WORLD TRADE  
ORGANIZATION  WT/DS294/18 
19 June 2006 
 (06-2947) 
 Original:   English 
  
 
UNITED STATES – LAWS, REGULATIONS AND METHODOLOGY FOR 
CALCULATING DUMPING MARGINS ("ZEROING") 
 
Communication from the United States
 
 
 
 The following communication, dated 12 June 200 6, is circulated at the request of the 
delegation of the United States.  
_______________ 
 
 1. In a prior communication
1, the United States presented some initial observations regarding the 
report of the Appellate Body in US – Zeroing (EC) .2  In light of comments received, including those 
by other Members regarding the report at the last meeting of the Dispute Settlement Body, and because the United States considers the issues presented by this Appellate Body report to be important 
to the effectiveness and credibility of the WTO disp ute settlement system, the United States takes this 
opportunity to share with Members some a dditional observations concerning the report. 
 2. In the First US Communication, the United States described the troubling implications of the Appellate Body's conclusions for other provisions of the Agreement on Implementation of Article VI 
of the General Agreement on Tariffs and Trade 1994  ("Anti-Dumping Agreement").  The United 
States also described the disturbing failure of the Appellate Body's analysis to address significant 
arguments that were presented.  3. However, an even more significant defect in the Appellate Body report is that the Appellate 
Body's reasoning is fatally flawed.  In brief, th e Appellate Body erroneously concluded that Members 
must provide offsets for non-dumped transactions whenever "multiple comparisons" are made, and 
that only by aggregating the results of those multip le comparisons will a Member determine a margin 
of dumping for the "product as a whole".  This conclusion finds no basis in the text of the Anti-Dumping Agreement.  This conclusion also fail s to take into account important context for the 
terms that are
 in the text of the Anti-Dumping Agreement and the General Agreement on Tariffs and 
Trade 1994  ("GATT 1994"). 
 4. Obligations under the covered agreements fl ow from the text of those agreements, and the 
text of those agreements alone.  As  the Appellate Body has noted:  "The legitimate expectations of the 
parties to a treaty are reflected in the language of the treaty itself."
3  Unfortunately, in US – Zeroing 
(EC) , the Appellate Body did not base its findings on a reasoned analysis of the text of the applicable 
                                                      
1 United States – Laws, Regulations and Methodology for Calculating Dumping Margins ("Zeroing"); 
Communication from the United States , WT/DS294/16 (17 May 2006) (hereinafter "First US Communication"). 
2 Appellate Body Report, United States – Laws, Regulations and Methodology for Calculating 
Dumping Margins ("Zeroing") , WT/DS294/AB/R, adopted 9 May 2006 (hereinafter " US – Zeroing (EC) (AB)" ). 
3 Appellate Body Report, India – Patent Protection for Pharmaceutical and Agricultural Chemical 
Products , WT/DS50/AB/R, adopted 16 January 1998, para. 45. WT/DS294/18 
Page 2  
 
  agreements.  Instead, it relied primarily on prior Appellate Body reports (and a misapprehension of 
those reports, at that).  While Appellate Body reports  can provide valuable clarification of the covered 
agreements, Appellate Body reports are not themselv es agreed text nor are they a substitute for the 
text that was actually negotiated and agreed.  In re lying on prior Appellate Body reports rather than 
the text of the covered agreements, the Appella te Body took findings from one set of factual 
circumstances and applied them inappropriately to another, different set of factual circumstances 
without making allowances for tho se differences.  Specifically, the A ppellate Body declared that its 
findings of an obligation to provide offsets when aggregating comparisons in the context of multiple 
averaging
4 necessarily led to a finding that there is an obligation to provide offsets whenever multiple 
comparisons of any kind are ma de, whether averaged or not.5 
 
5. Furthermore, the Appellate Body, as noted in the First US Communication, failed to consider 
contextual arguments demonstrating that the approach it ultimately chose would create severe 
problems of interpretation not only with respect to the Anti-Dumping Agreement, but also with respect to the GATT 1994.
6  The meager analysis found in US – Zeroing (EC) (AB)  stands in stark 
                                                      
4 Previously, the Appellate Body defined multiple av eraging as "the practice of investigating authorities 
of sub-dividing the product under investigation into sub-groups of comparable transactions and determining a 
weighted average normal value and a weighted average export price for the transactions in each sub-group."  
Appellate Body Report, United States – Final Dumping Determination on Softwood Lumber from Canada , 
WT/DS264/AB/R, adopted 31 August 2004, para. 68 (hereinafter " US – Softwood Lumber V (AB) "). 
5 US – Zeroing (EC) (AB) , para. 127 ("Therefore, if the investiga ting authority establishes the margin of 
dumping on the basis of multiple comparisons made at an intermediate stage, it is required to aggregate the 
results of all of the multiple compar isons, including those where the expor t price exceeds the normal value."). 
The Appellate Body may have been confusing "model zeroing" with "simple zeroing," to use the 
terminology employed by Members that have challenged the use of zeroing, such as the European Communities 
("EC") and Japan.  According to these Members, "model zeroing" refers to a method whereby an authority 
makes average-to-average comparisons of export price and normal value within individual "averaging groups" established on the basis of physical or other characteristics ("models") and disregards any amounts by which 
average export prices for particular models exceed norm al value in aggregating the results of these multiple 
comparisons to calculate a weighted average margin of  dumping.  Under "model zeroing," when an authority 
aggregates the results of model-specifi c, average-to-average comparisons of normal value and export price into 
a weighted average margin of dumping, the numerator of that margin of dumping only includes the results of 
models for which the average export price is less than the normal value. 
On the other hand, "simple zeroing," in the parlance of  Members such as the EC and Japan, refers to a 
method whereby an authority determines a weighted average margin of dumping or an assessment rate based on 
average-to-transaction or transacti on-to-transaction comparisons between export price and normal value and 
disregards any amounts by which export prices of individual transactions exceed normal value in aggregating 
the results of these multiple comparisons.  Under "simple zeroing," when an authority aggregates the results of 
comparisons of normal value and export price made on an average-to-transaction basis or on a transaction-to-
transaction basis, the numerator of th e weighted average margin of dumping only includes the results of those 
comparisons in which individual export pr ices are less than the normal value. 
Previous Appellate Body reports involving zeroing dealt with "model zeroing."  See US – Softwood 
Lumber V (AB) ; and Appellate Body Report, European Communities – Anti-Dumping Duties on Imports of 
Cotton-Type Bed Linen from India , WT/DS141/AB/R, adopted 12 March 2001.  In US – Zeroing (EC) (AB) , the 
Appellate Body appeared to simply assume that because "model zeroing" has been found to be prohibited, 
"simple zeroing" also is prohibited.  Of course, if these types of "zeroing" could be presumed to be the same, 
there would have been no need for complaining parties to label them differently.  In addition, the Appellate 
Body's apparent assumption overlooks the fact that "simple zeroing" occurs in the context of transaction-specific 
comparisons, whereas "model zeroing" occurs in the context of comparisons involving averages. 
6 In this regard, the United States notes that the Appellate Body has in other disputes recognized the 
value and importance of considering the impact of a proposed interpretation for other agreement provisions.  For 
example, in the US – Softwood Lumber CVD dispute, the Appellate Body disagreed with the Panel's 
understanding that the term "in relation to" meant "i n comparison with".  To support its conclusion, the 
Appellate Body went through the SCM Agreement and showed how such an interpretation would not make 
sense in other parts of the SCM Agreement where "in relation to" was used:  WT/DS294/18 
 Page 3 
 
