WORLD TRADE  
ORGANIZATION  WT/DS264/AB/RW 
15 August 2006 
 (06-3893) 
 Original:   English 
  
 
     
 
   
UNITED STATES – FINAL DUMPING DETERMINATION  
ON SOFTWOOD LUMBER FROM CANADA  
 
RECOURSE TO ARTICLE 21.5 OF THE DSU BY CANADA 
 
  
AB-2006-3 
 
 
     
 
    
Report of the Appellate Body  WT/DS264/AB/RW 
 Page i 
 
 
 
I. Introduction................................................................................................................... ..............1  
II. Arguments of the Participants and the Third Participants ..........................................................4  
A. Claims of Error by Canada – Appellant ........................................................................ 4 
1. Article 2.4.2 of the  Anti-Dumping Agreement .................................................4  
2. Article 2.4 of the  Anti-Dumping Agreement ....................................................8  
B. Arguments of the United States – Appellee.................................................................. 10 
1. Article 2.4.2 of the  Anti-Dumping Agreement ...............................................10  
2. Article 2.4 of the  Anti-Dumping Agreement ..................................................15  
C. Arguments of the Third Participants............................................................................ 16 
1. China...............................................................................................................16  
2. European Communities...................................................................................16  
3. India ................................................................................................................19  
4. Japan ...............................................................................................................19  
5. New Zealand...................................................................................................22  
6. Thailand ..........................................................................................................24  
III. Issues Raised in This Appeal ................................................................................................... .26 
IV. Article 2.4.2 of the  Anti-Dumping Agreement .........................................................................26  
A. Introduction ................................................................................................................. 26 
B. Findings of the Panel................................................................................................... 28 
C. Arguments of the Participants  and the Third Participants.......................................... 30 
D. Is Zeroing Allowed under the Trans action-to-Transaction Comparison 
Methodology Set Out in Article 2.4.2 of the Anti-Dumping Agreement?..................... 31 
1. The Use of "Zeroing" in the Section 129 Determination................................31  
2. Article 2.4.2 of the  Anti-Dumping Agreement ...............................................33  
3. Context............................................................................................................41  
4. "Symmetry" between the Determina tion of Dumping and the Injury 
and Causation Analyses..................................................................................47  
5. Object and Purpose of the  Anti-Dumping Agreement ....................................48  
6. Historical Background ....................................................................................48  
7. Conclusion on Canada's Cl aim under Article 2.4.2 ........................................50  
V. Article 2.4 of the  Anti-Dumping Agreement ............................................................................51  
A. Introduction ................................................................................................................. 51 
B. Findings of the Panel................................................................................................... 51 
C. Arguments of the Participants  and the Third Participants.......................................... 52 WT/DS264/AB/RW 
Page ii  
 
D.
 Whether Zeroing is Consistent with the "Fair Comparison" Requirement in 
Article 2.4 of the Anti-Dumping Agreement ................................................................ 54 
1. Article 2.4 of the  Anti-Dumping Agreement ..................................................54  
2. The Basis of the Panel's Finding under Article 2.4 of the Anti-Dumping 
Agreement .......................................................................................................55  
3. The Consistency of Zeroing unde r the Transaction-to-Transaction 
Comparison Methodology with Article 2.4 of the  Anti-Dumping 
Agreement .......................................................................................................56  
VI. Findings and Conclusions....................................................................................................... ..59 
 
ANNEX I Notification of an Appeal by Canada  WT/DS264/AB/RW 
 Page iii 
 
 
CASES CITED IN THIS REPORT 
 
Short Title Full Case Title and Citation 
EC – Audio Cassettes  GATT Panel Report, EC – Anti-Dumping Duties on Audio Tapes in Cassettes 
Originating in Japan , ADP/136, 28 April 1995, unadopted  
EC – Bed Linen 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, DSR 2001:V, 2049 
EEC – Cotton Yarn  GATT Panel Report, European Economic Community – Imposition of Anti-
Dumping Duties on Imports of Cotton Yarn from Brazil , ADP/137, adopted 
30 October 1995, BISD 42S/17 
EC – Tube or Pipe Fittings Panel Report, European Communities – Anti-Dumping Duties on Malleable 
Cast Iron Tube or Pipe Fittings from Brazil , WT/DS219/R, adopted 18 August 
2003, modified by Appellate Body Report, WT/DS219/AB/R, DSR 2003:VII, 
2701 
Mexico – Anti-Dumping Measures on Rice Appellate Body Report, Mexico – Definitive Anti-Dump ing Measures on Beef 
and Rice, Complaint with Respect to Rice , WT/DS295/AB/R, adopted 20 
December 2005 
US – Corrosion-Resistant 
Steel Sunset Review  Appellate Body Report, United States – Sunset Review of Anti-Dumping 
Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan , 
WT/DS244/AB/R, adopted 9 January 2004, DSR 2004:I, 3  
US – Hot-Rolled Steel  Appellate Body Report, United States – Anti-Dumping Measures on Certain 
Hot-Rolled Steel Products from Japan , WT/DS184/AB/R, adopted 23 August 
2001, DSR 2001:X, 4697 
US – Softwood Lumber V  Appellate Body Report, United States – Final Dumping Determination on 
Softwood Lumber from Canada , WT/DS264/AB/R, adopted 31 August 2004, 
DSR 2004:V, 1875 
US – Softwood Lumber V  Panel Report, United States – Final Dumping Determination on Softwood 
Lumber from Canada , WT/DS264/R, adopted 31 August 2004, modified by 
Appellate Body Report, WT/DS264/AB/R, DSR 2004:V, 1937 
US – Softwood Lumber V 
(Article 21.5 – Canada) 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  
US – Zeroing (EC)  Appellate Body Report, United States – Laws, Regulations and Methodology 
for Calculating Dumping Margins ("Zeroing") , WT/DS294/AB/R, adopted 
9 May 2006 
US – Zeroing (EC) Panel Report, United States – Laws, Regulations and Methodology for 
Calculating Dumping Margins ("Zeroing") , WT/DS294/R, adopted 9 May 
2006, modified by Appellate Body Report, WT/DS294/AB/R 
 WT/DS264/AB/RW 
Page iv  
 
ABBREVIATIONS USED IN THIS REPORT 
 
Abbreviation Description 
Anti-Dumping 
Agreement Agreement on Implementation of Article VI of the General Agreement on 
Tariffs and Trade 1994 
DSB Dispute Settlement Body 
DSU Understanding on Rules and Procedures Governing the Settlement of 
Disputes 
GATT 1994 General Agreement on Tariffs and Trade 1994 
Group of Experts 
Report GATT Second Report of the Group of Experts, Anti-Dumping and 
Countervailing Duties , L/1141, adopted 27 May 1960, BISD 9S/194 
Harmonized System Harmonized Commodity Description and Coding System 
Original panel Panel in the original US – Softwood Lumber V   proceedings 
Panel Panel in these  US – Softwood Lumber V  (Article 21.5 – Canada) 
proceedings 
Panel Report Panel Report, US – Softwood Lumber V  (Article 21.5 – Canada)  
Section 129  Section 129 of the Uruguay Round Agreements Act, Public Law No.  
103-465, 108 Stat. 4836, United States Code , Title 19, section 3538 (2000) 
Section 129 
Determination Notice of Determination Under Section 129 of the Uruguay Round 
Agreements Act: Antidumping Measures on Certain Softwood Lumber 
Products from Canada, United States Federal Register , Vol. 70, No. 83 
(2 May 2005), pp. 22636- 22646 (Exhibit CDA-1 s ubmitted by Canada to 
the Panel) 
Statement of Administrative Action Statement of Administrative Action to the Uruguay Round Agreements Act, 
H.R. Doc. No. 103-316 (1994)  
Tokyo Round Anti-Dumping Code  Tokyo Round  Agreement on Implementation of Article VI of the General 
Agreement on Tariffs and Trade , BISD 26S/171 
USDOC United States Department of Commerce 
Vienna Convention Vienna Convention on the Law of Treaties , done at Vienna, 23 May 1969, 
1155 UNTS 331;  8 International Legal Materials 679 
Working Procedures Working Procedures for Appellate Review , WT/AB/WP/5, 4 January 2005 
WTO World Trade Organization  
  WT/DS264/AB/RW 
 Page 1 
 
 
WORLD TRADE ORGANIZATION  
APPELLATE BODY 
 
 
United States – Final Dumping Determination 
on Softwood Lumber from Canada 
 
Recourse to Article 21.5 of the DSU by Canada  
 
Canada, Appellant 
United States, Appellee  
 
China, Third Participant  
European Communities, Third Participant  
India, Third Participant  
Japan, Third Participant  
New Zealand, Third Participant  
Thailand, Third Participant  
  AB-2006-3 
  Present:   Abi-Saab, Presiding Member 
 Baptista, Member 
 Sacerdoti, Member  
  
I. Introduction 
1. Canada appeals certain issues of law and legal interpretations develope d in the Panel Report, 
United States – Final Dumping Determination on Softwood Lumber from Canada  
– Recourse to 
Article 21.5 of the DSU by Canada (the "Panel Report").1  The Panel was established to consider a 
complaint by Canada regarding the consistency with the Agreement on Implementation of Article VI 
of the General Agreement on Tariffs and Trade 1994   (the " Anti-Dumping Agreement ") of a measure 
taken by the United States to comply with the r ecommendations and rulings of the Dispute Settlement 
Body (the "DSB") in the  US – Softwood Lumber V   proceedings.2  
2. The original dispute concerned an anti-dumping investigation by the United States 
Department of Commerce (the "USDOC") that led to the imposition, in May 2002, of anti-dumping 
duties on imports of softwood lumber from Canada.3  Before the panel in  US – Softwood Lumber V   
(the "original panel"), Canada claimed that, in  imposing anti-dumping duties on imports of softwood 
lumber from Canada, the United States had acted in consistently with several provisions of the  
Anti-Dumping Agreement , as well as with Articles VI:1 and VI:2 of the  General Agreement on 
                                                      
1WT/DS264/RW, 3 April 2006. 
2The recommendations and rulings of the DSB resulted from the adoption on 31 August 2004, by the 
DSB, of the Appellate Body Report, WT/DS264/AB/R , and the Original Panel Report, WT/DS264/R.  
3Notice of Amended Final Determination of Sales at Less Than Fair Value and Antidumping Duty 
Order: Certain Softwood Lumber Products From Canada, United States Federal Register , Vol. 67, No. 99 
(22 May 2002) 36068.  WT/DS264/AB/RW 
Page 2  
 
Tariffs and Trade 1994   (the "GATT 1994").
4  The original panel found, inter alia , that the United 
States had acted inconsistently with Article 2.4.2 of the  Anti-Dumping Agreement  in determining the 
existence of margins of dumping on the basis of a methodology incorporating the practice of 
"zeroing".5  In the light of its finding on Article 2.4.2, the original panel applied judicial economy and 
declined to rule on Canada's cl aims under Article 2.4 of the  Anti-Dumping Agreement   ("fair 
comparison") in respect of zeroing.6  The original panel's finding of inconsistency with Article 2.4.2 
was upheld by the Appellate Body.7 
3. The original panel and Appell ate Body reports were adopt ed by the DSB on 31 August 2004.8  
On 6 December 2004, Canada and the United Stat es jointly informed the DSB, pursuant to 
Article 21.3(b) of the  Understanding on Rules and Procedures Governing the Settlement of Disputes 
(the "DSU"), that they had mutually agreed that  the reasonable period of time to implement the 
recommendations and rulings of the DSB would be seven and one-half months, that is, from  
31 August 2004 to 15 April 2005.9  The reasonable period of time was later extended to 2 May 2005 
by agreement between the parties.10 
4. On 2 May 2005, the USDOC issued a new final determination11 pursuant to Section 129 of 
the Uruguay Round Agreement Act12 (the "Section 129 Determination").  In the original 
determination, the USDOC had calculated the marg ins of dumping by comparing weighted-average 
normal value to the weighted average of export prices .  By contrast, in the Section 129 Determination, 
the USDOC established the margins of dumping on the basis of a comparison of normal value and 
export prices on a transaction-to-transaction basis.13  On 19 May 2005, the United States notified the 
DSB that, with the Section 129 Determination, it had implemented the DSB's recommendations and 
rulings.14   
                                                      
4Original Panel Report, para. 3.1.  See also Appellate Body Report, US – Softwood Lumber V , para. 3. 
5Original Panel Report, para. 8.1(a)(i). 
6Ibid., para. 8.1(c)(i). 
7Appellate Body Report, US – Softwood Lumber V , para. 183(a). 
8WT/DS264/9. 
9WT/DS264/12.  In the light of this agreement, the arbitration proceeding under Article 21.3(c) that had 
been initiated at the request of Canada was terminated. (WT/DS264/13) 
10WT/DS264/15. 
11Notice of Determination Under Section 129 of the Uruguay Round Agreements Act: Antidumping 
Measures on Certain Softwood Lumber Products from Canada, United States Federal Register , Vol. 70, No. 83 
(2 May 2005), pp. 22636-22646 (Exhibit CDA-1 submitted by Canada to the Panel).  
12Public Law No. 103-465, § 129, 108 Stat. 4836, United States Code , Title 19, section 3538 (2000). 
13See Section 129 Determination, pp. 22637-22639. 
14WT/DSB/M/189, para. 92.  WT/DS264/AB/RW 
 Page 3 
 
 
5. Canada, however, considered that the United States had failed to bring its measure into 
conformity with its obligations under the  Anti-Dumping Agreement .  Canada therefore requested  
that the matter of compliance be referred to  a panel pursuant to Article 21.5 of the DSU.15  On  
1 June 2005, the DSB referred the matter to the original panel.16  In the Article 21.5 proceedings, 
Canada claimed that the use of zeroing by th e USDOC in the Section 129 Determination is 
inconsistent with the United States' obliga tions under Articles 2.4 and 2.4.2 of the  Anti-Dumping 
Agreement .17   
6. The Panel Report was circulated to the Members of the World Trade Organization 
(the "WTO") on 3 April 2006.  The Article 21.5 Pa nel (the "Panel") found that "the [US]DOC was 
entitled not to offset the non-dumped transactions against the dumped transactions when calculating 
the margin of dumping for each respondent foreign producer or exporter."18  Consequently, the Panel 
rejected Canada's claim that "the [US]DOC's us e of zeroing in the [transaction-to-transaction] 
comparison methodology at issue is incons istent with Article 2.4.2 of the [ Anti-Dumping ] 
Agreement ."19  In addition, the Panel rejected Canada's claim that "the United States has violated the 
fair comparison obligation provided for in the first sentence of Article 2.4 of the [ Anti-Dumping ] 
Agreement ."20 
7. The Panel concluded that: 
... the determination of the [US]DOC in the section 129 proceeding 
investigation is not inconsistent  with the asserted provisions of 
Articles 2.4 and 2.4.2 of the [ Anti-Dumping ] Agreement.  
We therefore consider that the United States has implemented 
the recommendations and rulings of the DSB in US – Softwood 
Lumber V , to bring its measure into conformity with its obligations 
under the [ Anti-Dumping ] Agreement .21 
Having found that the United States did not act in consistently with its obligations under the  Anti-
Dumping Agreement ,  the Panel did not make any recommendation under Article 19.1 of the DSU.22 
                                                      
15WT/DS264/16. 
16WT/DS264/20/Rev.2. 
17Panel Report, para. 3.1. 
18Ibid., para. 5.66. 
19Ibid. 
20Ibid., para. 5.78. 
21Ibid., paras. 6.1-6.2. 
22Ibid., para. 6.3. WT/DS264/AB/RW 
Page 4  
 
8. On 17 May 2006, Canada notified the DSB, pursu ant to Article 16.4 of the DSU, of its 
intention to appeal certain issues of law and legal interpretations developed in the Panel Report, and 
filed a Notice of Appeal
23 pursuant to Rule 20 of the  Working Procedures for Appellate Review24 
(the  " Working Procedures ").  On 24 May 2006, Canada filed an appellant's submission.25  O n   
12 June 2006, the United States filed an appellee's submission.26  On the same day, the European 
Communities, Japan, New Zealand, and Thailand each filed a third participant's submission27, and 
China and India each notified the Appellate Body Secr etariat of its intention to appear at the oral 
hearing and make an oral statement.28   
9. The oral hearing in this appeal was held on 24 June 2006.29  The participants and the third 
participants presented oral arguments and respond ed to questions posed by the Members of the 
Division hearing the appeal. 
II. Arguments of the Participants  and the Third Participants 
A. Claims of Error by Canada – Appellant   
1. Article 2.4.2 of the  Anti-Dumping Agreement  
10. Canada claims that the Panel erred in finding  that the use of zeroing by the USDOC in the 
Section 129 Determination rests on a permissi ble interpretation of Article 2.4.2 of the Anti-Dumping 
Agreement .  Canada requests the Appellate Body to fi nd that the USDOC's use of zeroing in the 
Section 129 Determination is  inconsistent with Article 2.4.2 and that, therefore, the United States has 
failed to implement the recommendations and ruli ngs of the DSB in the original dispute. 
11. Canada asserts that Article 2.4.2 of the  Anti-Dumping Agreement   prohibits the use of zeroing 
when investigating authorities calculate the ma rgin of dumping by comparing normal value and 
export prices on a transaction-to-transaction basis in  accordance with the methodology set out in the 
first sentence of that provision.  Canada submits th at the calculation of a "margin of dumping" within 
the meaning of Article 2.4.2 must be done for the "product as a whole".  This means that an 
                                                      
23WT/DS264/25 (attached as Annex I to this Report). 
24WT/AB/WP/5, 4 January 2005. 
25Pursuant to Rule 21 of the Working Procedures . 
26Pursuant to Rule 22 of the Working Procedures . 
27Pursuant to Rule 24(1) of the Working Procedures . 
28Pursuant to Rule 24(2) of the Working Procedures . 
29The oral hearing was originally scheduled for 26 June 2006.  However, the oral hearing had to be 
rescheduled owing to logistical difficulties due to meetings held at the WTO building in connection with Doha 
Development Agenda negotiations.  Neither the participants nor the third participants objected to the change of 
date.  WT/DS264/AB/RW 
 Page 5 
 
 
investigating authority must take into account a ll intermediate comparison results, regardless of 
whether they are positive or negative, in any aggreg ation leading to a final margin of dumping.  
Canada explains that this requirement is based on the correct interpretation of the term "margin of 
dumping" and the definition of "dumping" set out in Article 2.1 of the  Anti-Dumping Agreement .  
According to Canada, in US – Softwood Lumber V  and US – Zeroing (EC) , the Appellate Body found 
that Article  VI:1 of the GATT 1994 and Article 2.1 of the  Anti-Dumping Agreement   use the term 
"product" to refer to the product under i nvestigation or the product "as a whole".30  Canada adds that 
the Appellate Body also found that Articles 6.10 and 9.2 of the  Anti-Dumping Agreement   provide 
contextual support confirming that the term "product" refers to the entire product under 
investigation.31   
12. Canada points out that the Appellate Body has found that the use of "zeroing" is not permitted 
when making weighted average-to-weighted averag e comparisons of normal value and export prices 
in an original investigation32, or when making weighted average-to-transaction comparisons in an 
assessment proceeding.33  In Canada's view, it follows that, where an investigating authority makes 
multiple comparisons on a transaction-to-transacti on basis and produces a number of intermediate 
values or results and then aggregates those results, Ar ticle 2.4.2 requires it to take into account the full 
amount of those results, be they positive or negativ e;  an investigating authority cannot treat those 
results that are negative as zero.  Therefore, acco rding to Canada, prior r easoning and interpretations 
of the Appellate Body apply to prohibit zeroing under the transaction-to-transaction comparison 
methodology in the same manner as they did under the weighted average-to-weighted average and 
weighted average-to-transaction methodologies.  
13. Canada further submits that Article 2.4.2 contai ns no express language that permits the use of 
zeroing in the calculation of margins of dumping.  Moreover, Canada argues that, as the Appellate 
Body has explained, calculating margins of dumping without aggregating the results of all "multiple 
comparisons" for the "product as a whole" introduces an "inherent bias" that "may distort not only the 
magnitude of a dumping margin, but also a finding of the very existence of dumping."34  In Canada's 
view, an interpretation of Article 2.4.2 that permits zeroing under the transaction-to-transaction 
                                                      
