Document: WT/DS264/RW Page C-1 ANNEX C SECOND SUBMISSION BY THE PARTIES Contents Page C-1 Executive Summary of the Second Written Submission of Canada C-2
Document codes: WT/DS264/RW
Complainant: Canada
Respondent: U.S.
Third parties: China, EU, India, Japan, New Zealand, Thailand
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. 1, 2, 4, 5, 9  Anti-dumpingArt. VI  GATT 1994Art. 18  Anti-dumping

ANNEX C

SECOND SUBMISSION BY THE PARTIES

Contents Page
C-1 Executive Summary of the Second Written Submission of Canada C-2
C-2 Executive Summary of Rebuttal Submission of the United States C-8

ANNEX C-1

EXECUTIVE SUMMARY OF THE
SECOND WRITTEN SUBMISSION OF CANADA

I. INTRODUCTION

1. The United States’ first written submission challenges Canada’s arguments regarding the
proper interpretation of Article 2.4.2 of the Anti-Dumping Agreement in essentially three ways: (1) by
arguing that this Panel should find the US interpre tation of this provision to be a "permissible"
interpretation under Article 17.6(ii); (2) by avoidi ng the central importance of the Appellate Body’s
findings regarding the terms "dumping" and "margins of dumping" for the proper interpretation of
Article 2.4.2; and (3) by arguing that "aggrega tion" of intermediate values is different under the
transaction-to-transaction methodology than unde r the weighted-average-to-weighted-average
methodology. Canada considers that the US argu ments are without merit and will respond to each of
them in turn in this submission.

2. The Appellate Body interpre ted critical language that applies to both methodologies under the
first sentence of Article 2.4.2 of the Anti-Dumping Agreement and reasoned that zeroing was
prohibited because of the definitions of "dumping" and "margins of dumping". The Appellate Body
also found that where the drafters of the Anti-Dumping Agreement wanted to allow investigating
authorities to disregard certain matters they did so ex plicitly. Article 2.4.2, first sentence, contains no
wording that would permit investigating authorities to disregard certain export transactions.

3. The United States wrongly claims that the a ggregation of "margins of dumping" under the
weighted-average-to-weighted-average and tran saction-to-transaction methodologies occurs in a
different manner. In addition, the US interpreta tion of Article 2.4.2 would prohibit zeroing under one
of the first two methodologies used to calculate margins of dumping, but allow it under the other. In
effect, it would allow investigating authorities to establish different "margins of dumping", solely on
the basis of zeroing under one calculation methodology, when it could not do so under the other
methodology.

4. Finally, Article 2.4 of the Anti-Dumping Agreement requires an investigating authority to
make a "fair comparison" between the normal value and the export price for the product under
investigation. As zeroing distorts the results of such comparisons it also violates this provision.

II. LEGAL ARGUMENT

A. THE UNITED STATES MISAPPLIES ARTICLE 17.6(II) OF THE ANTI-DUMPING AGREEMENT

5. Article 17.6(ii), in conjunction with Article 11 of the DSU, sets out the standard of review for
the legal interpretation of the provisions of the Anti-Dumping Agreement . Article 17.6(ii), first
sentence, provides that a panel "shall interpret the relevant provisions of the Agreement in accordance
with customary rules of interpretation of public international law". In addition, the second sentence of
this provision provides that panels may determine in exceptional circumstances that a measure rests
upon a provision that has more than one "permissible" interpretation.

6. Therefore, Article 17.6(ii), second sentence, must be understood in the context of its
relationship to the first sentence of this provision. Article 17.6(ii) provides that a panel may only find
that a provision has more than one "permissible" interpretation after it has applied these customary
rules of treaty interpretation and determined that it could not discern the or dinary meaning of the
provision. As the Appellate Body explained in US – Hot-Rolled Steel "… a permissible interpretation
is one which is found to be appropriate after application of the pertinent rules of the Vienna
Convention".

7. The United States asserts that Canada has depart ed from a "textual basis" for its interpretation
of Article 2.4.2 in this case; and argues that the US position is a "permissible" interpretation of this
provision. The United States fails to mention that the Appellate Body already has concluded that:

[T]he Anti-Dumping Agreement, when interpreted in accordance with customary rules
of interpretation of public international la w, as required by Article 17.6(ii), does not
permit establishing margins of dumping for product types when the product as a
whole is under investigation. The United States’ interpretation of Article 2.4.2 is,
therefore, not a "permissible interpretation" of that provision within the meaning of
Article 17.6(ii).
Article 2.4.2 also requires the aggregation of tr ansaction-to-transaction comparisons to arrive at
"margins of dumping" for the product under investigation as a whole. Accordingly, this Panel should
find that there is no need to reach the second sentence of Article 17.6(ii) of the Anti-Dumping
Agreement.

B. ARTICLE 2.4.2 PROHIBITS ZEROING UN DER THE TRANSACTION-TO-TRANSACTION
METHODOLOGY

1. The US Interpretation Ignores the Defi nitions of "Dumping" and "Margins of
Dumping"

8. The United States wrongly asserts that Canada provides no "textual basis" for its argument
that zeroing is prohibited under the transaction-to-t ransaction methodology. The "textual basis"
resides in the definitions of the terms "dumping and "margins of dumping" in the Anti-Dumping
Agreement. Canada demonstrated in its first written submission that these terms, in accordance with
their plain meaning as already construed by the Appe llate Body, provide a clear "textual basis" that
prohibits zeroing under the transaction-to-transaction methodology.

