UNITED STATES – FINAL DUMPING DETERMINATION ON SOFTWOOD LUMBER FROM CANADA - RECOURSE TO ARTICLE 21.5 OF THE DSU BY CANADA
Document: Report of the Panel
Date: 3 April 2006
Document codes: WT/DS264/RW
Complainant: Canada
Respondent: U.S.
Third parties: China, EU, India, Japan, New Zealand, Thailand
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. 1, 2, 4, 5, 9  Anti-dumpingArt. VI  GATT 1994Art. 18  Anti-dumping

UNITED STATES – FINAL DUMPING DETERMINATION ON
 SOFTWOOD LUMBER FROM CANADA -
RECOURSE TO ARTICLE 21.5 OF THE DSU BY CANADA

Report of the Panel

I. INTRODUCTION
1.1 On 19 May 2005, Canada requested the establishm ent of a panel pursuant to Article 21.5 of
the Understanding on Rules and Procedures Governing the Settlement of Disputes (hereinafter
"DSU") concerning the United States' alleged failure to implement the recommendations and rulings
of the Dispute Settlement Body (her einafter "DSB") in the dispute " United States – Final Dumping
Determination on Softwood Lumber from Canada".1
1.2 At its meeting on 1 June 2005, the DSB referred this dispute to the original panel, in
accordance with Article 21.5 of the DSU, to examine the matter referred to the DSB by Canada in
document At that meeting, the parties to the dispute also agreed that the Panel should
have standard terms of reference. The terms of reference are, therefore, the following:
"To examine, in the light of the relevant provisions of the covered agreements cited
by Canada in document , the ma tter referred to the DSB by Canada in
that document and to make such findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in those agreements".
2
1.3 On 3 June 2005, the Panel was composed as follows:
Chairman: Mr. Harsha V. Singh
 Members: Mr. Gerhard Hannes Welge
 M r . A d r i á n M a k u c . 3

1.4 China, the European Communiti es, India, Japan, New Zealand and Thailand reserved their
third-party rights.
1.5 On 3 August 2005, following his appointment as a Deputy Director-General of the WTO
Secretariat, Mr. Harsha Singh resigned from his positi on as Chairman of the Panel. Subsequently, on
18 August 2005 Canada requested the Director-Gen eral to appoint a replacement Chairperson,
pursuant to paragraph 7 of Article 8 of the DSU.
1.6 On 26 August 2005, the Director-General a ppointed a new Chairman of the Panel.
Accordingly, the composition of the Panel is as follows:
 Chairman: Dr. Toufiq Ali

 Members: Mr. Gerhard Hannes Welge
 M r . A d r i á n M a k u c
4

1.7 The Panel met with the parties on 15-17 November 2005. It met with the third parties on
16 November 2005. The Panel issued its interim report to the parties on 14 February 2006.
II. FACTUAL ASPECTS
2.1 This dispute concerns the implementation by the United States of part of the rulings and
recommendations of the DSB in respect of United States – Final Dumping Determination on
Softwood Lumber from Canada (DS264). The relevant part of the rulings and recommendations of

1 WT/DS264/16, 20 May 2005.
2 WT/DS264/20/Rev.2, 17 June 2005.
3 WT/DS264/20/Rev.2, 17 June 2005.
4 WT/DS264/23, 29 August 2005.

the DSB concerned the finding that the use of "zer oing" by the US Department of Commerce (DOC)
in the underlying investigation was inconsistent with Article 2.4.2 of the AD Agreement in the context
of a comparison of "a weighted average normal va lue with a weighted average of all comparable
export transactions".
2.2 In the original anti-dumping investigation unde rlying this dispute, DOC divided the product
under investigation into groups of identical, or broa dly similar, product types. After making certain
adjustments within each product type, DOC calculat ed a weighted average normal value and export
price for each product type, and then compared th e weighted averages for each product type. This
process resulted in multiple results, one for each product type. In some instances this comparison
showed that the weighted average export price for a specific product type was less than the weighted
average normal value, i.e., an amount of dumping, while in other instances, the comparison showed
that the weighted average export price was mo re than the weighted average normal value, i.e. , no
dumping. These results were then aggregated to produce one single margin of dumping for the
product under investigation for each investigated e xporter. In the aggregation process, a value of
"zero" was attributed as the amount of dumping for those product type comparisons where the
weighted average export price was more than th e weighted average normal value. DOC then
aggregated the positive amounts of dumping from th e individual product type comparisons, that is,
those instances where the weighted average export price was less than the weighted normal value, and
divided the result by the total value of exports, to arrive at a weighted average margin of dumping.
This process of attributing a "zero" value as the amount of dumping for individual product type
comparisons where the weighted average export price is more than the weighted average normal value
for the same product type is the process of "zeroing " which was at issue before the original panel and
Appellate Body in this dispute.
2.3 The issue before the original panel was whethe r zeroing is allowed when an investigating
authority is calculating an overall margin of dumping under the weighted average-to-weighted
average methodology set forth in Article 2.4.2. Th e original panel observed that "It is clear that
Article 2.4.2 requires that all comparable export tran sactions have to be taken into account when the
weighted average normal value is compared to th e weighted average of prices of all comparable
export transactions. ... Through the us e of zeroing, it is clear to us that the entirety of the prices of
some export transactions, i.e., those export transactions where the weighted-average-export-price is
greater than the weighted-average-normal-value, in the second stage of the process, are not taken into
account.
"5 Consequently, the original panel concluded (subject to a dissenting opinion6) that:
"...the United States has violated Article 2.4.2 of the AD Agreement by not taking into
account all comparable export transactions when DOC calculated the overall margin
of dumping as Article 2.4.2 requires that the existence of margins of dumping has to
be established for softwood lumber on the basis of a comparison of the weighted-
average-normal-value with the weighted av erage of prices of all comparable export
transactions, that is, for all transactions involving all types of the product under
investigation".
7
2.4 The original panel concluded that the United States "acted inconsistently with Article 2.4.2 of
the AD Agreement in determining the existence of margin s of dumping on the basis of a methodology
incorporating the practice of 'zeroing'."8

5 Panel Report, United States – Final Dumping Determination on Softwood Lumber from Canada ("US
– Softwood Lumber V "), WT/DS264/R, adopted 31 August 2004, as modified by Appellate Body Report,
WT/DS264/AB/R, paras. 7.215-216.
6 Panel Report, US – Softwood Lumber V, supra note 5, paras. 9.1-9-24.
7 Panel Report, US – Softwood Lumber V, supra note 5, para. 7.224.
8 Panel Report, US – Softwood Lumber V, supra note 5, para. 8.1(a).

2.5 The United States appealed that conclusion by the original panel. The Appellate Body upheld
the original panel's finding that the United States acted inconsistently with Article 2.4.2 of the
AD Agreement in determining the existence of margins of dumping on the basis of a methodology
incorporating the practice of zeroing.9
2.6 In reaching its conclusions, the Appellate Body emphasized that it was addressing the issue
specifically in the context of the weighted av erage-to-weighted average comparison methodology.
The Appellate Body concluded that dumping, and "margins of dumping", can be found only for the
product under investigation as a whole, and cannot be found to exist for a product type, model, or
category of that product, and further stated that the weighted average normal value/weighted average
export price comparisons for the product types in the DOC analysis did not result in the calculation of
"margins of dumping", but only in intermediate calcu lations on the way to the calculation of a margin
of dumping for the product (as defined by DOC), lumb er, as a whole. In looking at the text of
Article 2.4.2, the Appellate Body relied on the presence of the phrase "all comparable export
transactions", and stated, similarly to the original pane l: "Zeroing 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. Zeroing, therefore, does not take into account the entirety of the prices of some export
transactions, namely, the prices of export transactions in those sub-groups in which the weighted
average normal value is less than the wei ghted average export price." (footnote omitted) 10 T h e
Appellate Body specifically stated that the issue of whether zeroing is permitted under the transaction-
to-transaction methodology or the average-to-tra nsaction methodology was not before it, and it
refused to consider the United States' arguments th at this issue should be considered as context in
assessing the permissibility of zeroing under the average-to-average methodology.
2.7 The Appellate Body's report was adopted 31 August 2004.
2.8 Under US law (commonly referred to as "Secti on 129"), if a WTO Panel or Appellate Body
report finds that a determination by the DOC is not consistent with US obligations, then, following
consultations with and upon recei pt of a written request from the USTR, the DOC "shall ... issue a
determination in connection with the particular proceeding that would render the [DOC's] action ...
not inconsistent with the findings of the panel or the Appellate Body". 11 In this dispute, the USTR
made such a request to the DOC on 5 Novemb er 2004. The DOC issued its "Section 129"
determination within the statutory deadline set out in US law, on 2 May 2005. In that determination,
the DOC calculated new rates for the exporters su bject to the anti-dumping duty order, based on a
comparison of normal value and export prices on a tr ansaction-to-transaction basis. Specifically, the
DOC matched individual sales of Canadian lumber in the United States (export transactions) with
individual sales of Canadian lumber in Canada ( normal value transactions), using criteria developed
in the original investigation for matching comparab le transactions, and then compared the price of
each export transaction for which it had data with the price of a comparable normal value transaction.
The resulting comparisons yielded a positive amount wh ere normal value exceeded export price, or a
negative amount where normal value was less than export price. DOC then calculated a final margin
of dumping for individually examined exporters by adding together the positive amounts, and
dividing by the value of all export transactions fo r that exporter individually examined. DOC did not
take into account the negative amounts.
2.9 Canada claims that the methodology adopted by the DOC in the Section 129 determination is
inconsistent with Article s 2.4.2 and 2.4 of the AD Agreement. The United States denies Canada's
claims.

9 Appellate Body Report, United States – Final Dumping Determination on Softwood Lumber from
Canada ("US – Softwood Lumber V "), WT/DS264/AB/R, adopted 31 August 2004, para. 117.
10 Appellate Body Report, US – Softwood Lumber V , supra note 9, para. 101.
11 19 U.S.C. §3538(b)(2).

