WT/DS344/R
Page A-1
ANNEX A
EXECUTIVE SUMMARIES OF FIRST WRITTEN
SUBMISSIONS OF THE PARTIES
Contents Page
Annex A-1 Executive Summary of the First Written Submission of Mexico A-2
Annex A-2 Executive Summary of the First Written Submission of the
United StatesA-9WT/DS344/R
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ANNEX A-1
EXECUTIVE SUMMARY OF THE FIRST WRITTEN
SUBMISSION OF MEXICO
I. INTRODUCTION
1. Mexico seeks rulings from this Panel that the United States' Zeroing Procedures are
inconsistent with the United States' obligations under the relevant WTO Agreements, both "as such"
and "as applied" with respect to the original investigation and five periodic reviews of the
antidumping duty order on Stainless Steel Sheet and Strip in Coils from Mexico ("Stainless Steel from
Mexico ").
2. Mexico argues specifically that the Zeroing Procedures used by the US Department of
Commerce ("USDOC") in original investigations (where comparisons are normally made on an
average-to-average or on a transaction-to-transaction basis) are "as such" and "as applied" in the
original anti-dumping investigation of Stainless Steel from Mexico inconsistent with Articles VI:1 and
VI:2 of the General Agreement on Tariffs and Trade 1994 ("GATT 1994") and Articles 2.1, 2.4, 2.4.2,
and 18.4 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and
Trade 1994 ("Anti-Dumping Agreement ").
3. Mexico further argues that the Zeroing Procedures used by the USDOC in periodic reviews
(where comparisons are normally made on an average-to-transaction basis) are "as such" and "as
applied" in the five periodic reviews investigation of Stainless Steel from Mexico inconsistent with
Articles VI:1 and VI:2 of the GATT 1994 and Articles 2.1, 2.4, 9.3, and 18.4 of the Agreement on
Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 ("Anti-Dumping
Agreement ").
II. STANDARD OF REVIEW
A. G ENERAL CONSIDERATIONS
4. Mexico notes that Article 11 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes ("DSU") provides the standard of review for WTO panels in general.
Article 11 specifically requires a panel to "make an objective assessment of the matter before it,
including an objective assessment of the facts of the case and the applicability of and conformity with
the relevant covered agreements, and make such other findings as will assist the DSB in making
recommendations or in giving the rulings provided for in the covered agreements". Article 3.2 of the
DSU further provides that the provisions of the covered agreements are to be clarified "in accordance
with customary rules of interpretation of public international law".
5. Mexico further notes that Article 17.6(i) of the Anti-Dumping Agreement sets forth additional
standards of review applicable to disputes under the Anti-Dumping Agreement , including the
requirement that the panel, in its assessment of the facts of the matter, "shall determine whether the
authorities' establishment of the facts was proper and whether their evaluation of those facts was
unbiased and objective". If so, the panel should uphold the factual finding "even though the panel
might have reached a different conclusion". With respect to legal interpretations, Article 17.6(ii) of
theAnti-Dumping Agreement requires the panel to interpret the relevant provisions of the Agreement
"in accordance with customary rules of interpretation of public international law". Where the panelWT/DS344/R
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finds that a relevant provision of the Agreement "admits of more than one permissible interpretation",
Article 17.6 requires the panel to uphold the authorities' interpretation "if it rests upon one of those
permissible interpretations".
6. Mexico states that it is generally accepted that the "customary rules of interpretation"
referenced in Article 3.2 of the DSU and Article 17.6 of the Anti-Dumping Agreement are reflected in
Articles 31 and 32 of the Vienna Convention on the Law of Treaties ("Vienna Convention").
Article 31(1) of the Vienna Convention provides that a treaty shall be interpreted "in good faith in
accordance with the ordinary meaning given to the terms of the treaty in their context and in the light
of its object and purpose".
B. A DHERENCE TO PRIOR DECISIONS OF THE APPELLATE BODY
7. Mexico argues that there is an expectation that panels will respect prior Appellate Body
rulings on the same issues, which is derived from Article 3.2 of the DSU which expressly requires
panels to promote the systemic values of "security and predictability" in "the multilateral trading
system". Mexico points to the Panel decision in US – Zeroing (EC 1) , recognizing this expectation, in
which it is stated that "although previous Appellate Body decisions are not strictly speaking binding
on panels, there clearly is a legitimate expectation that panels will follow such decisions in subsequent
cases raising issues that the Appellate Body has expressly addressed". Mexico notes that the
Appellate Body has further supported this principle in, among other cases, US – Oil Country Tubular
Goods Sunset Reviews, wherein the Appellate Body stated that "following the Appellate Body's
conclusions in earlier disputes is not only appropriate, but is what would be expected from panels,
especially where the issues are the same".
8. Mexico argues that the "as such" measure at issue in the present dispute – the USDOC's
Zeroing Procedures – is identical to the measure that was under consideration in US – Zeroing (EC 1) ,
US – Softwood Lumber V, US – Softwood Lumber V (Article 21.5 – Canada) , and, most recently, US –
Zeroing (Japan) , and the Appellate Body in each of these cases has "expressly addressed" the issues
raised by Mexico in this proceeding. Mexico urges the Panel to follow these prior Appellate Body
rulings in this case to achieve the measure of "security and predictability" called for in Article 3.2 of
the DSU.
III. SUMMARY OF ARGUMENTS AND CLAIMS
A. USDOC ZEROING PROCEDURES MAY BE CHALLENGED "ASSUCH"
9. Mexico describes the specific measure at issue in this proceeding as the "Zeroing
Procedures", which constitutes a norm or rule of general and prospective application pursuant to
which the USDOC, in calculating overall margins of dumping, disregards or treats as zero the results
of intermediate price comparisons where the export price exceeds the normal value ("negative results"
or "negative margins"). Mexico notes that this measure has been consistently manifested in all
procedural contexts including original investigations, periodic reviews and sunset reviews.
Furthermore, it is applied regardless of the price comparison methodology used (whether average-to-
average, transaction-to-transaction, or average-to-transaction).