 
  contrast to the reports in US – Zeroing (EC) (Panel)  and US – Softwood Lumber V (Article 21.5) .7  
These two reports, which were drafted by panelists w ith extensive experience in the trade remedies 
area, came to the conclusion that with the ex ception of average-to-average comparisons in 
investigations, the GATT 1994 and the Anti-Dumping Agreement do not preclude zeroing.  In reaching a different conclusion, the Appellate Body  simply erred, both as a matter of interpretation 
and as a matter of the applicable standard of review.  
 
A. The Appellate Body's Erroneous Conclusion that Authorities Must Provide Offsets 
Whenever They Conduct Multiple Comparisons  
 6. In US – Zeroing (EC) , the Appellate Body based its analysis in key respects not on the text of 
the Anti-Dumping Agreement but on its own pr ior reports, particularly its report in US – Softwood 
Lumber V (AB) .  As just one example, the Appellate Body  relied heavily on its interpretation of the 
term "product as a whole".  However, "product as a whol e" is a term that is not found anywhere in the 
Anti-Dumping Agreement nor in Article VI of th e GATT 1994.  In using its prior reports as a key 
starting point for its analysis rather than the text of the covered agreements, the Appellate Body came 
to the erroneous conclusion that any kind of aggregated comparison requires an offset, regardless of 
context.    
1. The Appellate Body's Mistaken Expansion of Softwood Lumber V  
 7. Contrary to the Appellate Body's suggestion, US – Softwood Lumber V (AB)  was limited to 
the first sentence of Article 2.4.2 of the Anti- Dumping Agreement and the question of whether 
zeroing is permissible when using the average-to -average comparison method in an anti-dumping 
investigation.  The Appellate Body's analysis in that  dispute is simply inapplicable in other contexts, 
such as assessment proceedings. 
 
8. More specifically, the issue in US – Softwood Lumber V (AB)  was whether Article 2.4.2 of the 
Anti-Dumping Agreement proscribes zeroing in  the context of "multiple averaging"; i.e.,  a method 
whereby an authority divides a product under investigation into product types or models, calculates a weighted average normal value and a weighted aver age export price for each product type or model, 
and then aggregates the results of these comparisons  to derive an overall margin of dumping.  The 
                                                                                                                                                                    
 
 
We observe that the phrase "in relation to" is used in other provisions of the  SCM Agreement  
in a manner that does not connote "in comparison with".  For instance, Article 15.6 of the  
SCM Agreement  states that "[t]he effect of the subsidized imports shall be assessed in 
relation to the domestic production of the like pro duct".  Article 15.6 cannot properly be read 
as requiring a comparison between "[t]he effect  of the subsidized imports" and "the domestic 
production of the like product".  Similarly, Article 15.3 of that Agreement provides that, in 
order to assess cumulatively the effects of imports of a product from more than one country that are simultaneously subject to countervaili ng duty investigations, investigating authorities 
must determine that, inter alia, "the amount of subsidization established in relation to the 
imports from each country is more than  de mini mis".  In this provision, the phrase "in relation 
to" is not used in the sense of "in comparison with" but rather in the sense of "in proportion 
to".  Therefore, the pr ecise meaning of the phrase "in relation to" will vary depending on the 
specific context in which it is used.  
Appellate Body Report, United States – Final Countervailing Duty Determination with Respect to 
Certain Softwood Lumber from Canada , WT/DS257/AB/R, adopted 17 February 2004, para. 89, note 107. 
7 Panel Report, United States – Laws, Regulations and Methodology for Calculating Dumping Margins 
("Zeroing") , WT/DS294/R, adopted 9 May 2006, as modified by the Appellate Body (hereinafter " US – Zeroing 
(EC) (Panel) "); and Panel Report,  United States – Final Dumping Determination on Softwood Lumber from 
Canada: Recourse to Article 21.5 of the DSU by Canada , WT/DS264/RW, circulated 3 April 2006 (hereinafter 
"US – Softwood Lumber V (Article 21.5) "). WT/DS294/18 
Page 4  
 