9. The Appellate Body began its analysis with the definition of "dumping" under GATT 1994
and the Anti-Dumping Agreement. After reviewing Article VI:1 of the GATT 1994 and Article 2.1 of
the Anti-Dumping Agreement (which, based on its opening phrase "[f]or the purpose of this
Agreement", informs the meaning of Article 2.4.2) the Appellate Body found that "… ‘[d]umping’,
within the meaning of the Anti-Dumping Agreement , can therefore be foun d to exist only for the
product under investigation as a whole, and cannot be found to exist only for a type, model, or
category of that product ." Accordingly, the Appellate Body determined that "dumping" only occurs
with respect to the whole "product under investigation" , rather than in relation to a smaller subset of
the product.

10. The Appellate Body observed that Article VI:2 of the GATT 1994 provides that "… the
margin of dumping is the price difference dete rmined in accordance with the provisions of
paragraph 1 [of Article VI of the GATT 1994]." As a consequence, it concluded that "‘margins of
dumping’ can be found only for the product under i nvestigation as a whole, and cannot be found to
exist for a product type, model, or category of that product".

11. The Appellate Body’s interpretation of these de finitions led it to c onclude that zeroing was
prohibited under the weighted-average-to-weighted-average methodology. It found that "intermediate
values" cannot be considered "margins of dumping" because these calculations do not reflect whether
dumping occurred for the entire product under investiga tion. The Appellate Body concluded that, in
order to establish "… margins of dumping for the product under investigation as a whole", an
investigating authority must aggregate "all these intermediate values".

12. Article 2.4.2 requires an investigating author ity to calculate "margins of dumping" for the
entire product under investigation in both of the normal calculation methodologies. As the Appellate
Body pointed out in EC – Bed Linen and reiterated in its report in the original proceeding, in
considering the proposed methodologies raised in t hose cases, "whatever the method used to calculate
the margins of dumping … these margins must be, and can only be, established for the product under
investigation as a whole."

13. It follows that the results of the comparis ons envisaged under the transaction-to-transaction
methodology cannot constitute "margins of dumping" , any more than "sub-group" comparisons could
under the weighted-average-to-weight ed-average methodology. An i nvestigating authority still must
aggregate all the results of these transaction comparisons to arrive at a single margin of dumping for
the product as a whole.

14. The US interpretation is also inconsiste nt with the ordinary meaning of the term
"comparison". A "comparison" as the term is used in Article 2.4.2 entails "the action … of observing
and estimating similarities, differences, etc." An investigating authority improperly aggregates
transaction comparisons where it aggregates the results of some comparisons and replaces the results
of other comparisons with a zero value.

15. As a consequence, the Appellate Body’s inte rpretation of the terms "dumping" and "margins
of dumping" demonstrates that zeroing is prohi bited under both the weighted-average-to-weighted-
average and transaction-to-transaction methodologies.

16. The US argument to the contrary relies h eavily on the absence of the phrase "all comparable
export transactions" in the language describing th e transaction-to-transaction methodology. Canada,
however, has shown that the analysis of the Appella te Body turned on the requirement that "margins
of dumping" must relate to "the product under investigation as a whole". The phrase "all comparable
export transactions" was not central to the Appellate Body’s findings that intermediate comparisons
must be aggregated to arrive at margins of dumping.

17. As a final matter, New Zealand asserts in its third party submission that the transaction-to-
transaction methodology also permits investigating authorities to eliminate non-dumped transaction
comparisons entirely from the calculation of margins of dumping. New Zealand attempts to
rationalize its position on the basis that an investiga ting authority should be pe rmitted to do this as it
"… targets more precisely the dumping taking place".

18. In EC – Bed Linen , the Appellate Body dismissed the argument that zeroing should be
permitted to deal with targeted dumping against di fferent product types, finding that "... had the
drafters of the Anti-Dumping Agreement intended to authorize Members to respond to such kind of
‘targeted’ dumping, they would have done so explicitly in Article 2.4.2 second sentence."

19. Article 2.4.2, second sentence, provides that in exceptional circumstances, where evidence of
targeted dumping exists, investigating authoriti es may use an asymmetrical comparison methodology
(i.e., a comparison of weighted-average-normal-valu e to individual export transactions). If the
transaction-to-transaction methodology permitted the elimination of non-dumped transactions to deal
with "targeted dumping", the third methodology would be reduced to redundancy.

2. Article 2.4.2 Contains No Language That Would Permit Investigating Authorities to
Zero Transaction-to-Transaction Comparisons

20. The United States asserts that the exclusion of the phrase "all comparable export transactions"
demonstrates that zeroing is permitted under the transaction-to-transaction methodology. It argues
that "[w]hen the drafters excluded language from th e treaty, it must be assumed that they did so
deliberately …". However, the United States provid es no explanation for the absence of language that
would permit zeroing under the transaction-to-transac tion methodology. In its report, the Appellate
Body found that the absence of language author izing an investigating authority to disregard
comparisons was deliberate:

[W]e observe that Article 2.4.2 contains no express language that permits an
investigating authority to disregard the results of multiple comparisons at the
aggregation stage. Other provisions of the Anti-Dumping Agreement are explicit
regarding the permissibility of disregardi ng certain matters. For example, Article
2.2.1 of the Anti-Dumping Agreement , which deals with the calculation of normal
value, sets forth the only circumstances under which sales of the like product may be
disregarded. … Thus, when the negotiators sought to permit investigating authorities
to disregard certain matters, they did so explicitly.
Article 2.4.2 contains no express la nguage that would permit an investigating authority to disregard
some of the results of transaction-to-transacti on comparisons. Accordingly, the transaction-to-
transaction methodology, like the weighted-avera ge-to-weighted-average methodology, does not
permit zeroing of intermediate transaction comparisons.