III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
3.1 Canada asks the Panel to find that the United States failed to implement the DSB’s
recommendations and rulings and rule that it has acted inconsistently with Articles 2.4 and 2.4.2 of
the Anti-Dumping Agreement by continuing to determine dumping on the basis of a methodology that
incorporates the practice of zeroing.
3.2 Canada also requests that the Panel recommend pursuant to Article 19.1 of the DSU that the
United States bring its measures into conformity w ith its obligations under Articles 2.4 and 2.4.2 of
the Anti-Dumping Agreement by recalculating dumping margins for all investigated exporters and the
“all others rate” on the basis of a methodology that does not incorporate the practice of zeroing and
that it return all anti-dumping cash deposits collected as a result of its failure to eliminate the practice
of zeroing.
3.3 The United States requests that the Panel reject Canada’s claims in their entirety and find that
the United States properly implemented the recommendations and rulings of the DSB in this dispute.
3.4 With respect to Canada's request that the Panel recommend that the United States bring its
measures into conformity in a particular ma nner, the United States notes its understanding that
Canada is asking for a “suggesti on” under Article 19.1 of the DSU. The United States asserts that
there should be no need for such a suggestion, as th e United States has come into compliance with its
WTO obligations. However, in the event the Pane l were to accept Canada ’s arguments, the United
States requests that the Panel dec line Canada’s request as inappropriate, asserting that it goes beyond
anything relevant to implementing a recommendation and seeks to impose an obligation – to return
anti-dumping cash deposits – nowhere called for under the WTO agreements.
3.5 The arguments of the parties and third parties ar e set out in their written submissions and oral
statements to the Panel. Executive summaries of those submissions and statements are appended to
this report.
IV. INTERIM REVIEW
4.1 On 31 January 2006, we submitted our interim re port to the parties. On 20 February 2006,
Canada and the United States submitted written request s for review of precise aspects of the interim
report. On 27 February 2006, Canada and the United States submitted written comments on each
other's request for interim review.
A.
REVIEW REQUESTED BY CANADA
4.2 Canada requested review of paragraphs 5.11, 5.14, 5.19, 5.37, 5.39 (footnote 54), 5.70
(footnote 82), and 6.80 of the interim report. Canada asked the Panel to correct alleged
mischaracterizations of Canada's position in these paragraphs.
4.3 In the absence of any objections from the Unite d States, we made the changes requested by
Canada to paragraphs 5.11, 5.19, 5.37, 5.39 (fo otnote 54), and 6.80 of the interim report (mis-
numbered in the interim report, paragraph 6.2 of the final report).
4.4 In respect of paragraph 5.14, in the absence of any objections from the United States, we
made changes to the text to reflect Canada's argument, based on the comments made by Canada.
4.5 In respect of paragraph 5.70, footnote 82, Cana da asked the Panel to insert a reference to a
letter it had submitted to the Appellate Body on 28 September 2004 regarding Canada's position in the
US – Softwood Lumber V Appellate Body proceedings. Canada asked the Panel to insert specific
language regarding this matter. The United States objected to the language proposed by Canada,

alleging that it referred in an unbalanced way to Canada's letter. The United States proposed
alternative language to be used in the event that the Panel decided to include a reference to Canada's
letter in footnote 82.
4.6 In response to Canada's request, we included a reference to Canada's 28 September 2004 in
footnote 82 (footnote 84 in the final report). In doing so, we relied in part on the language proposed
by the United States.
B. REVIEW REQUESTED BY THE UNITED STATES
4.7 The United States requested review of paragraphs 5.28, 5.31 and 5.73 of the Panel's interim
report. The United States also referred the Panel to a number of typographical errors in the interim
report.
4.8 In the absence of any objections from Canada, we made the changes requested by the United
States to paragraphs 5.31 and 5.73 of the interim report.
4.9 In respect of paragraph 5.28, the United St ates requested the deletion of the phrase "even
though it does not reflect the full results of all compar isons" from the final sentence of that paragraph.
The United States asserted that, although the phrase is not inconsistent with the Panel's findings, it
might be mis-read as being inconsistent. In it s comments on the US request for interim review,
Canada asserted that the phrase accurately reflects th e Panel's finding that an investigating authority
may treat non-dumped or negative transaction-specific comparison results as a zero value ( i.e., less
than they actually were) in calculating a margin of dumping.
4.10 We see no need to make the change requested by the United States. In the context of
paragraph 5.28, the meaning of the phrase "even though it does not reflect the full results of all
comparisons" should be clear. However, we have amended the text of para graph 5.28 in order to
ensure that it clearly reflects our view that, wh en establishing the amount of dumping for the purpose
of calculating a margin of dumping under the T-T comparison methodology, an investigating
authority need not include in its calculations th e results of comparisons where export price exceeds
normal value.
4.11 We also corrected the typographical errors iden tified by the United States, as well as others
we identified.
V. FINDINGS
A. I
NTRODUCTION AND GENERAL ISSUES
5.1 The claims put forward by Canada in this case challenge the DOC's Section 129
determination, and specifically one aspect of its methodology in calculating dumping margins for
individual exporters examined. Canada has not challenged any of the procedural aspects of the
Section 129 process, including the DOC's methodolog y in matching transactions for purposes of the
transaction-to-transaction comparisons in the dumping margin calculation.
5.2 The role of a Panel in an Article 21.5 proceed ing is to evaluate the challenged measure to
determine its consistency with the defending Member's obliga tions under the relevant WTO
Agreements. Thus, the Panel is not limited by the original analysis and decision – rather, it is to
consider, with a fresh eye, the new determination befo re it, and evaluate it in light of the claims and
arguments of the parties in the Article 21.5 proceeding.
5.3 In this case, there is no dispute as to the measure at issue, or as to the propriety of the claims
raised by Canada. The principal task for us is to assess, applying the familiar concepts regarding

standard of review and burden of proof, whether the methodology used by DOC in its dumping
margin calculation in the Section 129 determinati on is consistent with th e asserted obligations in
Articles 2.4 and 2.4.2 of the AD Agreement.
5.4 The concepts of standard of review and burden of proof applicable in this dispute are the
same as those applied in the original Panel's report. As the Panel noted in that report, Article 11 of the
DSU sets forth the appropriate standard of review, in general, for pane ls for all covered agreements.
Article 11 imposes upon panels a comprehensive oblig ation to make an "objective assessment of the
matter", an obligation which embraces all aspects of a panel's examination of the "matter", both
factual and legal.
12
5.5 Furthermore, Article 17.6(i) of the AD Agreement sets forth the special standard of review
applicable to anti-dumping disputes. It provides with regard to factual issues that:
"in its assessment of the facts of the matte r, the panel shall determine whether the
authorities' establishment of the facts was proper and whether their evaluation of
those facts was unbiased and objective . If the establishment of the facts was proper
and the evaluation was unbiased and objectiv e, even though the panel might have
reached a different conclusion, the evalua tion shall not be overturned". (emphasis
added)
In this case, there is no dispute between the parties as to the establishment of the facts relevant to the
claims before us.
5.6 Article 3.2 of the DSU notes that the dispute settlement system serves, inter alia, to "clarify
the existing provisions of [covered] agreements in accordance with customary rules of interpretation
of public international law". Furtherm ore, pursuant to Article 3.2 of the DSU, it is clear that a panel's
decision "must not add to or diminish rights and obligations provided in the WTO Agreement ".13
With respect to questions of the interpretation of the AD Agreement, Article 17.6(ii) provides:
"the panel shall interpret the relevant provisions of the Agreement in accordance with
customary rules of interpretation of public international law. Where the panel finds
that a relevant provision of the Agreement admits of more than one permissible
interpretation, the panel shall find the authorities' measure to be in conformity with
the Agreement if it rests upon one of t hose permissible interpretations ". (emphasis
added)
Thus, since Article 17.6(ii) requires us to apply th e customary rules of interpretation of treaties in
interpreting the AD Agreement, our task is in this respect no different from the task of all panels.
Article 31.1 of the Vienna Convention ,14 which is generally accepted as reflecting such customary
rules, provides that:
"[a] treaty shall be interp reted in good faith in accordan ce with the ordinary meaning
to be given to the terms of the treaty in their context and in the light of its object and
purpose".
It is thus clear that our interpretation of the releva nt provisions in this dispute must be based, first and
foremost, on the text of the treaty, while context and object and purpose may also play a role.
15 It is

12 Panel Report, US – Softwood Lumber V, supra note 5, para. 7.6.
13 Appellate Body Report, India – Patent Protection for Pharmaceutical and Agricultural Chemical
Products ("India – Patents (US)"), WT/DS50/AB/R, adopted 16 January 1998, DSR 1998:I, 9, para. 46.
14 Done at Vienna, 23 May 1969, 1155 U.N.T.S. 331; 8 International Legal Materials 679.
15 Appellate Body Report, Japan – Taxes on Alcoholic Beverages ("Japan – Alcoholic Beverages II "),
WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, 97, p. 11. The

also well-established that these principles of in terpretation "neither require nor condone the
imputation into a treaty of words that are not there or the importation into a treaty of concepts that
were not intended".
16

5.7 What Article 17.6(ii) of the AD Agreement adds is an explicit recognition that the provisions
of the AD Agreement may admit of more than one permissible interpretation, and an instruction that,
if the process of treaty interpretation leads us to th e conclusion that the interpretation of a provision in
question put forward by the defending party is permissible, we shall find the measure in conformity
with the AD Agreement if it is based on that permissible interpretation.
5.8 Finally, we recall that, in WTO dispute settleme nt proceedings, the burden of proof rests with
the party that asserts the affirmative of a particular claim or defence.
17 Canada as the complaining
party must therefore make a prima facie case of violation of the relevant provisions of the
AD Agreement, which the United States as respondent must refute. We also note, however, that it is
generally for each party asserting a fact, whether complainant or respondent, to provide proof
thereof.
18 We also recall that a prima facie case is one which, in the absence of effective refutation
by the other party, requires a panel, as a matter of law, to rule in favour of the party presenting the
prima facie case. The role of the Panel is not to ma ke the case for either party, but it may pose
questions to the parties "in order to clarify and distil the legal arguments".19
B. CANADA'S ARTICLE 2.4.2 CLAIM
5.9 Canada claims that the United Stat es violated Article 2.4.2 of the AD Agreement because
DOC engaged in zeroing when applying the transaction-to-transaction comparison methodology in the
Section 129 Determination.
5.10 Article 2.4.2 of the AD Agreement provides:
Subject to the provisions governing fair comparison in paragraph 4, the existence of
margins of dumping during the investiga tion 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 weight ed average-to-weighted average or
transaction-to-transaction comparison.

