-Upland Cotton (AB), 
para. 426). 
6 Korea's first written submission, para. 142 
7 United States' first written submission, para. 86. 
8 U.S. – Softwood Lumber VI,  Article 21.5 (Panel), para. 5.33. WT/DS464/R/Add.1 
 
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  14. We thank you for your kind attention and remain at your disposal for any question you may 
have. 
 
 
 WT/DS464/R/Add.1 
 
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  ANNEX D-9 
EXECUTIVE SUMMARY OF THE ARGUMENTS OF VIET NAM 
Madam Chair, distinguished Members of the Panel. 
 
1. Viet Nam appreciates this opportunity to present its views as a third party in this dispute.  
2. Viet Nam believes that this dispute is of gr eat systemic importance for the disciplines under 
the Agreement on Implementation of Article VI of the GATT 1994  ("Anti-Dumping Agreement") as 
well as the General Agreement on Tariffs and Trade 1994  ("GATT 1994). The issues raised in this 
dispute related to the application of the second sentence of Article 2.4.2 of the Anti-Dumping 
Agreement have, in fact, been raised by Viet Na m in the context of administrative proceedings 
being conducted against imports from Viet Nam by the U.S. Department of Commerce (USDOC). 
3. In this third party oral statement, Viet Nam submits that: (i) the use of "zeroing" by the 
USDOC under the W-T comparison methodology is "as such" inconsistent with several provisions of the Anti-Dumping Agreement and the GATT 1994;  and (ii) the panel should, interpret the 
conditions for applying the second sentences of Article 2.4.2 of the Anti-Dumping Agreement 
consistently with the object and purpose of Article 2.4.2 and, in particular, its status as an exception to the preferred rules for the comparison  of normal value and export price. This is 
essential for ensuring that recourse to the so-called third methodology remains an exception to the 
use of the two "normal" comparison methodologies under the first sentence of Article 2.4.2. This is what the drafters of the Anti-dumping Agreemen t intended by making the second sentence of 
Article 2.4.2 an exception. 
I. General observations 
4. As a general point, Viet Nam wishes to express its concern about the recent proliferation of 
investigations by the United States Department of Commerce (USDOC) in which the USDOC has 
used the third comparison methodology. This surge has largely coincided with the United States' 
decision to cease zeroing under the other two comparison methodologies. This gives cause for great concern. USDOC has found targeted dumping to exist in recent years with increasing 
frequency. Moreover, under the new "differentia l pricing" methodology which has replaced the 
targeted dumping methodol ogy, USDOC now examines automatically  – without a precipitating 
request by the applicant – whether the third methodology can be applied. All this undermines the exceptional nature of the second sentence of Arti cle 2.4.2. Furthermore, by applying zeroing when 
using the third comparison methodology USDOC has created a back-door through which zeroing is 
re-introduced into common anti-dumping practice, to be used at will by investigating authorities. 
5. It is essential that the conditions under which the third methodology may be used be 
interpreted in a manner that preserves their object  and purpose as an exception, as confirmed by 
the Appellate Body. In contrast to the object and purpose of the second sentence of Article 2.4.2, 
the United States would have the panel read the conditions for application of the exception as 
being little more than mere formalities which find prices to differ significantly without reference to 
significance as a concept based on common sense, statistics, or the object and purpose of the Anti-Dumping Agreement itself. This approach is simply not consistent with how Article 2.4.2 is 
drafted or with the object and purpose of the pr ovision within the broader context of the object 
and purpose of the Agreement. 
II. "Zeroing" is just as prohibited under  the average-to-transaction comparison 
methodology as it is prohibited under th e average-to-average and transaction-to-
transaction methodologies  
6. Viet Nam disagrees with the United States' reading of the second sentence of Article 2.4.2 
as permitting recourse to the "zeroing" methodol ogy. Korea has put forward a convincing set of 
arguments in this regard.
1 For instance, the United States' reading of Article 2.4.2 presumes that 
                                               