C. THE UNITED STATES AGGREGATES "MARGINS OF DUMPING" UNDER THE
TRANSACTION-TO-TRANSACTION AND THE WEIGHTED-AVERAGE-TO-WEIGHTED-
AVERAGE METHODOLOGIES

21. The United States suggests that the actual method of aggregation under the transaction-to-
transaction methodology is somehow different fro m aggregation under the weighted-average-to-
weighted-average methodology. As both met hodologies involve investigating authorities making a
series of intermediate comparisons, authorities must necessarily aggregate those comparisons in order
to determine the margins of dumping for the product under investigation as a whole. Aggregation is
nothing more than combining the results of th e multiple comparisons into a single result ( i.e., an
average) for the product under investigation as a whole.

22. The US practice confirms that there is no difference in aggregation under these
methodologies. In the section 129 determination, the DOC aggregated tr ansaction-to-transaction
comparisons in the same manner that it aggregated sub-group or model comparisons in the underlying
investigation to arrive at what it, itself, descr ibed as a "weighted-average margin" for each of the
investigated producers. In particular, the DOC added together the results of all positive dumping
comparisons, but, rather than subtracting the r esults of the negative non-dumped comparisons, it
treated these results as zero. This "total" amount was then divided by the amount of all exports to
arrive at a "weighted-average dumping margin" for each respondent.

23. If the United States is to rely upon a we ighted average in aggregating intermediate
transaction-to-transaction comparisons to develop an overall margin of dumping, it cannot ignore
some transactions in calculating such an overall margin of dumping for the product as a whole any
more than it could in aggregating the interm ediate weighted-average -to-weighted-average
comparisons. The United States certainly cannot claim that "the transaction-to-transaction
methodology … does not involve averages".

D. ARTICLE 2.4.2 PROHIBIT S THE USE OF ZEROING UN DER BOTH THE WEIGHTED-
AVERAGE-TO-WEIGHTED-AVERAGE AND THE TRANSACTION-TO-TRANSACTION
METHODOLOGIES

24. The position advanced by the United States – that Article 2.4.2 prohibits the use of zeroing
under one of the normal calculation methodologies, but permits it under the other – is at odds with the
concerns expressed by the Appellate Body that, wh enever it is used, zeroing tends to distort and
inflate dumping margins because it "… does not take into account the entirety of the prices of some
export transactions".

25. In US – Corrosion-Resistant Steel Sunset Review , the Appellate Body expressed this concern
in the context of the use of zeroing under the weighted-average-normal-value-to-individual-export-
transactions methodology. The Appellate Body observed that the distorting effect of zeroing was not
limited to the weighted-average-to-weighted-average methodology, stating that:

When investigating authorities use a zeroi ng methodology such as that examined in
EC – Bed Linen to calculate a dumping margin, whether in an original investigation
or otherwise, that methodology will tend to inflate the margins calculated.
 Apart from
inflating the margins, such a methodology c ould, 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.
This statement is significant for this case because the Appellate Body made it in the context of its
assessment of a methodology other than the wei ghted-average-to-weighted-average methodology.
The Appellate Body subsequently added to these co mments, in explaining why it could not rule on
this claim, that "in these circumstances … it is not possible for us to assess whether the [weighted-
average-normal-value-to-individual-export-transactions] methodology that … DOC used in
calculating the dumping margins in the administrative reviews was equivalent in effect to the
methodology used by the European Communities and considered by us in EC – Bed Linen".

26. The Appellate Body, therefore, indicated that if zeroing in a calculation methodology were
equivalent in effect to the use of zeroing under the weighted-average -to-weighted-average
methodology, it would be inconsistent with the Anti-Dumping Agreement . As is evident from the
United States’ own description of the methodology a pplied in this case, the use of zeroing under the
transaction-to-transaction methodology has an equivale nt effect and creates the same "inherent bias",
which inflates margins of dumping. Consequent ly, the use of zeroing under the transaction-to-
transaction methodology runs contrary to the reasoning of the Appellate Body in this dispute.

27. Finally, the US interpretation of Article 2.4. 2 is inconsistent with its position before the
original panel and the Appellate Body. In the original proceeding, the United States argued that
"[t]here is no basis for finding a different rule applicable to the two principal methodologies under
Article 2.4.2." Canada agrees, Article 2.4.2 prohibi ts the use of zeroing in both of these calculation
methodologies.

E. ARTICLE 2.4 PROHIBIT S THE USE OF ZEROING UNDER THE TRANSACTION-TO-
TRANSACTION METHODOLOGY

28. Article 2.4 of the Anti-Dumping Agreement provides that "[a] fair comparison shall be made
between the export price and the normal value". The obligation to provide a fair comparison "informs
all of Article 2, but applies, in particular, to Ar ticle 2.4.2 which is specifically made ‘subject to the
provisions governing fair comparison in [Article 2.4]’".

29. The New Shorter Oxford English Dictionary defines "fair" in its relevant meaning as "just,
unbiased, equitable, impartial, legitimate, in accordan ce with the rules or standards". Zeroing, as the
Appellate Body already noted in US – Corrosion-Resistant Steel Sunset Review, introduces an
"inherent bias" in the comparisons. Therefore, by definition, zeroing cannot yield a fair comparison
and is inconsistent with Article 2.4 of the Anti-Dumping Agreement.