10. In its First Written Submission and the annexes thereto, Mexico presented detailed
explanations and documentations concerning the precise content of the Zeroing Procedures. This
documentation included the standard computer programs for original investigations and periodic
reviews, the USDOC "Antidumping Manual", documentation of the application of the Zeroing
Procedures in the original investigation and six completed periodic review determinations concerning
Stainless Steel from Mexico , evidence of past consistent application of the Zeroing Procedures in pastWT/DS344/R
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original investigations and periodic reviews (including expert statements, documented statements and
concessions from US authorities, and prior WTO dispute settlement reports), and evidence of
continued application of the Zeroing Procedures in original investigations and periodic reviews.
11. Mexico argues, consistent with the three-part test articulated by the Appellate Body in
United States – Zeroing (EC-1) , that because this measure is attributable to the United States, because
its precise content is known and well-documented, and because it is a general rule or norm of
prospective application, it may be challenged "as such".
B. Z EROING PROCEDURES "ASSUCH"AND "ASAPPLIED "INORIGINAL INVESTIGATIONS ARE
INCONSISTENT WITH THE UNITED STATES 'WTO OBLIGATIONS
12. Mexico states that in pursuance of the challenged Zeroing Procedures, the USDOC normally
calculates margins of dumping in original investigations, by first making intermediate price
comparisons, on a model-by-model basis, between period average export prices and period average
normal values for each model. The USDOC then aggregates the results of these comparisons to
calculate a margin of dumping for the exporter or producer. However, in aggregating these
comparison results, the USDOC disregards, or treats as zero, any comparison results where the
average export price exceeds the average normal value for the model. This manifestation of the
Zeroing Procedures is commonly referred to as "model zeroing". Mexico argues that this calculation
methodology systematically results in margins of dumping which are inflated when compared to the
margin of dumping that would have resulted had the Zeroing Procedures not been used. Mexico
states that the USDOC applied the Zeroing Procedures in the original investigation of Stainless Steel
Sheet and Strip in Coils from Mexico ("Stainless Steel from Mexico ").
1. The Zeroing Procedures Used in Original Investigations are "As Such" Inconsistent
with Articles VI:1 and VI:2 of the GATT 1994 and Article 2.1 of the Anti-Dumping
Agreement
13. Mexico argues that the Zeroing Procedures applied in original investigations as described
above violate the relevant agreements, specifically Articles VI:1 and VI:2 of the GATT 1994 and
Article 2.1 of the Anti-Dumping Agreement . Mexico notes that the concepts of "dumping" and
"margins of dumping" contained in Articles VI:1 and VI:2 of the GATT 1994 and Article 2.1 of the
Anti-Dumping Agreement , refer to the "product" under consideration taken as a whole in each anti-
dumping proceeding. Mexico argues that these definitions should be interpreted consistently across
the relevant agreements and in allprocedural contexts and in relation to allprice comparison
methodologies used.
14. Mexico argues that the margins of dumping calculated using the Zeroing Procedures – by
disregarding or treating as zero individual comparison results where the export price exceeds the
normal value in calculating margins of dumping – do not reflect a margin of dumping for the product
as a whole under consideration. The Zeroing Procedures instead result in a margin of dumping for the
exporter or producer that reflects only part of the product under investigation, in violation of the
definitions of "dumping" and "margins of dumping" contained in the relevant agreements.
2. The Zeroing Procedures Used in Original Investigations are "As Such" Inconsistent
with Article 2.4.2 of the Anti-Dumping Agreement
15. Mexico argues that the Zeroing Procedures followed by the USDOC in original investigations
are also inconsistent with the terms of the first sentence of Article 2.4.2 of the Anti-Dumping
Agreement , which requires a comparison of the weighted-average normal value with a weighted-
average of prices of "all comparable export transactions". This language in Article 2.4.2 likewise
requires determination of a single margin of dumping for the product under consideration taken "as aWT/DS344/R
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whole". Accordingly, price comparison results obtained at the level of individual models are not
"margins of dumping" within the meaning of the agreements. The United States may not, therefore,
consistent with the first sentence of Article 2.4.2, ignore or treat as zero intermediate comparison
results where the export price exceeds the normal value. Mexico argues that the United States, in both
of the most recently completed panel proceedings dealing with the Zeroing Procedures as used in
original investigations ( i.e.,US – Zeroing (EC 1) andUS – Zeroing (Japan) ), chose not to contest the
Panel findings of inconsistency of that measure with the first sentence of Article 2.4.2 of the Anti-
Dumping Agreement .
3. The Zeroing Procedures Used in Original Investigations Are "As Such" Inconsistent
with Article 2.4 (first sentence) of the Anti-Dumping Agreement
16. Mexico states that the Zeroing Procedures followed in original investigations are also "as
such" inconsistent with the "fair comparison" requirement of the first sentence of Article 2.4 of the
Anti-Dumping Agreement .
17. Mexico argues first that any measure that results in the collection of duties in excess of the
margin of dumping for the product as a whole for the exporter or producer under consideration
necessarily fails to meet the "fair comparison" standard contained in the first sentence of Article 2.4.
The Appellate Body most recently found this to be the case in US – Zeroing (Japan) .
18. Mexico further argues that the US Zeroing Procedures violate Article 2.4 because such
zeroing unnecessarily inflates margins of dumping, as the Appellate Body has found in previous
cases.
4. The Zeroing Procedures Used in Original Investigations Are "As Such" Inconsistent
with Article XVI:4 of the WTO Agreement and Article 18.4 of the Anti-Dumping
Agreement
19. Mexico argues that because the Zeroing Procedures challenged are an "administrative
procedure" within the meaning of Article XVI:4 of the Marrakech Agreement establishing the World
Trade Organization ("WTO Agreement") and Article 18.4 of the Anti-Dumping Agreement , this
measure is also in violation of those provisions, as the Zeroing Procedures as applied in administrative
proceedings are not in conformity with the United States' obligations under the relevant agreements
for the reasons noted.