1 Korea's First Written Submission, Section IV. WT/DS464/R/Add.1 
 
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  dumping can be found at the level of individual  transactions. However, the Appellate Body has 
consistently ruled that "dumping" can only be determined for the product as a whole, and not for individual transactions.
2  
7. The fact that the second sentence of Article 2.4.2 is an exception3 does not speak to the 
issue of zeroing. The second sentence is an exception to the "normally"4 applicable comparison 
methodologies. It is exceptional not because it permits zeroing; rather, it is exceptional because it is asymmetrical – that is, what is compared on one side of the comparison (a weighted average) is 
different from what is on the other side of  the comparison (individual transactions).  
8. Viet Nam is also not convinced by the United States' mathematical equivalence argument.
5 
The United States' numerical example appears to be  somewhat simplistic and basic. Moreover, it 
would appear to rely on certain assumptions which are questionable under the second sentence of 
Article 2.4.2. For instance, the example appears to assume that an investigating authority may 
apply the third methodology to all export transactions, rather than only to transactions within the 
pattern. However, that is one of the many open questions that Korea has raised6 and that 
Viet Nam hopes the panel will address. The United States has not demonstrated whether mathematical equivalence would hold in the absence of that assumption.  
9. Moreover, as the Appellate Body has found, even if two methodologies were to yield the 
same mathematical result in some cases , this would not deprive the second sentence of 
Article 2.4.2 of its useful effect.
7 Rather, mathematical equivalence presupposes that the same 
result would obtain in all cases . The United States has not discharged this burden of proof on this 
point. 
10. Hence, in the light of the text of Article 2.4.2 and the existing extensive case law, Viet Nam 
considers that the United States' recourse to zero ing under the second sentence of Article 2.4.2 is 
inconsistent with Articles 2.1, 2.4, 2.4.2, 9.2 and 9.3 of the Anti-Dumping Agreement as well as 
with Articles VI:1 and VI:2 of the GATT 1994. 
III. The United States does not comply with the conditions that govern recourse to the 
third methodology 
11. Viet Nam is concerned about the United States' reading of the various conditions in 
Article 2.4.2, second sentence, that govern reco urse to the exceptional third methodology. These 
conditions include, among other things, the existence of a "pattern" of prices that "differ significantly among different purchasers, regions or time periods", as well as a meaningful 
explanation why the two "normally" used comparison methodologies are insufficient to capture 
such differences. 
12. Article 2.4.2 second sentence must be interpreted in a manner that preserves the useful 
effect of these conditions. These conditions must not be converted into mere formalities that are 
easily satisfied by an investigating authority in many cases. However, that appears to be precisely what the United States would have the panel do. 
13. Both the United States " Nails II " and "differential pricing" methodologies would appear to 
establish an excessively low threshold for the phra ses "pattern" and "differ significantly". Korea's 
first written submission highlights in detail numerous problematic aspects in this regard. Viet Nam did not see an adequate response to these arguments in the United States' submission. 
14. For instance, under the " Nails II " approach, the United States uses one standard deviation 
as one of the criteria. Whatever the discretion of an investigating authority, this would appear to be far too low a threshold. Viet Nam would urge the panel to engage in a thorough statistical and 
quantitative analysis of this point. The "differential pricing" methodology appears even more 
problematic in this regard, since the United Stat es appears to use only a 0.8 of one standard 
                                               
2 See for instance, Appellate Body Report, US – Continued Zeroing , para. 283. 
3 Appellate Body Report, US – Softwood Lumber V (Article 21.5 – Canada) , para. 97. 
4 Article 2.4.2 of the Anti-dumping Agreement . 
5 United States' First Written Submission, Sections IV.B.5.c and IV.B.5.d. 
6 Korea's First Written Su bmission, Section V.C.3. 
7 Appellate Body Report, US – Softwood Lumber V (Article 21.5 – Canada) , para. 99. WT/DS464/R/Add.1 
 