30. The transaction-to-transaction methodology invol ves a series of comparisons of export prices
to selected normal value transactions. Article 2.4 requires investigating authorities to take into
account the "comparison" or the full difference between these prices. When an investigating authority
zeroes under the transaction-to-transaction methodolog y, the "margins of dumping" do not properly
reflect the results of these comparisons. As th e Appellate Body explained "[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".

31. In the section 129 determination, the DOC manipulated the comparisons where the export
price was higher than the home market price by disregarding the difference between these prices and
replacing it with a zero value. This manipulation of transaction-to-transaction comparisons cannot be
considered a "fair comparison" between the export price and the normal value as it inflated the
margins of dumping. Accordingly, the United States has acted inconsistently with Article 2.4 of the
Anti-Dumping Agreement by zeroing in its section 129 determination.

III. CONCLUSION

32. As is apparent from the above, the use of zeroing under the transaction-to-transaction
methodology results in investigating authorities trea ting some export transactions as if they were less
than they actually are because it treats negative compar ison results as zero. In other words, zeroing
under the transaction-to-transaction methodology fails to take into account the entirety of the prices of
some export transactions for the whole product unde r investigation. Accordingly, zeroing under the
transaction-to-transaction methodology suffers from the same deficiencies that led the original panel
and the Appellate Body to find its use inconsistent with US obliga tions under Article 2.4.2 of the
Anti-Dumping Agreement. Moreover, a margin calcu lated using zeroing cannot by its nature satisfy
the "fair comparison" requirement of Article 2.4 of the Anti-Dumping Agreement.

33. For these reasons, Canada requests that th e Panel find the DOC’s use of zeroing under the
transaction-to-transaction methodology in the se ction 129 determination inconsistent with
Articles 2.4.2 and 2.4 of the Anti-Dumping Agreement; and that, as a consequen ce, the United States
has not brought its measures into conformity with the recommendations and rulings of the DSB.

ANNEX C-2

EXECUTIVE SUMMARY OF REBUTTAL SUBMISSION
OF THE UNITED STATES

1 August 2005

I. INTRODUCTION

1. In its rebuttal submission, the United States fo cuses on two aspects of the applicable text that
further confirm that Canada’s claims have no me rit. First, the United States demonstrates that
Canada’s proffered interpretati on of the fair comparison requirement in Article 2.4 of the AD
Agreement does not withstand scrutiny under the customar y rules of treaty interpretation. It yields an
anomaly that must cause it to be rejected under t hose rules. Second, the United States analyzes the
term "margin of dumping" in light of its context, demonstrating that the term may refer to the result of
a transaction-to-transaction comparison even if, in ce rtain circumstances, it also may refer to a single,
overall "margin of dumping" for an exporter or producer.

2. Canada substitutes for treaty text a reliance on obiter dicta, passing statements in footnotes,
and conclusions unsupp orted by reasoning. These all fail to demonstrate that the measure taken by
the United States to comply with the recommendati ons and rulings of the Dispute Settlement Body
("DSB") is not based on a permissible interpretation of the AD Agreement. As the measure taken to
comply is, in fact, based on a permissible interp retation of the AD Agreement, it must be upheld
under the applicable standard of review in Article 17.6(ii) of that agreement.

II. THE APPROACH OF THE UNITED STATES TO INVESTIGATING WHETHER
DUMPING EXISTS IS CONSISTENT WITH ARTICLE 2.4 OF THE AD
AGREEMENT, WHICH CONTAINS NO OBLIGATION WITH RESPECT TO
"ZEROING"

3. The AD Agreement contains no general obliga tion to offset dumping with transactions that
exceed normal value. The Appellate Body has found such an obligation to exist only in one
circumstance: determining whether dumping exis ts in the investigation phase when using the
average-to-average methodology. The basis for that finding is the particular text in Article 2.4.2
providing for that circumstance. In this regard , the Appellate Body in the underlying proceeding
specifically recognized that the issue before it w as whether so-called "zeroing" was prohibited under
the average-to-average methodology found in Article 2.4.2. The basis for its finding was the
obligation in Article 2.4.2 that "the existence of margins of dumping during the investigation phase
shall normally be established on the basis of a comparison of a weighted average normal value with a
weighted average of prices of all comparable export transactions . . . ." (AB Report, paras. 82, 86,
98.)

4. The Appellate Body did not base its findings on an interpretation of the obligation to make a
"fair comparison" of export price and normal value as set forth in Article 2.4. The obligation to make
a "fair comparison" under Article 2.4 addresses the appropriate adjustments that an investigating
authority must make for differences between export price and normal value that are demonstrated to
affect price comparability.

5. Indeed, reading the Article 2.4 obligation to make a "fair comparison" as requiring an offset
to dumping for transactions that exceed normal value in all situations would be at odds with the
approach advocated by the Appellate Body, namely that an "interpretation must give meaning and
effect to all the terms of a treaty". "An interprete r is not free to adopt a reading that would result in
reducing whole clauses or paragraphs of a treaty to redundancy or inutility." ( US – Gasoline (AB) ,
p. 23.)

6. Specifically, an interpretation that Article 2. 4 imposes such an offset obligation would render
meaningless the targeted dumping methodology set fort h in Article 2.4.2. A general obligation to
provide for an offset to dumping for sales exceedi ng normal value would mean that an investigating
authority must, mathematically, realize the same re sult, regardless of whether it uses the average-to-
average methodology in the investigation phase, as set forth in the first sentence of Article 2.4.2, or
the average-to-transaction methodology, as set forth in the targeted dumping provision of
Article 2.4.2. Such an interpretation would reduce the targeted dumping clause to inutility.