5. The Zeroing Procedures "As Applied" in the Original Investigation of Stainless Steel
from Mexico Are Inconsistent with Articles VI:1 and VI:2 of the GATT 1994;
Articles 2.1, 2.4 (first sentence) and 18.4 of the Anti-Dumping Agreement ; and
Article XVI:4 of the WTO Agreement
20. Mexico states that the USDOC applied a form of Zeroing Procedures known as "model
zeroing" in the original investigation of Stainless Steel from Mexico . For the same reasons, the
Zeroing Procedures used in original investigations are "as such" inconsistent with the relevant
agreements, Mexico argues that the United States' specific application of zeroing in the original
investigation of Stainless Steel from Mexico is consequently "as applied" inconsistent with the
United States' obligations under the relevant agreements.WT/DS344/R
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C. Z EROING PROCEDURES "ASSUCH"AND "ASAPPLIED "INPERIODIC REVIEWS ARE
INCONSISTENT WITH THE UNITED STATES 'WTO OBLIGATIONS
21. Mexico states that the USDOC calculates margins of dumping in periodic reviews by first
making intermediate price comparisons between individual export prices and monthly average normal
values. The USDOC then aggregates the results of these comparisons to calculate a margin of
dumping for the exporter or producer of the subject product. However, in aggregating these
comparison results, the USDOC disregards, or treats as zero, any comparison results where the
average export price exceeds the average normal value for the model. This manifestation of the
Zeroing Procedures is commonly referred to as "simple zeroing". Mexico argues that where negative
price comparisons appear in the database, the resulting "margin of dumping" is systematically inflated
in relation to the actual margin of dumping for the product as a whole that would result if the Zeroing
Procedures were not used.
1. The Zeroing Procedures Used in Periodic Reviews Are "As Such" Inconsistent with
Articles VI:1 and VI:2 of the GATT 1994 and Article 2.1 of the Anti-Dumping
Agreement
22. Mexico argues that for much the same reasons with regard to original investigations, the
Zeroing Procedures used in periodic reviews violate the United States' obligations under Articles VI:1
and VI:2 of the GATT 1994 and Article 2.1 of the Anti-Dumping Agreement because margins of
dumping calculated using zeroing do not reflect the margin of dumping for the exporter or foreign
producer for the product as a whole under consideration. By selectively disregarding, or treating as
zero, any individual comparison results where the export price exceeds the normal value in calculating
"margins of dumping", the US Authorities violate their obligation to calculate a margin for the
"product" as a whole.
2. The Zeroing Procedures Used in Periodic Reviews Are "As Such" Inconsistent with
Article 9.3 of the Anti-Dumping Agreement
23. Mexico argues the Zeroing Procedures used by the USDOC in periodic reviews also violate
the terms of Article 9.3 of the Anti-Dumping Agreement with regard to the imposition and collection
of anti-dumping duties. Article 9.3 of the Anti-Dumping Agreement states that "the amount of the
anti-dumping duty shall not exceed the margin of dumping as established under Article 2". By
disregarding the comparison results for certain transactions (those where the export price exceeds
normal value), Mexico argue the USDOC's Zeroing Procedures calculate a margin of dumping that is
inconsistent with Article 2. Mexico states that by disregarding intermediate comparison results where
the export price exceeds normal value, the margin of dumping determined by the USDOC on this
basis results in an inflated "margin of dumping" for the "product". Accordingly, the Zeroing
Procedures applied in periodic reviews exceed the margin of dumping for the exporter or producer
under Article 2 as provided for by Article 9.3 of the Anti-Dumping Agreement. Mexico's asserts that
this conclusion is fully consistent with the Appellate Body's reasoning and findings in prior cases,
including, inter alia ,US – Zeroing (EC 1) andUS – Zeroing (Japan ).
3. The Zeroing Procedures Used in Periodic Reviews Are "As Such" Inconsistent with
Article 2.4 (first sentence) of the Anti-Dumping Agreement
24. Mexico also argues that the Zeroing Procedures followed in periodic reviews are "as such"
inconsistent with the "fair comparison" requirement of the first sentence of Article 2.4. Mexico notes
that the Appellate Body recently found (in US – Zeroing (Japan) ) that any measure that results in the
collection of duties in excess of the margin of dumping for the product as a whole for the exporter or
producer under consideration necessarily fails to meet the "fair comparison" standard contained inWT/DS344/R
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Article 2.4, first sentence. In addition, Mexico argues, the US Zeroing Procedures violate Article 2.4
because such zeroing systematically inflates margins of dumping.
4. The Zeroing Procedures Used in Periodic Reviews are "As Such" Inconsistent with
Article XVI:4 of the WTO Agreement and Article 18.4 of the Anti-Dumping Agreement
25. Mexico argues that, for the same reasons that Zeroing Procedures used in original
investigations violate the WTO Agreement and Article 18.4 of the Anti-Dumping Agreement , the
Zeroing Procedures used in periodic reviews constitute a measure that is, as such, inconsistent with
these provisions.
5. The Zeroing Procedures "As Applied" in the five Periodic Reviews of Stainless Steel
from Mexico Are Inconsistent with Articles VI:1 and VI:2 of the GATT 1994 and
Articles 2.1, 2.4 (first sentence), 9.3 and 18.4 of the Anti-Dumping Agreement ; and
Article XVI:4 of the WTO Agreement
26. Mexico states that the USDOC applied a form of Zeroing Procedures known as "simple
zeroing" as described above in each of the five periodic reviews of Stainless Steel from Mexico
challenged by Mexico. Mexico argues that for the same reasons the Zeroing Procedures used in
periodic reviews are "as such" inconsistent with the relevant agreements, the United States' specific
application of zeroing in the periodic reviews of the anti-dumping order on Stainless Steel from
Mexico is consequently "as applied" inconsistent with the United States' obligations under
Articles VI:1 and VI:2 of the GATT 1994 and Articles 2.1, 2.4 (first sentence), 9.3 and 18.4 of the
Anti-Dumping Agreement , and Article XVI:4 of the WTO Agreement.