30See Appellate Body Report, US – Softwood Lumber V , paras. 92-93;  and Appellate Body Report, 
US – Zeroing (EC) , paras. 125-126.  
31See Appellate Body Report, US – Softwood Lumber V , para. 94. 
32Canada's appellant's submission, para. 28 and fo otnote 39 thereto (referring to Appellate Body 
Report, US – Softwood Lumber V , paras. 97-98). 
33Ibid. (referring to Appellate Body Report, US – Zeroing (EC) , para. 127). 
34Ibid., para. 31 (quoting Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , 
para. 135).  WT/DS264/AB/RW 
Page 6  
 
methodology cannot be reconciled with the "inflatio n and distortion" of dumping margins that this 
practice causes.
35   
14. Canada asserts that the Panel's erroneous interpretation rests on four flawed conclusions.  The 
first is the Panel's understanding that the term "margin of dumping", read in the context of 
Articles VI:1 and VI:2 of the GATT 1994, refers to a "price difference", and that this may be 
interpreted to allow investigating authorities not to reflect fully non-dumped transaction-specific 
comparison results.36  According to Canada, the Panel's unde rstanding "ignores" the interpretation of 
the term "margins of dumping" by the Appellate Body as requiring an investigating authority to take 
into account the full value of all intermediate compar ison results, be they positive or negative, so that 
the calculation of the final margin of dum ping reflects fully the "product as a whole".37  Canada adds 
that, as a result of this incorrect understanding, the Panel rejected Canada's submission that the term 
"margins of dumping" could not have a differe nt meaning for each of the two calculation 
methodologies set out in the first sentence of Article 2.4.2.  
15. Secondly, Canada argues that the Panel impr operly interpreted the term "product" as not 
referring to the "product as a whole".  The Panel cl aimed that interpreting "product" in Articles VI:2, 
VI:3, and VI:6 of the GATT 1994 to refer to th e "product as a whole" would mean that these 
provisions could not be read as requiring the "app lication of a duty on a single import transaction".38  
Canada observes, however, that the Panel did not explain why these provisions needed to be 
interpreted as referring to the application of a duty on a single import transaction.   
16. Thirdly, Canada submits that the Panel inco rrectly concluded that the Appellate Body's 
reasoning in  US – Softwood Lumber V   does not apply to the transaction-to-transaction comparison 
methodology set out in the latter part of the first se ntence of Article 2.4.2.  Canada explains that, 
contrary to the Panel's view, the phrase "all comp arable export transactions" was not central to the 
Appellate Body's reasoning in that case, which was,  instead, based on the definitions of "dumping" 
and "margins of dumping".  In add ition, Canada notes that the Appella te Body recently found that the 
term "margin of dumping" prohibits  zeroing under not just the weighted average-to-weighted average 
comparison methodology pursuant to Article 2.4.2, but also under a weighted average-to-transaction 
methodology in duty assessment proceedings pursuant to Article 9.3 of the  Anti-Dumping 
                                                      
35Canada's appellant's submission, para. 31.  
36Panel Report, paras. 5.27-5.28. 
37Canada's appellant's submission, paras. 37-38. 
38Ibid., para. 43 (referring to Panel Report, para. 5.23).   WT/DS264/AB/RW 
 Page 7 
 
 
Agreement .39  Canada explains that the Appellate Body reached this conclusion by applying the same 
interpretation to the term "margin of dumping" in  Article 9.3 as it did to the term "margins of 
dumping" in Article 2.4.2 with respect to original investigations, and that the phrase "all comparable 
export transactions" does not appear in Article 9. 3.  The Appellate Body's interpretation in  US – 
Zeroing (EC)   of "margin of dumping" in Article 9.3 therefore completely undermines the basis upon 
which the Panel restricted the reasoning of the Appellate Body in  US – Softwood Lumber V   to the 
weighted average-to-weighted average comparison methodology.  
17. Fourthly, Canada asserts that the Panel's re liance on the so-called "broader contextual 
considerations" it identified is mispl aced.  According to the Panel, one  such consideration was that, if 
"margins of dumping" were interpreted to prohib it zeroing under the weighted average-to-transaction 
comparison methodology provided in the second senten ce of Article 2.4.2, such an interpretation 
would render this methodology redundant, becau se it would produce results that were 
"mathematically equivalent" to the weighted  average-to-weighted average methodology.40   
18. Canada argues that this "contextual considerati on" rests on two faulty analytical foundations.  
First, the issue before the Panel was the use of  zeroing in the Section 129 Determination under  
the transaction-to-transaction comparison methodology ;  the weighted average-to-weighted average 
and the weighted average-to-transaction methodologies were not before the Panel.  Moreover, Canada 
and all but one of the third participants noted th at their answers to the Panel's questions on the 
weighted average-to-transaction comparison met hodology were hypothetical, because none of them 
had any experience with this calculation methodology.  In Canada's view, it is inappropriate to reject 
an interpretation of a provision and its application in  respect of a concrete measure on the basis of the 
interpretation and application of a provision not at issue, in the abstract, and without evidence.    
19. The second fault in the Panel's analysis of the "m athematical equivalence" argument is that it 
rests on the false premise that the hypothetical proposed by the United States represented the only 
way in which the weighted average-to-transacti on comparison methodology could be applied.  
However, Canada and certain third participants provided a variety of examples of how the weighted 
average-to-transaction comparison methodology woul d not result in "mathematical equivalence" 
without the use of zeroing.  According to Canada, the Panel "ignored" these examples.41  Thus, even if 
the Panel's consideration of the weighted av erage-to-transaction comparison methodology were 
appropriate, the conclusions it drew, in  Canada's view, were incorrect.   
                                                      
39Canada's appellant's submission, para. 49 (referring to Appellate Body Report, US – Zeroing (EC) , 
paras. 135 and 263(a)(i)). 
40Ibid., para. 52 (referring to Panel Report, para. 5.33). 
41Ibid., para. 56. WT/DS264/AB/RW 
Page 8  
 
20. Canada also draws attention to the Panel's conc lusion that the term "margin of dumping" has a 
different meaning in Article 9.3 of the  Anti-Dumping Agreement   than in the rest of that Agreement.  
Canada argues that this is "manifestly at odds" with the findings of the Appellate Body in  US – 
Zeroing (EC) , where it determined that the term "margi n of dumping" in Article 9.3 has the same 
meaning as "margins of dumping" in Article 2.4.2 a nd prohibits zeroing "in some forms of assessment 
proceedings".
42   
21. In addition, Canada notes that the Panel relie d on an interpretation of Article 2.2 of the  Anti-
Dumping Agreement   in the abstract as a "contextual c onsideration" that requires interpreting 
Article 2.4.2 to allow zeroing under the transacti on-to-transaction comparison methodology.  Canada 
asserts that Article 2.2 was not at issue in this case  and that this "consideration", again, reflects the 
Panel's "misguided effort" to decide this case on th e basis of provisions other than the one before it.43  
Canada also challenges the Panel's reliance on a single line in a GATT report as negotiating history.44  
According to Canada, this report should be accorded no weight as it is already clear that the ordinary 
meaning of Article 2.4.2 read in its context prohibits zeroing.   
22. Finally, Canada argues that an interpretation of  Article 2.4.2 that prohibits zeroing in one of 
the "normal" calculation methodologies set out in the first sentence of that provision (weighted 
average-to-weighted average), but permits it under th e other (transaction-to-transaction), would lead 
to "absurd results" in anti-dumping investigations.45  Canada explains that such an interpretation 
would mean that the choice of a calculation me thodology could be determinative as to whether 
dumping exists, and could create subs tantial differences in the size of the "margins of dumping".   
23. For these reasons, Canada requests the Appellate Body to reverse the Panel's conclusion and 
to find, instead, that the use of zeroing in the Section 129 Determination is inconsistent with 
Article 2.4.2 of the  Anti-Dumping Agreement .  
2. Article 2.4 of the  Anti-Dumping Agreement   
24. Canada asserts that the Panel erred in finding that Article 2.4 of the  Anti-Dumping Agreement   
permits the treatment of transaction-specific compar isons that result in a negative value as zero in the 
calculation of margins of dumping under the trans action-to-transaction comparison methodology.  
                                                      
42Canada's appellant's submission, para. 57 (referring to Appellate Body Report, US – Zeroing (EC) , 
paras. 127-129). 
43Ibid., para. 58. 
44Canada's appellant's submission, para. 59 (referring to Panel Report, para. 5.63;  and GATT Second 
Report of the Group of Experts, Anti-Dumping and Countervailing Duties , L/1141, adopted 27 May 1960, 
BISD 9S/194 ("Group of Experts Report")). 
45Ibid., para. 62.  WT/DS264/AB/RW 
 Page 9 
 
 
Canada requests the Appellate Body to reverse th e Panel's finding and to find, instead, that the 
USDOC's use of zeroing in the Section 129 Determin ation is inconsistent with the "fair comparison" 
requirement in Article 2.4 of the  Anti-Dumping Agreement . 
25. Canada notes that the ordinary meaning of the term "fair" is "just, unbiased, equitable, 
impartial; legitimate, in accordan ce with the rules or standards".46  Therefore, based on this plain 
meaning, Article 2.4 must be interpreted as requi ring an "equitable" comparison between the export 
price and the normal value.  Canada refers  to the Appellate Body's statement in  US – Corrosion-
Resistant Steel Sunset Review   that zeroing inflates margins of dumping and creates an "inherent bias" 
in these comparisons.47  According to Canada, this bias is more pronounced under the transaction-to-
transaction comparison methodology than under the weighted average-to-weighted average 
methodology because, under the former, zeroing is applied to every non-dumped transaction.  Thus, 
Canada asserts that zeroing intermediate compar ison values in a transaction-to-transaction comparison 
is not consistent with the requirement in Article 2.4 to provide a "fair" or "equitable" comparison 
between export price and normal value. 
26. Canada submits, moreover, that the term "compari son" in Article 2.4 refers to "the full and 
true difference between an export price and a normal value".48  It argues that, because the calculation 
of margins of dumping under the transaction- to-transaction comparison methodology involves 
multiple comparisons between export prices and selec ted normal values, the calculation must include 
the "full results of all of these comparisons".49  In contrast, Canada argues, the USDOC "manipulated" 
the results of comparisons where the export pr ice was higher than the home market price by 
disregarding the difference between these prices a nd replacing that difference with zero.  Canada 
asserts that this "manipulation" is inconsistent w ith Article 2.4 because it does not lead to a "fair 
comparison".50 
27. Canada argues that the Panel's conclusion with  respect to Article 2.4 is premised on the 
Panel's incorrect interpretation of Article 2.4.2 as permitting zeroing under the transaction-to-
transaction comparison methodology.  Canada repeats in  this claim the arguments that it put forward 
in its challenge against the Panel's conclusion un der Article 2.4.2 and concludes that, given that 
                                                      
46Canada's appellant's submission, para. 66 (quoting The New Shorter Oxford English Dictionary , 
L. Brown (ed.) (Clarendon Press, 1993), Vol. 1, p. 907 (Exhibit CDA-5 submitted by Canada to the Panel)). 
47Ibid., para. 67 (quoting Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , 
para. 135). 
48Ibid., para. 68 (referring to Appellate Body Report, EC – Bed Linen , para. 55;  and Appellate Body 
Report, US – Corrosion-Resistant Steel Sunset Review , para. 135). 
49Ibid., para. 68.  
50Ibid., para. 69.  WT/DS264/AB/RW 
Page 10  
 
Article 2.4.2 does not allow the use of zeroing wh en making a transaction-to-transaction comparison, 
the USDOC's use of zeroing in the Section 129 Dete rmination does not constitute a "fair comparison" 
within the meaning of Article 2.4.  
28. Finally, because the USDOC's Section 129 De termination is inconsistent with the 
requirements of Articles 2.4 and 2.4.2 of the  Anti-Dumping Agreement , Canada requests the 
Appellate Body to find that the United States has failed to implement the recommendations and 
rulings adopted by the DSB in the original dispute.  
B. Arguments of the United States – Appellee  
1. Article 2.4.2 of the  Anti-Dumping Agreement
 
29. The United States asserts that Canada's appeal  should be rejected because, as the Panel 
correctly found, Article 2.4.2 of the  Anti-Dumping Agreement   does not require the provision of 
offsets when the margins of dumping are establis hed on the basis of transaction-to-transaction 
comparisons of normal value and export prices.  According to the United States, Canada's 
interpretation contradicts the ordinary meaning of th e relevant treaty texts and leads to implications 
that cannot be reconciled with other provisions of the  Anti-Dumping Agreement . 
30. The United States rejects Canada 's reliance on Article VI of the GATT 1994 to support its 
assertion that margins of dumping must be established for the "product as a whole" under the transaction-to-transaction comparison methodology set out in Article 2.4.2 of the  Anti-Dumping 
Agreement .  The United States points out that the Panel,  upon reviewing the use of the term "product" 
in Article VI of the GATT 1994, noted several inst ances where that term is used in a manner that 
refers to a single import transaction.  The Panel note d, for example, the references in Article VI to 
"levy[ing]" a duty on a "product", which suggest transaction-specific events.
51  For the United States, 
depending on the context in which it is used, the te rm "product" can have either a collective or an 
individual meaning.52  Where the term "product" is used in a collective sense, a particular model, type, 
or category constitutes a sub-group of the "product ".  This does not exclude that, in a different 
context, the object of a particular transaction can be  considered to be the "product".  In addition, the 
United States asserts that Canada's argument "ignores the sense in which the Appellate Body 
originally used the phrase 'product as a whole'".53  According to the United States, in  EC – Bed Linen   
                                                      
51United States' appellee's submission, paras. 18-19 (referring to Panel Report, para. 5.23). 
52The United States notes, for exam ple, that Article 2.6 of the  Anti-Dumping Agreement   refers to the 
"product under consideration" in the co llective sense.  In contrast, Article VII:3 of the GATT 1994 uses the term 
"product" in the individual sense. 
53United States' appellee's submission, para. 24.  WT/DS264/AB/RW 
 Page 11 
 
 
and  US – Softwood Lumber V ,  the Appellate Body used the phrase "product as a whole" for the 
purpose of distinguishing the margin of dumping for a product from the dumped amounts found to 
exist for sub-products based on multiple weighted-a verage comparisons.  The United States alleges 
that Canada's use of the phrase "product as a whole" in this appeal "represents a dramatic departure 
from the original sense in which the Appellate Body used the phrase".54   
31. The United States submits, furthermore, that the Panel correctly concluded that a margin of 
dumping may be established on a transaction-specific basis.  The United States observes that the 
Panel "based its finding firmly in the text of Article VI of the GATT 1994"55, which provides that 
there is dumping when the export price is less than the normal value.  Given this definition of dumping, the United States agrees with the Panel that it would be permissible for a Member to 
interpret the term "margin of dumping" as the amount by which the export price is less than  the 
normal value.  The United States disagrees, in this  regard, with Canada's characterization of the 
results of transaction-specific comparisons as "int ermediate values" and Canada's argument that, in 
establishing the margin of dumping, the investigatin g authority must take into account the full value 
of all intermediate comparison r esults, be they positive or negative.
56  The United States also rejects 
Canada's argument that the grammatical construction of the first sentence of Article 2.4.2 means that 
the term "margins of dumping" must have the same  meaning with respect to transaction-to-transaction 
comparisons as it has with respect to weighted av erage-to-weighted average comparisons.  According 
to the United States, this argument wrongly assum es that the "product as a whole" is a generic 
concept, equally applicable to different compar ison methodologies, even though the Appellate Body 
used that term in the context of weighted averag e-to-weighted average comparisons.  Furthermore, the 
United States submits that Canada "effectively invents"57 an obligation found nowhere in the text of 
Article 2.4.2, which contains no express language requiring offsets in  the calculation of "margins of 
dumping".   
32. The United States notes that Canada seeks support in Article 6.10 of the  Anti-Dumping 
Agreement   for the proposition that a margin of dumping can be established only with respect to a 
"product as a whole".  The United States responds that Article 6.10 merely provides that a Member must calculate a margin of dumping for each individual exporter or producer, but says nothing about 
whether the margin must be based on more than  one transaction.  For the United States, nothing 
                                                     
 
54United States' appellee's submission, para. 28. 
55Ibid., para. 41. 
56Ibid., para. 42 (referring to Canada's appellant's submission, para. 37). 
57Ibid., para. 47. WT/DS264/AB/RW 
Page 12  
 
prevents a margin of dumping from being calcu lated on both a transaction-specific basis and an 
exporter-specific basis at the same time.
58 
33. The United States considers that Canada's relian ce on previous reports of the Appellate Body 
is misplaced.  According to th e United States, Canada essentially urged the Panel to separate the 
reasoning of the Appellate Body Report in  US – Softwood Lumber V   from the context in which it 
was articulated and to apply it to the different context of the present dispute.  The United States 
emphasizes that, in  US – Softwood Lumber V , the Appellate Body referred to the phrase "all 
comparable export transactions" in Article 2.4.2 as an  element of context within which the term at 
issue, "margins of dumping", should be construed.  This phrase, notes the United States, pertains only 
to the weighted average-to-wei ghted average comparison methodology.  Furthermore, the United 
States maintains that Canada dismisses the signi ficance of the Appellate Body's decision in  US – 
Softwood Lumber V   to refrain from ruling on the transaction-to-transaction comparison methodology 
that was raised as relevant context.  
34. The United States also rejects Canada's reliance on the Appellate Body Report in  
US – Zeroing (EC) ,  which the United States considers to be i rrelevant to the question at issue in this 
dispute—that is, whether zeroing is allowed in tran saction-to-transaction comparisons in an original 
investigation.  Furthermore, the United States considers that the Appellate Body's finding in  
US – Zeroing (EC)  "appears to be based on a misinterpretati on of a finding of the original Appellate 
Body report" in  US – Softwood Lumber V .59  The United States explains that, in  US – Zeroing (EC) , 
the concept of the "product as a whole" was "inexplicably broadened from the  multiple averaging   
context to the context of ' multiple comparisons '"60, such that, if multiple comparisons are undertaken, 
zeroing is prohibited.  According to the Un ited States, such reasoning renders "illusory"61 a WTO 
Member's right to choose whether to use multiple comparisons in calculating the margin of dumping, 
because a Member must always aggregate transactions  for calculating a margin of dumping.  Finally, 
the United States considers that Canada's argu ment based on the Appellate Body Report in US – 
Zeroing (EC)   effectively makes redundant the phrase "all co mparable export transactions".  This is 
because Canada's reasoning leads to a general oblig ation to establish the margin of dumping for the 
"product as a whole", regardless of the comparis on methodology.  The phrase "all comparable export 
transactions", however, is used only with refere nce to the weighted average-to-weighted average 
comparison methodology.  
                                                      
58United States' appellee's submission, para. 52. 
59Ibid., para. 64. 
60Ibid., para. 65. (original emphasis)  
61Ibid., para. 65.  WT/DS264/AB/RW 
 Page 13 
 
 
35. The United States asserts that the Panel correctly found that simply extending the finding 
from the Appellate Body Report in  US – Softwood Lumber V   to the transaction-to-transaction 
comparison methodology, as Canada proposed, would r esult in a number of difficulties.  First, the 
United States submits that Canada's argument that "the term 'product' in Article VI of the GATT 1994 
necessarily refers to the entire universe of exporte d product subject to an antidumping investigation 
hinges importantly on the use of that term in paragr aphs (1) and (2) of Article VI", but is undercut by 
paragraphs 6(a) and (b) that re fer to "'levy[ing]' a duty on th e 'importation of any product'".62  
Moreover, the United States asserts that the te rm "margin of dumping", as used in Note  Ad  
Article VI:1 of the GATT 1994, refers to a singl e export transaction through an associated importer 
and, therefore, contradicts Canada's suggestion th at a margin of dumping necessarily means a margin 
of dumping for the "product as a whole".  Secondly,  the United States refers to Article 2.2 of the  
Anti-Dumping Agreement , which provides that constructed norma l value may be used where there are 
no sales in the ordinary course of trade.  According to the United States, the practice of many Members is to resort to constructed normal value on a model- or transaction-specific basis.  However, 
under Canada's interpretation, the United States subm its, an investigating authority would be required 
to use constructed normal value for the "product as a whole" even though its use might only be 
necessary for the model not sold in the ordinary course of trade.   
36. Thirdly, the United States asserts that, if th e "margins of dumping" must invariably be 
calculated for the "product as a whole", zeroing woul d also be prohibited under the second sentence of 
Article 2.4.2, which permits weighted average-to -transaction comparisons if certain conditions are 
met, including a "pattern of export prices which differ significantly among different purchasers, regions or time periods".  Calculating, in a ta rgeted dumping scenario, one margin of dumping for 
transactions falling within the specified pricing patte rn and another for all other transactions would 
also be inconsistent with Canada's "product as a whole" theory.
63  Moreover, according to the 
United States, this would nullify the second sentence of Article 2.4.2 because, without zeroing, the 
results of the weighted average-to-weighted aver age comparison methodology in the first sentence of 
Article 2.4.2 would be mathemati cally equivalent to those of the weighted average-to-transaction 
methodology in the second sentence of Article 2.4.2.   
37. In addition, the United States refers to the probl em that Canada's interpretation would raise in 
the context of prospective normal-value systems.  The United States explains that, under a prospective 
normal-value system, a WTO Member determines the liability for anti-dumping duties at the time of importation by comparing the export price with a pr ospective normal value.  If the export price is 
                                                     