Appellate Body has recently emphasized the importance of the "ordinary meaning" of the terms used in the treaty
text in, for example, Appellate Body Report, United States – Continued Dumping and Subsidy Offset Act of 2000
("US – Offset Act (Byrd Amendment )"), WT/DS217/AB/R, WT/DS234/AB/R, adopted 27 January 2003, DSR
2003:I, 375.
16 Appellate Body Report, India – Patents (US), supra note 13, para. 45.
17 Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and
Blouses from India ("US – Wool Shirts and Blouses "), WT/DS33/AB/R and Corr.1, adopted 23 May 1997,
DSR 1997:I, 323, p. 14, et seq.
18 See Appellate Body Report, US – Wool Shirts and Blouses, supra note 17.
19 Appellate Body Report, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or
Non-Alloy Steel and H-Beams from Poland ("Thailand – H-Beams "), WT/DS122/AB/R, adopted 5 April 2001,
DSR 2001:VII, 2701, para. 136.

1. Main arguments of the parties
5.11 Canada submits that the Appellate Body has already found that zeroing is prohibited in the
context of the weighted average-to-weighted average ("W-W") comparison methodology. Canada
asserts that the Appellate Body's reasoning should also apply in respect of ze roing in the context of
the transaction-to-transaction ("T-T") comparison methodology at issue in these proceedings.
5.12 Canada asserts that the Appellate Body ruled, in the appeal of the original Panel's decision in
this case, that, when establishing "margins of dumping" "on the basis of a comparison of a weighted
average normal value with a weighted average of prices of all comparable export transactions",
margins of dumping can be found only for the product under investigation as a whole, and cannot be
found to exist for a product type, model, or category of that product. In this regard, Canada refers to
the Appellate Body's finding that:
… the results of the multiple comparisons at the sub-group level are … not “margins
of dumping” within the meaning of Article 2.4.2. Rather, those results reflect only
intermediate calculations made by an i nvestigating authority in the context of
establishing margins of dumping for the product under investigation. Thus, it is only
on the basis of aggregating all these “intermediate values” that an investigating
authority can establish margins of dumping for the product under investigation as a
whole.
20
5.13 Canada also relies on the Appellate Body's statement that it:
... fail[ed] to see how an investigating authority could properly establish margins of
dumping for the product under investigation as a whole without aggregating all of the
“results” of the multiple comparisons for all product types. There is no textual basis
under Article 2.4.2 that would justify taking into account the “results” of only some
multiple comparisons in the process of calculating margins of dumping, while
disregarding other “results”. If 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 2.4.2.21
5.14 Canada notes that this approach led the Appella te Body to find that zeroing is prohibited in
the context of the W-W comparison methodology because the margin of dumping was not established
for the product as a whole, in th e sense that zeroing meant that non-dumped comparisons were treated
as if the result were zero rather than the actual negati ve result, such that not all the results for all the
multiple comparisons were taken into account. Cana da submits that the same approach should apply
in the context of the T-T comparison methodology. In particular, Canada asserts that, as with the W-
W methodology, the T-T methodology involves multiple comparisons, in the sense that every
transaction-specific comparison made by DOC represents an intermediate calculation in the context of
establishing a margin of dumping for the product under investigation. According to Canada,
therefore, DOC must aggregate all ( i.e., without zeroing any) of these transaction-specific
“intermediate values” in order to arrive at a single margin of dumping for the product as a whole. In
other words, Canada claims that zeroing is pr ohibited under the T-T comparison methodology for the
same reasons that it is prohibited under the W-W comparison methodology.
22

20 Appellate Body Report, US – Softwood Lumber V , para. 97 (emphasis in original).
21 Appellate Body Report, US – Softwood Lumber V , para. 98 (emphasis in original).
22 Canada's arguments are broadly supported by Ch ina, the European Communities, India, Japan and
Thailand, as third parties.

5.15 According to the United States, there is no textual basis for any obligation to offset the results
of comparisons in which export prices are less than normal value with the results of comparisons in
which export prices are greater than normal valu e when aggregating the results of multiple
transaction-to-transaction comparisons. With regard to the Appellate Body Report, the United States
asserts that the Appellate Body's condemnation of zeroing under the W-W comparison methodology
was based on an integrated interpretation of th e phrases "margins of dumping" and "all comparable
export transactions". The United States submits that th e latter phrase is absent in that part of the first
sentence of Article 2.4.2 providing for the T-T co mparison methodology. In addition, the United
States asserts that, rather than being treated as "int ermediate values", the results of T – T comparisons
between normal value and export price may themse lves be treated as "margins of dumping". The
United States asserts that the term "margins of dum ping" should be interpreted in the context of the
particular comparison methodology be ing applied by the investigating authority. The United States
argues that although "margins of dumping" mu st be determined for all comparable export
transactions, and therefore the product as a whole, in the context of the W – W methodology,
transaction-specific "margins of dumping" may be determined in the context of the T – T
methodology. According to the US, the prohibition of zeroing under the W-W comparison
methodology therefore does not apply in the context of the T-T comparison methodology.23
2. Evaluation by the Panel
(a) The Issue
5.16 In its Section 129 Determination, the DOC calculated a single margin of dumping for
softwood lumber for each respondent foreign producer or exporter. It calculated that margin of
dumping by determining the total amount of dumpi ng 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, in cluding those sales for which export price exceeded
normal value. In order to establish the amount of dumping, the DOC summed up the amounts by
which, on individual transactions, export price was less than the normal value. The 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 DOC did not offset the amounts attributable to non-dumped
transactions against the amounts attributable to dumped transactions. The issue presented by Canada's
Article 2.4.2 claim is whether it was permissible for the DOC to not make such offsets when
calculating the margin of dumping for each producer/exporter.
24 In other words, we must decide
whether the DOC was permitted to sum only the amounts derived from T-T comparisons showing
dumping, or whether it was required to also incl ude the amounts derived from comparisons involving
non-dumped transactions in that aggregation.
(b) Text
5.17 The starting point for our analysis of this issue is the relevant text of the first sentence of
Article 2.4.2 of the AD Agreement , which provides, inter alia , that "[s]ubject to the provisions
governing fair comparison in paragraph 4, the exis tence of margins of dumping" may be established

23 In effect, the US argues that the investigati ng authority may therefore concentrate on the positive
(transaction-specific) margins of dumping, without needing to make an offsets for non-dumped transactions.
New Zealand, as third party, agrees that zeroing is permitted in the context of the T-T comparison methodology,
albeit for different reasons than those presented by the United States.
24 Canada asserts that the onus is on the United States to demonstrate that Article 2.4.2 allows an
investigating authority to disregard the results of (non-dumped) intermediate values. See , e.g. , Canada's
Comments on the United States' Answers to the Panel's Questions at page 4. However, as complaining Member,
the onus is on Canada to establish a prima facie case of violation, which entails demonstrating that Article 2.4.2
requires an investigating authority using the T-T comp arison methodology to treat each transaction-specific
comparison as an intermediate value, and to sum up all such intermediate values in calculating a single margin
of dumping.

"by a comparison of normal value and export prices on a transaction-to-transaction basis". This is all
that the relevant text of the first sentence of Article 2.4.2 says. It contains no definition of the term
"margins of dumping", nor any additional instruction, or even guidance, on practical issues to be
addressed by investigating authorities using the tran saction-to-transaction comparison methodology.
For example, will the margin of dumping be expressed as an absolute amount, or will it be expressed
as a proportion of the value of export sales? Whic h export transactions will be compared with which
transactions in the exporting Member? Will the resu lts of the transaction-to-transaction comparisons
be aggregated and, if so, how? We stress that su ch issues are not explicitly addressed by the relevant
text of the first sentence of Article 2.4.2.
5.18 Thus, if an investigating authority chooses to express the margin of dumping in proportion to
the value of export sales, and to aggregate the re sults of the relevant transaction-to-transaction
comparisons, the text contains no explicit instruction that such aggregation sh ould include offsets for
non-dumped amounts. In particular, the relevant pa rt of the first sentence of Article 2.4.2 does not
explicitly prohibit zeroing. Nor does Canada argue that it does. Instead, Canada argues that the
prohibition of zeroing stems from the proposition that the phrase "margins of dumping" (in the
relevant part of the first sentence of Article 2.4.2) refers to the margin of dumping "for the product as
a whole", fully reflecting the results of all trans action-to-transaction comparisons. Canada relies in
this regard on the findings of the Appellate Body in US - Softwood Lumber V.
(c) Scope of Appellate Body Findings in US – Softwood Lumber V
5.19 US - Softwood Lumber V concerned the DOC's treatment of the results of model-to-model, or
sub-group, comparisons when applying the wei ghted-average-to-weighted-average comparison
methodology, which is also provided for in the firs t sentence of Article 2.4. 2. The Appellate Body
found that "'margins of dumping' can be found only for the product under investigation as a whole,
and cannot be found to exist for a product ty pe, model, or category of that product".
25 In the present
case, Canada asserts that the Appellate Body's reasoning should have been applied by the DOC to
establish a single margin of dumping (per exporter/producer) for "the product as a whole" by
aggregating all the results of the transacti on-to-transaction comparisons (concerning that
exporter/producer), and specifically by taking into account the full amount by which, in some of those
comparisons, export price exceeded normal valu e against the amounts by which, in other
comparisons, export price was less than normal value, i.e., showed dumping. In other words, Canada
asserts that the DOC was required to fully reflect the value of all import transactions included in the
transaction-to-transaction comparisons, rather than focusing on only those import transactions where
export price was less than normal value.
5.20 We are not persuaded by Canada's argu ment, however. The Appellate Body's ratio decidendi
were necessarily limited to the legal issues before it, and those issues concerned the application of the
W-W comparison methodology.
26 The Appellate Body did not make findings regarding the T-T
comparison methodology which is at issue in these proceedings, and its decision does not contain any
legal analysis of the permissibility of zeroing unde r that methodology. Indeed, the Appellate Body
explicitly declined to apply its findings regarding zeroing under the W-W comparison methodology to
zeroing under the T-T comparison methodology. In pa rticular, the Appellate Body "fail[ed] to see