7. Although the targeted dumping methodology is not itself at issue in this dispute, the
implications for that methodology of the genera l Article 2.4 requirement that Canada posits
demonstrate the fallacy of Canada’s claim. These implications confirm that the general Article 2.4
requirement that Canada posits cannot exist. As Canada’s claim that the fair comparison obligation
requires offsetting with respect to the transaction-to-transaction methodology rests on the premise that
the fair comparison obligation requires offsetting generally, that claim must fail.

A. THE "FAIR COMPARISON" OBLIGATION IN ARTICLE 2.4 REFERS TO THE ADJUSTMENTS
NECESSARY TO ACCOUNT FOR DIFFERENCES IN EXPORT PRICE AND NORMAL VALUE
THAT ARE DEMONSTRATED TO AFFECT PRICE COMPARABILITY

8. Canada asserts that when the United Stat es, using transaction-to-transaction comparisons,
does not reduce the amount of dumping found based on export transactions sold at above normal
value, it has failed to make a "fair comparison" pursuant to Article 2.4. There are two principal flaws
with the suggestion that Article 2.4 contains a gene ral offset requirement. First, such a requirement
would pertain to steps an investigating authority takes after making a comparison between export
price and normal value, whereas Article 2.4 plainl y addresses only adjustments that must be made
before a comparison is performed. Second, such a re quirement would impermissibly render part of
Article 2.4.2 superfluous.

9. Article 2.4 of the AD 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 conditi ons and terms of sale, taxation, levels
of trade, quantities, physical characteristi cs, and any other differences which are also
demonstrated to affect price comparability. In the cases referred to in paragraph 3 of
Article 2, allowances for costs, includ ing 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 th e level of trade of the constructed export
price, or make due allowance as warranted under this paragraph. The authorities shall
indicate to the parties in question what in formation is necessary to ensure a fair
comparison and shall not impose an unreasonable burden of proof on those parties.

10. Article 2.4 thus plainly establishes the oblig ation that a fair comparison be made between
normal value and export price and pr ovides detailed guidance as to how that fair comparison is to be
made. Article 2.4 recognizes that the normal valu e and export transactions to be compared may
occur, inter alia , (a) with respect to models with differing physical characteristics, (b) at distinct
levels of trade, (c) pursuant to different terms and conditions, and (d) in varying quantities.

11. The focus of Article 2.4 is on how an inves tigating authority is to select transactions for
comparison and make the appropriate adjustments for di fferences that are demonstrated to affect price
comparability. The article does not address steps that an investigating authority may take after a
comparison is made. As the panel in Egypt – Rebar explained, "[A]rticle 2.4 in its entirety, including
its burden of proof requirement, has to do with ensuring a fair comparison, through various
adjustments as appropriate, of export price and normal value." (Para. 7.335).

12. Every Appellate Body and panel report that has turned on the question of price comparability
has interpreted Article 2.4 to address pre-comparison price adjustments for differences that are
demonstrated to affect the comparability of prices be tween markets. Thus, the original panel in the
underlying proceeding summarized the scope of Article 2.4, finding:

An examination of a request for an Article 2.4 adjustment should therefore start with
a determination of whether a difference between the export price and the normal
value exists. That is, a difference between the price at which the like product is sold
in the domestic market of the exporting country and that at which the allegedly
dumped product is sold in the importing country. Ultimately, this provision requires
that differences exist between two markets. If there is no difference affecting the
products sold in the markets concerned, for instance, wh ere the packaging of the
allegedly dumped product and that of the lik e product sold in the domestic market of
the exporting country is identical, in our view, an adjustment would not be required
to be made by that provision.
13. Similarly, as the Appellate Body stated in US – Hot-Rolled Steel , "[A]n examination of
whether USDOC acted consistently with Article 2. 4 of the Anti-Dumping Agreement must focus on
. . . whether there were ‘differenc es’, relevant under Article 2.4, wh ich affected the comparability of
export price and normal value." (Para. 179.)

14. Canada’s view appears to be that to co mply with the fair comparison requirement in
Article 2.4, the United States had to apply the resu lt of one comparison (not involving dumping) as an
offset to the result of another comparison (involving dumping). In other words, Canada’s view seems
to be that the fair comparison requi rement is a requirement to adjust the results of one comparison in
light of the results of a distinct comparison. However, Article 2.4 is quite clear in requiring
adjustments for differences that are demonstrated to affect price comparability and in delineating
illustrations of such differences. Canada has not s hown – and, logically, cannot show – that the result
of a comparison between two particular transactions is a difference affecting the price comparability
of two completely different transactions.

15. As Article 2.4 contains no general obligati on to make an adjustment to the result of one
transaction-to-transaction comparison in light of the result of another transaction-to-transaction
comparison, the United States did not breach any oblig ation under Article 2.4 by declining to make
such an adjustment.

B. CANADA’S INTERPRETATION OF ARTICLE 2.4 WOULD RENDER PART OF
 ARTICLE 2.4.2 SUPERFLUOUS

16. Canada’s suggestion that the "fair comparison" requirement in Article 2.4 contains a general
obligation to offset dumping margins also cannot be reconciled with Article 2.4.2. This interpretive
problem results from application of the general off set obligation that Canada posits to the targeted
dumping methodology provided for in Article 2.4.2. Under Canada’s interpretation of Article 2.4, the
targeted dumping methodology would become redunda nt with the average-to-average methodology.
Reference to a distinct targeted dumping methodolog y in Article 2.4.2 thus would be superfluous.
That unavoidable result undermines Canada’s proposed interpretation.