 
62United States' appellee's submission, para. 69.  
63Ibid., para. 84. WT/DS264/AB/RW 
Page 14  
 
greater than the prospective normal value, the Member collects no anti-dumping duty, but does not 
give the importer a credit against other export tran sactions.  Thus, the assessment is based on a single 
transaction.
64  The United States argues that a general ob ligation to establish the margin of dumping 
for the "product as a whole" would require a Member  applying a prospective normal-value system to 
take all export transactions into consideration.  As a result, the anti-dumping duties owed by one 
importer would be offset by the amount of "non -dumping" determined with respect to another 
importer.65  In this respect, the United States concur s with the Panel that such a result "makes no 
sense".66 
38. Finally, the United States refers to the past e xperience regarding the application of Article VI 
of the GATT 1947, which, in its view, contradicts Ca nada's interpretation of the term "margins of 
dumping".  The United States refers to a 1960 report by a Group of Experts concerning Article VI of 
the GATT 1947, which states that the ideal method for applying anti-dumping duties was "to make a 
determination in respect of both dumping and material injury in respect of each single importation of the product concerned."
67  In the United States' view, the Pane l properly considered this report and 
found that "the Group of Experts clearly envisaged  the calculation of transaction-specific margins of 
dumping."68  In addition, the United States refers to two pre-WTO panel reports69, in which the panels 
rejected arguments that failure to take into account  negative margins was inconsistent with the Tokyo 
Round   Agreement on Implementation of  Article VI of the General Agreement on Tariffs and Trade70  
(the " Tokyo Round Anti-Dumping Code "), the predecessor to the  Anti-Dumping Agreement .  The 
United States maintains that none of the parties in those disputes considered Article VI of the 
GATT 1947 as containing a "product as a whole" concept.   
39. The United  States also recalls that, at the time of the Uruguay Round negotiations, during 
which the  Anti-Dumping Agreement   was negotiated, it was common among major users of anti-
dumping measures to use zeroing when aggregating i ndividual comparisons.  Thus, it is "completely 
inconsistent with these historical facts, to suggest  that any Contracting Pa rty or negotiator believed 
that, without any modification to Article VI  [of the GATT 1947], the word 'product' in that provision 
                                                      
64United States' appellee's submission, para. 86. 
65Ibid., para. 89. 
66Ibid., para. 91 (quoting Panel Report, para. 5.57). 
67Ibid., para. 34 (quoting Group of Experts Report, supra , footnote 44, para. 8). 
68Ibid., para. 34 (quoting Panel Report, para. 5.64). 
69GATT Panel Report, EC – Audio Cassettes , para. 360 (unadopted);  GATT Panel Report,  
EEC – Cotton Yarn , para. 502. 
70BISD 26S/171.   WT/DS264/AB/RW 
 Page 15 
 
 
as carried into the GATT 1994" effectively would prohibit zeroing.71  In the light of this background, 
the United States submits that "it hardly can be cl aimed that the understanding of the terms 'product' 
and 'margins of dumping' urged by the United States  and supported by the Panel in the present dispute 
is impermissible" under the applicable standard of review set out in Article 17.6(ii) of the  Anti-
Dumping Agreement .72 
40. For these reasons, the United States requests the Appellate Body to uphold the Panel's finding 
that the Section 129 Determination is not inconsistent with Article 2.4.2 of the Anti-Dumping 
Agreement . 
2. Article 2.4 of the  Anti-Dumping Agreement  
41. The United States submits that the Panel corr ectly rejected Canada's argument that the 
Section 129 Determination is inconsistent with the "fair comparison"  requirement in Article 2.4 of the  
Anti-Dumping Agreement .  The United States asserts that Canada's argument assumes its own 
conclusion by simply insisting that a margin estab lished without zeroing is fair.  In addition, the 
United States submits that Canada's argument must fa il in the light of the fact that zeroing in the 
context of transaction-to-transaction comparisons is  permissible under Article 2.4.2.  As the Panel 
correctly stated, in the Unites States' view, the very general "fair comparison" requirement of Article 2.4 cannot trump the more specific provisions of Article 2.4.2.
73 
42. According to the United States, Canada's argument is that, if a given comparison 
methodology yields a higher margin of dumping th an another comparison methodology, then the first 
methodology is unfair.  Such an argument, the Un ited States observes, incorrectly assumes that the 
magnitude of the resulting margin of dumping is th e basis for determining whether the selection of a 
comparison methodology is "fair" during the investiga tion phase.  This would mean that investigating 
authorities would have to determine at least two putative margins of dumping for each exporter, using 
at least two comparison methodologies provided in  Article 2.4.2, and ultimately rely on the 
methodology that generated the lowest marg in.  The United States sees nothing in the  Anti-Dumping 
Agreement   that imposes such a results-driven obligation.74  In addition, the United States refers to the 
contextual considerations referred to  by the Panel in relation to Article  2.4.2.  In particular, the United 
States reiterates that, should Canada's interpretation be accepted, the second sentence of Article 2.4.2 
would be rendered inutile due to the mathematica lly equivalent results reached under the weighted 
                                                      
71United States' appellee's submission, para. 39. (original emphasis) 
72Ibid., para. 40. 
73Ibid., para. 98. 
74Ibid., para. 100. WT/DS264/AB/RW 
Page 16  
 
average to-transaction comparison methodology provid ed in this sentence a nd the weighted average-
to-weighted average methodology provided in the firs t sentence of Article 2.4.2.  Finally, the United 
States asserts that the Appellate  Body reports cited by Canada
75 do not support Canada's argument.76 
43. Consequently, the United States requests the Appellate Body to uphold the Panel's finding 
that the Section 129 Determination is not inconsis tent with the "fair comparison" requirement in 
Article 2.4 of the  Anti-Dumping Agreement . 
C. Arguments of the Third Participants  
1. China  
44. Pursuant to Rule 24(2) of the Working Procedures , China chose not to submit a third 
participant's submission.  In its statement at the oral  hearing, China agreed with Canada that the Panel 
erred in concluding that zeroing under the transac tion-to-transaction comparison methodology was not 
inconsistent with Articles 2.4.2 and 2.4 of the  Anti-Dumping Agreement . 
2. European Communities  
45. The European Communities argues that, "[i]n principle"77, an exporter's margin of dumping 
must be established for the product under investigatio n "as a whole".  Thus, although an investigating 
authority may undertake multiple comparisons at an intermediate stage, it is only by aggregating the 
results of all such intermediate comparisons that an investigating authority can establish an exporter's 
margin of dumping for the "product as a whole".  According to the European Communities, there is 
no justification for taking into account only some  of the results of multiple comparisons while 
disregarding the other results.  Moreover, the European Communities observes that other provisions 
of the  Anti-Dumping Agreement   are explicit regarding the perm issibility of disregarding certain 
matters.  As examples, the European Communities refe rs to Article 2.2.1 (that allows certain domestic 
sales to be disregarded), Article 9.4 (that dir ects investigating authorities to disregard zero and 
de minimis   margins of dumping), Article 2.7 (that exclud es application of the disciplines of Article 2 
in cases involving non-market economies), and Arti cle 6.8 and Annex II (that permit investigating 
authorities to disregard certain information). 
                                                      
75Canada referred to Appellate Body Report, EC – Bed Linen , para. 55;  and Appellate Body Report, 
US – Corrosion-Resistant Steel Sunset Review , para. 135.  (See Canada's appellant's submission, paras. 67-68) 
76United States' appellee's submission, para. 104. 
77European Communities' third participant's submission, para. 6.  WT/DS264/AB/RW 
 Page 17 
 
 
46. The European Communities disagrees with th e United States that the term "margin of 
dumping" can be interpreted as applying on a tran saction-specific rather than an exporter-specific 
basis.  According to the European  Communities, Article 6.10 confirms that an investigating authority 
is required, as a rule, to determine an individu al margin of dumping for each known exporter of the 
product under investigation.  Moreover, Article  2.4.2 provides that transaction-to-transaction 
juxtapositions may be the  basis   for the calculation of a margin of dumping.  In other words, this 
indicates that there is one thing (one or more transaction-to-transaction comparisons) that is an 
underlying support for something else (a margin of dumping).  Therefore, although a first step may involve more than one transaction-to-transaction comp arison, in a subsequent step of calculation, all 
intermediate results of the first step must be aggr egated.  The European Comm unities asserts that such 
a proposition is supported by the first sentence of Ar ticle 2.4, which uses the singular when it provides 
that a "fair comparison" must be made between the export price and the normal value.  Also, 
Article VI of the GATT 1994 consistently refers to  "normal value" in the singular.  The European 
Communities finds support for its interpretation in the term "normal value", in that it would be "highly 
problematic" for an investigating authority to assume that the price at which a single domestic 
transaction is concluded is equivalent to a "normal value" simply because, in the first step of the 
calculation, the transaction-to-transaction method of juxtaposition is used.
78  The European 
Communities asserts that the phrase "ordinary course of trade" in Article 2.2 provides further 
contextual support because, if one transaction is is olated from many other transactions at varying 
prices, that single transaction cannot be taken as re presentative of the "ordinary course of trade" and 
cannot, on its own, be considered a "normal value".   
47. Recalling the definitions of "dumping" and "margin of dumping" in Article VI of the 
GATT 1994, as implemented in Article 2 of the  Anti-Dumping Agreement , the European 
Communities argues that the intermediate results of  a series of transaction-to-transaction comparisons 
cannot be "margins of dumping" because they do no t involve a comparison between normal value and 
export price.  For the European Communities, it is not possible to measure fairly international price 
discrimination between two different markets if  the fundamental methodology for defining and 
measuring behaviour in each of the markets is diffe rent.  Nor does price variation or volatility justify 
zeroing.  Moreover, the fact that market conditions  in the United States and in the home market may 
be different (for example, demand may be diffe rent) has nothing to do with a comparison between 
normal value (in one market) and export price (in the other market), and is irrelevant for determining 
how dumping should be measured—assuming that all appropriate adjustments for any differences 
affecting price comparability have been ma de in accordance with Article 2.4.    
                                                      
78European Communities' third participant's submission, para. 17. WT/DS264/AB/RW 
Page 18  
 
48. In the European Communities' view, the true question before the USDOC was how the United 
States market and the home market can be defi ned, independently, and in terms of product, 
geography, and time.
79  What the USDOC has done, however, by using a transaction-to-transaction 
methodology with zeroing, is to posit that the home ma rket should be temporally  defined by reference 
to each transaction.  If the United States wanted to address a situation where there is "a pattern  of 
export prices which differ significantly among different ... time periods"80, then a targeted dumping 
analysis on the basis of a weighted average-to-transaction comparison would have been the only 
lawful approach. 
49. The European Communities rejects the "mathe matical equivalence" argument because the 
measure taken to comply at issue in this dispute is based on the transaction-to-transaction methodology, whereas the Panel's discussion of the "mathematical equivalence" was hypothetical and 
related to the two other methods of comparison.  According to the European Communities, even 
assuming that zeroing is permitted under the targeted dumping provision, it does not follow that zeroing must also be permitted when using the tran saction-to-transaction comparison:  something that 
might be justified by exceptional circumstances is no t, for that reason, justified in all circumstances 
and as a general and normal method of calculation.  The European Communities further submits that 
because the number of transactions in the domestic and export markets, in practice, will rarely, if ever, be the same, the transaction-to-transaction comp arison methodology without  zeroing will not produce 
a mathematical result equivalent to that obtained when using either of the other two methodologies.  
50. With respect to the United States' argument regarding prospective normal-value systems, the 
European Communities asserts that the Panel erred when it proceeded as if it were discussing final 
duty assessment based on contemporaneous normal va lue and export price (within the meaning of 
Articles 9.3.1 and 9.3.2), although what the Panel wa s in fact discussing was the initial payment based 
on prospective normal value.  The European Commun ities also submits that Article 9.4 concerns the 
issue of sampling and, for that reason alone, is irre levant to the present case, where that issue does not 
arise.  Furthermore, the European Communities reca lls that similar discussions regarding the situation 
of importers in a duty assessment proceeding were rejected by the Appellate Body in  US – 
Zeroing (EC) .
81  In this regard, the Europ ean Communities notes that the  Anti-Dumping Agreement   
addresses the behaviour of exporters (not the rela tive position of importers), and an investigating 
authority must calculate a margin of dumping for each  exporter (not each importer).  According to the 
European Communities, therefore, the total amoun t of duties collected from importers purchasing 
                                                      
79European Communities' third participant's submission, para. 45.  
80Ibid., para. 46. (original underlining)  
81Ibid., para. 70 (referring to Appellate Body Report, US – Zeroing (EC) , paras. 130-131 and 
footnote 234).   WT/DS264/AB/RW 
 Page 19 
 
 
from a particular exporter cannot exceed the ceili ng of the margin of dumping for that exporter.82  The 
European Communities explains th at, if necessary, the duty amounts calculated with respect to 
specific importers must be reduced  pro rata   until that ceiling is respected, but this does not mean 
that importers with a "negative" duty amount are "offsetting" dumping margins, as the United States argues.   
51. The European Communities also takes issue with the Panel's reasoning regarding constructed 
normal value under Article 2.2.  The European Commun ities states that it is clear that Article 2.2 of 
the  Anti-Dumping Agreement   is drafted in such a manner as to  describe the various means by which 
a normal value may be established.  This does not mean that the practice of making multiple 
comparisons at sub-group level is not possible, prov ided that an investiga ting authority eventually 
aggregates in full all of the results of such multiple  comparisons in order to calculate a margin of 
dumping for the "product as a whole", and, in doing so, it is not entitled to "zero" negative 
intermediate results.
83 
52. The European Communities, therefore, considers that the Appellate Body should reverse the 
Panel's finding that the Section 129 Determination is not inconsistent with Articles 2.4.2 and 2.4 of 
the  Anti-Dumping Agreement . 
3. India  
53. Pursuant to Rule 24(2) of the Working Procedures , India chose not to submit a third 
participant's submission.  In its statement at the oral hearing, India presented its views as to why it 
considers that the Panel erred in finding that the use of zeroing in a transaction-to-transaction 
comparison methodology is not inconsistent  with Articles 2.4.2 and 2.4 of the  Anti-Dumping 
Agreement . 
4. Japan  
54. Japan disagrees with the Panel's finding th at zeroing in a transaction-to-transaction 
comparison is permitted under Article 2.4.2 of the  Anti-Dumping Agreement .  Japan emphasizes that 
"dumping" is not determined on the basis of i ndividual transaction-to-transaction comparisons, and 
the price differences that arise in individual comp arisons do not, on their own, "show" that there is 
dumping.84  According to Japan, in order to establish "dumping" and "margins of dumping" under the  
Anti-Dumping Agreement   and Article VI of the GATT 1994, an i nvestigating authority must take into 
                                                      
82European Communities' third participant's submission, para. 70.  
83Ibid., para. 74. 
84Japan's third participant's submission, para. 11. WT/DS264/AB/RW 
Page 20  
 
account the "product as a whole".
85  Whenever the USDOC disregards negative comparison results, 
the dumping determination is based on only a partial aggregation of comparison results that takes into 
account some, but not all, export transactions.  Howeve r, the meanings of "dumping" and "margins of 
dumping" should not change because only indivi dual export transactions are involved in the 
comparison method.  Japan further argues that the fi rst sentence of Article 2.4.2 by no means indicates 
that the term "margins of dumping" encompasse s "two quite different meanings" in the same 
sentence.86  In Japan's view, the prohibition of zeroing stems from the meaning of "dumping" in 
Article 2.1 of the  Anti-Dumping Agreement   and in Article VI:1 of the GATT 1994, and therefore 
should extend equally to the weighted average-to -weighted average and the transaction-to-transaction 
comparison methodologies.87  Japan adds that, by defining "dumping" in relation to a product, the  
Anti-Dumping Agreement   ensures parallelism between the sc ope of a dumping determination and the 
scope of the regulatory conseque nces the determination entails. 
55. Japan also takes issue with the Panel's analysis of broader contextual c onsiderations.  First, 
Japan considers that the Panel wrongly held that  prohibiting zeroing in a transaction-to-transaction 
comparison "would deprive the second sentence of Article 2.4.2 of effect".88  Japan asserts that the 
Panel made this finding because it agreed with th e United States' position that, without the use of 
zeroing, a weighted average-to-weighted average comparison and a weighted average-to-transaction 
comparison pursuant to the second sentence of Article 2.4.2 of the  Anti-Dumping Agreement   would 
lead to the same mathematical outcome.  According to Japan, properly interpreted and absent zeroing, 
weighted average-to-transaction comparisons pr oduce different outcomes from those resulting from 
weighted average-to-weighted average comparis ons.  Japan also notes that the "mathematical 
equivalence" argument involves the two comparis on methodologies that are not at issue in this 
dispute, which concerns the transaction-to-tra nsaction methodology under the first sentence of 
Article 2.4.2.  Thus, even assuming  arguendo   that the second sentence of Article 2.4.2 permits 
zeroing on an exceptional basis, that exception is not re levant in this dispute.  In any event, Japan 
argues that, by extending a right to zero from the seco nd sentence to the first sentence of Article 2.4.2, 
the Panel improperly transforms an exceptional right into a general rule.  Japan further submits that 
the structure of the exceptional weighted average- to-transaction comparison must be rooted in the 
circumstances that justify its use, namely, the existe nce of a particular pricing pattern "which differ[s] 
significantly among different purchasers, regions or tim e periods".  This is also the interpretation 
                                                      
85Japan's third participant's submission, para. 35 (quoting Appellate Body Report, US – Zeroing (EC) , 
para. 126).  See also Appellate Body Report, US – Softwood Lumber V , paras. 93 and 99;  and Appellate Body 
Report, US – Corrosion-Resistant Steel Sunset Review , paras. 126 and 127. 
86Japan's third participant's submission, para. 37. 
87Ibid., paras. 34 and 38 (referring to Appellate Body Report, US – Zeroing (EC) , paras. 125-126). 
88Ibid., para. 13 (referring to Panel Report, para. 5.52).  WT/DS264/AB/RW 
 Page 21 
 
 
adopted, according to Japan, by the USDOC in its own regulations.89  Therefore, contrary to the 
Panel's assumptions, the universe of export transac tions in an exceptional weighted average-to-
transaction comparison is narrower than in a wei ghted average-to-weighted average comparison.  
Consequently, absent zeroing, the outcome of the tw o comparison methodologies differ.  In addition, 
Japan notes that, even assuming  arguendo   that a weighted average-to-transaction comparison must 
be applied to all export transactions without zer oing, the second sentence of Article 2.4.2 is not 
rendered a nullity because it has not been shown that  the outcome is always the same as under a 
weighted average-to-weighted average comparison.   
56. Secondly, Japan states that the Panel's analys is of the implications for prospective normal-
value systems confuses two concepts, the "amount  of anti-dumping duty" and the "margin of 
dumping", which are distinct and separate.90  Japan submits that the rules in Article 9 on the 
imposition and collection of anti-dumping duties do not ha ve a bearing on the rules in Article 2 on the 
determination of dumping margins.  Japan argues th at Members are entitled to  impose variable duties 
on the basis of a prospective normal value, as envisaged by Article 9.4(ii), but the amount of variable duties initially imposed is not a transaction-specific "margin of dumping" determined under Article 2.  
Rather, relying upon the Appellate Body's ruling in  US – Zeroing (EC) , Japan argues that the margin 
of dumping operates as a "ceiling" on the amount of anti-dumping duties and is distinguishable from "the amount of duties initially imposed on entries of a product".
91  Subject to this proviso, Members 
may also appropriately apportion liability amo ng importers to avoid disturbing competitive 
conditions.  According to Japan, there is no basis for the United States' argument that investigating 
authorities would be obliged to refund to importers an amount that exceeds the duties initially paid in 
the event that export prices were higher than  normal value for the "product as a whole".92  
57. Thirdly, Japan asserts that the Pa nel misread Article 2.2 of the  Anti-Dumping Agreement , 
thereby incorrectly finding that, if the term "margi n of dumping" always refers to the "product as a 
whole", constructed normal value can no longe r be determined on a model-specific basis.93  Japan 
submits that, although the texts of Articles 2.2 and 2.4.2 are silent in terms of the comparison of 
normal value and export price on a model-sp ecific basis, the Appellate Body in  US – Softwood 
Lumber V   held that such a comparison is permissible.94  Thus, Articles 2.2 and 2.4.2 must be 
                                                      