25 Appellate Body Report, US – Softwood Lumber V, supra note 9, para. 96.
26 Canada also relies on the Appellate Body's finding in EC - Bed Linen that "[w]hatever the method
used to calculate the margins of dumping, ... these margins must be, and can only be, established for the product
under investigation as a whole" (Appellate Body Report , European Communities – Anti-Dumping Duties on
Imports of Cotton-Type Bed Linen from India ("EC – Bed Linen"), WT/DS141/AB/R, adopted 12 March 2001,
DSR 2001:V, 2049, para. 53) (see para. 12 of Canada's second written submission). Since the Appellate Body
in US - Softwood Lumber V was simply reiterating its earlier finding in EC – Bed Linen to support its position in
US - Softwood Lumber V , we see no need to address the findings of the Appellate Body in EC – Bed Linen in
detail. Instead, we shall focus - as the parties have done – on the findings of the Appellate Body in US -
Softwood Lumber V.

how [it] could find that the transaction-to-tran saction and average-to-transaction methodologies could
provide contextual support for the United States' in terpretation of Article 2.4.2 without examining
first whether zeroing is permitted under those methodologies ".27 If the Appellate Body's
interpretation of the term "margins of dumping" (in isolation from the phrase "all comparable export
transactions) necessarily leads to the prohibition of zeroing under the T-T comparison methodology,
as alleged by Canada, 28 there would have been no need for the Appellate Body to first examine
"whether zeroing is permitted" under the T-T met hodology before addressing the contextual argument
advanced by the United States. Th e fact that the Appellate Body declined to extend its interpretation
of "margins of dumping" from the context of the W-W methodology to the T-T methodology suggests
strongly that that interpretation was indeed limite d to the situation where the term "margins of
dumping" is used in conjunction with the phrase "all comparable export transactions".
5.21 Furthermore, the first clause of the first sentence of Article 2.4.2 describes the W-W
methodology as the establishment of margins of dumping "on the basis of a comparison of a weighted
average normal value with a weighted average of pr ices of all comparable export transactions". The
phrase "all comparable export transactions" is not included in the description of the T-T comparison
methodology, which is set out in the second clause of the first sentence Article 2.4.2, and is the
methodology at issue in these Article 21.5 proceedings. According to the Appellate Body, the parties
in US - Softwood Lumber V "disagree[d] as to the proper interp retation of the terms 'all comparable
export transactions' and 'margins of dumping' ...".
29 Although Canada asserts that "[t]he phrase 'all
comparable export transactions' was not central to the Appellate Body's findings that intermediate
comparisons must be aggregated to arrive at margins of dumping", 30 the Appellate Body explicitly
"emphasize[d]" that because "both of these terms occur in the same sentence and relate to establishing
the existence of margins of dumping under Article 2.4. 2", "they should be interpreted in an integrated
manner".31 Accordingly, we do not consider it appr opriate to focus on the Appellate Body's
interpretation of the term "margins of dumping", in isolation from the phrase "all comparable export
transactions".
32

27 Appellate Body Report, US – Softwood Lumber V , supra note 9, para. 105 (footnote omitted,
emphasis supplied).
28 Canada also asserts that the term "margins of dumping" appears, without modification, in a single
sentence that applies to both the W- W and T-T comparison methodologies. According to Canada, therefore, it
is not possible, as a matter of grammatical construction, for "margins of dumping" to have one meaning for one
methodology and another meaning for the other. We are not persuaded by this argument, however, because the
two comparison methodologies in the first sentence are separated and distinguished by the disjunctive "or".
Since "margins of dumping" may therefore be established in different ways, using different methodologies, it is
entirely possible that the nature of the resultant "margins of dumping" may also differ, in order to reflect the
nature of the comparison methodology at issue.
29 Appellate Body Report, US – Softwood Lumber V, supra note 9, para. 82 (emphasis supplied).
30 Canada's second written submission, para. 16.
31 The importance attached by the Appellate Body to the phrase "all comparable export transactions"
may also be implied from the fact that it upheld, without modification, the finding of the original panel that had
placed great emphasis upon this phrase. Indeed, th e Panel had found that the United States violated
Article 2.4.2
"by not taking into account all comparable export transactions when DOC calculated the
overall margin of dumping as Article 2.4.2 requires that the existence of margins of dumping
has to be established for softwood lumber on the basis of a comparison of the weighted-
average-normal-value with the weighted av erage of prices of all comparable export
transactions, that is, for all transactions involving all types of the product under investigation."
Panel Report, US – Softwood Lumber V , supra note 5, para. 7.224. The Panel's views did not address the term
"margins of dumping" or the concept of "product as a whole" as discussed by the Appellate Body.
32 We note that Canada also relies on the Appellate Body's statements regarding Article VI.1 of the
GATT 1994 and Article 2.1 of the AD Agreement (see, for example, para. 9 of Canada's second written
submission). Since these statements were made in the context of the Appellate Body's interpretation of the
phrase "margins of dumping" (see, Appellate Body Report, US – Softwood Lumber V, supra note 9, paras. 92-

(d) "Product As A Whole" Under The T-T Methodology
5.22 Besides, in a case where the DOC had applie d the W-W methodology, making a comparison
for each of several sub-groups of the product, and th en aggregating them to determine the margin of
dumping, it was entirely logical for the Appellate Body to have concluded that the margin of dumping
for the "product as a whole" must fully reflect those instances where, for a particular sub-group,
33 the
weighted average export price was greater than the weighted average normal value. We do not
consider that this necessarily re quires that in a calculation based on the T-T methodology, the same
logic applies and the same result must obtain. In particular, although there is little doubt that a margin
of dumping is established for each exporter/producer with respect to the product under investigation,
further examination indicates that "product" need not necessarily be interpreted as "product as a
whole", in the sense that Canada posits, that is, the summed results, fully reflecting negative and
positive results, of all comparisons concerning the product under investigation. There are also good
reasons why "margins of dumping" need not necessar ily relate to "the product as a whole" in all
circumstances in the AD Agreement.
5.23 The Appellate Body drew its conclusion that dumping is to be found for the "product as a
whole" from its consideration of Article VI of GATT 1994 and Article 2.1 of the AD Agreement,
which both define the concept of "dumping", in the case of the latter, by its own terms for the entire
AD Agreement.34 To extend the Appellate Body's reference to the concept of "product as a whole" in
the sense that Canada proposes to the T-T met hodology would entail accepting that it applies
throughout Article VI of GATT 1994, and the AD Agreement , wherever the term "product" or
"products" appears. 35 A review of the use of these terms does not support the proposition that
"product" must always mean the entire univer se of exported product subject to an anti-dumping
investigation. For instance, Article VI:2 states that a contracting party "may levy on any dumped
product" an anti-dumping duty. Article VI:3 provide s that "no countervailing duty shall be levied on
any product". Article VI:6(a) provides that no contracting party shall levy any anti-dumping or
countervailing duty on the importation of any product...". Similarly, Article VI:6(b) provides that a
contracting party may be authorized "to le vy an anti-dumping or countervailing duty on the
importation of any product". Taken together, these provisions suggest that "to levy a duty on a
product" has the same meaning as "to levy a duty on the importation of that product". Canada's
position, if applied to these provisions, would mean that the phrase "importation of a product" cannot

93), these statements should likewise be read in light of the phrase "all comparable e xport transactions". Since
Canada has not raised any claims based on these provisions , there is no need for us to examine their application
in the context of the T-T comparison methodology, i.e., independent of the phrase "all comparable export
transactions". That being said, we consider that there is nothing inherent in the word "product[]" (as used in
Article VI:1 of the GATT 1994 and Article 2.1 of the AD Agreement) to suggest that this word should preclude
the possibility of establishing margins of dumping on a transaction-specific basis, although this should not imply
that a margin of dumping established with respect to a particular transaction is sufficient to impose an anti-
dumping measure on all subsequent imports of the product. The notion that "a product is introduced into the
commerce of another country" (Article 2.1) clearly can meaningfully apply to a particular export sale and does
not require consideration of different export sales taken together. Indeed, even Canada acknowledges that a
margin of dumping may be established for a single export transaction when an investigation involves only one
transaction. See Responses of Canada to Questions to the Parties following the Substantive Meeting of the
Panel, Response to Question 27.
33 We note that the Appellate Body itself described the "product as a whole" in US - Softwood Lumber
V as "softwood lumber", rather than "all comparisons involving softwood lumber". Appellate Body Report, US –
Softwood Lumber V, supra note 9, para. 99. In light of the Appellate Body's own description of "the product as
a whole", we believe that the Appellate Body simply us ed the phrase "product as a whole" to emphasise the
difference between establishing a margin of dumping for a single model of the product under investigation on
the one hand, and establishing a margin of dumping for the product under investigation writ large, in all its
types, models or categories.
34 Article 2.1 begins "For the purpose of this Agreement,...".
35 We note that the phrase "product as a whole" does not appear in either Article VI of GATT 1994, or
the AD Agreement.

refer to a single import transaction. In many places where the words product and products are used in
Article VI of the GATT 1994, an interpretation of these words as necessarily referring to the entire
universe of investigated export transactions is not compelling.36
5.24 The Appellate Body supported its reference to "product as a whole" by having regard to
Articles 6.10 and 9.2 of the AD Agreement. For the reasons set forth below, we do not consider that
these provisions provide any guidance as to whether or not offsets should be made outside the context
of the W-W comparison methodology at issue in US – Softwood Lumber V.
5.25 Article 6.10 of the AD Agreement requires that, as a rule, "an individual margin of dumping"
shall be determined for each known exporter or producer of "the product under investigation". That is
to say, known exporters or producers must be treated individually for purposes of determining
dumping. In addition, this provision can also reasonably be understood to imply that for each of these
exporters or producers a single margin of dumping mu st be calculated. Thus, Article 6.10 arguably
entails a need to aggregate the results of the compar isons made in respect of different transactions in
order to establish "an individual margin of dumping" for a particular exporter or producer. Assuming
such an obligation exists, this does not answer the question of what methodology can be used to
calculate that margin. The AD Agreement contains no express provision on the precise methodology
to be used to calculate an overall margin. It certainly does not preclude the view that, in the
methodology at issue in this dispute, the DOC did, in fact, calculate a single overall margin for each
investigated producer/exporter of softwood lumber, i.e. a margin derived by aggregating the results of
multiple transaction-specific comparisons of export price and normal value. Except in the case of
Article 5.8, the AD Agreement does not expressly indicate whether such a margin must be expressed
as an absolute amount or as a percentage. Wher e a margin is expressed as a percentage, which
implies that the magnitude of one variable is defined as a proportion of another variable, the
AD Agreement does not contain any rules regarding the methodology for computing these variables,
i.e,. the denominator and numerator. Absent such rules, the mere fact that Article 6.10 uses the term
"product under investigation" is insufficient to conclude that this provision dictates the use of a
particular methodology for calculating an overall ma rgin 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.