17. The targeted dumping methodology provided for in Article 2.4.2 mathematically must yield
the same result as an average-to-average comparis on if, in both cases, non-dumped comparisons are
required to offset dumped comparisons. In this respect, an offset requirement (or "non-zeroing"
requirement) based on the "fair comparison" requirement of Article 2.4 would render the targeted
dumping exception in Article 2.4.2 a nullity.

18. The "targeted dumping" methodology is an exception to the obligation to engage in a
symmetrical comparison in an investigation. By th e terms of Article 2.4.2, it may be used "if the
authorities find a pattern of export prices which differ significantly among different purchasers,
regions or time periods . . . ." When the inves tigating authority provides an explanation as to why
these "differences cannot be taken into account appr opriately by the use of a weighted average-to-
weighted average or transaction-to-transaction comparison," it may then use the asymmetrical
average-to-transaction comparison to establish th e existence of margins of dumping during the
investigation phase.

19. The targeted dumping methodology is not an ex ception to the fair comparison requirement of
Article 2.4. It is an exception only to the symme trical comparison requirements for investigations set
forth in the first sentence of Article 2.4.2. Article 2.4, on the other hand, applies to all comparison
methodologies. Canada argues that "zeroing" violates the fair comparison obligations of Article 2.4.
However, if Canada were correct, then the fair comparison obligation would require the investigating
authority to provide for an offset for transacti ons that exceed normal value even when using the
targeted dumping methodology. In fact, in the underlying proceeding before the Appellate Body,
Canada conceded that "zeroing is permitted under the third methodology [ i.e., the targeted dumping
methodology]." (AB Report, para. 105 n.164.) Ho wever, Canada did not offer then, and does not
offer now, any textual basis for a distinction betw een the fair comparison requirement as applied to
the targeted dumping methodology and the fair comp arison requirement as applied to the other two
methodologies provided for in Article 2.4.2.

20. If offsetting were required, the overall dum ping margin calculated for an exporter must,
mathematically, be the same under both a symmetri cal comparison of weighted averages of normal
values and export prices and an asymmetrical comp arison of weighted average normal values and
individual export prices. The reason for this is that , if offsetting were required, then all non-dumped
sales (i.e., negative values) would offset the margins on all dumped sales ( i.e., positive values). It
makes no difference mathematically whethe r the calculations are based on comparing
weighted-average normal values to weighted-averag es of all comparable export transactions or on
comparing weighted-average normal values to tran saction-specific export prices. In both cases, the
sum total of the positive values will be offset by the sum total of the negative values, and the results
will be the same.

21. An interpretation of Article 2.4 of the AD Ag reement that requires such offsets in general
would render the distinctions between the aver age-to-average and the average-to-transaction
methodologies in Article 2.4.2 a nullity. A panel should not interpret the AD Agreement in such a

way that its express provisions are rendered mean ingless or superfluous. The Appellate Body has
consistently found that "interpretation must give me aning and effect to all the terms of a treaty. An
interpreter is not free to adopt a reading that would result in reducing whole clauses or paragraphs of a
treaty to redundancy or inutility." (US – Gasoline (AB), p. 23.)

22. The "general obligation" that Canada posits cannot exist, because if it existed it would nullify
any distinction between the average-to-average and the average-to-transaction methodologies in
Article 2.4.2. As the posited obligation cannot exist with respect to the average-to-transaction
methodology, it cannot exist at all, for there is no textual basis for any distinction between the fair
comparison requirement as applicable to the av erage-to-transaction methodology and the fair
comparison requirement as applicable to the tr ansaction-to-transaction methodology. Canada has
asserted no such distinction and, in fact, refers to the asserted requirement at issue as a "general
obligation". As the Article 2.4 "general obligati on" that Canada posits does not and cannot exist,
Canada’s claim that the measure taken to comply is inconsistent with Article 2.4 must be rejected.

III. ARTICLE 2.4.2 DOES NOT REQUIRE CALCULATION OF ONE MARGIN OF
DUMPING FOR THE "PRODUCT AS A WHOLE" WHEN USING THE
TRANSACTION-TO-TRANSACTION COMPARISON METHODOLOGY

23. Having demonstrated that the fair comparison ob ligation in Article 2.4 is not an obligation to
provide for offsets, the United States now turns to Canada’s argument that "margins of dumping" can
be found only for the "product as a whole". Canada’s argument, in effect, is that the reasoning of the
Appellate Body in the underlying proceeding, co ncerning the meaning of the term "margins of
dumping" in the context of the average-to-average methodology, is equally applicable here, in the
context of the transaction-to-transaction methodology. That is, Canada argues that, regardless of
context, "margins of dumping" always means ma rgins of dumping for the "product as a whole".
Canada’s argument is fatally flawed, because it ignores the ordinary meaning of "margin of dumping"
in light of relevant context, including Article VI of the General Agreement on Tariffs and Trade 1994
("GATT 1994"). From the ordinary meaning of that term read in light of relevant context, it is clear
that a particular transaction-to-transaction comparison itself may yield a margin of dumping.
Moreover, the AD Agreement imposes no obligation whatsoever with respect to transaction-to-
transaction comparisons that do not yield margins of dumping. In particular, it imposes no obligation
to apply the results of those comparisons as offsets to comparisons that do yield margins of dumping.