89Japan's third participant's submission, para. 14 (referring to United States Code of Federal 
Regulations , Title 19, Secti on 351.414(f)(2)). 
90Ibid., para. 71. (emphasis omitted)  
91Ibid., para. 73 (referring to Appellate Body Report, US – Zeroing (EC) , para. 130). 
92Ibid., para. 76 (referring to Appellate Body Report, US – Zeroing (EC) , footnote 234 to para. 131).   
93Panel Report, para. 5.62.  
94Japan's third participant's submission, para. 81 (referring to Appellate Body Report, US – Softwood 
Lumber V , para. 80). WT/DS264/AB/RW 
Page 22  
 
interpreted harmoniously to accommodate the right to  calculate constructed normal value for some 
models, but not for others, provided that the marg in of dumping is determined on the basis of the 
product under investigation as a whole.  
58. Finally, Japan argues that, contrary to the Pane l's finding, the use of zeroing in a transaction-
to-transaction comparison violates the "fair comparison" requirement in Article 2.4 of the  Anti-
Dumping Agreement .  Japan asserts that zeroing involves an "inherent bias"
95 that is the very 
"antithesis" of fairness.96  Japan explains that this is becau se the positive comparison results included 
in the determination relate to export transactions wi th prices that are lower than normal value;  in 
contrast, the excluded negative results relate to export transactions with prices higher than normal 
value.  The export transactions selected for inclusion in the determination, therefore, relate to the 
"sub-part" of the product that is the most likely to generate an affirmative dumping determination and 
inflate the margin of dumping, because, for exclude d transactions, the export prices are treated as if 
they were less than what they actually are. 
59. Consequently, Japan considers that the Appella te Body should reverse the Panel's findings 
and find, instead, that the Section 129  Determination is inconsistent w ith Articles 2.4.2 and 2.4 of the  
Anti-Dumping Agreement . 
5. New Zealand  
60. At the outset, New Zealand emphasizes that it does not intend to "defend 'zeroing'".97  Rather, 
it is New Zealand's concern th at interpretations of the  Anti-Dumping Agreement   developed in the 
context of the weighted average-to-weighted aver age comparison methodology are not applied in such 
a way as to prohibit permissible applications of the transaction-to-transaction methodology.  
61. New Zealand argues that the transaction-to-transaction comparison methodology "does not 
involve making 'multiple comparisons' producing a number of 'intermediate values or results'".98  
Thus, the transaction-to-transaction comparison methodology is not an averaging methodology 
requiring "multiple comparisons", a nd should not be construed as such.  New Zealand submits that the 
transaction-to-transaction comparison methodology involves the establishment of dumping margins 
on a transaction-specific basis.  If the export price is  less than the comparable home market price, 
dumping has occurred.  In New Zealand's view, Cana da's interpretation blurs the distinction between 
                                                      
95Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , para. 135. 
96Japan's third participant's submission, para. 21. 
97New Zealand's third participant's submission, para. 2.03.  
98Ibid., para. 1.05.   WT/DS264/AB/RW 
 Page 23 
 
 
the two methodologies set out in the first sentence of  Article 2.4.2, namely, the weighted average-to-
weighted average and transaction-to-transaction comparison methodologies.  
62. According to New Zealand, the focus of an  anti-dumping investigation is to determine 
whether there has been injurious dumping.  Focu sing on the export transactions below normal value 
under the transaction-to-transaction comparison methodology does not necessarily inflate or distort the margin of dumping.  New Zealand explains that, in a transaction-to-transaction analysis, only the 
volume of dumped products, rather than the entire volume of imported goods, should be relied upon 
to ascertain the appropriate dumping margin.  The volume and prices of the export transactions that are above normal value "are fully taken into acc ount" in the non-attribution analysis required under 
Article 3.5 of the  Anti-Dumping Agreement .
99  New Zealand asserts, in this regard, that there is "no 
distortion" of the margins of dumping where "there is symmetry or parallelism between the dumping 
investigation and the injury/causation investigation".100  In New Zealand's view, the transaction-to-
transaction comparison methodology can, and should, be  interpreted and applied in a way that ensures 
"consistent treatment" of th e product under investigation.101  According to New Zealand, "Canada's 
concern that a transaction-specific methodology infl ates dumping margins is not warranted", because 
the dumping margin is not artificially assigned to the entire volume of imports.102  
63. New Zealand submits that Canada incorrectly draws from the notion of "product as a whole" 
a requirement to examine average pricing beha viour of an exporter throughout the period of 
investigation.  While such an interpretation may be  possible in the context of  a weighted average-to-
weighted average comparison methodology, there is no basis for making this a requirement under a 
transaction-to-transaction methodology.  In New Zeal and's view, this would reduce the transaction-to-
transaction comparison methodology to an averaging methodology.  New Zealand disagrees with Canada's proposition that the term "product as a whol e" relates to the overall volume of imports and 
asserts that, instead, it refers to the scope of the pr oduct subject to investiga tion.  In addition, New 
Zealand argues that Canada is wrong in dismissing th e broader contextual considerations relied on by 
the Panel.  New Zealand notes, in this regard, that the provisions of the  Anti-Dumping Agreement   
"work in an integrated fashion to provid e relief for instances of injurious dumping".
103   
                                                      
99New Zealand's third participant's submission, para. 1.09. 
100Ibid., para. 1.10. 
101Ibid., para. 3.33.  
102Ibid., para. 1.10. 
103Ibid., para. 3.35. WT/DS264/AB/RW 
Page 24  
 
6. Thailand
 
64. Thailand disagrees with the Panel's analysis a nd urges the Appellate Body to reverse the 
Panel's finding that the use of zeroing under the transaction-to-transaction comparison methodology is 
consistent with Articles 2.4.2 and 2.4 of the  Anti-Dumping Agreement .   
65. Thailand submits that the Panel misunderstood the implications of the Appellate Body's 
previous rulings that Article 2.1 of the  Anti-Dumping Agreement   requires an investigating authority 
to calculate a single margin of dumping for the product under investigation as a whole.104  Thailand 
explains that, if a single margin of dumping must  be calculated for the product under investigation as 
a whole, then any interim steps to that end do not  constitute determinations  of dumping within the 
meaning of Article 2.1.  In calculating a single ma rgin of dumping, therefore, an investigating 
authority cannot prejudge the issue of whether dumping exists by including in its calculation only transactions that are likely to lead to a finding  of dumping and by excluding those that reduce  
the likelihood of such a finding.  Thailand emph asizes that the Appellate Body clarified in  US – 
Zeroing (EC)   that its reasoning in  US – Softwood Lumber V   was not limited to issues involving the 
use of zeroing in weighted average-to-weighted av erage comparisons, but applies to all instances in 
which investigating authorities make multiple comparis ons at an intermediate stage and aggregate the 
results of those comparisons in calculating margins of dumping.  Thailand finds contextual support in 
Articles 5.8, 6.10, and 9.2 of the  Anti-Dumping Agreement   for the notion that margins of dumping 
must be calculated for the product under investigation as a whole.   
66. In addition, Thailand argues that the Panel's re liance on broader contextual considerations was 
misplaced.  Thailand asserts that there is mathema tical equivalence between the weighted average-to-
weighted average and the weighted average-to-transaction comparison methodologies only if the same 
weighted-average normal value is used in both met hodologies.  According to Thailand, this would not 
occur in practice, even under the United States' system, because it do es not use the same normal value 
for each methodology.  Moreover, the exchange ra te used to convert the domestic and export 
currencies could also change.  Therefore, Tha iland does not see why allowing zeroing is necessary in 
order to give effect to the weighted average-to -transaction comparison met hodology referred to in the 
second sentence of Article 2.4.2.  Moreover, that se ntence refers to the use of weighted average-to-
transaction comparisons in situations where export prices differ significantly among different purchasers, regions, or time periods, and an explanatio n is given as to why such differences would not 
be taken into account by either of the comparis on methodologies referred to in the first sentence of 
Article 2.4.2.  The second sentence does not, however , refer to or permit the use of zeroing, anymore 
                                                     
 
104Thailand's third participant's submission, para s. 21-22 (referring to Appellate Body Report,  US – 
Zeroing (EC) , para. 126).   WT/DS264/AB/RW 
 Page 25 
 
 
than the first sentence of that provision.  Thailand adds that, in any event, the argument that zeroing 
may be necessary in order to give effect to the weighted average-to-transaction comparison 
methodology referred to in the seco nd sentence of Article 2.4.2, would suggest that zeroing is 
therefore not permitted under either of the comparis on methodologies referred to in the first sentence 
of Article 2.4.2, that is, weighted average-to -weighted average and transaction-to-transaction.  
67. Thailand points out, furthermore, that there is nothing inherent in a prospective normal-value 
system of collecting duties on importation that is inconsistent with a prohibition on zeroing.  Under 
any system of collecting anti-dumping duties—prosp ective or retrospective—the amount collected on 
each importation represents merely an estimate of  the final duty liability and does not necessarily 
reflect either the difference between export price a nd normal value for that transaction or the dumping 
margin for the "product as a whole".  For this reason, the  Anti-Dumping Agreement   provides for the 
possibility of a review or refund procedure under Arti cles 9.3.1 (retrospective) and 9.3.2 (prospective) 
to determine final duty liability so as to ensure that, in accordance with the  chapeau   of Article 9.3, 
the amount of the anti-dumping duty does not exceed the margin of dumping established in accordance with Article 2.   
68. Moreover, Thailand states that the reference to  the term "margin of dumping" in Article 2.2 
does not mean that, if that term were interpreted to refer to the margin of dumping for the product as a 
whole, the investigating authority would, as th e Panel suggests, be prohibited from calculating 
constructed normal value on a model-specific basis.  Thailand submits that an investigating authority 
has ample discretion to interpret the phrase "sales  of the like product" in the first sentence of 
Article 2.2 to refer to sales of particular models within the like product and to use constructed normal 
value on a model-specific basis provided that the marg in of dumping is determined on the basis of all 
intermediate model-specific comparisons.  
69. Finally, Thailand argues that the Panel erred in concluding that, because it had found zeroing 
to be consistent with Article 2.4.2, it could not co nclude that it was inconsis tent with Article 2.4.  
Instead, Thailand asserts, the Panel should have inte rpreted Article 2.4 as an independent obligation 
that informs all of Article 2.  It should have c oncluded that it required an impartial, objective, and 
unbiased analysis in determining the existence of dumping.  Because zeroing involves the systematic 
exclusion, from the determination of whether dumpi ng exists, of sales that are likely to lead to a 
contrary outcome, the use of zeroing is neither impartial, objective, or unbiased, and is therefore 
inconsistent with Article 2.4. WT/DS264/AB/RW 
Page 26  
 
III. Issues Raised in This Appeal 
70. The following issues are ra ised in this appeal: 
(a) whether the Panel erred in finding that th e use of zeroing when margins of dumping 
are established by comparing normal value and export prices on a transaction-to-
transaction basis is not inconsiste nt with Article 2.4.2 of the  Anti-Dumping 
Agreement ;  and 
(b) whether the Panel erred in finding that th e use of zeroing when margins of dumping 
are established by comparing normal value and export prices on a transaction-to-
transaction basis is not inconsistent with the requirement of "fair comparison" in 
Article 2.4 of the  Anti-Dumping Agreement . 
IV. Article 2.4.2 of the  Anti-Dumping Agreement 
A. Introduction 
71. Canada claims that the use of zeroing by  the United States Department of Commerce 
(the "USDOC") in the Section 129 Determination
105 is inconsistent with the United States' obligations 
under Articles 2.4 and 2.4.2 of the Anti-Dumping Agreement .  We begin with the claim under 
Article 2.4.2 because it is the main focus of Ca nada's argumentation.  Canada's claim under 
Article 2.4 is addressed in Section V of this Report.   
72. This is not the first time that the issue of zeroing has been raised on appeal.  The Appellate 
Body has previously examined the use of zeroing by investigating authorities in the context of original 
investigations106, sunset reviews107, and duty assessment proceedings.108  The use of zeroing was 
                                                      
105Section 129 Determination, supra , footnote 11. 
106Appellate Body Report, EC – Bed Linen , para. 66;  Appellate Body Report, US – Softwood 
Lumber V , para. 117. 
107Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , paras. 127-128 and 133-138. 
108Appellate Body Report, US – Zeroing (EC) , paras. 132-135.   WT/DS264/AB/RW 
 Page 27 
 
 
found to be inconsistent with Ar ticle 2.4.2 in both disputes involvi ng original investigations, and it 
was found to be inconsistent with Article 9.3 in  the dispute involving duty assessment proceedings.109 
73. In the two previous appeals involving zeroing in an original investigation, the investigating 
authorities had established the margins of dumpi ng by comparing weighted -average normal value 
with a weighted average of export prices.  One of these disputes concerned the USDOC's original 
dumping determination against softwood lumber impor ts from Canada.  In that appeal, the Appellate 
Body upheld the panel's finding that the use of zeroing under the weighted average-to-weighted 
average comparison methodology was inconsistent with Article 2.4.2.110  The Section 129 
Determination, which is the subject of this appeal , was taken to comply with the findings of the 
Appellate Body in the original  US – Softwood Lumber V  dispute.111  In the Section 129 
Determination, the USDOC switched to a different  methodology.  The USDOC explained that, "[i]n 
light of the Appellate Body's findings and reco mmendations" concerning the weighted average-to-
weighted average comparison methodology, "[i]t ha[d] determined to apply the transaction-to-
transaction methodology in th[e] Section 129 Determ ination" to establish the margins of dumping.112  
Certain Canadian parties objected to the USDOC switching methodologies in the Section 129 
Determination.113  This argument was rejected by the USDOC, which stated that the Section 129 
Determination is a "new", "second", or "different" determination and, consequently, it "may modify 
its calculations or methodologies to effectuate its compliance with a WTO decision".114  The USDOC 
added that "the calculations or methodologies that are necessary to implement [the Appellate Body's] 
decision rest largely with the discretion of the [USDOC], the United States Trade Representative and 
[the United States] Congress".115  In addition, the USDOC stated that, under United States law, it 
could calculate the margins of dumping using either  the weighted average-to-weighted average or the 
                                                      
109In an appeal involving the use of  zeroing in a sunset review, the Appellate Body stated that it saw 
"no obligation under Article 11.3 [of the Anti-Dumping Agreement ] for investigating authorities to calculate or 
rely on dumping margins in determining the likelihood of continuation or recurrence of dumping".  It added, 
nevertheless, that "should investigating authorities choose to rely upon dumping margins in making their 
likelihood determination, the calculation of these margin s must conform to the disciplines of Article 2.4." 
(Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , para. 127)  The Appellate Body was 
unable to complete the analysis and rule on the consis tency of zeroing in that particular case because of 
insufficient factual findings. (paras. 133-138) 
110Appellate Body Report, US – Softwood Lumber V , para. 117. 
111United States' appellee's submission, para. 11. 
112Section 129 Determination, p. 22637. 
113Ibid., p. 22640. 
114Ibid., p. 22640 (referring to Statement of Administrative Action to the Uruguay Round Agreements 
Act, H.R. Doc. No. 103-316 (1994) ("Statement of Administrative Action"), pp. 1025 and 1027). 
115Ibid., pp. 22640-22641.  Canada did not claim before the Panel that the USDOC was precluded from 
changing methodology.  Consequently, this issue is not before us. WT/DS264/AB/RW 
Page 28  
 
transaction-to-transaction comparison methodology.
116  At the oral hearing, the United States 
acknowledged that the Section 129 De termination was the first time th at the transaction-to-transaction 
comparison methodology had been used by the USDOC. 
74. In what follows, we summarize briefly the fi ndings of the Panel and the arguments of the 
participants and the third participants before turning to the issue before us. 
B. Findings of the Panel 
75. Canada argued before the Panel that the use of  zeroing in the context of the transaction-to-
transaction methodology is inconsistent with th e first sentence of Article 2.4.2 of the  Anti-Dumping 
Agreement .  The Panel rejected Canada's claim.  Acco rding to the Panel, "neither the ordinary 
meaning of the first sentence of Article 2.4.2 as a whole, nor the ordinary meaning of the phrase 
'margins of dumping' in particular, require[s] that all transaction-specific comparisons under the 
[transaction-to-transaction] comparison methodology must be treated as 'intermediate values' and 
aggregated, without zeroing, in order to arrive at a single margin of dumping for the product as a 
whole."117  In addition, the Panel did not consider that  the Appellate Body's ruling in the original 
dispute was applicable.  First, the Panel noted that the Appellate Body's ruling in the original dispute 
was limited to the use of zeroing under the weig hted average-to-weighted average comparison 
methodology.118  Secondly, the Panel observed that the Appellate Body's finding that zeroing is 
prohibited under the weighted average-to-weight ed average comparison methodology was based on 
the phrase "all comparable export transactions" in the fi rst part of the first sentence of Article 2.4.2 of 
the  Anti-Dumping Agreement .  That phrase, the Panel explained, appears in connection with the 
weighted average-to-weighted average comparison methodology and does not apply to the description 
of the transaction-to-transaction methodology in Article 2.4.2.119   
                                                      
116The USDOC, however, explained th at the Statement of Administra tive Action expresses a preference 
for the weighted average-to-weighted average comparison methodology, which was reflected in the United States anti-dumping regulations adopted after the Uruguay Round.  These regulations provide that the USDOC 
"will only use the transaction-to-transaction means of  comparison 'in unusual situations.'" (Section 129 
Determination, p. 22638 (quoting United States Code of Federal Regulations , Title 19, section 351.414(c)) 
According to the USDOC, the regulatio ns' preamble explains that the pref erence for the weighted average-to-
weighted average comparison methodology "was directly tied to difficulties the agency had in the past with 
regard to the transaction-to-transaction methodology and concerns about the difficulty of guaranteeing that 
'merchandise in both markets' would be 'identical or very similar' in order for such a comparison to work 
appropriately." (Section 129 Determination, pp. 22638-22639) 
117Panel Report, para. 5.65. 
118Ibid., para. 5.20. 
119Ibid., para. 5.21.  WT/DS264/AB/RW 
 Page 29 
 
 
76. Moreover, the Panel stated that "broader cont extual considerations demonstrate that the 
application of the Appellate Body's interpretati on beyond the confines of the [weighted average-to-
weighted average] comparison methodology would lead  to absurd results that could never have been 
intended by the Appellate Body, let alone the drafters of the [ Anti-Dumping ] Agreement ."120  I n  
particular, the Panel referred to the results that would obtain if, as Canada proposed, the interpretation 
of the term "margins of dumping" developed by the Appellate Body in US – Softwood Lumber V  
were applied to the other methodologies in Article 2.4.2.  The Panel focused, in particular, on the 
weighted average-to-transaction comparison methodology set out in the second sentence of Article 2.4.2, explaining that it would be "deprive [d] ... of effect" if zeroing were to be prohibited 
under this methodology.
121  This is because the results under the weighted average-to-transaction 
comparison methodology would be mathematically e quivalent to those under the weighted average-
to-weighted average methodology set out in the first sentence of that provision.  
77. The Panel also found support for its interpretation in Articles 2.2 and 9.3 of the  Anti-
Dumping Agreement .  According to the Panel, "[i]f the refere nce in Article 2.2 to 'margin of dumping' 
were understood to mean a single margin of dumping  for the product as a whole", it would mean that 
an investigating authority would have to use cons tructed normal value for all models even if the 
conditions for using construc ted normal value were applicable only to one model.122  Similarly, the 
Panel stated that, if this interpretation of "margins of dumping" were to apply to Article 9.3.2, "which 
expressly applies in respect of prospective duty assessment systems, [it] would mean that a refund 
becomes payable if an anti-dumping duty is paid in excess of the single margin of dumping for the 
product as a whole, calculated by aggregating the r esults of all intermediate comparisons, without 
zeroing."123  According to the Panel, "this makes no sense in the context of a prospective normal value 
duty assessment system, because ... the 'margin of dump ing' at issue is a transaction-specific price 
difference calculated for a specific import transaction."124   
                                                      
