UNITED STATES – FINAL DUMPING DETERMINATION ON SOFTWOOD LUMBER FROM CANADA
Document: RECOURSE TO ARTICLE 21.5 OF THE DSU BY CANADA AB-2006-3
Date: 15 August 2006
Document codes: WT/DS264/AB/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

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

APPELLATE BODY

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 developed in the Panel Report,

– 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.

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 Appellate Body reports were adopted 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 determination 11 pursuant to Section 129 of
the Uruguay Round Agreement Act 12 (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.
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.

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.

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 Review 24
(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 submission 27, 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 rulings 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.

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 investigation 32, 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, Article 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).

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

36Panel Report, paras. 5.27-5.28.
37Canada's appellant's submission, paras. 37-38.

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)).
41Ibid., para. 56.

20. Canada also draws attention to the Panel's conclusion 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 and 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 substantial 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.

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 comparison 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.

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 collective sense. In contrast, Article VII:3 of the GATT 1994 uses the term
"product" in the individual sense.

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 average-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

55Ibid., para. 41.
57Ibid., para. 47.

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.

59Ibid., para. 64.
60Ibid., para. 65. (original emphasis)
61Ibid., para. 65.

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 would 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

63Ibid., para. 84.

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 reports 69, 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 Trade 70
(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

65Ibid., para. 89.
69GATT Panel Report, EC – Audio Cassettes , para. 360 (unadopted); GATT Panel Report,
EEC – Cotton Yarn, para. 502.
70BISD 26S/171.

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.

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 transaction-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 refers 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)
77European Communities' third participant's submission, para. 6.

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 aggregated. The European Communities asserts that such
a proposition is supported by the first sentence of Article 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 made in accordance with Article 2.4.

78European Communities' third participant's submission, para. 17.

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 was 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).

from a particular exporter cannot exceed the ceiling 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 investigating authority must take into

82European Communities' third participant's submission, para. 70.
83Ibid., para. 74.
84Japan's third participant's submission, para. 11.

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 first 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 consequences 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 second 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).

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, Section 351.414(f)(2)).
90Ibid., para. 71. (emphasis omitted)
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).

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 average 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", and 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.

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 Zealand'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 provide 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.

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 reliance 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 does 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 methodology 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 explanation 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).

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 and 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.

III. Issues Raised in This Appeal
70. The following issues are raised 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 reviews 107, 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.

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.
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.

transaction-to-transaction comparison methodology.
116 At the oral hearing, the United States
acknowledged that the Section 129 Determination was the first time that 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 that the Statement of Administrative 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.

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.

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 States' 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.
127Ibid., paras. 51-58.
128United States' appellee's submission, paras. 3 and 67.
129Ibid., paras. 30 and 40.

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.

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 margins of dumping in the Section 129 Determination:

133Panel Report, para. 5.16.
134Ibid.
135See Section 129 Determination, p. 22645.

[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 inclusion of all comparison results in the numerator.
139Panel Report, para. 5.66.

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 methodology, 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

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' submission 141, 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 transactions 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))
142The United States has not asserted that an investigating authority could limit its examination to some
export transactions under the transaction-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 constructed export prices under certain conditions.
144Appellate Body Report, US – Softwood Lumber V, para. 98. (original emphasis)

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-weighted 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).
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.

phrase "all comparable export transactions" is not pertinent 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 [transaction-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.

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 comparison 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.

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 2.4.2 159, 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-transaction 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 questioning at the oral hearing.
160Neither has Canada, nor the third participants.

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 weighted 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 scenarios 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.

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 their 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-weighted average methodology. In
these circumstances, the two methodologies would not yield equivalent results, except by coincidence.

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 triggered, 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 Canada 170 and several third participants 171 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 specific model or type, but, rather, when the results of

167Panel Report, para. 5.61.
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)

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 provided 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 recognizes 173, 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 acknowledged 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 questioning 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).

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 comparison 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.

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 excess of the margin of dumping.
112. As several third participants have indicated 181, 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").

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 Article 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 departure 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 decisions 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 rate 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

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)
189Ibid.

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 tariff 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 export 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)

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 analysis 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 Duties 195 (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", which "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.

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 zeroing 199 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 injury". (Group of Exports Report, para. 8 (reproduced in
Panel Report, para. 5.63)) The fact that making a determination of dumping and injury 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.
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 recourse 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.

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 paragraph 5.66 of the Panel Report, 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." 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'
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))

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.

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.
217Ibid., para. 99.
218Ibid., para. 100.

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 comparison" 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

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 ,
225Ibid., para. 96 (referring to Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review ,

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 regarding 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.

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 claim 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 conclusion 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)

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 "fair 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) (Oxford 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)

... 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.
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)

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 with 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 contextual 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 examination 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 section 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.

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 conformity 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 conformity with its obligations under the Anti-Dumping Agreement.

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

ANNEX I

17 May 2006
 (06-2427)
 Original: English

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
– 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.

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 and 6.1 of the panel
report.

In the light of these errors, Canada respectfully 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.

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).