A. ARTICLE 2.4.2 ADDRESSE S ONLY THE METHODOLOGIES AVAILABLE TO DETERMINE
THE EXISTENCE OF DUMPING, NOT THE AGGREGATION OF MULTIPLE TRANSACTION-
TO-TRANSACTION COMPARISONS

24. Article 2.4.2 does not contain an obligation to calculate a single margin of dumping for the
product as a whole when the transaction-to-tra nsaction comparison methodology is used.
Article 2.4.2 provides three methodologies for comp aring export prices to normal values in an
investigation: (1) weighted-average-to-weighted-a verage comparisons; (2) transaction-to-transaction
comparisons; and, (3) under certain circumstances, weighted-average-to-transaction comparisons. In
most circumstances, the second and third methodologi es will result in multiple comparisons, because
neither is limited to the rare circumstance of inve stigations involving only one export transaction.
Under these methodologies, each export transaction will result in a separate comparison.

25. Article 2.4.2 simply does not address the issue of aggregating the results of multiple
comparisons under the transaction-to-transaction met hodology. While this methodology will, in most
cases, lead to multiple comparisons between export transactions and normal values, Article 2.4.2 does
not provide any guidance as to how the results of those comparisons are to be aggregated to determine
a single overall margin. In fact, Article 2.4.2 itself does not require that the results of those multiple
comparisons be aggregated at all.

B. CONSISTENT WITH ARTICLE VI:2 OF TH E GATT 1994, ARTICLE 2.4.2 OF THE AD
AGREEMENT ENVISIONS THE ESTABLISHMENT OF MULTIPLE TRANSACTION-TO-
TRANSACTION MARGINS OF DUMPING

26. The question framed by Canada’s argument is, "W hat is a ‘margin of dumping’ in the context
of the transaction-to-transaction methodology provide d for in Article 2.4.2 of the AD Agreement?"
For the answer to that question, it is appropriate to begin with Article VI of the GATT 1994, which
provides the relevant definition of the term.

27. Paragraph 2 of Article VI pr ovides that "[f]or the purposes of this Article, the margin of
dumping is the price difference determined in accord ance with the provisions of paragraph 1". When
read with the provisions of paragraph 1, the "margin of dumping" is the price difference between
export price and normal value when a product h as been "introduced into the commerce of an
importing country at less than its normal value", i.e., the difference between export price and normal
value when the product has been dumped.

28. For present purposes, the key term in Article VI:2 is "price". A price is a transaction-specific
fact. It follows that a "price difference" is the difference between two transaction-specific facts.
Accordingly, through its reference to "the margin of dumping" as "the price difference determined in
accordance with the provisions of paragraph 1", Arti cle VI:2 plainly envisions a margin of dumping
being established with respect to individual transactions.

29. The fact that a margin of dumping within the meaning of Article VI:2 may be found with
respect to transaction-specific comparisons is furthe r confirmed by the text of the first paragraph of
Ad Article VI, Paragraph 1 of the GATT 1994, whic h uses the term "margin of dumping" in a manner
that cannot reasonably be interpreted as requiring a single result for the "product as a whole". Thus,
Ad Article VI:1(1) provides:

Hidden dumping by associated houses (that is, the sale by an importer at a price
below that corresponding to the price invoiced by the exporter with whom the
importer is associated, and also below the price in the exporting country) constitutes a
form of price dumping with respect to which the margin of dumping may be
calculated on the basis of the price at which the goods are resold by the importer.
30. This provision expressly refers to a particular type of export transaction. In such a
circumstance, the margin of dumping may be calcula ted based on the price charged by the importer.
Of course, exports of the product at issue may be sold through a variety of different channels. Some
sales may be made to importers unrelated to the seller, and others may be made to "associated
houses". The fact that Ad Article VI:1(1) contemplates a margin of dumping being calculated with
respect to "the price at which the goods are resold by the importer" in the case of "associated houses"
demonstrates that under Article VI a "margin of dumping" may refer to a transaction-specific margin
and need not refer, in all contexts, to a margin for a "product as a whole".

31. This interpretation of "margin of dumping" in Article VI is also consistent with the manner in
which many Contracting Parties to the GATT 1947 conducted anti-dumping proceedings prior to the
conclusion of the GATT 1994 and the AD Agreement. As is well established, prior to the conclusion
of these agreements, the Contracting Parties commonly established margins of dumping based on
comparisons between individual export transactions and average normal values. This practice is
reflected, for example, in US – Atlantic Salmon (para. 483) and in EC – Audio Tapes (paras. 499-501).
In concluding the GATT 1994 and the AD Agreemen t, the Contracting Parties did not amend the
meaning of "margin of dumping" as used in the GATT 1947 at all, let alone in a way that would have
indicated a departure from the meaning of that term as followed in their contemporaneous practice.

This circumstance of the conclusion of the agreem ents confirms the agreed-upon meaning of "margin
of dumping" in Article VI, i.e., a margin of dumping may be established on a transaction-specific
basis.

32. As Article VI of the GATT 1994 plainly envisions that a margin of dumping may be
established on a transaction-specific basis, the AD Agreement (that is, the agreement that implements
Article VI) may not be interpreted in a way that prohibits establishing a margin of dumping on a
transaction-specific basis. Canada’s suggestion to th e contrary would require an interpretation of the
AD Agreement that is inconsistent with the GATT article that the AD Agreement implements.

33. That the drafters of Article 2.4.2 of th e AD Agreement understood the term "margin of
dumping" to include a transaction-specific comparis on, consistent with Article VI:2 of the GATT
1994, is evident from their use of the plural form – "margins of dumping". With respect to at least
two of the methodologies set forth in Article 2.4. 2, the transaction-to-transaction and average-to-
transaction methodologies, except in the unusual s ituation in which there is only one export
transaction, there will be multiple comparisons. Each of those comparisons will yield a price
difference. To the extent that such a price differe nce reflects a normal value greater than export price,
the price difference will be a margin of dumping w ithin the meaning of Article VI:2 of the GATT
1994 and, by extension, within the meaning of Article 2.4.2 of the AD Agreement. Thus, with respect
to the transaction-to-transaction and transaction-to -average methodologies there will ordinarily be
multiple "margins of dumping".