120Panel Report, para. 5.65. 
121Ibid., para. 5.52. 
122Ibid., para. 5.61. 
123Ibid., para. 5.57. 
124Ibid. WT/DS264/AB/RW 
Page 30  
 
78. For these reasons, the Panel concluded: 
We therefore find that the [US]DOC was entitled not to offset the 
non-dumped transactions against the dumped transactions when calculating the margin of dumping for each respondent foreign producer or exporter.  Accordingly, we reject Canada's claim that the 
[US]DOC's use of zeroing in the [transaction-to-transaction] comparison methodology at issue is in consistent with Article 2.4.2 of 
the [Anti-Dumping ] Agreement .
125 
C. Arguments of the Participants and the Third Participants 
79. Canada requests the Appellate Body to rever se the Panel's finding and find, instead, that 
Article 2.4.2 of the  Anti-Dumping Agreement   prohibits the use of zeroing when calculating the 
margin of dumping on the basis of the trans action-to-transaction comparison methodology.  
According to Canada, the Appellate Body's reasoning in the original dispute concerning the weighted 
average-to-weighted average comparison methodology  is equally applicable to the use of zeroing 
when calculating the margin of dumping on the basis of the transaction-to-transaction methodology.126  
In addition, Canada argues that the Panel erred in relying on the so-calle d "broader contextual 
considerations", including the United Stat es' mathematical equivalence argument.127   
80. The United States asserts that the Appellate Body should dismiss Canada's appeal and 
maintains that the Appellate Body's reasoning in th e original dispute in relation to the weighted 
average-to-weighted average comparison methodol ogy does not apply to the transaction-to-
transaction methodology set out in the second part of the first sentence of Article 2.4.2.128  The United 
States requests the Appellate Body to uphold the Pa nel's finding that zeroing is allowed under the 
transaction-to-transaction comparison methodology set out in Article 2.4.2 of the  Anti-Dumping 
Agreement   because it is a permissible interpretation of that provision in accordance with 
Article 17.6(ii) of the  Anti-Dumping Agreement .129 
81. China, the European Communities, India, Jap an, and Thailand support Canada's appeal and 
consider that the Appellate Body should find that  the use of zeroing is not permissible under the 
transaction-to-transaction comparison methodology set out in Article 2.4.2 of the  Anti-Dumping 
                                                      
125Panel Report, para. 5.66. 
126Canada's appellant's submission, para. 29. 
127Ibid., paras. 51-58. 
128United States' appellee's submission, paras. 3 and 67. 
129Ibid., paras. 30 and 40.   WT/DS264/AB/RW 
 Page 31 
 
 
Agreement .130  New Zealand disagrees with Canada's appeal and argues that the transaction-to-
transaction comparison methodology in Article 2.4.2 does not require that all transaction-specific 
comparisons be treated as intermediate  values and aggregated, without zeroing.131  The basis for New 
Zealand's position is somewhat different than that of the United States.  New Zealand emphasizes that 
the transaction-to-transaction comparison methodolog y does not necessarily inflate the margins of 
dumping if "there is symmetry between the goods determined to be dumped and the volume of 
dumped goods" considered for purposes of the injury and causation analyses.132    
D. Is Zeroing Allowed under the Transacti on-to-Transaction Comparison Methodology 
Set Out in Article 2.4.2 of the Anti-Dumping Agreement? 
1. The Use of "Zeroing" in the Section 129 Determination  
82. Before turning to Article 2.4.2, we consider it useful to identify what is understood by 
"zeroing" in terms of the measure that is the subjec t of this dispute.  As we explained earlier, the 
USDOC calculated the margins of dumping in the original investigation by using the weighted 
average-to-weighted average comparison methodology set  out in the first sentence of Article 2.4.2 of 
the Anti-Dumping Agreement .  In the Section 129 Determination, the USDOC used the other 
comparison methodology provided in the first sentence of Article 2.4.2, that is, it compared normal 
value and export prices on a transaction-to-transaction basis.  The Panel described the USDOC's 
approach in the Section 129 Determination in the following terms: 
                                                      
130China's statement at the oral hearing;  European Communities' third participant's submission, 
para. 77;  India's statement at the oral hearing;  Japan's third participant's submission, para. 86;  Thailand's third participant's submission, para. 52. 
131New Zealand's third participant's submission, para. 4.01. 
132Ibid., paras. 4.02-4.03. WT/DS264/AB/RW 
Page 32  
 
In its Section 129 Determination, the [US]DOC calculated a single 
margin of dumping for softwood lu mber for each respondent foreign 
producer or exporter.  It calculated that margin of dumping by 
determining the total amount of dumping on the basis of individual comparisons of export price and normal value for each export 
transaction, and then expressing that total amount as a proportion of 
the total value of all export sales, including those sales for which export price exceeded normal value.  In order to establish the amount of dumping, the [US]DOC summed  up the amounts by which, on 
individual transactions, export price wa s less than the normal value.  
The [US]DOC did not include in that summing up the amounts by 
which, in individual transactions, export price exceeded the normal value.  In other words, the [US]DOC did not offset the amounts attributable to non-dumped transactions against the amounts attributable to dumped transactions.
133 (emphasis added)    
The Panel went on to describe the issue before it as follows: 
The issue presented by Canada's Article 2.4.2 claim is whether it was 
permissible for the [US]DOC to not make such offsets when 
calculating the margin of dumping for each producer/exporter.  In 
other words, we must decide whether the [US]DOC was permitted to sum only the amounts derived from [transaction-to-transaction] 
comparisons showing dumping, or whether it was required to also 
include the amounts derived from comparisons involving non-
dumped transactions in that  aggregation .
134 (footnote omitted; 
emphasis added) 
83. At the oral hearing, the United States did not contest that it aggregated the results of the 
transaction-to-transaction comparisons.  However,  it explained that the aggregation was not 
performed by the USDOC for purposes of establishing the margin of dumping under Article 2.4.2, 
but, rather, to determine whether the margin of dumping exceeded the  de minimis   level for purposes 
of Article 5.8.  We find it difficult to reconcile th is explanation with the USDOC's approach in the 
Section 129 Determination.  The Section 129 Determination plainly shows that the USDOC 
aggregated the results of the individual transacti on-to-transaction comparisons.  Indeed, according to 
the Section 129 Determination, the USDOC determined an overall margin of dumping for each 
exporter and an overall "all others  rate", both of which it labe lled "weighted-average margin".135  The 
use of aggregation is confirmed in the description provided by the United States in its appellee's submission of how the USDOC calculated the marg ins of dumping in the Section 129 Determination: 
                                                     
 
133Panel Report, para. 5.16. 
134Ibid.  
135See Section 129 Determination, p. 22645.  WT/DS264/AB/RW 
 Page 33 
 
 
[The USDOC] compared each export transaction to the most appropriate normal value transaction, based on the [USDOC]'s matching criteria, to determine whether it was sold at less than normal value.  For comparisons for which the U.S. sale was made at less than normal value, the results were aggregated  and divided by 
the total of the respondent company's U.S. sales to determine whether 
the dumping margin for that respondent was above the de minimis  
level.
136 (emphasis added) 
84. Therefore, the Section 129 Determination invol ved a two-step process:  (i) a comparison of 
normal value and export prices on a transaction-specific basis;  and (ii) the aggregation of the results 
of those transaction-specific comparisons in which export price was less than normal value "when calculating the margin of dumping for each respondent foreign producer or exporter."
137  The results 
of the transaction-specific comparisons in which ex port prices exceeded the normal-value price were 
disregarded, as they were not included in the aggregation.138  Zeroing thus occurred during the second 
step in the process when the tran saction-specific comparisons were aggregated.  Accordingly, the 
issue before us in this appeal is whether it is consistent with Article 2.4.2 of the  Anti-Dumping 
Agreement   for an investigating authority to disregar d the results of those transaction-specific 
comparisons in which export prices exceeded normal value, when aggregating the results of those 
comparisons for purposes of establishing the ma rgins of dumping for each respondent foreign 
producer or exporter, under the transaction-to-transaction comparison methodology.139 
2. Article 2.4.2 of the  Anti-Dumping Agreement  
85. Having identified the issue before us, we turn to Article 2.4.2 of the  Anti-Dumping 
Agreement .  Our examination will begin with the first sente nce of that provision, which is directly at 
issue in this appeal.  We will then address the second sentence of Article 2.4.2.  Although the 
comparison methodology provided in the second sen tence was not applied in the Section 129 
Determination, both the United States and the Panel drew guidance from it for their interpretation of 
the first sentence.  Finally, we will address the context provided by other provisions of the Anti-
                                                      
136United States' appellee's submissi on, para. 11.  The manner in wh ich the USDOC proceeded in the 
Section 129 Determination is similar to the description of the transaction-to-transaction comparison methodology set out in A Handbook on Anti-Dumping Investigations , written by the WTO Secretariat.  
According to the Handbook , when there is more than one export tr ansaction subject to the investigation, 
multiple comparison results under the transaction-to-t ransaction comparison methodology are aggregated in 
order to arrive at "one margin of dumping for the subject product". (J. Czako, J. Human and J. Miranda, A 
Handbook on Anti-Dumping Investigations  (World Trade Organization, 2003), pp. 127-130)  
137Panel Report, para. 5.16. 
138"Aggregation" in this Report refers to the calculation of the absolute amount of dumping.  This 
amount is placed in the numerator when calculating the margins of dumping as a percentage of the total value of 
export transactions.  It is undisput ed that the USDOC included the value of all export transactions in the 
denominator.  The issue before us relates to the in clusion of all comparison results in the numerator.  
139Panel Report, para. 5.66. WT/DS264/AB/RW 
Page 34  
 
Dumping Agreement  and the GATT 1994, the object and purpose,  and certain historical materials 
referred to by the United States and the Panel. 
86. Article 2.4.2 provides : 
Subject to the provisions governing fair comparison in paragraph 4, 
the existence of margins of dumping during the investigation phase shall normally be established on the basis of a comparison of a 
weighted average normal value  with a weighted average of prices of 
all comparable export transactions  or by a comparison of normal 
value  and export prices  on a transaction-to-transaction basis.  A 
normal value established on a weighted average basis may be compared to prices of individual export transactions if the authorities 
find a pattern of export prices which differ significantly among 
different purchasers, regions or time periods, and if an explanation is provided as to why such differences cannot be taken into account appropriately by the use of a wei ghted average-to-weighted average 
or transaction-to-transaction comparison. (emphasis added) 
This provision establishes three methodologies that i nvestigating authorities may use to calculate the 
"margins of dumping during the i nvestigation phase".  The first sentence sets out two comparison 
methodologies (weighted average-to-weighted average and transaction-to-transaction) involving symmetrical comparisons of normal value and export prices.  These two methodologies "shall normally" be used by investigating authorities to establish margins of dumping.  The second sentence 
of Article 2.4.2 sets out a third methodology (weighted average-to-transaction), which involves an 
asymmetrical comparison and may be used only in excep tional circumstances.  It may be used only if 
the following two conditions are met:  (i) "the au thorities find a pattern of export prices which differ 
significantly among different purchasers, regions or time periods";  and (ii) "an explanation is 
provided as to why such differences cannot be take n into account appropriately by the use of a 
weighted average-to-weighted average or transaction-to-transaction comparison."   
(a) The First Sentence of Article 2.4.2 
87. Turning to the transaction-to-transaction methodolo gy, Article 2.4.2 provides that "margins of 
dumping" may be established "by a comparison of no rmal value and export prices on a transaction-to-
transaction basis".  The reference to "export prices"  in the plural suggests that the comparison will 
generally involve multiple transactions, as was the c ase in the anti-dumping investigation before us.  
At the same time, the reference to "a comparis on" in the singular suggests an overall calculation 
exercise involving aggregation of these multiple transactions.  The transaction-specific results are mere steps in the comparison process.  This tallies w ith the term "basis" at the end of the sentence, 
which suggests that these individual transaction comparisons are not the final results of the  WT/DS264/AB/RW 
 Page 35 
 
 
calculation, but, rather, are inputs for the overall calculation exercise.140  Thus, the text of Article 2.4.2 
implies that the calculation of a margin of dumping using the transaction-to-transaction methodology 
is a multi-step exercise in which the results of transaction-specific comparisons are inputs that are 
aggregated in order to establish the margin of dumping of the product under investigation for each 
exporter or producer.  Contrary to the United States' submission141, the results of the transaction-
specific comparisons are not, in themselves, "margins of dumping".   
88. Furthermore, the reference to "export prices" in the plural, without further qualification, 
suggests that all of the results of the transacti on-specific comparisons should be included in the 
aggregation for purposes of calculating the margins of dumping.142  In addition, the "export prices" 
and "normal value" to which Article 2.4.2 refe rs are real values, unless conditions allowing an 
investigating authority to use other values are met.143  Thus, in our view, zeroing in the transaction-to-
transaction methodology does not conform to the requireme nt of Article 2.4.2 in that it results in the 
real values of certain export transacti ons being altered or disregarded.  
89. This interpretation is consistent with prev ious Appellate Body stat ements concerning the 
other methodology set out in the first sentence of Article 2.4.2, namely, the weighted average-to-
weighted average comparison methodology.  We recall that the Appellate Body has held, in 
connection with the weighted average-to-weighted  average comparison methodology, that, "[i]f an 
investigating authority has chosen to undertake multiple comparisons, the investigating authority 
necessarily has to take into account the results of  all  those comparisons in order to establish margins 
of dumping for the product as a whole under Article 2.4.2."144  Both methodologies set out in the first 
sentence of Article 2.4.2 fulfil the same function, namely, establishing "the existence of margins of 
dumping".  As Canada pointed out before the Pane l, the grammatical construction of this sentence 
strongly confirms "that the term 'margins of dumpin g' could not have different meanings for each of 
the two calculation methodologies to which it applies because that term appears unmodified in the 
                                                      
140The European Communities emphasizes this point in its third participant's submission, arguing that 
"[t]he word 'basis' indicates that there is one thing (one  or more transaction-to-transaction juxtapositions) that is 
an underlying support for something else (a margin of dumping)."  It adds that, although "in a first step of the 
calculation, there may be one or more transaction-to-tra nsaction juxtapositions. ... [U] ltimately, in a subsequent 
step of the calculation, ... there is 'a comparison' (that is, a single compar ison) of 'normal value' (also in the 
singular) and export prices, which ... re quires an aggregation of all intermediate results established in the first 
step of the calculation." (European Communities' third participant's submission, para. 12) (footnote omitted)) 
141United States' appellee's submission, para. 52. 
142The United States has not asserted that an investigating authority could limit its examination to some 
export transactions under the trans action-to-transaction methodology, rather than examining all of them. 
143Article 2.2 allows investigating authorities, under  certain conditions, to use constructed normal 
value.  Article 2.3 permits the use of constr ucted export prices under certain conditions. 
144Appellate Body Report, US – Softwood Lumber V , para. 98. (original emphasis) WT/DS264/AB/RW 
Page 36  
 
sentence in question."
145  The disjunctive "or", which is placed between the weighted average-to-
weighted average and transaction-to-transacti on comparison methodologies, while denoting the 
existence of alternative means, do es not sever the logical relationship between the term "margins of 
dumping" and the transaction-to-transaction methodol ogy, which is provided precisely to establish 
those margins.  This indicates that the term "margi ns of dumping" has the same meaning regardless of 
which of the two methodologies in the first sentence of  Article 2.4.2 is used to establish them.  In 
other words, it is a unitary concept and the tw o methodologies provided in the first sentence of 
Article 2.4.2 are alternative means to capture it. 
90. The United States and the Panel consider that the term "margins of dumping" must have a 
different meaning when applied to the transacti on-to-transaction comparison methodology because of 
the absence of the phrase "all comparable export transac tions", which appears in only the first part of 
the first sentence of Article 2.4.2, dealing with the weighted average-to-w eighted average comparison 
methodology.146  In the Panel's view, "[t]his difference in  language reflects a fundamental distinction 
between the nature of the [weighted average-to-w eighted average] and [transaction-to-transaction] 
comparison methodologies."147   
91. We do not agree with the conclusions that the United States and the Panel draw from the 
phrase "all comparable export transactions".  The A ppellate Body has recognized that Article 2.4.2 
allows investigating authorities to use "multiple av eraging" under the weighted average-to-weighted 
average comparison methodology.148  In the case of that methodology, transactions may be divided 
into groups, for instance, according to model or pr oduct type.  Because of this possibility, the phrase 
"all comparable export transactions" implies that tw o requirements must be met when investigating 
authorities make the comparison by grouping transactions and averaging them.  First, they must include in each group only those export transactions that are "comparable".  Secondly, they must 
include "all" comparable export transactions corr esponding to that group, and none of these export 
transactions may be left out arbitrarily.  Such a scenario does not arise in the same way when 
comparisons are made under the transaction-to-tra nsaction comparison methodology.  As transactions 
are not divided into groups under the transaction-to-transaction comparison methodology
149, the 
                                                      
145Canada's appellant's submission, para. 39 (referring to Panel Report, footnote 28 to para. 5.20). 
146United States' appellee's submission, para. 55 (referring to Panel Report, para. 5.21). 
147Panel Report, para. 5.30. 
148Appellate Body Report, US – Softwood Lumber V , para. 81.  The Appellate Body added that "the 
results of the multiple comparisons at the sub-group le vel are, however, not 'margins of dumping' within the 
meaning of Article 2.4.2." (para. 97) 
149However, product types could be used as a criterion in selecting which domestic transaction to match 
with a particular export transaction when carrying out a transaction-to-transaction comparison, but the initial 
comparison is not made on a sub-group basis.  WT/DS264/AB/RW 
 Page 37 
 
 
phrase "all comparable export transactions" is not pe rtinent to that methodology and, consequently, no 
inference may be drawn from the fact that this phrase  does not appear in relation to the transaction-to-
transaction methodology.  Accordingly, we disagree with  the United States' and the Panel's view that 
the phrase "all comparable export transactions" would be deprived of effect and meaning if zeroing 
were prohibited under the transaction-to -transaction comparison methodology.  
92. Furthermore, we note that the United States made a similar argument in  US – Zeroing (EC)   
to support its contention that the term "margins of dumping" had a different meaning in Article 9.3 of 
the  Anti-Dumping Agreement .150  The United States emphasized that the phrase "all comparable 
export transactions", which appears in Article 2.4. 2 in connection with the weighted average-to-
weighted average comparison methodology, does not appear in Article 9.3.  This argument was 
rejected by the  Appellate Body, which found that  the USDOC's use of zeroing in the underlying 
assessment reviews was inconsistent with Article 9.3.151  The Appellate Body underscored that its 
previous finding concerning the inconsistency of  zeroing under the weighted average-to-weighted 
average comparison methodology "was based not only on Article 2.4.2, first sentence, but also on the 
context found in Article 2.1 of the  Anti-Dumping Agreement ."152     
93. The use of zeroing under the transaction-to-transaction comparison methodology also raises 
an issue concerning the relationship between the two methodologies set out in the first sentence of 
Article 2.4.2 of the Anti-Dumping Agreement .  If zeroing were allowed under the transaction-to-
transaction comparison methodology, while being im permissible under the weighted average-to-
weighted average methodology, having recourse to on e or the other methodology provided in the first 
sentence of Article 2.4.2 could produce results that  are systematically different.  Canada points out 
that "[t]he Panel's conclusion that zeroing is prohibited under the [weighted average-to-weighted 
average] methodology, but permitted under the [tra nsaction-to-transaction] methodology, would mean 
that the choice of a calculation methodology could be determinative as to whether dumping exists and 
could create substantial differences in the size of 'margins of dumping'".153  We share Canada's 
concerns.  The first sentence of Article 2.4.2 set s out the two methodologies that "shall normally" be 
used by investigating authorities to establish "mar gins of dumping".  Although the transaction-to-
transaction and weighted average-to-weighted aver age comparison methodologies are distinct, they 
fulfil the same function.  They are also equivalent  in the sense that Article 2.4.2 does not establish a 
hierarchy between the two.  An investigating authority may choose between the two depending on 
                                                      