  Appellate Body agreed with the participants in th at dispute that Article 2.4.2 permits such multiple 
averaging, and noted that the participants disagr eed on the proper interpretation of the terms "all 
comparable export transactions" and "margins of dum ping" in Article 2.4.2.  With respect to the 
interpretation of the term "margins of dumping", th e Appellate Body stated that the "disagreement 
turns on the question of whether that term applies to the product under investigation as a whole, or, at 
the sub-group level, when multiple averaging is undertaken ".
8  In its analysis of this question, the 
Appellate Body consistently characterized the issue before it in terms of whether the terms "dumping" 
and "margins of dumping" apply at the produc t or "sub-group" or "sub-product" level9 and concluded, 
in light of, inter alia, Article 2.1 of the Anti-Dumping Agreement and Article VI:2 of the GATT 
1994, that, for purposes of Article 2.4.2, dumping a nd margins of dumping can be found to exist only 
for a product as a whole and not for "a type, model or category of that product".10  In other words, the 
Appellate Body developed the notion of "the produc t [under investigation] as a whole" to make a 
distinction between the "product," on the one hand,  and "sub-group", "sub-product", "type", "model" 
or "category" on the other.   
9. Thus, the terminology used by the Appellate B ody in this respect was closely connected to the 
multiple averaging method and the Appellate Body's analysis thereof.  Indeed, the Appellate Body 
itself indicated in Softwood Lumber V that it was interpreting the phrases "margins of dumping" and 
"all comparable export transactions" as they appear  in Article 2.4.2 "in an integrated manner".
11  
 10. In addition, in Softwood Lumber V  the Appellate Body specifically declined to consider 
contextual arguments regarding the denial of o ffsets when an investigating authority uses the 
transaction-to-transaction or average-to-transaction comparison methods.
12  The Appellate Body 
stated:   
We fail to see how we could find th at the transaction-to-transaction and 
average-to-individual methodologies could provide contextual support for the United 
States' interpretation of Article 2.4.2 w ithout examining first whether zeroing is 
permitted under those methodologies.
13   
If the Appellate Body's finding in US – Softwood Lumber V (AB)  had been based on an interpretation 
of Article 2.1 and some general obligation to find margins of dumping for the "product as a whole," then there would have been no need for the Appella te Body to consider separately whether the denial 
of offsets was permitted under the transaction-to-tra nsaction and average-to-transaction comparison 
methods.  In other words, it would have been misl eading for the Appellate Body to claim that its 
finding left open the question of whether offsets were required under these other methods. 
 11. In US – Zeroing (EC) , the Appellate Body inexplicably divorced the phrase "product as a 
whole" from the original context in which it was coined
14 – the use of average-to-average 
comparisons in an investigation.  In so doing, the Appellate Body also divorced the concept embodied in the phrase from its limited applicability in the contex t of Article 2.4.2.  The Appellate Body simply 
decided that the concept "product as a whole" is not limited to the interpretation of obligations 
relating to multiple averaging.  It did so by asserting that in Softwood Lumber V the requirement to 
calculate margins of dumping for the "product as a whole" meant that offsets must be provided not 
                                                     
 
8 US – Softwood Lumber V (AB) , para. 84 (emphasis added). 
9 US – Softwood Lumber V (AB) , paras. 90-91, 97, 99, 101-103 and 115. 
10 US – Softwood Lumber V (AB) , paras. 93, 96. 
11 US – Softwood Lumber V (AB) , para. 85. 
12 US – Softwood Lumber V (AB) , para. 105. 
13 US – Softwood Lumber V (AB) , para. 105. 
14 It bears repeating that the phrase "product as a whole" was invented and is not a phrase found in the 
text of either the Anti-Dumping Agreement or Article VI of the GATT 1994.  WT/DS294/18 
 Page 5 
 
 
  only when aggregating intermediate values in the context of multiple averaging , but when 
undertaking " multiple comparisons " more generally.15  That statement is simply wrong.16  T h e  
reasoning in US – Softwood Lumber V (AB) was expressly limited to comparisons in connection with 
multiple averaging, not all so-called "multiple comparisons" more generally.    
12. The Appellate Body's assumption that the analysis in US – Softwood Lumber V (AB) is 
applicable to all instances when th ere are multiple comparisons, rather than just multiple averaging, is 
not just unfounded but also leads to further errors .  The Appellate Body appears to view "multiple 
comparisons" as including any situation in which th ere is more than a single export transaction. 
Although the Appellate Body has suggested that Members have a choice as to whether to use 
"multiple comparisons" in calculating the margin of dumping, the inevitable consequence of the 
Appellate Body's reasoning would be that Members must, in fact, aggregate transactions in order to 
calculate a margin of dumping whenever ther e is more than a single export transaction; i.e., in 
virtually all situations.
17  Thus, as discussed below, not only is  the Appellate Body's assertion that "an 
investigating authority may choose to undertake multiple comparisons"18 simply wrong, but it means 
that the Appellate Body, based on a phrase it created a nd that is not in the text of the Anti-Dumping 
Agreement, has prohibited zeroing in every circumst ance in which a Member calculates a margin of 
dumping.  
2. The Correct Analysis of "Product as  a Whole" and "Margins of Dumping"  
 
 "Product as a whole"
 
 
13. In US – Softwood Lumber V (Article 21.5) , the panel properly rejected Canada's attempt to 
take the phrase "product as a whole" – not found anywhere in the Anti-Dumping Agreement or the GATT 1994 – that the Appellate Body used in US – Softwood Lumber V (AB)  and apply it outside of 
the context of Article 2.4.2 of the Anti-Dumping Agreement.  The panel correctly noted that in the 
context of the average-to-average method where comparisons are made for each of several sub-
groups, "it was entirely logical for the Appellate Body  to have concluded that the margin of dumping 
for the 'product as a whole' must fully reflect tho se instances where, for a particular sub-group, the 
weighted average export price was greater than the weighted average normal value".
19  The panel then 
explained why it would be wrong to extend the Appe llate Body's "product-as-a-whole" concept to 
other comparison methods: 
                                                      