5.26 Similarly, the fact that Article 9.2 of the AD Agreement provides for the imposition of anti-
dumping duty on "product" is of limited relevance to the question of the precise methodology for
calculating margins of dumping. It is obvious that there must be identity between the product subject
to the anti-dumping duty and the product in respec t of which determinations of dumping and injury
are made.37 It also stands to reason that, because the duty is applied to all subsequent imports of the
product, the determination of dumping on the basis of a T-T comparison must be based on an analysis
that takes into account all transactions under consid eration. It does not necessarily follow, however,
that transactions in which export prices are above the normal value must be treated in the same
manner as transactions in which export prices are below the normal value.
(e) "Margins of Dumping" Under The T-T Methodology
5.27 We are also not persuaded that, outside the context of the W-W comparison methodology,
"margins of dumping" must necessarily be established for "the product as a whole", on the basis of the

36 More generally, an analysis of the use of the words product and products throughout the GATT 1994,
indicates that there is no basis to equate product with "product as a whole" in the sense in which Canada uses
that term in this proceeding. Thus, for example, when Article VII:3 of the GATT refers to "the value for
customs purposes of any imported product", this can only be interpreted to refer to the value of a product in a
particular import transaction.
37 Of course, the "product" on which the duty is actually imposed after the conclusion of an
investigation is not the universe of exports that was subject to the investigation, as these exports have already
been imported without duty.

full results of all comparisons. While "mar gins of dumping" is not defined by the AD Agreement ,
Article VI:2 of the GATT 1994 provides that, for the purposes of Article VI, "the margin of dumping
is the price difference determined in accordance with the provisions of paragraph 1" of Article VI.
Paragraph 1 of Article VI defines dumping as a pr actice "by which products of one country are
introduced into the commerce of another country at less
 than the normal value of the products"
(emphasis supplied). Leaving aside the use of c onstructed normal value and third country reference
markets, addressed in Article VI:1(b)(i) and (ii), Ar ticle VI:1 provides that "a product is to be
considered as being introduced into th e commerce of an importing country at less than its normal
value, if the price of the product exported from one country to another (a) is less than the comparable
price, in the ordinary course of trade, for the like product in the exporting country" (emphasis
supplied). In other words, there is dumping when the export "price" is less than the normal value.
Given this definition of dumping, and the expres s linkage between this definition and the phrase
"price difference", it would be permissible 38 for a Member to interpret the "price difference" referred
to in Article VI:2 as the amount by which the export price is less than normal value, and to refer to
that "price difference" as the "margin of dumping".
5.28 In the absence of any definition of the phrase "margins of dumping" in Article 2.4.2, and in
the absence of any obligation under the T-T meth odology to ensure that "all comparable export
transactions" are represented in a weighted aver age export price, we see no reason why a Member
may not, when applying the transaction-to-transaction comparison methodology, establish the "margin
of dumping" on the basis of the total amount by which transaction-specific export prices are less than
the transaction-specific normal values. In such cases, the margin of dumping clearly would reflect the
price difference for dumped , rather than non-dumped , exports of the product by a particular
exporter.39 In our view, this would be a permissible in terpretation of the relevant part of the first
sentence of Article 2.4.2, even though it does not re flect the full results of all comparisons. In other
words, when establishing the amount of dumping for the purpose of calculating a margin of dumping
under the T-T comparison methodology, an investigati ng authority need not include in its calculations
the results of comparisons where export price exceeds normal value.
(f) Margins of Dumping Without Averaging
5.29 In any event, even if we were to accept the argument that "margins of dumping" must be
established "for the product as a whole", this concep t in and of itself does not explain whether offsets
should be made in the context of the T-T compar ison methodology. It seems clear to us that the
concept of a "weighted average export price", and particularly combined with the phrase "all
comparable export transactions" is reasonably unde rstood to require taking into account the entire
universe of export prices for all transactions under consideration, regardless of whether they are above
or below normal value. Thus, that the Appellate Body, drawing on the c oncept of "product as a
whole", concluded that the margin of dumping shou ld reflect all comparisons involving the product,
or all import transactions involving the product, seems entirely consistent with the obligation to
establish margins of dumping under the W-W comparison methodology, which is an averaging
methodology that requires consideration of "all compar able export transactions". But, since this latter
phrase does not appear in the text with reference to the T-T comparison methodology, we see no basis
to conclude that the phrase "margins of dumping for the product as a whole" must be understood in
the same way when applying the T-T comparis on methodology. Moreover, although the T-T
methodology might involve aggregation or summing up of results of comparisons of transaction-
specific prices, this should not be confused with av eraging. There is no requirement that aggregation

38 We recall in this regard, the applicable standa rd of review set out Article 17.6(ii) of the AD
Agreement, as discussed in paras. 5.5 - 5.7 above.
39 In the Section 129 Determination, the DOC expressed the amount of dumping as a proportion of the
total value of export sales. The denominator (i.e., the total value of export sales) included the value of both
dumped and non-dumped export transactions. Only the numerator included only dumped export transactions.
Canada has not challenged the DOC's calculation of the denominator.

under the T-T methodology should result in, or reflect , averages. Thus, we see no reason to conclude
that a concept of a "margin of dumping for the product as a whole" must be understood, as Canada
has argued, to be a margin of dumping that in corporates (through aggregation) price differences on
individual transactions where export price is both greater than and less than normal value. Rather
than investigating average pricing behaviour ov er a given period, the T-T methodology allows
authorities to investigate transacti on-specific instances of dumping, where export price is less than
normal value, and calculate an overall margin of dumping which reflects the total amount of dumping
on the imports subject to the investigation.
40 As a result, the US interpretation of the first sentence of
Article 2.4.2, in the context of the T-T comp arison methodology, as not precluding zeroing would
seem at a minimum to be permissible.41
(g) Summary
5.30 In summary, we recall that Canada has not argue d that the relevant text of Article 2.4.2
explicitly prohibits zeroing during the aggrega tion of transaction-to-transaction comparisons.
Canada's Article 2.4.2 claim is instead depe ndent on the Appellate Body's finding in US - Softwood
Lumber V that margins of dumping should be established for "the product as a whole". However, we
have demonstrated that the Appellate Body's fi ndings regarding the need to establish margins of
dumping for "the product as a whole" should not necess arily be applied in the same manner outside
the W-W comparison methodology. Those findings may in any event not be isolated from its
consideration of the phrase "all comparable export tr ansactions", which phrase does not appear in the
relevant text concerning the transaction-to-tran saction comparison methodology. This difference in
language reflects a fundamental distinction betwee n the nature of the W-W and T-T comparison
methodologies. Although both methodologies might involve aggregation, the W-W methodology is
based on an analysis of average price behaviour, while the T-T methodology allows an investigating
authority to identify transaction-sp ecific instances of dumping. In these circumstances, we conclude
that there is no basis to uphold Canada's claim th at Article 2.4.2 required the DOC to establish
margins of dumping by aggregating the results of all transaction-to-transaction comparisons,
offsetting non-dumped comparisons against dumped comparisons.
(h) Broader Contextual Considerations
5.31 The above analysis is confirmed by a number of broader contextual considerations which
highlight a number of difficulties that would result from simply extending the findings of the
Appellate Body in US - Softwood Lumber V , as Canada would have us do. One of these broader
contextual considerations concerns the impact of Canada's "margins of dumping for the product as a
whole" argument on the targeted dumping compar ison methodology set forth in the second sentence
of Article 2.4.2. Further contextual considera tions concern the consequences of applying Canada's
"margins of dumping for the product as a whole" argument to other provisions of the AD Agreement.
In its final submission to the Panel, Canada s ought to discourage the Panel from taking the latter

40 We note that there is a fundamental underlying question whether the concept of dumping may relate
to individual export transactions or whether it relates exclusively to the average pricing behaviour of an exporter
over time. Although Canada has not expressly argu ed that dumping in the AD Agreement and in the
GATT 1994 should be conceptualized in terms of average pricing behaviour, the argument that positive
differences between individual export prices and normal values in a T-T comparison must be offset by negative
differences between individual export prices and normal values, leads to a result tantamount to a comparison on
an average-to-average basis. However, there is no indication in the AD Agreement or GATT 1994 to suggest any
agreement or common understanding among Members on this underlying question, and thus no principled basis
on which to conclude that one or the other view should influence the interpretation of the text of the
AD Agreement. Consequently, there would seem no basis to prohibit a calculation methodology which
generates an overall margin of dumping which reflects precisely the amount of anti-dumping duty that could
have been collected on the import transactions from which it was calculated.
41 We recall that, pursuant to Article 17.6(ii) of the AD Agreement , we shall find in favour of the
defending party if its measure is based on a permissible interpretation of the AD Agreement.