150Appellate Body Report, US – Zeroing (EC) , para. 34. 
151Ibid., para. 135. 
152Ibid., para. 126. 
153Canada's appellant's submission, para. 62. WT/DS264/AB/RW 
Page 38  
 
which is most suitable for the particular investigation.  Given that the two methodologies are 
alternative means for establishing "margins of dumpi ng" and that there is no hierarchy between them, 
it would be illogical to interpret the transacti on-to-transaction comparison methodology in a manner 
that would lead to results that are systematica lly different from those obtained under the weighted 
average-to-weighted average methodology.  
94. In sum, the results of the transaction-specific comparisons cannot be c onsidered "margins of 
dumping" within the meaning of Article 2.4.2.  The "margins of dumping" established under the 
transaction-to-transaction comparison methodology provided in Article 2.4.2 result from the 
aggregation of  the transaction-specific comparisons .  Article 2.4.2 does not permit an investigating 
authority, when aggregating the results of transac tion-specific comparisons, to disregard transactions 
in which export price exceeds normal value. 
(b) The Second Sentence of Article 2.4.2 
95. We turn to the second sentence of Article 2.4.2, on which the Panel relied as context.
154  We 
recall that the comparison methodology provided in  the second sentence of Article 2.4.2 was not the 
one applied in the Section 129 Determination.155  The second sentence of Article 2.4.2 provides:  
A normal value established on a weighted average basis may be 
compared to prices of individual export transactions if the authorities find a pattern of export prices which differ significantly among different purchasers, regions or time periods, and if an explanation is 
provided as to why such differences cannot be taken into account 
appropriately by the use of a wei ghted average-to-weighted average 
or transaction-to-transaction comparison. 
96. The Panel placed much emphasis on the results that  would obtain if the interpretation of the 
term "margins of dumping", devel oped by the Appellate Body in pr evious disputes dealing with the 
weighted average-to-weighted average compar ison methodology, were extended to the other 
methodologies provided in Article 2.4.2.  This  reasoning assumes that a finding that zeroing is 
prohibited under the transaction-to-transaction co mparison methodology would imply a prohibition of 
zeroing under the weighted average-to-transaction methodology, and that this would undermine the 
effective interpretation of the entire provision.  The Panel was persuaded by the United States' 
submission that, if zeroing were prohibited also  under the weighted average-to-transaction 
comparison methodology, that methodology would yi eld results that would be mathematically 
equivalent to those obtained by applying the weighted average-to-weighted average methodology, 
                                                     
 
154Panel Report, para. 5.31. 
155See supra , para. 82.  WT/DS264/AB/RW 
 Page 39 
 
 
rendering the second sentence of Article 2.4.2  inutile .156  Such a result, according to the Panel, 
undermines Canada's argument that the Appellate Bo dy's interpretation of the term "margins of 
dumping" applies not only to the weighted aver age-to-weighted average comparison methodology, 
but also to the other methodologies provided in Article 2.4.2.  The United States provided a hypothetical example to support its argument, which it has also submitted on appeal.
157  The Panel 
"accept[ed]" the United States' mathematical equiva lence argument, noting that "Canada and certain 
third parties ha[d] provided convolut ed explanations of how the [weighted average-to-transaction] 
comparison methodology might be applied, without  zeroing, so as to give results that are 
mathematically different from the results of the [w eighted average-to-weighted average] comparison 
methodology."158 
97. We disagree with the Panel's analysis of the "m athematical equivalence" argument for several 
reasons.  First, the United States acknowledges that  it has never applied the methodology provided in 
the second sentence of Article 2.4.2159, nor has it provided examples of how other WTO Members 
have applied this methodology.160  Thus, the United States' argument on "mathematical equivalence" 
rests on a non-tested hypothesis.161  Secondly, we note that the methodology in the second sentence of 
Article 2.4.2 is an exception.  Article 2.4.2 clear ly provides that investigating authorities "shall 
normally" use one of the two methodologies set out in the first sentence of that provision.  Neither the participants, nor the third participants, disagree with  this description of the relationship between the 
two sentences of Article 2.4.2.  Being an exception, the comparison methodology in the second 
sentence of Article 2.4.2 (weighted average-to-tra nsaction) alone cannot determine the interpretation 
of the two methodologies provided in the first sentence, that is, transaction-to-transaction and weighted average-to-weighted average.   
98. Thirdly, the United States' "mathematical e quivalence" argument assumes that zeroing is 
prohibited under the methodology set out in the second sentence of Article 2.4.2.  The permissibility 
of zeroing under the weighted average-to-transac tion comparison methodology provided in the second 
sentence of Article 2.4.2 is not before us in this appeal, nor have we examined it in previous cases.  
We also note that there is considerable uncerta inty regarding how precisely the third methodology 
should be applied.  For exampl e, Canada and Japan suggested that the weighted average-to-
transaction methodology could be applied only to the pa ttern of exports transactions that have prices 
                                                     
 
156Panel Report, paras. 5.33 and 5.52. 
157United States' appellee's submission, para. 78 (Table 1). 
158Panel Report, para. 5.52. 
159United States' response to questi oning at the oral hearing. 
160Neither has Canada, nor the third participants. 
161Canada's appellant's submission, para. 54. WT/DS264/AB/RW 
Page 40  
 
that differ significantly among different purchasers, regions, or time periods.
162  Before the Panel, the 
United States indicated that the USDOC would appl y the weighted average-to-transaction comparison 
methodology to export transactions falling within th e "pricing pattern" and would examine the other 
export transactions using the weighted average- to-weighted average methodology.  The results 
obtained under each methodology would be combined  to establish the margins of dumping for the 
respondent exporters or producers.163  At the oral hearing, however,  the United States failed to explain 
how precisely the results of the two comparison methodologies would be combined, acknowledging 
that it had never applied the weighted average- to-transaction methodology.  These uncertainties, 
which we are not called upon to resolve, undermine the Panel's reasoning based on the "mathematical 
equivalence" argument. 
99. Fourthly, Canada and several th ird participants argued before the Panel that, even assuming 
that zeroing were prohibited also under the weight ed average-to-transaction comparison methodology, 
mathematical equivalence would be limited to a speci fic set of circumstances.  Canada and these third 
participants offered their own hypothetical scenario s showing that the weighted average-to-transaction 
comparison methodology would not yield necessarily the same results as the weighted average-to-
weighted average methodology, even if the prohibiti on to use zeroing were to extend to the former.  
Thailand also explains that the mathematical e quivalence argument works only under very specific 
assumptions, one of them being that the weighted-a verage normal value used in both the weighted 
average-to-weighted average and weighted averag e-to-transaction comparison methodologies be the 
same.164  The Panel rejected these explanations becau se, in its view, they "failed to address the 
[United States'] mathematical equivalence argument on a  ceteris paribus   basis."165  In our view, the 
Panel's approach is misguided.  One part of a provision setting forth a methodology is not rendered  
inutile  simply because, in a specific set of circumstan ces, its application would produce results that 
are equivalent to those obtained from the applica tion of a comparison methodology set out in another 
part of that provision.  In other words, the fact that, under the specific assumptions of the hypothetical 
scenario provided by the United States, the weight ed average-to-transaction comparison methodology 
could produce results that are equivalent to tho se obtained from the application of the weighted 
                                                      
162Canada's closing statement before the Panel, Exhibit CDA-8 submitted by Canada to the Panel;  
Japan's response to Question 44 posed by the Panel, Panel Report, pp. E-70-E-73. 
163United States' response to Question 17 posed by the Panel, Panel Report, pp. E-24-E-25,  
paras. 25-30.  Japan points out that the United St ates anti-dumping regulations provide that the USDOC 
"normally will limit the app lication of the average-to-transaction method to those sales that constitute targeted 
dumping". ( United States Code of Federal Regulations , Title 19, section 351.414(f)( 2) (quoted in Japan's third 
participant's submission, para. 58 (emphasis omitted))   
164Thailand's third participant's submission, para. 33.  Canada and the third participants do not contest 
that mathematical equivalence does result under the specific assumptions used in the hypothetical provided by 
the United States.  
165Panel Report, para. 5.52.  WT/DS264/AB/RW 
 Page 41 
 
 
average-to-weighted average methodology is insuff icient to conclude that the second sentence of 
Article 2.4.2 is thereby rendered ineffective.166  It has not been proven that in all cases, or at least in 
most of them, the two methodologies would produce the same results.  Even if that were the case, it 
would not be sufficient to compel a finding that  zeroing is permissible under the transaction-to-
transaction comparison methodology, because this methodology is not involved in the "mathematical equivalence" argument.   
100. In sum, we find the concerns of the Panel and the United States over the third comparison 
methodology (weighted average-to-transaction) being rendered  inutile   by a prohibition of zeroing 
under the transaction-to-transaction methodology to be overstated.  It c ould be argued, on the 
contrary, that the use of zeroing under the two co mparison methodologies set out in the first sentence 
of Article 2.4.2 would enable investigating au thorities to capture pricing patterns constituting 
"targeted dumping", thus rendering the third methodology  inutile .     
3. Context
 
101. We now turn to the other provisions of the  Anti-Dumping Agreement   and the GATT 1994 
that have been raised as relevant context in order to complete our interpretation of Article 2.4.2.  
Before proceeding, we observe that Article 2.4 of the  Anti-Dumping Agreement , which is the subject 
of a separate claim by Canada, is also part of Artic le 2.4.2, in that Article 2.4.2 is expressly made 
"subject to the provisions governing fair comparison in  paragraph 4 [of Article 2]", as well as possibly 
relevant as context.  We address Article 2.4 when we examine Canada's claim under that provision in 
Section V of this Report.  
(a) Article 2.2 of the  Anti-Dumping Agreement  
102. The United States and the Panel find support for th eir interpretation in Article 2.2 of the  Anti-
Dumping Agreement , which provides: 
                                                      
166It could be argued that in targeted dumping the universe of export transactions constituting the 
"pricing pattern" would be smaller than the total number of export transactions.  Thus, the universe of export 
transactions to which the weighted average-to-transaction comparison methodology applies would be different 
from the universe of transactions examined under the weighted average-to-weighte d average methodology.  In 
these circumstances, the two methodol ogies would not yield equivalent results, except by coincidence.   WT/DS264/AB/RW 
Page 42  
 
When there are no sales of the like product in the ordinary course of trade in the domestic market of  the exporting country or when, 
because of the particular market situation or the low volume of the sales in the domestic market of th e exporting country, such sales do 
not permit a proper comparison, the margin of dumping shall be 
determined by comparison with a comparable price of the like 
product when exported to an appropria te third country, provided that 
this price is representative, or with the cost of production in the country of origin plus a reasonable amount for administrative, selling and general costs and for profits. (footnote omitted) 
According to the Panel, "[i]f the reference in Ar ticle 2.2 to 'margin of dumping' were understood to 
mean a single margin of dumping for the product as a whole", it would mean that "once the conditions 
for use of a constructed normal value were trigge red, a constructed normal value would necessarily be 
used in all aspects of the determination of the margin of dumping for the product as a whole."
167  
103. The United States asserts that such a result would be contrary to the practice of WTO 
Members, which it explains as follows:  "[I]f the home  market sales of a particular model were not in 
the ordinary course of trade, the importing Member might resort to using a constructed normal value 
for that particular model;  however, normal value for other models might still be based on home 
market sales."168  The United States adds that, if the term "margins of dumping" were to refer to the 
product as a whole throughout the Anti-Dumping Agreement , as Canada argues, then investigating 
authorities would be required to use constructed normal value "eve n if the condition precedent for 
using Article 2.2 relates only to 25  of the 100 comparisons."  This , according to the United States, 
would be "inconsistent with the principle that cons tructed normal value is to be used only in limited 
circumstances."169 
104. As Canada170 and several third participants171 point out, there is nothing in the text of 
Article 2.2 that prohibits an investigating authorit y from dividing the product under investigation into 
product types or models.172  Under the weighted average- to-weighted average comparison 
methodology, the prohibition of zeroing in Article 2.4. 2 is triggered, not at the stage of determining 
whether to use a constructed normal value for a specifi c model or type, but, rather, when the results of 
                                                      
167Panel Report, para. 5.61. 
168United States' appellee's submission, para. 74. 
169Ibid., para. 75 (referring to Panel Report, para. 5.62). 
170Canada's statement at the oral hearing. 
171See European Communities' third participant's subm ission, para. 74;  Japan's third participant's 
submission, paras. 81-85;  and Thailand's third participant's submission, para. 51.   
172In the context of Article 2.4.2, the Appellate Body has said that an investigating authority may divide 
the product under investigation into product types or models for purposes of calculating the weighted-average 
normal value and weighted-average export price.  (Appellate Body Report, US – Softwood Lumber V , para. 80)   WT/DS264/AB/RW 
 Page 43 
 
 
the comparisons for each model or type are aggr egated for purposes of establishing the margin of 
dumping for the product under investigation.  Therefore, a prohibition of zeroing under the 
transaction-to-transaction comparison methodology pr ovided in Article 2.4.2 does not limit the ability 
of an investigating authority, when the conditions are met, to use constructed normal value for one 
particular model or type, but not for others.  We fa il to see, therefore, the relevance of Article 2.2 for 
the interpretation of Article 2.4.2 as regards the permissibility of zeroing under the transaction-to-
transaction comparison methodology.   
(b) Articles 5.8, 6.10, and 9.3 of the  Anti-Dumping Agreement  
105. Our interpretation that zeroing is not permis sible when calculating margins of dumping by 
comparing normal value and export prices on a transac tion-to-transaction basis is consistent with 
other provisions of the Anti-Dumping Agreement as well.  For instance, Article 5.8 requires that an 
anti-dumping investigation be terminated if the inv estigating authority determines that the margin of 
dumping is  de minimis , which is then defined as less than two per cent expressed as a percentage of 
the export price.  As the United States recognizes173, a determination under Article 5.8 requires 
aggregation.174   
106. Article 6.10 of the  Anti-Dumping Agreement   states that investigating authorities "shall as a 
rule, determine an individual margin of dumpi ng for each known exporter or producer concerned of 
the product under investigation."  The Panel acknowle dged that this provision "arguably entails a need 
to aggregate the results of the comparisons made in respect of different transactions in order to 
establish 'an individual margin of dumping'  for a particular exporter or producer."175  Nevertheless, the 
Panel reasoned that "the mere fact that Article 6.10 uses the term 'product under investigation' is 
insufficient to conclude that this provision dictat es the use of a particular methodology for calculating 
an overall margin of dumping whereby the numerator of  that margin must include the sum total of all 
(positive and negative) differences between  export prices and the normal value."176  The United States 
adds that "Article 6.10 simply provides that a Member must calculate a margin of dumping for each individual exporter or producer – as opposed to one margin for all exporters or producers [but] 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."
177   
                                                      
173United States' response to questi oning at the oral hearing. 
174Thailand's third participant's submission, para. 29. 
175Panel Report, para. 5.25. 
176Ibid.  
177United States' appellee's submission, para. 51 (referring to Appellate Body Report,  
Mexico – Anti-Dumping Measures on Rice , paras 208 and 217;  and Panel Report, para. 5.25). WT/DS264/AB/RW 
Page 44  
 
107. We agree with the United States and the Panel that Article 6.10 does not expressly require 
taking into account both negative and positive compar ison results from transactions relating to a given 
exporter or producer.  However, it does not express the reverse proposition either.  Rather, the import 
of Article 6.10 is to reinforce the notion that the "margins of dumping" are the result of an aggregation, in this case, of transaction-specific comparisons.  
108. We find further contextual guidance in Article 9.3.   This provision states that "[t]he amount of 
the anti-dumping duty shall not exceed the margin of dumping as established under Article 2."  Thus, 
Article 9.3 sets the margins of dumping determined  under Article 2 as a ceiling for the total amount of 
anti-dumping duty that may be imposed on i ndividual exporters or foreign producers.
178  L i k e  
Articles 5.8 and 6.10, this provision suggests that the margin of dumping is the result of an overall aggregation and does not refer to the results of th e transaction-specific comparisons.  Indeed, we do 
not see how the margin of dumping could operate as a ceiling under Article 9.3 if the result of each 
transaction-by-transaction comparison is deemed to  be a margin of dumping as the United States 
suggests.   
109. In our view, interpreting the term "margins of  dumping" in Article 2.4.2 as referring to the 
aggregation of the results of individual transacti on-to-transaction comparisons fits well into the 
context of the other provisions of the  Anti-Dumping Agreement , including Articles 5.8, 6.10, and 9.3.  
In this regard, we agree with New Ze aland that "[t]he provisions of the Anti-Dumping Agreement  
work in an integrated fashion", and that an interp retation of Article 2.4.2 "cannot be considered in 
isolation from the rest of the  Anti-Dumping Agreement ."
179  Articles 5.8, 6.10, and 9.3 do not support 
the United States' interpretation of Article 2.4.2 th at the results of transaction-specific comparisons 
are "margins of dumping".    
(c) Prospective Normal-Value Systems – Article 9.3.2 of the  Anti-
Dumping Agreement 
110. Turning to the Panel's concerns relati ng to Article 9.3, we note that the Anti-Dumping 
Agreement   allows WTO Members to assess duties either prospectively or retrospectively.  According 
to the Panel, interpreting the term "margin of dumping" in the manner suggested by Canada would 
lead to absurd results under th e prospective duty assessment system because it would mean that "one 
importer could request a refund on the basis of a margin of dumping calcula ted by reference to non-
dumped transactions made by other importers."180 
                                                      
178Appellate Body Report,  US – Zeroing (EC) , para. 130. 
179New Zealand's third participant's submission, para. 3.35. 
180Panel Report, para. 5.57.  WT/DS264/AB/RW 
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111. Article 9.3.2 of the  Anti-Dumping Agreement   applies when investigating authorities assess 
duties prospectively.  It provides: 
When the amount of the anti-dumping duty is assessed on a 
prospective basis, provision shall be made for a prompt refund, upon 
request, of any duty paid in ex cess of the margin of dumping. 
112. As several third participants have indicated181, the Panel confuses duty collection at the time 
of importation with the determination of the final margin of dumping and assessment of final duties in 
administrative reviews.  The margin of dumping is  established during the investigation phase.  Once 
an anti-dumping order has been issued, Article 9.2 allo ws an investigating authority to collect an anti-
dumping duty in "the appropriate amounts in each case" on all subsequent entries of that product.  
Under a prospective normal-value system, the anti- dumping duty collected at the time of importation 
is subject to review and importers have the right to request a refund when the duties paid exceed the 
actual margin of dumping, pursuant to Article 9.3.2 of the Anti-Dumping Agreement .182  Accordingly, 
the operation of prospective normal-value systems has no bearing on the permissibility of zeroing under the transaction-to-transaction comparison methodology in Article 2.4.2.      
(d) Article VI of the GATT 1994 
113. The United States takes issue w ith Canada's reliance on Article VI of the GATT 1994 to 
support its argument that "margins of dumping" must  be established for the "product as a whole".  
According to the United States, the Panel identifie d several instances in Article VI where the term 
"product" "is used in a manner that refers to a single import transaction, as opposed to 'the entire 
universe of exported product subject to an anti-dumping investigation.'"
183  As Canada pointed out at 
                                                      