15 The Appellate Body in US – Zeroing (EC)  states that the "Appellate Body specified that, while an 
investigating authority may choose to undertake multiple comparisons or multiple averaging at an intermediate 
stage to establish margins of dumping, 'it is only on the basis of aggregating all these 'intermediate values' that 
an investigating authority can establish margins of dumping for the product under investigation as a whole."  
Para. 126, citing US – Softwood Lumber V (AB) , para. 97 (emphasis in original).  To the contrary, however, in 
paragraph 97 of US – Softwood Lumber V (AB) , the Appellate Body expressly referenced "multiple averaging" 
and "multiple comparisons at the sub-group level " (emphasis added). 
16 The Appellate Body now considers zeroing to be prohibited whenever a Member engages in 
"multiple comparisons," but it declin ed to address whether zeroing is also prohibited in transaction-to-
transaction comparisons in investigations.  Notwithstanding the logical flaw in that view, to the extent the 
Appellate Body may consider zeroing to be prohibited only  where "multiple comparison s" occur, it should be 
noted that, as discussed below, the US assessment syst em results in the same assessment of anti-dumping duties 
as a transaction-by-transac tion, prospective normal va lue system, but only if zeroing is permitted under the US 
system.  Otherwise, to equalize the two systems, zeroing would have to be also prohibited in transaction-by-
transaction assessment systems, which is akin to requiring authorities to compensate an importer for individual importations for which normal value is less than the export price. 
17 Based on the experience of the United States, it is  exceedingly rare for an anti-dumping investigation 
or review to involve only a single export transaction for an exporter. 
18 US – Zeroing (EC) (AB) , para. 126 (emphasis added). 
19 US – Softwood Lumber V (Article 21.5) , para. 5.22. WT/DS294/18 
Page 6  
 
   
[A]lthough there is little doubt that a margin of dumping is established for each exporter/producer with respect to the produc t under investigation, further examination 
indicates that "product" need not necessarily  be interpreted as "product as a whole", 
in the sense that Canada posits, that is, the summed results, fully reflecting negative 
and positive results, of all comparisons con cerning the product under investigation.  
There are also good reasons why "margins of dumping" need not necessarily relate to "the product as a whole" in all circumstances in the AD Agreement . 
 The Appellate Body drew its conclusion th at dumping is to be found for the "product as a 
whole" from its consideration of Article VI of GATT 1994  and Article 2.1 of the AD Agreement, 
which both define the concept of "dumping", in the case of the latter, by its own terms for the entire 
AD Agreement .  To extend the Appellate Body's referen ce to the concept of "product as a whole" in 
the sense that Canada proposes to the [transacti on-to-transaction] methodology would entail accepting 
that it applies throughout Article VI of GATT 1994 , and the AD Agreement , wherever the term 
"product" or "products" appears.  A review of the use of these terms does not support the proposition 
that "product" must always mean the entire universe of exported product subject to an anti-dumping 
investigation.  For instance, Article VI:2 states that a contracting party "may levy on any dumped 
product" an anti-dumping duty.  Article VI:3 provid es that "no countervailing duty shall be levied on 
any product".  Article VI:6(a) provides that ["] no contracting party shall levy any anti-dumping or 
countervailing duty on the importation of any product ..." .  Similarly, Article VI:6(b) provides that a 
contracting party may be authorized "to le vy an anti-dumping or countervailing duty on the 
importation of any product".  Taken together, these provisions suggest that "to levy a duty on a 
product" has the same meaning as "to levy a duty  on the importation of that product".  Canada's 
position, if applied to these provisions, would mean that the phrase "importation of a product" cannot 
refer to a single import transaction.  In many places where the words product and products are used in 
Article VI of the GATT 1994 , an interpretation of these words as necessarily referring to the entire 
universe of investigated export transactions is not compelling.
20 
 14. The United States agrees with the panel's an alysis, and makes the following observations in 
support thereof.  In its report, the Appellate Body re fers several times to the concept of the "product as 
a whole" and states that this concept is "clear" from the text of Article 2.1 of the Anti-Dumping 
Agreement and Article VI of the GATT 1994.
21  It is very unclear what the Appellate Body means by 
"product as a whole" or why that concept derives from the terms of Article 2.1 of the Anti-Dumping 
Agreement and Article VI of the GATT 1994.  Neither  of those provisions cont ains the term "product 
as a whole".  In fact, those provisions both refer si mply to "product".  The term "product" does not in 
and of itself convey the meaning the Appellate Body  assigns to it:  "if the investigating authority 
establishes the margin of dumping on the basis of multiple comparisons made at an intermediate 
stage, it is required to aggregate the results of all of the multiple comparisons, including those where 
the export price exceeds the normal value.  If the investigating authority chooses to undertake 
                                                      
20 US – Softwood Lumber V (Article 21.5) , paras. 5.22-5.23.  The panel added that:  
 [W]e consider that there is nothing inherent in the word "product[]" (as used in Article VI:1 of 
the GATT 1994  and Article 2.1 of the AD Agreement ) to suggest that this word should 
preclude the possibility of establishing margins of dumping on a transaction-specific basis, although this should not imply that a margin of dumping established with respect to a 
particular transaction is sufficient to impose an anti-dumping measure on all subsequent 
imports of the product.  The notion that "a product is introduced into the commerce of another country" (Article 2.1) clearly can meaningfully apply to a particular export sale and does not 
require consideration of different  export sales taken together. 
 Id., note 32. 
21 US – Zeroing (EC) (AB) , para. 126.  WT/DS294/18 
 Page 7 
 
 
  multiple comparisons at an intermediate stage, it is not allowed to take into account the results of only 
some multiple comparisons, while disregarding others."22  
 15. In other words, for the Appellate Body, the term "product" means that Members are required
 