considerations into account. In pa rticular, Canada stated that it "has not argued that the term 'margins
of dumping' must have the same meaning throughout the Agreement".
42 Instead, Canada asserts that
"margins of dumping" simply has the same meaning thr oughout Article 2.4.2. In its oral statement at
the substantive meeting, however, Canada explicitly stated that "the Appellate Body interpreted
'margins of dumping' in the context of Article VI of the GATT and Article 2.1 of the Anti-Dumping
Agreement – provisions that apply to the entire Anti-Dumping Agreement".43 Despite its protestations
in its final submission, therefore, Canada has clearly argued that the phrase "margins of dumping"
should have the same meaning throughout the AD Agreement, and that that meaning must necessarily
be that set forth in the findings of the Appellate Body in US - Softwood Lumber V.
5.32 Since Canada's Article 2.4.2 claim is essentia lly based on the extension of the Appellate
Body's US - Softwood Lumber V findings beyond the scope of that case, contextual considerations
demonstrating the difficulties of applying those Ap pellate Body findings universally, throughout the
AD Agreement, are highly relevant to the case before us. We begin by discussing the difficulty of
applying the Appellate Body's findings in the cont ext of the second sentence of Article 2.4.2. We
then examine the implications of extending t hose findings to prospective normal value duty
assessment systems. Thereafter, we examine the consequences of finding that margins of dumping
must be established for the product as a whol e in the context of Article 2.2 of the AD Agreement. We
conclude our analysis by identifying the problem of reconciling the "margins of dumping for the
product as a whole" approach with prior GATT discu ssion of the use of transaction-specific margins
of dumping.
(i) Article 2.4.2, second sentence
The US mathematical equivalence argument
5.33 The second sentence of Article 2.4.2 provides for a departure from the two comparison
methodologies provided for in the first sentence of that provision "if the authorities find a pattern of
export prices which differ significantly among differe nt purchasers, regions or time periods". In
instances of such targeted dumping, "[a] normal value established on a weighted average basis may be
compared to prices of individual export transactions" (the "W-T comparison methodology"). In such
cases, the margins of dumping are established using the W-T comparison methodology. If Canada is
correct in arguing that the Appellate Body "did no t limit its analysis of 'dumping' and 'margins of
dumping' to the meaning of these terms under the weighted-average-to-weighted-average
methodology",44 there is seemingly nothing to prevent the Appellate Body's interpretation applying
not only to the T-T methodology set forth in the second part of the first sentence of Article 2.4.2, but
also to the W-T methodology provide d for in the second sentence thereof. 45 This would effectively
prohibit zeroing under the W-T comparison methodology (just as Canada alleges that it prohibits
zeroing under the T-T comparison methodology). The United States asserts that such prohibition of
zeroing in the context of the W-T methodology would mean that the margin of dumping using the W-
T methodology would be mathematica lly equivalent to the margin of dumping established using the
W-W methodology, thereby depriving the second sentence of Article 2.4.2 of effect. It is by now well
established that panels may not interpret provisions in a way that would reduce those provisions to
redundancy or inutility.
46 If the United States is correct, theref ore, we are precluded from endorsing a
prohibition of zeroing on the basis of the Appellate Body's interpretation of the term "margins of
dumping" in US - Softwood Lumber V ., as argued by Canada. For this reason, we explored this issue

42 See Canada's Comments on the United States' Answers t the Panel's Questions, page 1.
44 Ibid. para. 9.
45 Canada has not provided any basis for restricting the application of the Appellate Body's
interpretation to only the first sentence of Article 2.4.2.
46 See, for example, Appellate Body Report, United States – Standards for Reformulated and
Conventional Gasoline ("US – Gasoline"), WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3, para. 21.

in detail with the parties and third parties, both at the substantive meeting, and through subsequent
written questions. We did not explore this issue in order to make findings under the second sentence
of Article 2.4.2, which is, of course, not before us in this dispute. Instead, we explored this issue to
test the validity of the US mathematical equivalence argument. Our analysis of the various arguments
made in respect of this issue led us to accept the US mathematical equivalence argument.
Separate margins of dumping for patterns of export prices
5.34 In response to the US argument, Canada and cer tain third parties sought to demonstrate that
the W-T comparison methodology may be applied so as to give a result that is mathematically
different from the W-W methodology, even wit hout zeroing in the manner practised by the
United States. In other words, they sought to demonstrate that the W-T methodology would not be
nullified in the manner alleged by the United States. As described below, they do so by effectively
arguing that the term "margins of dumping" h as a different meaning under the W-T comparison
methodology than under the W-W and T-T comparison methodologies, and that this difference in
meaning is linked to the targeted nature of the dumping examined in the second sentence of
Article 2.4.2.
47
5.35 We presented Canada with a written question asking how the targeted dumping mechanism
might operate to produce a mathematically distinct result from that obtained in a W-W comparison,
without zeroing, in a hypothetical case regarding regional targeting, where imports into one region are
dumped, and imports into other regi ons are not dumped. In reply, Ca nada stated that, having proven
the regional pattern of dumping:
an investigating authority would ... have a c hoice. It could either continue its anti-
dumping investigation into export transactions to other parts of the country or it could
terminate the investigation outside the ta rgeted region. As the example in the
question provides that transactions to ot her regions were not dumped, Canada
assumes that the investigating authority w ould terminate its investigation into the
non-targeted regions and continue the investig ation with respect to transactions to the
targeted region only.
The investigating authority could then calculate the amount of dumping to the
targeted region and place this value in the numerator. Canada is of the view that
zeroing would not be permitted in the aggreg ation of any intermediate comparisons,
just as it is not permitted in the two other methodologies found in the first sentence of
Article 2.4.2. Similarly, the denominator would consist of the total value of dumped
and non-dumped export transactions to the ta rgeted region. The necessary injury
analysis would also consider the same series or group of export transactions.
As this example resulted in the termination of the investigation outside the targeted
region, anti-dumping duties would only be applied to imports into the targeted region.
Were an investigating authority to use the targeted dumping methodology in this
example, it necessarily would produce a different margin of dumping than the
weighted-average-to-weighted average me thodology which would be applied to all
imports into a country because the latter methodology would necessarily examine a
different data set ( i.e., all export transactions, rather than the subset of export
transactions that make up transaction involving the targeted region).

47 We note that this was not the position taken by Thailand. Thailand explicitly stated that the results of
the W-T comparisons within the targeted pattern were merely intermediate comparisons that needed to be
aggregated. See Thailand's Responses to the Panel's Questions for Parties and Third Parties, Response to
Question 45, para. 12.

5.36 In reply to a further question, Canada descr ibed how the second sentence of Article 2.4.2
might be applied in respect of purchaser-specific ta rgeting. Canada asserted that, having identified
such a pattern, an investigating authority could co nduct a W-T calculation and apply that margin of
dumping to the transactions involving that purchaser. Canada acknowledged that
 [t]his procedure would result in two margins of dumping being applied to an exporter
or producer who has some sales to the purchaser to which the targeted dumping
methodology was applied and other sales to ot her purchasers that were not subject to
the targeted dumping methodology.
48
5.37 Regarding the application of the second sentence of Article 2.4.2 in respect of time-specific
targeting, Canada asserts that "the investiga ting authority would ... calculate a margin for the
transactions that fall within the pattern", and "a pply that margin of dumping to those transactions". 49
Canada submits that "only one margin of dumping would be applied at any particular point in time. If
an import occurred within the period of time of the year in which targeted dumping was found, then
the targeted dumping rate would be applied. If the import occurred at a point in time that was outside
the targeted dumping time period, then the rate cal culated for the balance of the year would be
applied."
50
5.38 We note as an initial matter that each of Canada's proposed methods of applying the targeted
dumping provision changes the parameters of the analysis from those that would apply in a W-W
analysis. Thus, Canada's arguments do not address the question of how a targeted dumping analysis
based on W-T comparison without zeroing could yield a result different from a W-W comparison, in a
situation holding everything except the comparison methodology equal. Nor does Canada address
how any anti-dumping duty calculated under one of its proposed methodologies could be applied
consistently with the AD Agreement. For instance, Article 9.2 provides that "[w]hen an anti-dumping
duty is imposed in respect of any product, such dut y shall be collected in the appropriate amounts in
each case, on a non-discriminatory basis on imports of such product form all sources found to be
dumped and causing injury". It is not clear that collection of duty only on imports into certain
regions, to certain purchasers, or during certain time-periods, even if otherwise possible
51, would be
consistent with this requirement. We note also in this regard Artic le 6.10, which provides that "[t]he
authorities shall, as a rule determine an individual margin of dumping for each known exporter or
producer concerned of the product under investigati on" (emphasis added). It is not clear that
calculation of two different duty rates, for imports forming the targeted pattern, and other imports,
would be consistent with this provision. On th e other hand, the alternative, of imposing the duty
calculated for the imports forming the targeted pa ttern on all imports from the producer/exporter in
question without limitation would, presumably, be an even worse outcome than the imposition of a
duty calculated with zeroing, and has not been suggested by any party or third party as a possibility.
Separate universes of export transactions treated as the "product as a whole"
5.39 Canada addresses the US mathematical equivale nce argument by showing that the results of
the W-T methodology will differ from those of the W-W methodology when one margin of dumping
is calculated (using the W-T methodology, without zero ing) for the targeted sub-category of product,
and another is calculated for the non-targeted sub-category. 52 At first glance, the calculation of
multiple margins of dumping for different sub-categor ies of product would appear to be at odds with

48 Responses of Canada to Questions to the Parties following the Substantive Meeting of the Panel,
Response to Question 6.
49 Ibid., para. 30.
50 Ibid., para. 31.
51 See discussion below at para. 5.44 regarding imposition of duties in regional industry cases, for
which special provision is made in Article 4.2 of the AD Agreement.
52 In each case, the amount of dumping attributable to the imports forming the targeted pattern is not
offset by non-dumping outside of that pattern.