34. This conclusion is not affected by the fact that "margins of dumping" may have a different
meaning in the context of the average-to-average methodology in Article 2.4.2. There, as was found
in the underlying proceeding, the term "margins of dumping" has been interpreted "in an integrated
manner" with "all comparable export transactions", such that offsets for non-dumped comparisons
must be provided in order to properly establish a single margin of dumping for each exporter or
producer. (AB Report, paras. 85-103). As is clear from the Appellate Body report in the underlying
proceeding, this finding is a function of the particul ar text specific to average-to-average comparisons
in Article 2.4.2 (matters not expressly addressed in Article VI:2 of the GATT 1994). Nothing in this
finding changes the fact that, as expressly address ed in Article VI:2 of the GATT 1994, a price
difference between two transactions, where normal value exceeds export price, is a margin of
dumping.

35. Finally, that the term "margin of dumping" can refer to the results of a comparison involving
a single export transaction is confirmed by Article 9.3 of the AD Agreement. Article 9.3 provides that
"[t]he amount of the anti-dumping duty shall not ex ceed the margin of dumping . . . ". In that
instance, the context for "margin of dumping" is the term "anti-dumping duty", which is a transaction-
specific concept. That is, a "duty" normally is based on the particular characteristics of the import and
is often calculated based on the value/price of that particular import. Thus, the anti-dumping duty for
a specific import cannot exceed the extent to which the export price for that transaction falls below
normal value (i.e., the margin of dumping). The clear meani ng of "margin of dumping" in Article 9.3
as a transaction-specific concept further undermines Canada’s suggestion that "margin of dumping"
necessarily and always refers to a margin of dumping for a "product as a whole".

36. Canada’s argument that Article 2.4.2 of th e AD Agreement contains a requirement that non-
dumped transaction-to-transaction comparisons be applied as offsets to dumped transaction-to-
transaction comparisons is predicated largely on the supposition that under the transaction-to-
transaction methodology there can be only one margin of dumping for the "product as a whole". That
supposition is refuted by the ordinary meaning of "m argin of dumping" as used in Article VI:2 of the
GATT 1994 and the AD Agreement, the context fo r that term, and the circumstances of the
conclusion of the GATT 1994 and the AD Agreement.

C. NEITHER THE GATT 1994 NOR THE AD AG REEMENT RECOGNIZES "NEGATIVE MARGINS
OF DUMPING"

37. Article VI of the GATT 1994 provides that the "margin of dumping" is the amount by which
normal value "exceeds" export price. If normal valu e does not exceed export price, the result of the
comparison is not a margin of dumping. Such a comp arison simply is not the concern of Article VI.
For its argument to succeed with respect to th e transaction-to-transaction comparison methodology,
Canada would need this Panel to accept that wher e export price exceeds normal value the result is a
"negative margin of dumping", equally cognizable as a "margin of dumping" under Article VI of the
GATT 1994 and the AD Agreement. However, neit her Article VI of the GATT 1994 nor the AD
Agreement recognizes such a concept.

38. Since Article VI of the GATT 1994 and the AD Agreement do not recognize "negative
margins of dumping", they do not require an investig ating authority to take any particular steps where
it finds that export price exceeds normal value in a given transaction-to-transaction comparison. The
Appellate Body report in the underlying proceeding is not inconsistent with this proposition. The
Appellate Body "emphasize[d] that [the terms "a ll comparable export transactions" and "margins of
dumping"] should be interpreted in an integrated ma nner". (Para. 85.) Accordingly, the Appellate
Body’s conclusion that there was an obligation to provide offsets when usi ng the average-to-average
comparison methodology during the investigation ph ase was the result of its interpretation of "all
comparable export transactions" together with "margins of dumping".

39. Any offsets that occur in th is context reflect the use of averages of all export prices and
normal values. That is, in applying the average- to-average methodology, the Appellate Body found
that the United States was entitled to make multiple in termediate comparisons. However, in order to
establish the weighted average margin of dumpi ng for "all comparable export transactions", the
Appellate Body concluded that the United States woul d have had to aggregate all of the results of
those intermediate comparisons including those comp arisons that were not dumped. The offsets,
therefore, were tied to the use of the average-to-average methodology in an investigation, and did not
arise out of any independent obligation to offset prices.

40. Canada has offered no textual analysis in support of its claim that offsetting is required when
applying the transaction-to-transaction comparison met hodology pursuant to Article 2.4.2. The lack
of a textual basis for Canada’s argument is unavo idable because the scope of the AD Agreement and
the GATT 1994, with respect to the measurement of dumping, is limited to instances in which there
are positive differences between normal value and export prices. Because there is no basis for
Canada’s assertion that Article 2.4.2 requires a Member, when using the transaction-to-transaction
comparison methodology, to reduce the am ount of dumping found based on non-dumped
comparisons, Canada’s claim under Article 2.4.2 should be rejected.

IV. CONCLUSION

41. For the reasons stated in the first submissi on and the rebuttal submission of the United States,
Canada’s challenge to the implementation by th e United States of the DSB’s recommendations and
rulings in this dispute is groundless. The Unite d States therefore requests that the Panel reject
Canada’s claims in their entirety and find that th e measure the United States took to comply with the
recommendations and rulings of the DSB is consistent with its obligations under the AD Agreement.