to average the entries of all of the particular pr oduct from a particular exporter or producer, at least 
where the investigating authority "chooses" to u ndertake multiple comparisons at an intermediate 
stage.  As the United States has explained, the Appellate Body interprets Article 6.10 as prohibiting 
the calculation of a margin on transaction-specific b asis, and there is therefore no real "choice" for 
investigating authorities.  Such a reading of the term "product" would have significant implications 
for other places where "product" is used.  It would me an for example that the treatment of a "product" 
is to be determined not with respect to the entry of  that product, but with respect to an average of all 
particular entries of that product.  16. However, there is nothing in the Anti-Du mping Agreement nor the GATT 1994 that requires 
such a constrained reading of the term "product".  Nothing prevents the term "product" from meaning 
the single entry of a particular product.  The Appella te Body's own report demonstrates that this is a 
correct meaning of the term "product".  In paragr aph 109, the Appellate Body states:  "Under this 
system, the United States collects security in the fo rm of a cash deposit at the time a product enters 
the United States, and determines the amount of dut y due on the entry at a later date".  Here, the 
Appellate Body is clearly using "product" to refer to a single entry.  
17. Furthermore, a reading of the term "produc t" in Article VI of the GATT 1994 as requiring the 
aggregation of multiple transactions does not reflect th e ordinary meaning of the term in context.  For 
example, that reading does not work in the contex t of Article VII of the GATT 1994.  The panel in US 
– Softwood Lumber V (Article 21.5)  observed that:  "[A]n analysis of the use of the words product 
and products throughout the GATT 1994 , indicates that there is no ba sis to equate product with 
'product as a whole' in the sense in which Canada uses that term in this proceeding.  Thus, for 
example, when Article VII:3 of the GATT refers to 'the value for customs purposes of any imported product', this can only be interpreted to  refer to the value of a product in a particular 
import transaction. "
23  Similarly, that reading does not work in the context of Article II of the GATT 
1994.  Article II:2(b) specifically uses the term "product" in relation to  "any anti-dumping or 
countervailing duty applied c onsistently with the provisions of Artic le VI".  If, as the Appellate Body 
found, the term "product" for purposes of Article VI  "clearly" means "product as a whole," then the 
term "product" for purposes of Article II would also m ean "product as a whole".  Yet that reading, if 
product as a whole in fact requires an examination of multiple transactions, simply does not work.  
"Product" is used several places in Article II.  The Appellate Body's reading would mean, for 
example, that for purposes of the other two items listed in paragraph 2 of Article II – "a charge 
equivalent to an internal tax" and "fees or othe r charges commensurate with the cost of services 
rendered" – each Member would need to consider  the "product as a whole".  In other words, a 
Member would average the charges or fees applied to all the entries of a product to determine if the 
charge was equivalent to an internal tax or comme nsurate with the cost of services rendered.  The 
result would be even more striking for the tariff trea tment of a "product".  Again, since the Appellate 
Body finds that "product" means "product as a whole," and if "product as a whole" requires 
consideration of multiple transactions, then in de termining if a Member has abided by its tariff 
bindings, it would be necessary to consider the "p roduct as a whole".  It would be permissible to 
impose a tariff in excess of the bound rate of duty on particular entries so long as it was "offset" by 
the tariff on other entries such that the tariff fo r the "product as a whole" does not exceed the bound 
rate.  The United States suspects that Members ma y have some difficulty with this reading of 
"product". 
 
                                                      
22 US – Zeroing (EC) (AB) , para. 127. 
23 US – Softwood Lumber V (Article 21.5) , note 36. WT/DS294/18 
Page 8  
 
   "Margins of dumping"
 
 
18. With respect to the phrase "margins of dumping," the panel in US – Softwood Lumber V 
(Article 21.5)  noted that, pursuant to the text of Article VI, dumping is essentially a price difference.24  
Pursuant to Article VI:1 and VI:2 of the GATT 1994,  a margin of dumping exists when the price of a 
product is less than its normal value.25  The panel found that this definition of the margin of dumping 
as a price difference could be applied to individual  transactions and does not require an examination 
of export transactions at an aggregate level:   
In the absence of any definition of the phrase "margins of dumping" in Article 2.4.2, 
and in the absence of any obligation un der the [transaction-to-transaction] 
methodology to ensure that "all comparable  export transactions" are represented in a 
weighted average export price, we se e no reason why a Member may not, when 
applying the transaction-to-transaction comparison methodology, establish the 
"margin of dumping" on the basis of the total amount by which transaction-specific 
export prices are less
 than the transaction-specific nor mal values.  In such cases, the 
margin of dumping  clearly would reflect the price difference for dumped , rather than 
non-dumped , exports of the product by a particular  exporter.  In our view, this would 
be a permissible interpretation of the re levant part of the first sentence of 
Article 2.4.2, even though it does not reflect the full results of all comparisons. In other words, when establishing the amount of dumping for the purpose of calculating 
a margin of dumping under the [transaction-to-transaction] comparison methodology, 
an investigating authority need not incl ude in its calculations the results of 
comparisons where export price exceeds normal value.
26 
19. Thus, the analysis of the panel in US – Softwood Lumber V (Article 21.5)  was based firmly on 
the text of the Anti-Dumping Agreement and the GATT 1994.  By contrast, in US – Zeroing (EC) , the 
Appellate Body failed to address fully the terms of th e covered agreements, in light of their context, 
and in light of the object and purpose of the agre ements. Instead, the Appella te Body interpreted its 
own report language, removed from the context of the agreement provisions with respect to which the 
language was first coined, in order to achieve the result of requiring offsets in all contexts.   
 