Canada's argument that a single53 margin of dumping should be established for the product as a whole,
regardless of which Article 2.4.2 comparison methodology is being used.54 Canada seeks to reconcile
this apparent inconsistency by defi ning the "product as a whole" as "the universe of transactions that
would be aggregated to arrive at a margin of du mping". In other words, Canada treats the imports
forming the targeted pattern of dumping as a separate universe of transactions, calculates a single
margin of dumping for that universe, and refers to that margin of dumping as being the margin for the
product as a whole. Canada claims that this is th e sense in which the Appella te Body used the phrase
"product as a whole". Specifically, Canada asserts that the Appellate Body "used the phrase 'product
as a whole' to refer to the universe of transactions th at would be aggregated to arrive at a margin of
dumping".55 However, Canada points to nothing in the Appellate Body Report to support its
argument that the Appellate Body used the phrase "p roduct as a whole" to mean a separate universe,
or sub-category, of export transactions, either in ge neral, or in the context of the second sentence of
Article 2.4.2.56 Nor have we been able to find anything to this effect in the Appellate Body Report.
Rather, we note that the Appellate Body frequently re fers instead to "the product under investigation
as a whole", as opposed to "a type, model, or category of that product" 57. By the phrase "the product
under investigation as a whole", we understand the Appellate Body to mean the product as defined
upon initiation of the investigation. This understanding is shared by Canada, which itself points out in
reply to Question 11 that "[t]he Appellate Body pr operly concluded that 'product under investigation'
referred to the 'product' defined at the outset of an investigation". 58 We therefore see no basis for
concluding that the Appellate B ody, as alleged by Canada, used the phrase "product as a whole" to
refer to a sub-category, or universe, of transactions that could be carved out from the totality of the
transactions initially under investigation. In a ddition, Canada's argument would mean that an
investigating authority might calculate different "m argins of dumping" in one investigation for one
exporter for different sub-categories of products based on purchasers, regions, or time periods. This is
at odds with Canada's argument that, throughout Artic le 2.4.2, "margins of dumping" always means a
single margin of dumping (per exporter/producer) for the product as a whole, that is, the entire
universe of exports subject to the investigation.
5.40 Although Canada has sought to rely on th e findings of the Appellate Body in US - Softwood
Lumber V, it does not point to anything in the text of the second sentence of Article 2.4.2 that would
justify the calculation of separate margins of dumping for separate universes of transactions. Nor
have we been able to identify any langua ge that might support such an approach. 59 Rather, because

53 We note in this regard that Canada asserted that "an investigating authority [] must aggregate all the
results of transaction-specific comparisons to arrive at a single margin of dumping for the product as a whole".
Canada's second written submission, para. 13 (bold emphasis supplied).
54 We recall Canada's statement that "[t]he consistent meaning of the phrase 'margins of dumping'
within Article 2.4.2 warrants emphasis". Canada's Co mments on the United States' Answers to the Panel's
Questions, page 2.
55 Responses of Canada to Questions to the Parties following the Substantive Meeting of the Panel,
Response to Question 6, para. 28 and Question 11, paras. 46-48.
56 Indeed, as noted above, the Appellate Body declined to consider the second sentence of Article 2.4.2
as context in its analysis, and thus did not address it at all.
57 See, for example, Appellate Body Report, US – Softwood Lumber V, , supra note 9, at paras, 93, 96
and 103..
58 Responses of Canada to Questions to the Parties following the Substantive Meeting of the Panel,
Response to Question 11, para. 46, emphasis supplied. Likewise, the EC asserts that the Appellate Body used
the words "as a whole" "to emphasise that 'the product' is 'the product' as defined by the investigating authority
at the outset of the original proceeding, and not some type, model or category of that product ". European
Communities Responses to the Panel's Questions, Response to Question 32 (emphasis supplied).
59 In our view, the only text in the second sentence of Article 2.4.2 that might possibly be of relevance
in this regard is the phrase "individual export transactions". However, there is nothing to suggest that the group
of "individual export transactions" to be compared with normal value (established on a weighted average basis)
may be confined to the "pattern of export prices" id entified by the investigating authority. Indeed, had the
concepts of "individual export transactions" and "pattern of export prices" been identical, we would have
expected them to be described within a single sentence in identical terms.

the W-T methodology is presented as a limited alternative to the W-W and T-T methodologies, the
text of Article 2.4.2 would appear to indicate that an investigating authority should use only the W-T
methodology if the factual circumstances are such that it is entitled to not use either the W-W
methodology or the T-T methodology. In other word s, if targeted dumping is identified, and the
investigating authority invokes the second sentence of Article 2.4.2, the whole investigation would be
conducted on the basis of the W-T methodology.
60 Just as there is no basis in Article 2.4.2 for
combining the W-W and T-T methodologies, so too there would seem to be no basis for combining
one, or both, of these methodologies with the W-T methodology under the second sentence of
Article 2.4.2.
5.41 In addressing the US mathematical equivale nce argument, therefore, Canada's position
exposes a fundamental inconsistency between its ar gument that the term "margins of dumping" has
the same meaning throughout Article 2.4.2 on the on e hand, and its assertion that the Appellate Body
has found that "margins of dumping" may only ever be calculated for a product as a whole on the
other. This inconsistency means either that the term "margins of dumping" does not have the same
meaning throughout Article 2.4.2, or that "margins of dumping" need not necessarily (outside of the
W-W comparison methodology) be established for the product as a whole by aggregating the results
of all transaction-specific comparisons. Either wa y, this inconsistency fundamentally undermines
Canada's claim that the term "mar gins of dumping" must be interpre ted and applied in the same way
under both the W-W and T-T comparison methodologies.
Targeted dumping as an exception to the need to establish margins of dumping for the "product as a
whole"
5.42 The EC, as third party, seeks to avoid this in consistency by arguing that the second sentence
of Article 2.4.2 is an exception. 61 Thus, the EC asserts that a single "margin of dumping" must be
established for the product as a whole throughout the AD Agreement, except in the case of targeted
dumping.62 However, the ordinary meaning of the text of the second sentence of Article 2.4.2
provides no basis for such an approach. The second sentence simply states that the two primary
comparison methodologies provided for in the firs t sentence need not be applied when certain

60 In its comments on the US replies to our questions, Canada further asserts that the mathematical
equivalence argument would be undermined when the W-T methodology is used to calculate a margin of
dumping for the targeted export transactions, and the T-T methodology is used to calculate a margin of dumping
for the non-targeted export transactions. Canada's Comments on the United States' Answers to the Panel's
Questions, page 5. In our view, such a combination of the W-T and T-T methodologies is not envisaged by
Article 2.4.2. In any event, we are examining ways in which the W-T methodology might continue to have
meaning in and of itself. We do not consider it suffici ent to reject the mathematical equivalence argument on
the basis that the second sentence of Article 2.4.2 continues to have some limited applicability provided the W-T
methodology is combined with the T-T methodology.
61 We note that the European Communities has brought its own case against US zeroing measures (see
WT/DS294, currently on appeal). We have only co nsidered the arguments presented by the European
Communities in its capacity as third party in these proceedings.
62 In response to a Question from the Panel, the EC asserts that the term "margin of dumping"
"has the same meaning throughout Article VI:2 of the GATT 1994 and the ADA, subject to the
targeted dumping provisions. [The EC] agree[s] w ith Canada that if there is targeted dumping
by purchaser, region or time, an investigating authority is entitled – for example - to calculate
the dumped amount relating to a purchaser, region or time so identified. The second sentence
of Article 2.4.2 is an exception to the first sentence of Article 2.4.2; thus, similarly, the
targeted dumped amount may, subject to the conditions provided for in the second sentence of
Article 2.4.2, be expressed as a percentage of export price, or characterized as a “margin of
dumping”. Rather than expressing this in terms of the second sentence of Article 2.4.2
constituting an exception to the general requirement to calculate a margin of dumping for the
product as a whole, the EC would say that the targeted dumping provisions provide for a
specific methodology to determine such margin in exceptional circumstances."
European Communities Responses to the Panel's Questions, Response to Question 1.

conditions are met, i.e., when there is evidence of particular types of targeted dumping. In such
circumstances, the second sentence provides for the use of a third comparison methodology. There
is nothing in the second sentence to suggest that the scope of the investigation is different when the
targeted dumping provision applies than when th e W-W or T-T comparison methodology is used.
Nor is there anything in the second sentence to sugg est that an investigating authority may focus on
(and calculate separate margins of dumping for) sub-categories of products that it would not otherwise
be able to focus on in the context of a W-W or T- T comparison. In other words, the second sentence
merely allows the investigating authority to compare the investigated data differently than in the first
sentence (by using a W-T approach, rather than W-W or T-T); it does not allow the investigating
authority to change that data, or ignore parts thereof. 63 Thus, in examining the US mathematical
equivalence argument, we are exploring ways in which the W-T targeted dumping methodology
might be applied without zeroing so as to produce results that are different from the W-W
methodology on a ceteris paribus basis.
5.43 Indeed, the European Communities appears to implicitly acknowledge that Article 2.4.2 per
se does not allow an investigating authority to focus on sub-sets of transactions because, in the context
of regional targeted dumping, it relies on Article 4.2 of the AD Agreement to justify the imposition of
the resultant anti-dumping measure on a regional basis. Thus, after stating that the investigating
authority could focus its analysis on the set of trans actions in the targeted region, the EC asserts that
the resultant anti-dumping duty "could, for example, be imposed on the products consigned for final
consumption to [that] region [], when the domestic industry has been interpreted as referring to the
producer in [that] region [] c onsistent with Article 4.2".
64 We recall that this argument has been
advanced by the EC in response to the US argume nt that a broad prohibition of zeroing (based on the
proposition that a single "margin of dumping" must be calculated for "the product as a whole") would
nullify the comparison methodology set forth in the sec ond sentence of Article 2.4.2. In this context,
we are not persuaded by an argument that th e W-T comparison methodology still has meaning,
despite a broad prohibition of zeroing, provided th e second sentence of Article 2.4.2 is applied in
conjunction with Article 4.2. In testing the continued utility of the W-T comparison methodology, the
Panel is interested in exploring ways in which th e second sentence of Article 2.4.2 continues to have
meaning in and of itself. 65 The EC's argument says nothing regarding how the targeted dumping
provision would apply in a case where the "region" did not satisfy the strict requirements of
Article 4.1(ii) regarding regional markets, and thus Article 4.2 did not apply.
5.44 Furthermore, unlike in Article 4.2, there is no pr ovision in Article 2.4.2 for application of the
anti-dumping duty resulting from a targeted dumping analysis to only imports into the region.
Article 4.2 requires the imposition of anti-dum ping duties only on imports into the defined
geographical market, unless
 the Constitutional law of the importing Member precludes such selective