IV. CONCLUSION
27. Mexico respectfully requests that the Panel make findings that:
(1) the US Zeroing Procedures applied in original investigations are, as such, inconsistent
with Articles VI:1 and VI:2 of the GATT 1994 and Articles 2.1, 2.4, 2.4.2, and 18.4
of the Anti-Dumping Agreement, and Article XVI:4 of the WTO Agreement,
regardless of the comparison methodology used;
(2) the US Zeroing Procedures applied in the original investigation of Stainless Steel
Sheet and Strip in Coils from Mexico are, as applied, inconsistent with Articles VI:1
and VI:2 of the GATT 1994 and Articles 2.1, 2.4, 2.4.2, and 18.4 of the Anti-
Dumping Agreement ; and Article XVI:4 of the WTO Agreement;
(3) the US Zeroing Procedures applied in periodic reviews are, as such, inconsistent with
Articles VI:1 and VI:2 of the GATT 1994 and Articles 2.1, 2.4, 9.3, and 18.4 of the
Anti-Dumping Agreement , and Article XVI:4 of the WTO Agreement, regardless of
the comparison methodology used;
(4) the US Zeroing Procedures as applied in the five listed periodic reviews of Stainless
Steel Sheet and Strip in Coils from Mexico are, as applied, inconsistent with
Articles VI:1 and VI:2 of the GATT 1994 and Articles 2.1, 2.4, 9.3, and 18.4 of the
Anti-Dumping Agreement , and Article XVI:4 of the WTO Agreement.
28. Pursuant to Article 19.1 of the DSU Mexico urges the Panel to suggest that DSB recommend
that the United States bring its measures into conformity with its WTO obligations by eliminating
both "as such" and "as applied" the Zeroing Procedures in all antidumping procedural contexts.WT/DS344/R
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Mexico notes that there have been many instances in which panels have exercised their discretion
under Article 19.1 to make a suggestion regarding implementation to promote the resolution of the
dispute, particularly where – as in the present case – the violations of the responding party are
fundamental and pervasive.WT/DS344/R
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ANNEX A-2
EXECUTIVE SUMMARY OF THE FIRST WRITTEN
SUBMISSION OF THE UNITED STATES
I. INTRODUCTION
1. In this dispute, Mexico asks this Panel to read an obligation into the Agreement on
Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 ("AD Agreement")
and Article VI of the General Agreement on Tariffs and Trade 1994 ("GATT 1994"), notwithstanding
the fact that there is no textual basis for the obligation that Mexico proposes.
II. GENERAL PRINCIPLES
2. Burden of Proof : In WTO dispute settlement, the burden of proving that an obligation has
not been satisfied is on the complaining party. Accordingly, the burden is on Mexico to prove that US
measures exist that are inconsistent with US obligations under the relevant covered agreement. The
burden is not on the United States.
3. Standard of Review : In a dispute involving the AD Agreement, a panel must also take into
account the standard of review set forth in Article 17.6(ii) of the AD Agreement. Article 17.6(ii)
confirms that there are provisions of the Agreement that "admit[] of more than one permissible
interpretation". Where that is the case, and where the investigating authority has relied upon one such
interpretation, a panel is to find that interpretation to be in conformity with the Agreement.
4. Article 11 of the DSU requires a panel to make an objective assessment of the matter before
it, including an objective assessment of the facts and the applicability of and conformity with the
relevant covered agreements. The Appellate Body has explained that the matter includes both the
facts of the case (and the specific measures at issue in particular) and the legal claims raised.
Articles 3.2 and 19.2 of the DSU contain the fundamental principle that the findings and
recommendations of a panel or the Appellate Body, and the recommendations and rulings of the DSB,
cannot add to or diminish the rights and obligations provided in the covered agreements.
5. While prior adopted panel and Appellate Body reports create legitimate expectations among
WTO Members, the Panel in this dispute is not bound to follow the reasoning set forth in any
Appellate Body report. The rights and obligations of the Members flow, not from panel or Appellate
Body reports, but from the text of the covered agreements. In this regard, the "security and
predictability" referred to in the first sentence of Article 3.2 results from the application of the correct
interpretive approach set forth in the second sentence of Article 3.2 – the customary rules of
interpretation of public international law – to the provisions of the WTO Agreement. A result which
adds to or diminishes the rights or obligations of Members is the antithesis of the "security and
predictability" referred to in Article 3.2. Appellate Body reports should be taken into account only to
the extent that the reasoning is persuasive. The Appellate Body itself has stated that its reports are not
binding on panels.WT/DS344/R
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III. ARGUMENT
A. S COPE OF "ASSUCH"CLAIMS
6. In both its request for consultations and its request for the establishment of a panel, Mexico
clearly and specifically identified two distinct methodologies being challenged "as such" – the use of
"zeroing" in average-to-average comparisons in original investigations and the use of "zeroing" in
assessment proceedings. Yet, in its First Submission, Mexico asserts that it is challenging "a single
zeroing measure, the Zeroing Procedures", regardless of the procedural setting or the comparison
methodology employed by the United States authorities.
7. The Panel's terms of reference are to "examine, in the light of the relevant provisions of the
covered agreements cited by Mexico in document WT/DS344/4, the matters referred to the DSB by
Mexico in that document". It is clear from reading "that document" that Mexico was challenging the
use of zeroing in two very distinct circumstances which it describes in great detail. Mexico's reason
for attempting to expand the scope of its "as such" claims is that in the time that transpired between
the establishment of this Panel and the time Mexico was required to make its First Submission, the
Appellate Body issued its report in US - Zeroing (Japan) . In that report, the Appellate Body
concluded that there was one single rule it called the "zeroing procedures" which it found to be
inconsistent with US obligations. However, the prerequisite to the Appellate Body's finding was that
"zeroing" in all contexts and with respect to all comparison methodologies was in Japan's request for
the establishment of a panel and request for consultations, and therefore within the panel's terms of
reference. This situation is not present here. Mexico's "as such" claim against a "single zeroing
measure" must fail on this basis alone. In light of its terms of reference and Article 7 of the DSU, the
Panel may only address those matters identified in Mexico's request for establishment of a panel.