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  deviation. This lowers the bar even further. It cannot be that numerical thresholds are set so low 
that they would potentially be satisfied in the vast majority of anti-dumping investigations.  
15. These concerns are compounded by several other factors. For instance, USDOC uses 
average  export prices per comparison point (e.g. per purchaser), rather than the actual  prices of 
individual export transactions. Doing so affects the calculation of the standard deviation and in 
many cases will make it more likely that a given purchaser, region or time-period will fall below the cut-off points and will be deemed to form a "pattern". Moreover, the use of such computed 
averages – which are different from the prices of actual export transactions – appears inconsistent 
with the term "export prices" in Article 2.4.2. Another example is what Korea has identified as the "vertical", "horizontal" and "cross-category" variation practice.
8 Viet Nam shares these concerns 
expressed by Korea.  
16. These aspects of the United States' methodol ogy inappropriately create the possibility that 
random, relatively minor and commercially entirely commonplace price fluctuations will be characterized as a "pattern" of prices that "differ significantly". This makes it unduly easy to apply 
the third methodology. This cannot have been the intention of the drafters of the 
Anti-dumping Agreement or they would not have cl assified the third methodology as an exception. 
17. Also, USDOC considers it entirely irrelevant that lower prices may reflect standard 
commercial practices, for instance, routine seasonal fluctuations or lower prices to large-volume 
customers. In Viet Nam's view, contrary to the United States' arguments, such considerations are highly relevant for an effective interpretation of the term "pattern", both in its ordinary meaning and in the context at hand. Beyond all technicalities of the second sentence of Article 2.4.2, it 
cannot be that the Anti-dumping Agreement entitles WTO Members to burden exporters with 
higher anti-dumping duties simply because they follow standard business practices. Viet Nam agrees with Korea's arguments on this point.
9 
18. Finally, Viet Nam is concerned that the United States' practice reduces to an empty formality 
the requirement to provide an "explanation" as to why the two "normally" applicable 
methodologies cannot be used. First, the United States fails to provide any explanation with 
respect to the T-T methodology, contrary to th e plain meaning of Article 2.4.2. Second, the 
explanation that the W-W methodology "conceals" certain price differences is, as Korea correctly argues, merely a description of what any averaging process entails by its very essence. Finally, saying that the W-T methodology with zeroing yields a higher margin than the W-W methodology 
without zeroing is not an explanation why price differences "cannot be taken into account 
appropriately" by the W-W methodology. When ze roing is applied the margins of dumping will 
always be higher than if zeroing is not applied because of the absence of any offset for the margin 
by which export prices exceed normal value. Recourse to the third methodology cannot be driven, 
or justified, by the fact that the application of zeroing will always result in the highest possible 
dumping margin. Nothing in Article 2.4.2 supports such an interpretation when choosing among 
the possible methodologies for determining the margins of dumping. 
IV. The third methodology, to the extent it may be applied, can only be applied to the 
transactions constituting the identified pattern 
19. Finally, Viet Nam agrees with Korea that, assuming the third methodology can be used, it 
can only be applied to the transactions found to "differ significantly", that is, within the pattern. 
The two "normal[]" methodologies should be applied to transactions outside the pattern. 
V. Conclusion 
20. Madam Chair, distinguished Members of the Panel, 
21. This is the first time that a panel will rule on the consistency of a Member's actions with the 
second sentence of Article 2.4.2. Your ruling will  set an important precedent for the interpretation 
and the application of this provision. Viet Nam recognizes that, like many provisions under the 
Anti-dumping Agreement, Article 2.4.2 second se ntence leaves a margin of discretion to the 
                                               
8 See Korea's First Written Submission, paras. 217-233. 
9 Korea's First Written Submission, paras. 142-144. WT/DS464/R/Add.1 
 
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  investigating authorities in how to operationalize its various conditions. However, this discretion 
cannot entail recourse to zeroing, nor can it justify reducing the conditions in Article 2.4.2 to formalities or thresholds that can easily be satisfied potentially in any investigation.  
22. For the reasons explained above, Viet Nam would like to urge the panel to rule that the 
United States' " Nails II " methodology (as such and as applied in the Washers  investigation) and 
the "differential pricing" methodology (as such); as well as other aspects of the United States' approach to the third methodology, are inconsistent with Articles 2.1 2.4, 2.4.2, 9.2 and 9.3 of the 
Anti-dumping Agreement  as well as Articles VI:1 and VI:2 of the GATT 1994. 
__________