B. The Appellate Body's Erroneous Conclusi on that the Margin of Dumping Cannot be 
Transaction-Specific  
 
1.  The Appellate Body Misinterpreted Article 6.10 of the Anti-Dumping Agreement  
 
20. The Appellate Body compounded its error by fi nding that the margin of dumping cannot be 
calculated on a transaction-specific basis.27  The Appellate Body relied on Article 6.10 of the 
Anti-Dumping Agreement to find that margins of dumping must invariably be established on an exporter- or producer-specific basis, which it assumed was inconsistent with calculating a margin of 
dumping on a transaction-specific basis.
28   
                                                      
24 US – Softwood Lumber V (Article 21.5) , para. 5.27 ("While 'margins of dumping' is not defined by 
the AD Agreement , Article VI:2 of the GATT 1994  provides that, for the purposes of Article VI, 'the margin of 
dumping is the price difference determined in accordance with the provisions of paragraph 1' of Article VI."). 
25 US – Softwood Lumber V (Article 21.5) , para. 5.27 ("In other words, there is dumping when the 
export 'price' is less  than the normal value.  Given this definition of dumping, and the express linkage between 
this definition and the phrase 'price difference', it would be permissible for a Member to interpret the 'price 
difference' referred to in Article VI:2 as the amount by which the export price is less  than normal value, and to 
refer to that 'price difference' as the 'margin of du mping'.") (footnote omitted; underscoring in original). 
26 US – Softwood Lumber V (Article 21.5) , para. 5.28 (footnote omitted; underscoring in original). 
27 US – Zeroing (EC) (AB) , paras. 128-30. 
28 US – Zeroing (EC) (AB) , para. 128.  WT/DS294/18 
 Page 9 
 
 
   
21. The assumption is a non sequitur  because the Appellate Body proceeds on the false premise 
that a margin of dumping cannot be both exporter-specific and transaction-specific.  However, 
Article 6.10 simply provides that a Member must calculate a margin for each individual exporter or producer – as opposed to one margin for all expor ters or producers (or, as it was described in Mexico 
– Rice (AB), "company-specific" versus "country-wide").
29  This understanding of Article 6.10 is 
confirmed by the Spanish text of that article, wh ich provides that the investigating authority must 
determine a margin of dumping "que corresponda  a cada exportador" or "that corresponds to each 
exporter".  A margin may correspond to an exporter while being based on one transaction – as long as 
that transaction is the exporter's.  Article 6.10 says  nothing about whether the margin must be based 
on more than one transaction, and it does not prohibit the calculation of a margin of dumping on a 
transaction-specific basis.    22. Indeed, in its 1960 report, the Group of Expert s considered that the ideal method for imposing 
an anti-dumping duty is to make a dete rmination of dumping with respect to each single importation  
of the product.
30  Therefore, under Article VI, a margin of dumping ideally would be both transaction-
specific and calculated on an exporter-specific basis, and Article 6.10 of the Anti-Dumping 
Agreement does not provide to the contrary.  The Appellate Body's conclusion that the margin of 
dumping cannot be transaction-specific because Article 6.10 requires the margin of dumping to be calculated for each exporter is without basis.  
23. It should also be noted that a consequence of  the Appellate Body's assertion that the margin of 
dumping cannot be calculated on a transaction-specific  basis is that an investigating authority must  
calculate the margin of dumping based on all of the exporter's transactions.  However, it is difficult to 
see how this can be done without aggregating multip le comparisons.  In this sense, the Appellate 
Body's interpretation of Article 6.10 as precluding  transaction-specific margins of dumping renders 
hollow its suggestion that authorities undertake multiple comparisons as a matter of choice.
31  In fact, 
the Appellate Body is effectively requiring the ve ry aggregation of comparisons it insists must be 
accompanied by offsets.  The difficulty w ith the Appellate Body's reference to " if a margin of 
dumping is calculated on the basis of multiple co mparisons made at an intermediate stage"32 is 
underscored by the fact that the Appellate Body neve r indicates what the alternative could be to using 
multiple comparisons. 
 
                                                      
29 Appellate Body Report, Mexico – Definitive Anti-Dumping Measur es on Beef and Rice; Complaint 
with Respect to Rice , WT/DS295/AB/R, adopted 20 Decem ber 2005, paras. 208, 217 (" Mexico – Rice (AB) "). 
30 The Second Report of the Group of Experts on Anti-Dumping and Countervailing Duties , adopted on 
27 May 1960, BISD 9S/194, para. 8. 
31 See US – Zeroing (EC) (AB) , para. 127.  Further, even on its own terms, the Appellate Body's 
statement that Members "choose" to engage in "multip le comparisons" is simply  incorrect, because, as a 
practical matter, it is difficult for authorities to avoid ha ving to undertake multiple comparisons, whether in the 
form of multiple averaging of sub-gr oups or transaction-specific calculations.  Here again, perhaps due to its 
lack of familiarity with the manner in which anti-dumping systems are actually administered, the Appellate 
Body removes from its original context a statement it made in an earlier re port and applies that statement more 
broadly in a manner that makes no sense.  Specifically, the Appellate Body's discussion of "choosing" multiple comparisons in the Lumber report was related  to the choice of multiple averaging; i.e., "multiple comparisons at 
the subgroup level. "  US – Softwood Lumber V (AB) , paras. 97-98 (emphasis added).  However, in US – Zeroing 
(EC) , the Appellate Body characterizes its statement regard ing "choosing" as applying to multiple comparisons, 
and not multiple averaging. 
32 US – Zeroing (EC) (AB) , para. 127. WT/DS294/18 
Page 10  
 
  2.  The Appellate Body Appears to Have Exagg erated the Differences Between a Retrospective 
Assessment System and a Prospective Normal Value System  
 