That is, the Panel can only consider Mexico's claim regarding zeroing in investigations using average-
to-average comparisons and zeroing in assessment proceedings, based on the evidence and
argumentation Mexico presents with respect to those "measures".
8. The Appellate Body has identified several criteria in evaluating whether a measure exists that
can be challenged as such: whether the rule or norm embodied in that measure is attributable to the
responding Member; the precise content of the rule or norm; and whether the rule or norm has
general and prospective application. In addition, the Appellate Body has explained that "particular
rigour is required on the part of a panel to support a conclusion as to the existence of a "rule or norm"
that is notexpressed in the form of a written document". The Appellate Body has further explained
that its statement "did not mean that a mere abstract principle would qualify as a "rule or norm" that
can be challenged as such". This follows from the fact that the alleged measure must be "attributable
to" the responding Member. Article 3.3 and Article 4.2 of the DSU both help to illustrate the required
degree of relationship between an alleged measure and a Member in order for that alleged measure to
be subject to WTO dispute settlement. Article 3.3 refers to a measure "taken" by a Member and
Article 4.2 refers to a measure "taken" within the territory of a Member. Accordingly, "attributable
to" means "taken" by a Member within its territory. Were a panel to opine on an "abstract principle",
and not a measure taken by the responding party, it would be issuing an advisory opinion, which is
not provided for in the DSU. Hence, in carrying out its mandate under its terms of reference to
examine the matter referred to the DSB in the complaining Member's panel request – the matter
consisting of the measures identified in the request and the claims set forth therein – a panel must in
the course of the proceedings determine whether the measure actually exists.
9. Mexico has not established that a "single zeroing measure" exists. Mexico states that the
findings concerning the precise content of zeroing procedures in the panel reports in US – Zeroing
(Japan) andUS – Zeroing (EC) "themselves constitute conclusive evidence as to the precise content
of the measure challenged by Mexico in this case". However, as a general matter, a separate panel'sWT/DS344/R
Page A-11
findings are not evidence, but conclusions based on evidence. Further, the specific evidence before
that separate panel, cited now by Mexico, does not support the Panel repeating those findings here.
10. Among the arguments Mexico offers for the existence of a "single zeroing measure" is that
Commerce has always "zeroed", and that Commerce cannot point to a case in which it did not.
However, it is entirely to be expected that an administering authority will seek not to act arbitrarily by
treating the same circumstances differently. Mexico seems to expect that if an administering authority
is not acting in an arbitrary and inconsistent manner, there must be a separate measure requiring the
consistent approach. This assumption is not only baseless, but it is very troubling that the
consequence of good administrative practice would be to subject a Member to a finding that it is
somehow maintaining a separate measure subject to dispute settlement.
11. As Mexico acknowledges, Commerce has never "zeroed" in a targeted dumping context and
only once in a transaction-to transaction comparison, nor has Commerce ever made statements about
its intentions with respect to zeroing in these contexts. Mexico cites to nothing in US law and no act
by Commerce, whether in a statement or otherwise, that would permit the conclusion that Commerce
will, as a matter of general and prospective application, "zero" in these contexts. Absent such
evidence, it is not possible to conclude that there is a "single zeroing measure" covering all
comparison methodologies and all contexts.
12. Mexico also cites to Commerce's use of standard computer programmes that incorporate
Commerce's dumping margin calculation methodology and containing a so-called "standard zeroing
line". Mexico refers to a so-called expert's statement to the effect that the "standard zeroing line" is
always included. However, this is nothing more than yet another description of what Commerce has
done in the past, without any indication that it will do so as a matter of general and prospective
application. Commerce officials adjust the programmes based on policy decisions in individual
proceedings; the programmes are not their masters.
13. Mexico purports to refer to "concessions made by the United States" before other panels.
However, a cursory examination of these "concessions" demonstrates that they are neither
concessions nor do they support Mexico's position. In addition, Mexico's own argumentation
contradicts its assertion that there is a "single zeroing measure". Mexico divides its presentation into
two separate sections, one dealing with "USDOC Zeroing Procedures in Original Investigations" and
another with "USDOC Zeroing Procedures in Periodic Reviews". This division, and the use of the
plural, is in itself probative that there is no one single measure.
14. Finally, the United States is providing offsets when calculating margins of dumping on the
basis of average-to-average comparisons in antidumping investigations. This further demonstrates
that there is no one "single zeroing measure".
B. C LAIMS REGARDING ASSESSMENT PROCEEDINGS
15. The AD Agreement provides no general obligation to consider transactions for which the
export price exceeds normal value as an offset to the amount of dumping found in relation to other
transactions at less than normal value. In US – Softwood Lumber Dumping (AB) , the Appellate Body
found that the exclusive textual basis for an obligation to account for such non-dumping in calculating
margins of dumping appears in connection with the obligation in Article 2.4.2 that "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 . . . ". This particular text of Article 2.4.2 applies only within the limited context
of determining whether dumping exists in the investigation phase when using the average-to-average
comparison methodology in Article 2.4.2. There is no textual basis for the additional obligations that
Mexico would have this Panel impose.WT/DS344/R
Page A-12
16. Subsequent to US – Softwood Lumber Dumping (AB) , three panels comprising trade remedies
experts and experienced panelists and WTO negotiators, examined whether the obligation not to
"zero" when making average-to-average comparisons in an investigation extended beyond that
defined context. In every case, these panels determined that the customary rules of interpretation of
public international law do not support a reading of the AD Agreement that expands the zeroing
prohibition beyond average-to-average comparisons in an investigation. This Panel should likewise
find that, at a minimum, it is permissible to interpret the AD Agreement as not prohibiting zeroing
outside the context where the interpretation of "all comparable export transactions" articulated in the
Appellate Body report in US – Softwood Lumber Dumping is applicable.