181See European Communities' third participant's submission, para. 69;  and Thailand's third 
participant's submission, para. 44.  
182In US – Zeroing (EC) , the Appellate Body stated that:  
... under the methodology currently a pplied by the USDOC to assess anti-
dumping duties, the aggregation of the results of the multiple comparisons 
performed at an intermediate stage might result in a negative value, for a 
given importer, if zeroing is not allowed.  Of course, this would not mean that the authorities would be required under the  Anti-Dumping Agreement   
or Article VI of the GATT 1994 to compensate an importer for the amount 
of that negative value (that is, when export prices exceed normal value). 
(Appellate Body Report, US – Zeroing (EC) , footnote 234 to para. 131) 
Although that case involved a retrospective system, the r easoning is equally applicable to prospective normal-
value systems.   
183United States' appellee's submission, para. 18 (quoting Panel Report, para. 5.23).  The Panel referred 
to Article VI:2 ("may levy on any dumped product an an ti-dumping duty");  Article VI:3 ("[n]o countervailing 
duty shall be levied on any product";  Article VI:6( a) ("[n]o Member shall levy any anti-dumping or 
countervailing duty on the importation of any product");  and Article VI:6( b) ("a Member to levy an anti-
dumping or countervailing duty on the importation of any product"). WT/DS264/AB/RW 
Page 46  
 
the oral hearing, in its Report in  US – Softwood Lumber V , the Appellate Body referred to 
Article VI:1 and 2 of the GATT 1994, together with Article 2.1 of the Anti-Dumping Agreement , to 
interpret the term "margins of dumping" in Article  2.4.2.  The Appellate Body did not address the 
meaning of "product" in the other paragraphs of Ar ticle VI or in other provisions of the GATT 1994.   
114. In addition, the United States argues that extending the phrase "product as a whole" to include 
all import transactions represents "a dramatic depart ure from the original sense in which the Appellate 
Body used the phrase."
184  According to the United States, "the Appellate Body originally adopted the 
phrase to distinguish the margin of dumping for a 'product' from dumped amounts found to exist for 
individual sub-products based on multiple [weighted average-to-w eighted average] comparisons."185  
New Zealand makes a similar argument, stating that  the phrase "product as a whole" was used by the 
Appellate Body in previous cases to refer to "the scope  of the product subject to the investigation", 
while, in this case "there is no suggestion of 'model zeroing'".186  We note that in US – Softwood 
Lumber V , the Appellate Body referred generally to the use of zeroing in relation to the use of 
"multiple comparisons" when it stated that, "[i]f an  investigating authority has chosen to undertake 
multiple comparisons , the investigating authority necessarily has to take into account the results of  
all  those comparisons in order to establish margins of dumping for the product as a whole under 
Article 2.4.2."187  We fail to see, therefore, how concluding  that zeroing is prohibited in respect of 
aggregation under the transaction-to-transac tion comparison methodology would represent a 
"dramatic departure" from earlier d ecisions by the Appellate Body. 
(e) Article II of the GATT 1994 
115. The United States also points to Article II of the GATT 1994 arguing that, if the references to 
the "product" in that provision were understood to  mean "the product as a whole", "[i]t would be 
permissible to impose a tariff in excess of the bound ra te of duty on particular entries so long as it was 
'offset' by the tariff on other entries such that the tariff for the 'product as a whole' does not exceed the 
bound rate."188  This result, the United States adds, "would be extremely surprising to WTO 
Members".189  Article II of the GATT 1994 was not at i ssue in previous appeals relating to zeroing 
and there is no basis in the Appellate Body's  analysis of certain provisions of the  Anti-Dumping 
Agreement   in those appeals for the United States to draw the implications for Article II and WTO 
                                                      
184United States' appellee's submission, para. 28. 
185Ibid.  
186New Zealand's third participant's submission, para. 3.29. (original underlining) 
187Appellate Body Report, US – Softwood Lumber V , para. 98. (original emphasis;  underlining added) 
188United States' appellee's submission, para. 23. 
189Ibid.   WT/DS264/AB/RW 
 Page 47 
 
 
Members' tariff Schedules that it seeks to draw.  We also note that WTO Members' Schedules base 
their product categorization on the Harmonized  Commodity Description and Coding System 
(the "Harmonized System") and specify their tari ff commitments by product subheadings.  There is no 
indication in previous Appella te Body reports addressing the  Anti-Dumping Agreement   or in the 
Harmonized System to indicate that levying tariffs in excess of a bound rate on the importation of a product could be "offset" or justified by levying tariffs below the bound rate on another importation of 
that product.  Nor is there any basis for an anal ogy between establishing the margin of dumping for 
the "product as a whole" under Article VI:2 of the GATT 1994 and the  Anti-Dumping Agreement , on 
the one hand, and the application of a tariff on a product above the bound rate within the meaning of 
Article II of the GATT 1994, on the other hand. 
116. Thus, our examination of the relevant context in the  Anti-Dumping Agreement   and the 
GATT 1994  does not support the United States' interpreta tion that the use of zeroing is permissible 
under the transaction-to-transaction comparis on methodology in Article 2.4.2 of the Anti-Dumping 
Agreement . 
4. "Symmetry" between the Determination of Dumping and the Injury and 
Causation Analyses  
117. New Zealand emphasizes that the concern with  zeroing in previous disputes focused on the 
lack of symmetry between the transactions in cluded in the dumping determination and those 
considered in the injury determination.190  According to New Zealand,  the use of zeroing in the 
context of the transaction-to-transaction compar ison methodology does not raise concerns provided 
that the treatment of transactions in which the expo rt price exceeds normal value is symmetrical in the 
dumping determination and in the injury, causation, and non-attribution analyses.191  The approach 
advocated by New Zealand is not before us in this appeal.192  The Section 129 Determination, which is 
the measure before us, concerns the determination of dumping exclusively and does not address injury 
or causation.193  Nor did the United States suggest that  it followed the approach advocated by New 
                                                      
190New Zealand's third participant's submission, para. 3.33. 
191It is unclear whether, under New Zealand's approach, account is taken of export prices above normal 
value in the causation or non-attribution analysis, or both.  In addition, at the oral hearing, New Zealand seemed 
to suggest that these transactions would be relevant when applying the "lesser duty" rule pursuant to Article 9.1. 
192We therefore express no views on whether such an approach is consistent with the obligations under 
the Anti-Dumping Agreement . 
193Canada challenged the injury and causation determina tions in separate disputes.  (See Request for 
the  Establishment of a Panel by Canada, United States – Investigation of the International Trade Commission in 
Softwood Lumber from Canada , WT/DS277/2, 4 April 2003;  Request for the Establishment of a Panel by 
Canada, United States – Investigation of the International Trade Commission in Softwood Lumber from Canada , 
Recourse to Article 21.5 of the DSU by Canada , WT/DS277/8, 15 February 2005) WT/DS264/AB/RW 
Page 48  
 
Zealand.
194  Thus, New Zealand's argument about symmet ry is irrelevant for purposes of determining 
whether the use of zeroing by the USDOC is consistent with Article 2.4.2.  
5. Object and Purpose of the  Anti-Dumping Agreement  
118. We turn to examine what guidance is provided by the object and purpose of the  Anti-
Dumping Agreement   for the interpretation of Article 2.4.2.  The  Anti-Dumping Agreement   does not 
contain a preamble or an explicit indication of its object and purpose.  Neither participant referred to 
the object and purpose in its written submission.  At the oral hearing, Canada and certain third participants indicated that the object and purpose of the  Anti-Dumping Agreement   could be discerned 
from Article 1 of the  Anti-Dumping Agreement .  The United States and New Zealand, in contrast, 
said guidance could be found in Article VI of the GATT 1994.  We do not consider it necessary for purposes of resolving the issue before us on appeal to engage in an in-depth an alysis of the object and 
purpose of the  Anti-Dumping Agreement .   
6. Historical Background
 
119. Finally, we examine the "historical" arguments put forward by the United States, which were 
also examined by the Panel.  The United States referred to a 1960 Second Report by the Group of 
Experts on Anti-Dumping and Countervailing Duties195 (the "Group of Experts Report") that, 
according to the Panel, "clearly envisaged th e calculation of transaction-specific margins of 
dumping."196  This, in the Panel's view, "would suggest that the Group of Experts did not consider that 
there was anything in the definition of dumping set forth in Article VI of the  GATT   [1947] that would 
preclude the calculation of such transaction-specific margins", whic h "in turn would suggest that the 
GATT Contracting Parties would have  disagreed with Canada's reliance on the same provision of the  
                                                      
194Before the Panel, the United States explained that "[i]n calculating an overall margin of dumping, the 
United States fairly reflects the total quantity of all imports of the product under consideration ... in the 
denominator of its calculations".  It then explained that, if the transactions with an export price above normal 
value were to be taken into account in the injury dete rmination, it would result in "'double-counting' of the[] 
non-dumped transactions". (United States' response to Question 19 posed by the Panel, Panel Report, pp. E-27-
E-28, paras. 40-41.) At the oral hearin g in this appeal, the United States qualified its response to the Panel, by 
stating that the Section 129 Determination was the first time that the USDOC had applied the transaction-to-
transaction comparison methodology and that it was unclear how the United States International Trade 
Commission would treat the transactions with export pr ices above normal value in the injury and causation 
analyses.     
195Group of Experts Report, supra , footnote 44. 
196Panel Report, para. 5.64.   WT/DS264/AB/RW 
 Page 49 
 
 
GATT 1994   to support its argument that 'margins of du mping' must always be  calculated 'for the 
product as a whole'  by aggregating all transaction-specific comparisons."197   
120. On appeal, Canada asserts that "the Panel's dubious reliance on a single line in a GATT report 
as negotiating history should be afforded no weight as it is already clear that the ordinary meaning of Article 2.4.2 read in its context prohibits zeroing."
198  The United States points to various historical 
materials including, in addition to the 1960 Group of  Experts Report, two pre-WTO panel reports that 
dealt with the issue of zeroing199 and several proposals submitted dur ing the Uruguay Round, which 
allegedly demonstrate that zeroing is not prohibited by the  Anti-Dumping Agreement .200  The United 
States adds that, throughout the history of th e GATT, it was recognized that zeroing was allowed 
under Article VI of the GATT 1947.  This provision, the United States emphasizes, was not modified during the Uruguay Round.
201 
121. The same historical materials submitted in these Article 21.5 proceedings were also raised by 
the United States before the Appellate  Body in the original dispute.202  The Appellate Body stated in 
response that "[t]he material to which the United States refer[red] does not ... resolve the issue of 
whether the negotiators of the  Anti-Dumping Agreement   intended to prohibit zeroing."203  T h e  
Appellate Body noted that, "[i]n any event", it ha d "concluded, based on the ordinary meaning of 
Article 2.4.2 read in its context, that zeroing is prohibited when establishing the existence of margins 
of dumping under the weighted-average -to-weighted-average methodology."204  In our view, the 
historical materials referred to by the Panel and the United States are of limited relevance.  The Group 
of Experts Report dates back to 1960.  Both pr e-WTO panel reports examined the issue under the 
                                                      
197Panel Report, para. 5.64.  We note that the Group of Experts Report states that, although the ideal 
method to determine dumping and injury  was in respect of each single im portation of the product concerned, 
this "was clearly impracticable, particularly as regards in jury". (Group of Exports Report, para. 8 (reproduced in 
Panel Report, para. 5.63))  The fact that making a de termination of dumping and in jury for each importation was 
not considered practical could also be seen as implying that the Group of Experts did not, in fact, endorse transaction-specific determinations of dumping.   
198Canada's appellant's submission, para. 59. 
199GATT Panel Report, EC – Audio Cassettes , para. 360 (unadopted), circulated 28 April 1995;  GATT 
Panel Report, EEC – Cotton Yarn , para. 502, adopted 30 October 1995. 
200United States' appellee's submission, paras. 30-40.  
201Ibid., paras. 37-39. 
202Appellate Body Report, US – Softwood Lumber V , para. 107 and footnote 168 thereto.  The United 
States argued in the original Appellate  Body proceedings that reco urse to the circumstances  of the conclusion of 
the  Anti-Dumping Agreement   was appropriate as a supplementary means of interpretation under Article 32 of 
the  Vienna Convention on the Law of Treaties (the " Vienna Convention "). (Done at Vienna, 23 May 1969, 1155 
UNTS 331;  8 International Legal Materials 679)  At the oral hearing in those proceedings, the United States 
acknowledged that the historical materials did not constitute "travaux préparatoires".  
203Appellate Body Report, US – Softwood Lumber V , para. 108. 
204Ibid.  WT/DS264/AB/RW 
Page 50  
 
provisions of the  Tokyo Round Anti-Dumping Code , which did not contain a provision equivalent to 
Article 2.4.2 of the  Anti-Dumping Agreement .  The latter Agreement entered into force in 1995, as 
part of the Uruguay Round results, long after the 1960 Group of Experts Report and after the panels 
referred to by the United States and the Panel had been established.
205  Furthermore, one of the two 
panel reports was not adopted.  Finally, the negotia ting proposals referred to by the United States are 
inconclusive and, in any event, reflected the positions of some, but not all, of the negotiating 
parties.206  In sum, the historical materials do not provide any additional guidance for the question 
whether zeroing under the transaction-to-transacti on comparison methodology is consistent with 
Article 2.4.2 of the  Anti-Dumping Agreement . 
7. Conclusion on Canada's Claim under Article 2.4.2  
122. On the basis of the above analysis, we c onclude that zeroing is not permitted under the 
transaction-to-transaction methodology set out in the firs t sentence of that provision.  The "margins of 
dumping" established under this methodology are the results of the aggregation of the transaction-
specific comparisons of export prices and normal value.   In aggregating these results, an investigating 
authority must consider the results of all of th e comparisons and may not disregard the results of 
comparisons in which export prices are above normal value.   
123. We have found that Article 2.4.2 does not admit an interpretation that would allow the use of 
zeroing under the transaction-to-transaction comparison methodology.  Therefore, the contrary view is 
not a permissible interpretation of Article 2.4.2 within the meaning of Article 17.6(ii) of the  Anti-
Dumping Agreement .207     
124. For these reasons, we  reverse   the Panel's finding, in paragra ph 5.66 of the Panel Report, that 
"the [US]DOC was entitled not to offset the non-dump ed transactions against the dumped transactions 
when calculating the margin of dumping for each respondent foreign producer or exporter."  We 
reverse  also the Panel's conclusion, in paragraph 6.1 of  the Panel Report, that "the determination of 
the [US]DOC in the section 129 proceeding investigati on is not inconsistent with ... Article[] 2.4.2 of 
                                                      
205The relevance of these panel reports is fu rther diminished by the fact that the  Tokyo Round Anti-
Dumping Code   was not part of the GATT 1947 and was terminated in 1996 without being incorporated into the 
WTO covered agreements. 
206The United States refers to:  Communication from Japan, Background Notes to Japan's Proposals on 
the Anti-Dumping Code , MTN.GNG/NG8/W/30, 20 June 1988;  Communication from the Delegation of 
Singapore, Proposed Elements for a Framework for Negotiations Principles and Objectives for Anti-Dumping 
Rules , MTN.GNG/NG8/W/55, 13 October 1989;  and Communication from the Delegation of Hong Kong, 
Principles and Purposes of Anti-dumping Provisions , MTN.GNG/NG8/W46, 3 July 1989, p. 7. (United States' 
appellee's submission, footnote 36 to para. 35 and footnote 39 to para. 38) 
207The Appellate Body has explained that "a permissible interpretation is one which is found to be 
appropriate  after   application" of the customary rules of interpretation reflected in Articles 31 and 32 of the  
Vienna Convention . (Appellate Body Report, US – Hot-Rolled Steel , para. 60 (original emphasis))  WT/DS264/AB/RW 
 Page 51 
 
 
the [ Anti-Dumping ] Agreement . "   W e   find, instead, that the use of zeroing by the USDOC in the 
Section 129 Determination is incons istent with the United States' ob ligations under Article 2.4.2 of 
the  Anti-Dumping Agreement .  
V. Article 2.4 of the  Anti-Dumping Agreement  
A. Introduction 
125. We turn next to Canada's claim under Article 2.4 of the  Anti-Dumping Agreement .  Before 
examining Article 2.4, we provide a brief summary of the Panel's findings and the arguments of the 
participants and the third participants. 
B. Findings of the Panel 
126. Canada argued before the Panel that the u se of zeroing in the transaction-to-transaction 
comparison methodology is "by definition" inconsiste nt with the "fair comparison" requirement in 
Article 2.4.208  Canada submitted that zeroing does not take into account all comparisons, and that this 
introduces an "inherent bias" that inflates the margin  of dumping.  The Panel considered that "[t]he 
principle of effective treaty interpretation implies that the 'fair comparison' obligation in Article 2.4 
must not be interpreted in a manner so as to trum p the more specific provisions of Article 2.4.2."209  
Thus, because it had concluded that the use of  zeroing under the transaction-to-transaction 
comparison methodology was consistent with Article  2.4.2, the Panel found that the use of zeroing 
under such a comparison methodology was not "unfair" under Article 2.4.210  The Panel concluded 
that, "[s]ince zeroing therefore cannot be prohibite d as 'by definition' unfair in the context of 
Article 2.4.2, Article 2.4 cannot provide for the unqualified, 'by definition' prohibition suggested by 
Canada."211  On this basis, the Panel rejected Ca nada's claim that the United States acted 
inconsistently with the "fair comparison" requireme nt in the first sentence of Article 2.4 of the  Anti-
Dumping Agreement .212 
                                                      
208Panel Report, para. 5.72.  Canada had already asse rted before the original panel that the USDOC's 
use of zeroing in aggregating the resu lts of weighted average-to-weighted average comparisons in the original 
investigation was inconsistent with the "fair co mparison" requirement under Article 2.4 of the  Anti-Dumping 
Agreement .  Having found that the use of zeroing was inconsistent with Article 2.4.2 of the  Anti-Dumping 
Agreement , the original panel found it neither appropriate, nor necessary, to rule on Canada's Article 2.4 claim. 
(Original Panel Report, US – Softwood Lumber V , para. 7.226) 
209Panel Report, para. 5.75. (footnote omitted) 
210Ibid., para. 5.75. 
211Ibid., para. 5.76. 
212Ibid., para. 5.78. WT/DS264/AB/RW 
Page 52  
 
C. Arguments of the Participants and the Third Participants 
127. Canada submits that the Panel improperly inte rpreted Article 2.4 to permit zeroing under the 
transaction-to-transaction comparison methodology.   Canada emphasizes the Appellate Body's 
repeated findings that zeroing inflates margins of dumping and creates an "inherent bias" in these 
comparisons.
213  According to Canada, "[t]he USDOC mani pulated the results of comparisons where 
the export price was higher than the home market price by disregarding the difference between these 
prices and replacing that difference with 'zero'."214  Canada argues that this manipulation is a violation 
of Article 2.4 because it is not a "fair comparison".215  Canada contends that the Panel wrongly relied 
on its conclusion that Article 2.4.2 permits zer oing under the transaction-to-transaction comparison 
methodology to find that zeroing was consistent with Article 2.4 of the  Anti-Dumping Agreement .  
Because the Panel's interpretation of Article 2.4. 2 is, according to Canada, incorrect, its reliance on 
the principle of effective interpretation also fails.   
128. The United States responds that the Panel properly found the use of zeroing by the USDOC in 
the Section 129 Determination to be not inconsiste nt with the "fair comparison" requirement of 
Article 2.4 of the Anti-Dumping Agreement .  The United States asserts that Canada's argument 
assumes its own conclusion by insisting that a ma rgin of dumping established without "zeroing" is 
"fair".216  The United States agrees with the Panel's reliance on the principle of effective treaty 
interpretation, arguing that, because zeroing is permissible under the transaction-to-transaction 
comparison methodology, it cannot be  deemed "unfair" simply because it results in a margin of 
dumping higher than that which would obtain without the use of zeroing.217  The United States further 
argues that, if, as Canada suggests, the size of an y resulting margin of dumping were the basis for 
determining "fairness", investigating authorities w ould have to determine "at least two putative 
margins of dumping for each exporter" using the comparison methodologies provided under Article 2.4.2 and "ultimately rely on the meth odology that generated the lowest margin."
218  
According to the United States, the text of the  Anti-Dumping Agreement   imposes no such results-
                                                      