24. In its report, the Appellate Body states th at a prohibition on zeroing would not "mean that 
liability for payment of anti-dumping duties may not  be based on a prospective normal value as 
contemplated by Article 9.4(ii) of the Anti-Dumping Agreement ".
33  In so stating, the Appellate Body 
appears to have been of the view that there are significant differences between prospective normal 
value systems and retrospective assessment systems, su ch as the system used by the United States.  In 
fact, the differences that exist are largely ones of form.  
25. Under the US retrospective assessment system, the export price for an individual export 
transaction is compared to a contemporaneous monthl y average normal value.  If the export price is 
lower than the monthly average normal value, a dumping margin exists.  The understanding of the 
United States is that prospective normal valu e systems work on the same basic principles; i.e., the 
export price of an individual export transaction is compared to a contemporaneous normal value, and 
if the export price is lower, a dumping margin exis ts.  Under both systems, duties can be assessed in 
absolute amounts on specific transactions.
34 
 26. Thus, both types of systems are essentially transaction-specific.  The two major differences between the systems are entirely ones of form.  Firs t, in a retrospective system, the normal value and 
export price are determined after  the transaction has taken place, whereas in a prospective normal 
value system, normal value and export price are determined at or around the time of importation.  
However, a normal value for the month of October 2 004, should be the same regardless of whether it 
is determined in October 2005 (as might happen unde r a retrospective system), or in September 2004 
(as might happen under a prospective normal value system).  
27. Second, in a retrospective system, authorities may convert absolute duty amounts into 
ad valorem  percentages.  In the United States, approximately fifteen years ago the US Department of 
Commerce decided to cease assessing duties in the fo rm of absolute amounts and to begin issuing 
assessment instructions in the form of ad valorem  percentages.  This was done with the objective of 
easing the burden on both administrators and private entities.  However, as a matter of mathematics, 
the use of an ad valorem  percentage results in exactly the same amount of anti-dumping duty liability 
as would be due if absolute amounts were used. 
 28. Therefore, given the fact that retrospective systems and prospective normal value systems are both essentially transaction-specific, it is difficult to understand the Appell ate Body's apparent 
distinction between the two types of systems.  If zeroing is prohibited in the case of a retrospective 
system, then it must also be prohibited in the case of a prospective normal value system.  However, 
notwithstanding the Appellate Body's apparent asserti on to the contrary in footnote 234 of its report, 
the United States fails to see how a prospective normal value system can operate if authorities do not use zeroing.
35 
                                                      
33 US – Zeroing (EC) (AB) , note 234. 
34 In other words, if the differen ce between the normal value and the export price is $5, authorities can 
assess $5 on the transaction, as opposed to applying some ad valorem  percentage. 
35 The Appellate Body states that  the disallowance of zeroing "does [not] mean that liability for 
payment of anti-dumping duties may not be based on a prospective normal value as contemplated by 
Article 9.4.(ii) of the Anti-Dumping Agreement ."  US – Zeroing (EC) , note 234.  However, as the United States 
explained in the First US Communication, prospective normal value assessment systems operate on a transaction-specific basis.  If, as the Appellate Body posits, margins of dumping must be calculated for "the 
product as a whole," it would seem impossible for an authority to legitimately assess anti-dumping duties on a 
transaction-specific basis using a pros pective normal value.  The panel in US – Softwood Lumber V 
(Article 21.5) , para. 5.57, reached a similar conclusion, finding that the Appellate Body's interpretation of 
"margins of dumping" "makes no sense in the context of a prospective normal value duty assessment system,  WT/DS294/18 
 Page 11 
 
 
   
3.  The Consequences of the Appellate Body's Conclusion for Article 2.4.2  
 
29. Further, this approach cannot be reconciled with the Appellate Body's assertion that it makes 
no finding with respect to the other two methodologies under Article 2.4.2.36  The Appellate Body 
notes that Article 6.10 applies in investigations.   However, the transaction-to-transaction and targeted 
dumping methodologies under Article 2.4.2 will, unless there is only one export transaction, always 
result in multiple comparisons.  If, as the Appellate  Body contends, Article 6.10 requires not simply 
the calculation of a margin of dumping for an individual exporter but rather a margin of dumping for an individual exporter based on all of that exporter' s transactions, then it is impossible for a Member 
to calculate a margin of dumping wit hout aggregating multiple comparisons.   
 30. The Appellate Body's reasoning has other pe rverse consequences for Article 2.4.2.  For 
example, it renders the phrase "all comparable export transactions," as the Appellate Body has understood it, redundant.  The Appellate Body has ar gued that Article 6.10 requires not just margins 
of dumping for individual exporters, but margin s of dumping based on all of the exporter's 
transactions.  If that is true, then it calls into qu estion the meaning the Appellate Body ascribed to the 
phrase "all comparable export transactions" in US – Softwood Lumber V (AB) .  If Article 6.10 requires 
consideration of all export tr ansactions, and Article 2.1 requires offsets when making multiple 
comparisons of those transactions, then it is unclear why the Appellate Body in US – Softwood 
Lumber V (AB)  considered the phrase "all comparable expor t transactions," in conjunction with the 
phrase "margins of dumping," to require the very sam e outcome.  Indeed, it appears that the only way 
to escape the conclusion that the Appellate Body's analysis in US – Zeroing (EC) renders the phrase 
"all comparable export transactions" redundant or "i nutile" (a result which the Appellate Body has 
otherwise indicated is to be disfavored) is to c onclude that the US interpretation of the phrase "all 
comparable export transactions" in US – Softwood Lumber V (AB)  was correct.
37 
 
31. The more logical interpretation of the Anti-Du mping Agreement is the one that panels have 
followed:  that the requirement to  provide offsets articulated in US – Softwood Lumber V (AB)  is 
limited to the average-to-average comparison met hod in investigations based on the phrases "margins 
of dumping" and "all comparable export transactions" in  the first sentence of Article 2.4.2; that no 
provision in the Anti-Dumping Agreement precludes the calculation of margins of dumping on a 
transaction-specific basis, consistent with  Article VI of the GATT 1994 and the common 
understanding of that Article as expressed over forty-fi ve years ago by the Group of Experts; and that 
Members are not obliged to give refunds on non-dumped transactions.    
C.  The Appellate Body's Conclusion that Article VI of the GATT 1994 and Article 2.1 of 
the Anti-Dumping Agreement Prohibit Zeroing  
 
32. In the First US Communication, the United States noted the problematic nature of the Appellate Body's reliance in US – Zeroing (EC)  on Article VI of the GATT 1994 and Article 2.1 of 
the Anti-Dumping Agreement.
38  Upon further reflection, our concern with this aspect of the 
Appellate Body's analysis has only increased. 
 