17. In US – Softwood Lumber Dumping (AB) , the Appellate Body specifically recognized that the
issue before it was whether so-called "zeroing" was prohibited under the average-to-average
comparison methodology found in Article 2.4.2. Thus, the report found only that "zeroing is
prohibited when establishing the existence of margins of dumping under the weighted-average-to-
weighted-average methodology". The Appellate Body reached this conclusion by interpreting the
terms "margins of dumping" and "all comparable export transactions" as they are used in Article 2.4.2
in an "integrated manner". The obligation to provide offsets, therefore, was tied to text of the
provision addressing the use of the average-to-average comparison methodology in an investigation,
and did not arise out of any independent obligation to offset prices. Any assertion by Mexico that
there is a general prohibition of "zeroing", or one specifically applicable to the more particular context
of assessment proceedings, cannot be reconciled with the interpretation articulated in US – Softwood
Lumber Dumping (AB) . If there is a general prohibition of zeroing that applies in all proceedings and
under all comparison methodologies, the meaning ascribed to "all comparable export transactions" by
the Appellate Body in that dispute would be redundant of the general prohibition of zeroing and
therefore "inutile".
18. The need to avoid such redundancy was recognized in US – Zeroing (Japan)(AB) when the
Appellate Body changed its interpretation of this phrase. In US – Softwood Lumber Dumping (AB) ,
"margins of dumping" and "all comparable export transactions" were interpreted in an integrated
manner. The Appellate Body found that in aggregating the results of the model-specific comparisons,
"all" comparable export transactions must be accounted for. Thus, the phrase necessarily referred to
all transactions across all models of the product under investigation, i.e. the product "as a whole".
However, in US – Zeroing (Japan)(AB) , the Appellate Body reinterpreted "all comparable export
transactions" to relate solely to all transactions within a model, and not across models of the product
under investigation. In doing so, the Appellate Body abandoned the only textual basis for its
reasoning in US – Softwood Lumber Dumping (AB) .
19. In addition, a general prohibition of zeroing that applies beyond the context of average-to-
average comparisons in investigations, would be inconsistent with the remaining text of Article 2.4.2,
which provides for the "targeted dumping" methodology that may be utilized in certain circumstances.
The "targeted dumping" methodology was drafted as an exception to the obligation to engage in
symmetrical comparisons in an investigation. The mathematical implication of a general prohibition
of zeroing, however, is that the targeted dumping clause would be reduced to inutility. That is
because the targeted dumping methodology, provided for in Article 2.4.2, mathematically must yield
the same result as an average-to-average comparison if, in both cases, non-dumped comparisons are
required to offset dumped comparisons. In US – Zeroing (EC), US – Softwood Lumber Dumping
(Article 21.5) andUS – Zeroing (Japan) , each of the panels recognized that the customary rules of
interpretation of public international law precluded an interpretation that rendered the targeted
dumping provision of Article 2.4.2 redundant. Mexico has not offered any explanation as to how this
defect is avoided under its interpretation of the AD Agreement.
20. Despite the findings of fact of the panels that the results of the targeted dumping methodology
"will necessarily always yield a result identical to that of an average-to-average comparison", under aWT/DS344/R
Page A-13
general prohibition of zeroing, the Appellate Body has found this concern to be "overstated". The
Appellate Body has asserted that mathematical equivalence will occur only in "certain situations" and
represents "a non-tested hypothesis". These objections, however, are not persuasive. First, the panels
have specifically addressed all of the situations under which it was argued that mathematical
equivalence would not obtain and found these situations did not represent methodologies consistent
with the AD Agreement. The targeted dumping provision is rendered inutile if the only alternative
methodologies that do not result in mathematical equivalence are, themselves, not consistent with the
AD Agreement. Second, mathematical equivalence is not a "non-tested hypothesis" because a WTO
Member that actively utilizes this methodology is actually faced with this problem in administering its
antidumping duty regime.
21. Article 2.1 of the AD Agreement and Article VI:1 of the GATT 1994 are definitional
provisions that do not impose independent obligations. Nevertheless, these definitions are important
to the interpretation of other provisions of the AD Agreement at issue in this dispute. In particular, it
is most significant that Article 2.1 of the AD Agreement and Article VI of the GATT 1994 do not
define "dumping" and "margins of dumping" so as to require that export transactions be examined at
an aggregate level. The definition of "dumping" in these provisions references "product . . .
introduced into the commerce of another country at less than its normal value". This definition
describes the real-world commercial conduct by which a product is imported into a country, i.e.,
transaction by transaction.
22. In addition, the term "less than normal value" is defined as when the "price of the product
exported . . . is less than the comparable price . . . ". Again, this definition describes the real-world
commercial conduct of pricing such that one price is less than another price. The ordinary meaning of
"price" as used in the definition of dumping is the "payment in purchase of something". In the US –
Zeroing (Japan) dispute, the panel found that this definition "can easily be applied to individual
transactions and does not require an examination of export transactions at an aggregate level".
23. There is nothing in the GATT 1994 or the AD Agreement that suggests that injurious
dumping that occurs with respect to one transaction is mitigated by the occurrence of another
transaction made at a non-dumped price. Indeed, the commercial reality is that the foreign producer
or exporter itself exclusively enjoys the benefit of the extent to which the price of a non-dumped
export transaction exceeds normal value.
24. In US – Zeroing (Japan) , the panel noted that "the record of past discussions in the
framework of GATT shows that historically the concept of dumping has been understood to be
applicable at the level of individual export transactions". Well before the recent debate about
"zeroing" or "offsets", a Group of Experts convened to consider numerous issues with respect to the
application of Article VI of the GATT 1947. In this report, the Group of Experts considered that the
"ideal method" for applying antidumping duties "was to make a determination of both dumping and
material injury in respect of each single importation of the product concerned".
25. The methodology of not offsetting dumping based on comparisons where the export price was
greater than normal value was examined by two GATT panels and was found to be consistent with the
Antidumping Code. In view of these findings, the Uruguay Round negotiators actively discussed
whether the use of "zeroing" should be restricted. The text of Article VI of the GATT 1947, however,
did not change as a result of the Uruguay Round agreements. The normal inference one draws from
the absence of a change in language is that the drafters intended no change in meaning.