213Canada's appellant's submission, para. 67 (quoting Appellate Body Report, US – Corrosion-Resistant 
Steel Sunset Review , para. 135). 
214Ibid., para. 69. 
215Ibid.  
216United States' appellee's submission, para. 97. 
217Ibid., para. 99. 
218Ibid., para. 100.  WT/DS264/AB/RW 
 Page 53 
 
 
driven obligation.219  Finally, the United States submits that  the Appellate Body reports on which 
Canada relies do not support its "fair comparison" argument.220 
129. In their third participant's submissions, th e European Communities, Japan, and Thailand 
contend that the Panel erred in its  interpretation of Article 2.4, arguing that zeroing in transaction-to-
transaction comparisons is inconsistent with th e "fair comparison" requirement in Article 2.4.221  The 
European Communities submits that Article 2. 4 establishes an overarching and independent 
obligation to make a "fair comparison" between export price and normal value.  The European 
Communities considers that the negotiating history of  Article 2.4 confirms such an interpretation, 
noting that under the  Tokyo Round Anti-Dumping Code , "the equivalent or similar provisions to the 
first and second sentences of Artic le 2.4 of the Uruguay Round Anti-Dumping Agreement  were 
contained in the same sentence" but the "fair comp arison" requirement was placed on its own in a new 
first sentence of Article 2.4 in the Uruguay Round.222  Furthermore, the European Communities 
argues that, because of the "arbitrary and artif icial reduction of the value of certain export 
transactions", zeroing does not accord the same treatment to both domestic and export sales.223   
130. Japan submits that the "discernable standard " the Panel used to assess fairness was wrong 
because, contrary to the Panel's conclusion, zeroing  is not permitted in a transaction-to-transaction 
comparison under the first sentence of Article 2.4.2.  Regarding the meaning of "fair", Japan refers to 
the findings by the panel in  EC – Tube or Pipe Fittings   that an "investigating authority must act in an 
 unbiased , even-handed   manner and must not exercise its discretion in an arbitrary  manner", arguing 
that such findings suggest a meaning rooted in the basic requirements of good faith and fundamental 
fairness.224  Japan also emphasizes the Appellate Body's findings in  EC – Bed Linen   and  US – 
Corrosion-Resistant Steel Sunset Review   that zeroing inflates margins of dumping and creates an 
"inherent bias".225  Thailand makes similar arguments in its submission, arguing that a "fair 
                                                      
219United States' appellee's submission, para. 100. 
220Ibid., paras. 104-106. 
221New Zealand does not present arguments under Article  2.4 in its third participant's submission.  New 
Zealand nevertheless rejects, in its arguments responding to Canada's claims under Article 2.4.2, the notion that 
zeroing is unfair.  
222European Communities' third participant's submission, para. 28.  
223Ibid., para. 30. 
224Japan's third participant's submission, para. 90 (quoting Panel Report, EC – Tube or Pipe Fittings , 
para. 7.178). (emphasis added by Japan) 
225Ibid., para. 96 (referring to Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , 
para. 135;  and Appellate Body Report, EC – Bed Linen , para. 55). WT/DS264/AB/RW 
Page 54  
 
comparison", rather than being a "subjective" test as suggested by the Panel, requires objectivity, lack 
of bias, and even-handedness.
226   
D. Whether Zeroing is Consistent with the "Fair Comparison" Requirement in 
Article 2.4 of the Anti-Dumping Agreement 
131. We begin our analysis with the text of Article 2.4 of the  Anti-Dumping Agreement   and with 
a brief review of how it has been interpreted in prev ious appeals.  Next, we examine the basis of the 
Panel's finding on this issue.  Finally, we conduct our  own examination of Canada's claim, taking into 
account the conclusion that we reached in the previous  section of this Report re garding Article 2.4.2.  
1. Article 2.4 of the  Anti-Dumping Agreement  
132. Article 2.4 of the  Anti-Dumping Agreement   provides: 
A fair comparison shall be made between the export price and the 
normal value.  This comparison shall be made at the same level of trade, normally at the ex-factory level, and in respect of sales made at as nearly as possible the same time.  Due allowance shall be made in each case, on its merits, for differences which affect price 
comparability, including differences in conditions and terms of sale, 
taxation, levels of trade, quantities,  physical characteristics, and any 
other differences which are also demonstrated to affect price comparability.  In the cases  referred to in paragraph 3, allowances for 
costs, including duties and taxes, incurred between importation and 
resale, and for profits accruing, should also be made.  If in these 
cases price comparability has been affected, the authorities shall 
establish the normal value at a level of trade equivalent to the level of trade of the constructed export price,  or shall make due allowance as 
warranted under this paragraph.  The authorities shall indicate to the parties in question what informa tion is necessary to ensure a fair 
comparison and shall not impose an unreasonable burden of proof on 
those parties. (footnote omitted) 
We recall that Article 2.4.2 begins with the phrase "[s]ubject to the provisions governing fair 
comparison in paragraph 4".  Thus, the appli cation of the comparison methodologies set out in 
Article 2.4.2 of the Anti-Dumping Agreement , including the transaction-to-transaction methodology 
applied in the investigation underlying this dispute, is expressly made subject to the "fair comparison" 
requirement set out in Article 2.4. 
133. In  EC – Bed Linen , the Appellate Body explained that  "Article 2.4 sets forth a general 
obligation to make a 'fair comparison' between expor t price and normal value", adding that "[t]his is a 
general obligation that ... informs all of Article 2, but  applies, in particular, to Article 2.4.2 which is 
                                                     
 
226Thailand's third participant's submission, paras. 54-56.  WT/DS264/AB/RW 
 Page 55 
 
 
specifically made 'subject to the provisions gove rning fair comparison in [Article 2.4]'."227  Moreover, 
in  US – Zeroing (EC) ,  the Appellate Body agreed with that panel's conclusion that "the 'fair 
comparison' language in the first sentence of Arti cle 2.4 creates an independent obligation, and, 
secondly, that the scope of this obligation is not exhausted by the general subject matter expressly 
addressed by paragraph 4 (that is to say, the price comparability)."228   
2. The Basis of the Panel's Finding under Article 2.4 of the Anti-Dumping 
Agreement   
134. The Panel's finding on Canada's cl aim under Article 2.4 is premised on its finding that the use 
of zeroing in transaction-to-transaction comparisons  is not inconsistent with Article 2.4.2:  
Since we have already concluded that [a transaction-to-transaction 
comparison]  with  zeroing (resulting in higher margins) is not 
inconsistent with Article 2.4.2, one  cannot conclude that failure to 
use a comparison methodology that would have resulted in lower margins ( i.e., [transaction-to-transaction] without zeroing) is 
"unfair".
229 
The Panel did not offer any other reasons that could independently support its finding under 
Article 2.4. 
135. Because the Panel's conclusion under Article 2.4 was premised precisely on its finding that 
zeroing under the transaction-to-transaction comparison methodology is consistent  with Article 2.4.2, 
which we have reversed, this c onclusion can no longer stand.  
136. Moreover, the Panel's reasoning essentially make s the "fair comparison" requirement in 
Article 2.4 dependent on Article 2.4.2.  According to the Panel, "[t]he principle of effective treaty 
interpretation implies that the 'fair comparison' oblig ation in Article 2.4 must not be interpreted in a 
manner so as to trump the more specific provisions of Article 2.4.2".230  Apparently, the Panel 
considered Article 2.4.2 as lex specialis .  This, however, is not a correct representation of the 
                                                      
227Appellate Body Report, EC – Bed Linen , para. 59. 
228Appellate Body Report, US – Zeroing (EC) , para. 146 (referring to Panel Report, US – Zeroing (EC) , 
paras. 7.253-7.258).  With regard to the remai nder of Article 2.4, the Appellate Body found in US – 
Zeroing (EC)  that "disregarding a result when  the export price exceeds the no rmal value (zeroing) cannot be 
characterized as an allowance or an adjustment covere d by the third sentence of Article 2.4, including its 
a contrario   application." (para. 158)  The Appellate Body th erefore agreed with the panel that "conceptually, 
zeroing is not an adjustment or an allowance falling within  the scope of Article 2.4, third to fifth sentences." 
(Ibid. ) 
229Panel Report, para. 5.75. 
230Ibid. (footnote omitted) WT/DS264/AB/RW 
Page 56  
 
relationship between the two provisions.  Rather, the introductory clause to Article 2.4.2 expressly 
makes it "[s]ubject to the provisions governing fair comparison" in Article 2.4.     
3. The Consistency of Zeroing unde r the Transaction-to-Transaction 
Comparison Methodology with Article 2.4 of the  Anti-Dumping Agreement   
137. We turn to examine whether the use of zeroing in the Section 129 Determination, in addition 
to being contrary to Article 2.4.2, is inconsis tent with the "fair comparison" requirement in 
Article 2.4. 
138. The term "fair" is generally understood to c onnote impartiality, even-handedness, or lack of 
bias.231  For the reasons stated below, we consider that the use of zeroing under the transaction-to-
transaction comparison methodology is difficult to r econcile with the notions of impartiality, even-
handedness, and lack of bias reflected in the "f air comparison" requirement in Article 2.4.  
139. First, the use of zeroing under the transaction-to-transaction comparison methodology when 
aggregating the transaction-specific comparisons  for purposes of calculating the "margins of 
dumping", distorts the prices of certain export tran sactions because export transactions made at prices 
above normal value are not considered at their real value.  The prices of these export transactions are 
artificially reduced when zeroing is applied under the transaction-to-transaction comparison 
methodology.232  As the Appellate Body explained in the original dispute, "[z]eroing means, in effect , 
that at least in the case of  some   export transactions, the export prices are treated as if they were less 
than what they actually are."233      
140. Secondly, the use of zeroing in the transaction-to-transaction comparison methodology, as in 
the weighted average-to-weighted average met hodology, tends to result in higher margins of 
dumping.  As the Appellate Body underscored in  US – Corrosion-Resistant Steel Sunset Review ,  the 
use of zeroing:   
                                                      
231The relevant dictionary meaning of "fair" is "just, unbiased, equitable, impartial; legitimate, in 
accordance with the rules or standards", and "offering an equal chance of success". ( Shorter Oxford English 
Dictionary , 5th edn, W.R. Trumble, A. Stevenson (eds) (Oxf ord University Press, 2002), Vol.1, p. 915) 
232European Communities' third participant's submission, para. 30. 
233Appellate Body Report, US – Softwood Lumber V , para. 101. (original emphasis)  WT/DS264/AB/RW 
 Page 57 
 
 
... will tend to inflate the margins calculated.  Apart from inflating the margins, such a methodology could, in some instances, turn a negative margin of dumping into a positive margin of dumping. ...  Thus, the inherent bias in a zeroing methodology of this kind may distort not only the magnitude of a dumping margin, but also a 
finding of the very existence of dumping.
234   
141. Moreover, it has been argued in these Article 21. 5 proceedings that the effect of zeroing is 
even more pronounced under the transaction-to-t ransaction comparison methodology than under the 
weighted average-to-weighted average methodology.235  Japan explains that, under the weighted 
average-to-weighted average comparison methodology,  the effect of zeroing  is "moderated" because 
certain transactions in which export prices exceed normal value are included in the aggregation for 
purposes of calculating the margins of dumping.  This  is because zeroing is not performed at the level 
of individual transactions, but after the transactions  have been grouped (for instance, by model or 
type) and then averaged. 236  In contrast, the application of zeroing under the transaction-to-transaction 
comparison methodology excludes ab initio  the results of all the comparisons in which the export 
prices are above normal value.237  In fact, at the oral hearing, the United States acknowledged that the 
use of zeroing under the transaction-to-transaction comparison methodology in the Section 129 
Determination resulted in margins of dumping for respondent exporters or producers that were higher 
than those in the original determination, which had been calculated using zeroing under the weighted 
average-to-weighted average methodology.238 
142. In sum, the use of zeroing under the transaction-to-transaction comparison methodology 
artificially inflates the magnitude of dumping, r esulting in higher margins of dumping and making a 
positive determination of dumping more likely.  Th is way of calculating cannot be described as 
impartial, even-handed, or unbiased.  For this r eason, we do not consider that the calculation of 
"margins of dumping", on the basis of a transaction-to-transaction comparison that uses zeroing, 
                                                      
234Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , para. 135. 
235Canada's appellant's submission, para. 67.  
236Japan's third participant's submission, para. 100. 
237Ibid.  
238Indeed, the Section 129 Determination resulted in an increase in the margins of dumping over those 
calculated in the original determination.  The "all others" rate increased from 8.43 per cent to 11.54 per cent.  
Individual exporter rates increased as follows:  Abitibi from 12.44 per cent to 13.22 per cent;  Canfor from 5.96 
per cent to 9.27 per cent;  Slocan from 7.71 per cent to 12.91 per cent;  Tembec from 10.21 per cent to 12.96 per cent;  West Fraser from 2.18 per cent to 3.92 per cent; and Weyerhaeuser from 12.39 per cent to 16.35 per cent.  
(See Section 129 Determination, p. 22645;  Notice of Amended Final Determination of Sales at Less Than Fair 
Value and Antidumping Duty Order: Certain Softwood Lumber Products From Canada, United States Federal 
Register , Vol. 67, No. 99 (22 May 2002) 36068, 36069;  and Canada's appellant's submission, footnote 7 to 
para. 12)  In the Section 129 proceeding, the USDOC used the information gathered in the original investigation 
and did not reopen the record. (Section 129 Determination, p. 22645)  WT/DS264/AB/RW 
Page 58  
 
satisfies the "fair comparison" requirement w ithin the meaning of Article 2.4 of the  Anti-Dumping 
Agreement .  
143. According to the United States,  the basis for determining whether a comparison methodology 
is "fair" within the meaning of Article 2.4 cannot be whether it yields a higher margin of dumping than another comparison methodology.
239  Otherwise, the United States adds, investigating authorities 
"would have to determine at least two putative marg ins" and rely on the methodology that generated 
the lowest margin.240 We understand the United States to argue that, even if a comparison 
methodology that uses zeroing results in higher marg ins of dumping, it does not become "unfair" by 
this mere fact alone, provided that it is WTO-c onsistent.  This proviso, however, has not been met 
because, as we have found, the use of zeroing under the transaction-to-transaction comparison 
methodology is inconsistent w ith Article 2.4.2 of the  Anti-Dumping Agreement .      
144. The Panel followed a logic similar to that of the United States when it reasoned that: 
... the fact that comparison methodology A produces a higher margin 
of dumping than comparison methodology B would only make comparison methodology A unfair if comparison methodology B 
were the applicable standard.  If, however, the [ Anti-Dumping ] 
Agreement  were to permit either comparison methodology A or B, 
this would not be the case.
241 (footnote omitted) 
Given our finding under Article 2.4.2, the Panel's own logic would lead to a finding of unfairness.  
145. The United States reiterates here some of the c ontextual considerations examined by the Panel 
in its analysis of Canada's Article 2.4.2 claim, including the "mathematical equivalence" argument.  
We have examined these contextual considerations in the previous section and concluded that they did 
not support the United States' interpretation th at the use of zeroing under the transaction-to-
transaction comparison methodology is consistent with Article 2.4.2.  For the same reasons, we do not 
find that they are relevant to our examina tion of Canada's claim under Article 2.4. 
146. Therefore, we  reverse   the Panel's finding, in paragraphs  5.78 and 6.1 of the Panel Report, 
that "the determination of the [US]DOC in the sec tion 129 proceeding investigation is not inconsistent 
with ... Article[] 2.4 of the [ Anti-Dumping ] Agreement " .   W e   conclude   that the USDOC's use of 
zeroing under the transaction-to-transaction comparison methodology in the Section 129 
                                                      
239United States' appellee's submission, paras. 96-97. 
240Ibid., para. 100. 
241Panel Report, para. 5.74.  WT/DS264/AB/RW 
 Page 59 
 
 
Determination is inconsistent with the "fair co mparison" requirement in Article 2.4 of the  Anti-
Dumping Agreement .   
VI. Findings and Conclusions 
147. For the reasons set out in this Report, the Appellate Body: 
(a) reverses  the Panel's finding, in paragraphs 5.66 and 6.1 of the Panel Report, that the 
USDOC's Section 129 Determination is not in consistent with Article 2.4.2 of the  
Anti-Dumping Agreement   and finds , instead, that the use of zeroing by the USDOC 
in the Section 129 Determina tion is inconsistent with th e United States' obligations 
under Article 2.4.2 of the  Anti-Dumping Agreement ;  
(b) reverses  the Panel's finding, in paragraphs 5.78 and 6.1 of the Panel Report, that the 
USDOC's Section 129 Determination is not in consistent with Article 2.4 of the  Anti-
Dumping Agreement  and finds , instead, that the use of zeroing in the Section 129 
Determination is inconsistent with the "fai r comparison" requirement in Article 2.4;  
and 
(c) consequently, reverses  the Panel's conclusion, in para graph 6.2 of the Panel Report, 
that "the United States has implemented the recommendations and rulings of the DSB 
in  US – Softwood Lumber V , to bring its measure into c onformity with its obligations 
under the [ Anti-Dumping ] Agreement ".   
148. The Appellate Body recommends  that the Dispute Settlement Bo dy request the United States 
to bring its measure into conform ity with its obligations under the  Anti-Dumping Agreement . WT/DS264/AB/RW 
Page 60  
 
 
Signed in the original in Geneva this 28th day of July 2006 by:  
 
    
_________________________ 
Georges Abi-Saab  
Presiding Member 
 
 
 
  
 _________________________ _________________________ 
 Luiz Olavo Baptista Giorgio Sacerdoti 
 Member Member 
  WT/DS264/AB/RW 
 Page 61 
 
 
ANNEX I  
 
 WORLD TRADE  
ORGANIZATION  WT/DS264/25 
17 May 2006 
 (06-2427) 
 Original:   English 
   
 
UNITED STATES – FINAL DUMPING DETERMINATION ON 
SOFTWOOD LUMBER FROM CANADA 
 
Recourse to Article 21.5 of the DSU by Canada
 
 
 
Notification of an Appeal by Canada  
under Article 16.4 and Article 17 of the Understanding on Rules  
and Procedures Governing the Settlement of Disputes (DSU),  
and under Rule 20(1) of the Working Procedures for Appellate Review  
 
  The following notification, dated 17 May 2006,  from the Delegation of Canada, is being 
circulated to Members.  
_______________ 
 
 
Pursuant to paragraph 4 of Article 16 of the Understanding on Rules and Procedures  
Governing the Settlement of Disputes (the "DSU") and Rule 20 of  the Working Procedures for 
Appellate Review, Canada appeals certain issues of law and certain legal inte rpretations covered in 
the Panel Report in United States – Final Dumping Determination on Softwood Lumber From Canada 
– Recourse to Article 21.5 of the DSU by Canada .
1 
 The Panel found that the U.S. Department of Commerce's ("USDOC") section 129 dumping 
determination on softwood lumber was not inc onsistent with Articles 2.4.2 and 2.4 of the Agreement 
on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 ("ADA").
2  
Consequently, the Panel determined that the United States had implemented the rulings and 
recommendations of the Dispute Settlement Body ("DSB").3  These findings are in error as they are 
based on erroneous findings on issues of law and related legal interpretations. 
 
                                                      
1 Report of the Panel, WT/DS264/RW, circulated April 3, 2006. 
2 Ibid., at paras. 5.27-5.28, 5.30, 5.65-5.66, 5.78, 6.1. 
3 Ibid., at para. 6.2. See DSB, Minutes of Meeting (31 August 2004) , WT/DSB/M/175, September 24, 
2004, 4(a), at para. 42. WT/DS264/AB/RW 
Page 62  
 
Canada requests that the Appellate Body review , and reverse, these findings of the Panel.  
Specifically, Canada asks the Appellate Body to find:  
 
• first, the Panel erred in interpreting Article 2.4.2 to permit the USDOC to treat 
transaction-specific comparisons that result in a negative value ( i.e., non-dumped 
transactions) as zero in calculating "margins  of dumping" under the transaction-to-
transaction methodology.  These erroneous findings appear throughout the panel 
report including paragraphs 5.17-5.30, 5.65-5.66, and 6.1
4;  and 
 
• second, the Panel erred in finding that Article 2.4 permits the treatment of 
transaction-specific comparisons that resu lt in a negative value as zero in the 
calculation of "margins of dumping" under the transaction-to-transaction 
methodology.  These findings are set out in paragraphs 5.72-5.78 a nd 6.1 of the panel 
report.  
 In the light of these errors, Canada respec tfully requests that the Appellate Body: 
 
• reverse the findings of the Panel set out above;  
 
• find that the USDOC's use of zeroing under the transaction-to-transaction 
methodology in the section 129 determination,  as described above, is inconsistent 
with Articles 2.4.2 and 2.4 of the ADA;  and 
 
• determine that, as a consequence, the United States has failed to implement the 
recommendations and rulings of the DSB.  
 
__________ 
 
  
                                                     
 
4 The USDOC confirmed that it treat ed negative transaction-specific co mparison results as zero in its 
section 129 determination, at one point describing the process as follows: "… because the Appellate Body report 
requires the offset for non-dumped sales only for a weighted-average-to-weighted-average comparison, we have 
not applied the offset for non-dumped sales in our transaction-to-transaction comparison."  See Notice of 
Determination Under Section 129 of the Uruguay Round Agreements Act; Antidumping Measures Concerning 
Certain Softwood Lumber Products From Canada , 70 Fed. Reg. 22,636 at 22,639 (Dep't Commerce May 2, 
2005).