                                                                                                                                                                     
because . . . the 'margin of dumping' at issue is a tran saction-specific price differen ce calculated for a specific 
import transaction."  See also  First US Communication, paras. 9-12. 
36 US – Zeroing (EC) (AB), para. 203. 
37 In this regard, the US interpretation of Article 2.4.2 was as follows:  "[A]rticle 2.4.2 provides no 
guidance as to how results of multiple comparisons are to be aggregated in order to calculate an overall margin 
of dumping for the product under consideration. . . . [I]n fact, 'Article 2.4.2 itself does not require that the results 
of those multiple comparisons be aggregated at all.'"  US – Softwood Lumber V (AB) , para. 11. 
38 First US Communication, paras. 18-20. WT/DS294/18 
Page 12  
 
  33. As the United States noted previously, the text of Article VI did not change as a result of the 
Uruguay Round agreements, and the text of Article  2.1 of the Anti-Dumping Agreement mirrors the 
text of the Tokyo Round Anti-Dumping Code.  However, while the pre-WTO incarnations of 
Article VI and Article 2.1 were in effect, two panels rejected challenges to zeroing.  In EC – Cotton 
Yarn , the panel rejected an argument by Brazil that  the EC's failure to make due allowances for 
negative margins was inconsistent with the Anti-Dumping Code.
39  In EC – Audio Tapes , the panel 
rejected a claim by Japan that the EC's "zeroing of negative margins" was inconsistent with 
Article 2.1 of the Anti-Dumping Code.40  Consistent with these findings, the Uruguay Round 
negotiators actively discussed whether the use of "zeroi ng" should be restricted in what would become 
the WTO agreements.41   
 
34. However, assuming for purposes of argument that the negotiators did agree to prohibit 
zeroing, it simply is not reasonable to conclude, as did the Appellate Body, that the negotiators chose 
to implement such an agreement sub silentio  by leaving Article VI and Article 2.1 unchanged.  First 
of all, such a conclusion is contrary to the norma l inference one draws from the absence of a change 
in language, which is that the draf ters intended no change in meaning.42  Moreover, given that the 
negotiators elsewhere covered in  great detail various aspects of dumping margin calculations, it is 
telling that they made no reference to the topic of "zeroing" in Article VI or Article 2.1.43 
 35. Second, the conclusion that the drafters secretly  agreed to a reinterpretation of Article VI and 
Article 2.1 would imply that, through their use of zeroing, the EC, the United States, and Canada, 
among others, knowingly breached the GATT 1994 and the Anti-Dumping Agreement as soon as the 
WTO Agreement entered into force.  However, absent an assumption of bad faith – which the 
Appellate Body has said is impermissible
44 – it cannot be credibly main tained that these Members, 
each of which was an active user of anti-dumpi ng measures under the Anti-Dumping Code and an 
active participant in the Uruguay Round anti-dumping negotiations, agreed to a prohibition on zeroing 
in Article VI and Article 2.1 without any change in  language to either provision – and then continued 
to use zeroing anyway.  Nor can it cr edibly be maintained, in light of EC – Cotton Yarn  and EC – 
Audio Tapes , that Article VI and Article 2.1 "clearly" s upport the notion that "dumping" is defined in 
relation to "the product as a whole".  36. In this vein, the United States recalls that  Article 17.6(ii) of the Anti-Dumping Agreement 
provides that where a "relevant provision of the Ag reement admits of more than one permissible 
                                                     
 
39 Panel Report, EC – Imposition of Anti-Dumping Duties on Imports of Cotton Yarn from Brazil , 
ADP/137, adopted 30 October 1995, para. 502. 
40 Panel Report, EC – Anti-Dumping Duties on Audio Tapes in Audiocassettes Originating in Japan , 
ADP/136, circulated 28 April 1995 (unadopted), para. 360. 
41 See, e.g., Communication from Japan , MTN.GNG/NG8/W/30 (20 June 1988), item I.4(3), in which 
Japan expressed concern about a methodology wherein "negative dumping margins, i.e., the amount be which export price exceeds normal  value, are ignored." 
42 Instructive in this regard is US – Underwear , in which the Appellate Body found that the 
disappearance in the Agreement on Textiles and Clothing  of the earlier Multi-Fibre Agreement  provision for 
backdating the operative effect of a restraint measure, "s trongly reinforced the presum ption that such retroactive 
application is no longer permissable [sic]."  Appellate Body Report, United States – Restrictions on Imports of 
Cotton and Man-Made Fibre Underwear , WT/DS24/AB/R, adopted 25 February 1997, page 15.  The corollary, 
however, is that where a provision is not changed, there is a presumption that behaviour that previously was 
permissible remains permissible. 
43 See Appellate Body Report, European Communities – Anti-Dumping Duties on Malleable Cast Iron 
Tube or Pipe Fittings from Brazil,  WT/DS219/AB/R, adopted 18 August 2003, para. 99 (noting that the fact that 
"the treaty negotiators covered in great detail various aspects of the constructed value calculation, the omission 
of any reference to low-volume sales in the chapea u of Article 2.2.2 is telling" (footnote omitted)). 
44 Appellate Body Report, Chile – Taxes on Alcoholic Beverages, WT/DS87/AB/R, WT/DS110/AB/R, 
adopted 12 January 2000, para. 74.  WT/DS294/18 
 Page 13 
 
 
  interpretation, the panel shall find the authorities' me asure to be in conformity with the Agreement if 
it rests upon one of those permissible interpreta tions".  Two separate WTO panels composed of 
independent, impartial revi ewers (many of whom have extensive experience in the trade remedies 
area) have found, with the exception of investig ations using the average-to-average methodology45, 
that the use of zeroing reflects a permissible inte rpretation of the Anti-Dumping Agreement.  The 
Appellate Body's perfunctory conclusion that ther e is only one permissible interpretation simply has 
no persuasive force and cannot be reconciled with the appropriate standard of review. 
 
__________ 
  
                                                     
 
45 Specifically, the use of the average-to-average comparison method in anti-dumping investigations 
under the first sentence of Article 2.4.2 of the Anti-Du mping Agreement.