26. Mexico's claim ultimately depends on the reasoning set forth in the Appellate Body reports in
US – Zeroing (EC) andUS – Zeroing (Japan) , which rejected the notion that dumping may occur with
respect to an individual transaction in the absence of the textual basis that was present in EC – Bed
Linen (AB) and US – Softwood Lumber Dumping (AB) . This interpretation relies on the termWT/DS344/R
Page A-14
"product" as being solely and exclusively synonymous with the concept of "product as a whole". In
particular, it denies that the ordinary meaning of the word "product" or "products" used in Article 2.1
of the AD Agreement and Article VI of the GATT 1994 admits of a meaning that is transaction-
specific. However, as the panel report in US – Zeroing (Japan) explained, "[T]here is nothing
inherent in the word "product[]" (as used in Article VI:1 of the GATT 1994 and Article 2.1 of AD
Agreement) to suggest that this word should preclude the possibility of establishing margins of
dumping on a transaction-specific basis . . .".
27. Examination of the term "product" as used throughout the AD Agreement and the GATT
1994 demonstrates that the term "product" in these provisions does not exclusively refer to "product
as a whole". Instead, "product" can have either a collective meaning or an individual meaning.
Therefore, the words "product" and "products" as they appear in Article 2.1 of the AD Agreement and
Article VI of the GATT 1994 cannot be understood to provide a textual basis for an interpretation
requiring that margins of dumping established in relation to the "product" must necessarily be
established on an aggregate basis for the "product as a whole".
28. Likewise, examination of the term "margins of dumping" itself provides no support for
Mexico's interpretation of the term as solely, and exclusively, relating to the "product as a whole". As
the panel in US – Softwood Lumber Dumping (Article 21.5) observed:
[T]here 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
dumping".
Thus, the panel saw "no reason why a Member may not . . . establish the "margin of dumping" on the
basis of the total amount by which transaction-specific export prices are less than the
transaction-specific normal values".
29. Additionally, the term "margin of dumping", as used elsewhere in the GATT 1994 and the
AD Agreement, does not refer exclusively to the aggregated results of comparisons for the "product as
a whole". As used in the Note Ad Article VI:1, which provides for importer-specific price
comparison, the term "margin of dumping" cannot relate to aggregated results of all comparisons for
the "product as a whole" because an exporter or foreign producer may make export transactions using
multiple importers. Similarly, the term "margin of dumping" as used in Article 2.2 of the AD
Agreement would require the use of constructed value for the "product as a whole", even if the
condition precedent for using constructed value under Article 2.2 relates only to a portion of the
comparisons. The panel in US – Softwood Lumber Dumping (21.5) observed that this "would run
counter to the principle that constructed normal value is an alternative to be used only in the limited
circumstances provided for in Article 2.2".
30. As explained above, the term "margin of dumping", as defined in Article 2.1 of the AD
Agreement and Article VI of the GATT 1994, may be applied to individual transactions. This
understanding of the term "margin of dumping" is particularly appropriate in the context of
antidumping duty assessment. In the real world of administering antidumping regimes, the individual
transactions are both the means by which less than fair value prices are established and the
mechanism by which the object of the transaction (i.e., the "product") is "introduced into the
commerce of the importing country". Likewise, antidumping duties are assessed on individual entries
resulting from those individual transactions. Therefore, the obligation set forth in Article 9.3 to assess
no more in antidumping duties than the margin of dumping, is similarly applicable at the level of
individual transactions.WT/DS344/R
Page A-15
31. In Mexico's view, a Member breaches Article 9.3 by failing to provide offsets, because
Members are required to calculate margins of dumping on an exporter-specific basis for the product
"as a whole " and, consequently, a Member is required to aggregate the results of " all" "intermediate
comparisons ", including those for which the export price exceeds the normal value. The
United States notes that the terms upon which Mexico's interpretation rests are conspicuously absent
from the text of both Articles 2.1 and 9.3. Mexico's interpretation is not mandated by the definition of
dumping contained in Article 2.1, as described above.
32. As the panel in US – Zeroing (EC) correctly concluded, there is "no textual support in Article
9.3 for the view that the AD Agreement requires an exporter-oriented assessment of antidumping
duties . . .". The Panel in US – Zeroing (Japan) similarly rejected the conclusion that the "margin of
dumping under Article 9.3 must be determined on the basis of an aggregate examination of export
prices during a review period in which export prices above the normal value carry the same weight as
export prices below the normal value . . .". In US – Zeroing (Japan) , the panel explained that the
importer-and import-specific obligation to pay an antidumping duty "lend[s] further support to the
view . . . that there is no general requirement to determine dumping and margins of dumping for the
product as a whole, which, . . . entails a general prohibition of zeroing".
33. Although, dumping involves differential pricing behaviour of exporters or producers between
its export market and its normal value, dumping nevertheless occurs at the level of individual
transactions. Moreover, the remedy for dumping provided for in Article VI:2 of GATT 1994, i.e.,
antidumping duties, are applied at the level of individual entries for which importers incur the
liability. In this way, the importer may be induced to raise resale prices to cover the amount of the
antidumping duty, thereby preventing the dumping from having further injurious effect. If instead,
the amount of the antidumping duty must be reduced to account for the amount by which some other
transaction was sold at above normal value, possibly involving an entirely different importer, then the
antidumping duty will be insufficient to have the intended effect. The importer of the dumped
product would remain in a position to profitably resell the product at a price that continues to be
injuriously dumped. For this reason, if Mexico's interpretation of the margin of dumping is adopted
as the sole permissible interpretation of Article 9.3, the remedy provided under the AD Agreement
and the GATT 1994 will be prevented from addressing injurious dumping. These concerns led the
panel in US – Zeroing (Japan) to reject the same interpretation that Mexico offers in this dispute. The
panel found that this result was not supported by the text of Article 9.3, which "contains no language
requiring such an aggregate examination of export transactions in determining final liability for
payments of antidumping duties . . .".
34. It also follows that if a Member is unable to calculate and assess the duties on a transaction-
specific basis, importers of the merchandise for which the amount of dumping is greatest will actually
have an advantage over their competitors who import at fair value prices because they will enjoy the
benefit of offsets that result from their competitors' fairly priced imports. As the panel in US –
Softwood Lumber Dumping (Article 21.5) observed, the perverse incentives created by providing
offsets also arise in the context of prospective assessment systems:
[An] obligation to take all (including non-dumped) comparisons into account in
determining the margin of dumping for the product as a whole . . . is illogical, as it
would provide importers clearing dumped transactions with a double competitive
advantage vis-à-vis other importers: first, . . . the lower price inherent in a dumped
transaction; second, . . . offsets, or credits, "financed" by the higher prices paid by
other importers clearing non-dumped, or even less-dumped, transactions.
...WT/DS344/R
Page A-16
Again, this makes no sense in the context of a prospective normal value duty
assessment system, because (as even Canada acknowledges) the "margin of
dumping" at issue is a transaction-specific price difference calculated for a specific
import transaction.
35. Mexico's interpretation of Article 9.3, requiring that antidumping duty liability be determined
for the product "as a whole", is inconsistent with the specific provision in Article 9 that recognizes the
existence of prospective normal value systems of assessment. Because in a prospective normal value
system, liability for antidumping duties is incurred only to the extent that prices of individual export
transaction are below the normal value, the panel in US – Zeroing (Japan) concluded, "the fact that
express provision is made in the AD Agreement for this sort of system confirms that the concept of
dumping can apply on a transaction-specific basis to prices of individual export transaction below the
normal value and that the AD Agreement does not require that in calculating margins of dumping the
same significance be accorded to export prices above the normal value as to export prices below the
normal value". If in a prospective normal value system individual export transactions at prices less
than normal value can attract liability for payment of antidumping duties, without regard to whether
or not prices of other export transactions exceed normal value, there is no reason why liability for
payment of antidumping duties may not be similarly assessed on the basis of export prices less than
normal value in the retrospective system applied by the United States.
36. Further, accepting Mexico's interpretation that a Member must aggregate the results of " all"
comparisons on an exporter-specific basis would require that retrospective reviews be conducted,
even in a prospective normal value systems, in order to take into account " all" of the exporters'
transactions. This result, however, is contrary to the very concept of the prospective normal value
system. In effect, prospective normal value systems will become retrospective, a conclusion also
reached in a Canadian parliamentary report on potential changes to its prospective normal value
system. In that report and at its trade policy review, Canada expressed its view that in a prospective
normal value system, each entry provides a margin of dumping.
37. The United States respectfully requests that the Panel reject Mexico's "as such" and "as
applied" claims regarding antidumping assessment proceedings.
38. Mexico's claim of inconsistency with Article 2.4 adopts the reasoning set forth in the
Appellate Body report in US – Zeroing (Japan) , finding that a methodology cannot be viewed as
involving a "fair comparison" under Article 2.4 if the resulting assessments exceed the "margin of
dumping established in accordance with Article 2, as we have explained previously". The reasoning
upon which Mexico relies, however, is entirely consequential of the Appellate Body report's previous
analysis of the term "margin of dumping". Indeed, the passage quoted by Mexico makes plain that the
rationale followed in the Appellate Body report was based on the results of the comparison
methodology in relation to the previously interpreted "margin of dumping", rather than on any
inherently unfair aspect of the comparison methodology itself. Therefore, resolution of Mexico's
claims regarding assessment proceedings depends not on the text of Article 2.4, but on whether it is
permissible to interpret the term "margin of dumping" as used in Article 9.3 as applying to
transactions.
39. As the panels in US – Zeroing (EC) and US – Zeroing (Japan) have concluded, it is
permissible to interpret "margin of dumping" as used in Article 9.3 as applying to an individual
transaction. As a consequence, there is no obligation to aggregate transactions in calculating margins
of dumping in an assessment proceeding, and there can be no obligation to offset the antidumping
duty liability for a transaction to reflect the extent to which other transactions were not dumped.
Therefore, if the Panel finds, as the prior panels have found, that it is permissible to understand the
term "margin of dumping" as used in Article 9.3 as applying to an individual transaction, then theWT/DS344/R
Page A-17
challenged assessment will not exceed the margin of dumping and there will be no basis, according to
the rationale adopted by Mexico, for a finding of inconsistency with Article 2.4.
40. The targeted dumping provision is an exception to the symmetrical comparison
methodologies generally required by Article 2.4.2. It is not an exception to the fair comparison
requirement of Article 2.4. Thus, an interpretation of Article 2.4 that generally prohibits zeroing
would render the distinctions between the average-to-average and the average-to-transaction
methodologies in Article 2.4.2 without meaning.
41. Mexico's claims with respect to Article XVI:4 of the WTO Agreement and Article 18.4 of the
AD Agreement depend upon a finding of inconsistency with other provisions of the AD Agreement
and the GATT 1994. Mexico's claims with respect to these provisions should be rejected. Even if
Mexico should prevail on any of its underlying claims, it is not necessary for the Panel to address
these claims and the Panel should, instead, exercise judicial economy.
C. M EXICO 'S AS APPLIED CLAIM WITH RESPECT TO INVESTIGATIONS
42. The United States recognizes that in US – Softwood Lumber Dumping the Appellate Body
found that the use of "zeroing" with respect to the average-to-average comparison methodology in
investigations was inconsistent with Article 2.4.2, by interpreting the terms "margins of dumping" and
"all comparable export transactions" as used in Article 2.4.2 in an integrated manner. The
United States acknowledges that this reasoning is equally applicable with respect to this claim.
D. M EXICO 'SREQUEST FOR A SUGGESTION
43. The DSU does not identify any legal consequences that flow from suggestions under
Article 19.1. It is well-established that a Member has the right to determine the "means of
implementation". That a complaining party may prefer one form of implementation over another does
not affect the responding party's right to determine such implementation. In a dispute, such as this,
where a Member has undertaken implementation to comply with its WTO obligations in connection
with another dispute involving the same obligations alleged in the present dispute, such suggestions
may unnecessarily complicate ongoing compliance efforts. The United States, therefore, respectfully
requests that the panel reject Mexico's request for a suggestion.
IV. CONCLUSION
44. The United States requests that the Panel reject Mexico's "as such" claims and its "as applied"
claims regarding assessment proceedings.