63 For this reason, we also reject Canada's argumen t that a regional targeted dumping analysis would
produce a margin of dumping different from a W-W analysis "because the latter methodology would necessarily
examine a different data set ( i.e., all export transactions, rather than the subset of export transactions that make
up transaction[s] involving the targeted region". Responses of Canada to Questions to the Parties following the
Substantive Meeting of the Panel, Response to Question 5, para. 20.
64 European Communities Responses to the Panel's Questions, Response to Question 33.
65 We also note the EC assertion. in response to Qu estion 33 from the Panel, that if "the domestic
industry has [not] been interpreted as referring to the pr oducers in a certain area" (pur suant to Article 4.2), then
the investigation would not focus on transactions in the targeted region. Instead, the investigation would cover
both targeted and non-targeted regions together, and calculate a total dumped amount for both regions. In the
numerical example provided by the EC in its response to our Question 33, non-dumped transactions are zeroed,
i.e., there is no offset for non-dumped transactions. Although the EC purp orts to justify such zeroing on the
basis of "the targeted dumping provisions" (See European Communities Responses to the Panel's Questions,
Response to Question 33), we note that the comparison methodology employed is not
 targeted, because it is
based on the weighted average export price for both targeted and non-targeted regions. In the context of such a
non-targeted investigation, it makes no sense to speak of something being justified by the targeted pattern of
export prices.

imposition. In such cases, Article 4.2 permits the imposition of the duties without limitation, provided
certain conditions are met. In the context of Article 4.2, such non-selective duty imposition is
generally not problematic because the dumped imports must be concentrated into an isolated
geographic market as a prerequisite for regional anal ysis under Article 4.1(ii). In other words, there
are generally few or no imports of the subject merc handise into other areas of the importing Member.
This is not necessarily the case in the context of ta rgeted dumping, however. The fact that Members
found it necessary to include a specific provision deali ng with this issue in the context of regional
industries strongly suggests to us that selectiv e imposition of anti-dumping duties in the case of
targeted dumping would also have been specifically provided for.
Targeted dumping as a difference affecting price comparability

5.45 The EC also seeks to justify its focus on the set of transactions in the targeted region by
reference to the allowances permitted under Article 2.4. In particular, the EC asserts that if there is a
pattern of dumped prices in one region, but not in the other, then there is a difference between those
regions that "affect[s] price comparab ility" in the meaning of Article 2.4. 66 The EC states that "price
comparability" is affected because the dumping into the targeted region would be masked if a single
W-W comparison had to be made covering both th e targeted and non-targeted regions. The EC
asserts that, in such cases, the expor t price into the non-targeted region could be "adjusted" so that the
margin of dumping for that region is zero, i.e., there would be no non-dumping to offset against the
dumping in the targeted region.67
5.46 The United States asserts that the EC essentially confuses two concepts that have nothing to
do with one another: (1) differences in prices in the export market between regions, purchasers and
time-periods; and (2) differences (which affect pric e comparability) in the importing country market
between export price and normal value. 68 The United States asserts that the EC has identified a
difference that falls within the first category, whereas Article 2.4 only justifies allowances for
difference falling under the second category.
5.47 We note that the EC made the same argument to the US – Zeroing (EC) panel. That panel
rejected the EC's argument in the following terms:
This argument reflects a misinterpretation of the very concept of price comparability
as used in Article 2.4 of the AD Agreement . Differences in price comparability in
Article 2.4 for which an adjustment or a llowance may have to be are differences
between the product as sold in the export market and the product as sold in the
domestic market with respect to factors such as level of trade, taxation, quantities, etc.
The existence of differences in prices in the export market between regions,
purchasers and time-periods is conceptually wholly irrelevant to, and outside the
scope of, Article 2.4 because such differenc es have nothing to with whether or not
export sales and domestic sales are comparable with regard to factors such as level of
trade, taxation, quantities, etc. (...)69
5.48 We agree with this reasoning. We therefore reject the EC argument that the Article 2.4
allowance mechanism provides a justification for focu sing an investigation on the set of transactions

66 See, for example, European Communities Resp onses to the Panel's Questions, Response to
Question 35(d).
67 See, for example, Third Party Oral Submission by the European Communities, para. 34.
68 See Answers to the United States to the Panel's Questions of 18 November, Reply to Question 15,
para. 14.
69 Panel Report, United States – Laws, Regulations and Methodology for Calculating Dumping
Margins ("Zeroing") ("US – Zeroing (EC)"), WT/DS294/R, 31 October 2005 (appeal pending) at para. 7.279.

in the targeted region (or any other pattern of export prices), without making offsets for non-dumped
transactions outside of that region (or outside of the relevant pattern).70
Change in the normal value data set
5.49 Finally, the EC, Japan and Thailand also challenge the US mathematical equivalence
argument by suggesting that the result of a W-T comparison will differ from the result of a W-W
methodology to the extent that different weighted average normal values are used, i.e., to the extent
that the "W" in the W-W methodology is not the sa me as the "W" in the W-T methodology. Thus, the
EC asserts that the second sentence of Article 2.4.2 permits the use of a normal value "calculated by
reference to the sub-set of transactions within the pattern identified by the investigating authority". 71
Japan states that "[s]o long as Members are not prohibited from using different bases or methods
(including different time periods) to calculate the 'W' in the W-to-W and W-to- T comparisons, the
outcomes of the comparisons will almost inevitably differ because the groups of transactions making
up the weighted average normal value will differ".
72 In respect of time-specific targeted dumping,
Thailand asserts that "[i]f a W to T methodology is used for one period, and a W to W or T to T
methodology for another, export sales prices in the di fferent periods will be compared to different
normal values ..."
73
5.50 In response, the United States submits that:
nothing in the text of Article 2.4.2 supports such a leap from the treatment of prices in
the export market to the treatment of pri ces in the normal value market. Moreover,
there is no logic to the proposition that targ eting in the export market according to
purchaser, region, or time, which might jus tify special treatment of export prices,
would also justify corresponding special treatment of normal value prices. That
proposition assumes without any basis that the events that justify special treatment of
prices in the export market also are occurring in the normal value market. Just
because prices in the export market exhib it a targeted pattern with respect to
purchaser, region or time does not mean that a corresponding targeted pattern is being
exhibited in the normal value market.
74
5.51 In our view, the second sentence of Article 2.4.2 provides for a specific comparison
methodology to address situations where there is a "p attern of export prices" that result in targeted
dumping that might not be identified through the W-W or T-T comparison methodologies. The
relevant pattern, therefore, is the pattern of export sales into the importing Member. There is no
reference in the second sentence of Article 2.4.2 to patterns of home market sales in the exporting
Member. Once the relevant pattern has been id entified, the symmetrical comparison methodologies
provided for in the first sentence of Article 2.4. 2 may be replaced by the asymmetrical comparison

70 Furthermore, we note the US argument that the possibility of restricting the universe of export
transactions in the context of a targeted dumping analys is ignores Article 6.10 of the AD Agreement. This
provision provides in relevant part that, "[i]n cases where the number of exporters, producers, importers or types
of products involved is so large" as to make it impracticable to determine an individual margin of dumping for
each know exporter or producer of the product under investigation, "t he authorities may limit their examination
... to the largest percentage of the volume of the expor ts from the country in Question which can reasonably be
investigated". In our view, the fact that this provision addresses explicitly the circumstances in which less than
all export transactions may be examined in an investigation undermines the suggestion that the scope of an
investigation may be limited – implicitly – through the second sentence of Article 2.4.2.
71 See European Communities Responses to the Panel's Questions, Response to Question 9.
72 See Replies of Japan to the Questions of the Panel, Response to Question 44.
73 See Thailand's Responses to the Panels Questions for Parties and Third Parties, Response to
Question 45, at para. 8.
74 See Comments of the United States on Canada's and the third Parties Responses to the Panel's
Questions, para 45 (footnote omitted).

methodology provided for in the second sentence. That asymmetrical comparison methodology
employs a "normal value established on a weighted av erage basis". In order for the argument of the
EC, Japan and Thailand to succeed, that normal valu e would have to differ (or at least have the
potential to differ) from the "weighted average norma l value" provided for in the first sentence.
However, the abovementioned third parties have pr ovided no textual analysis justifying any such
conclusion. Given that the second sentence of Artic le 2.4.2 is designed to address a problem that
might result from particular patterns of export pric es, rather than home market prices, we ourselves
see no basis in the text of that provision to concl ude that the "normal value established on a weighted
average basis" is different from the "weighted average normal value". Furthermore, we note that even
Canada, the complaining Member, does not suppor t the contrary argument of the EC, Japan and
Thailand.
75 As a result, we are not persuaded by these third parties' assertion that the US
mathematical equivalence argument may be disposed of by varying the "W" in the W-T comparison
methodology.
Summary
5.52 In response to a very simple argument of math ematical equivalence, Canada and certain third
parties have provided convoluted explanations of how the W-T comparison methodology might be
applied, without zeroing, so as to give results that are mathematically different from the results of the
W-W comparison methodology. Their arguments are essentially based on the notion that targeted
dumping allows investigating authorities to reach th eir determinations on the basis of the pricing
behaviour in respect of universes of transactions that are narrower than the initial scope of the
investigation, and narrower than those analysed unde r the W-W methodology. Such an approach is at
odds with the very text of the second sentence of Article 2.4.2 and/or other provisions of the AD
Agreement. In other words, Canada and the relevant third parties have failed to explain how the
second sentence of Article 2.4.2 might be applied, without zeroing, in a WTO-consistent manner
, so
as to give results that are mathematically di fferent from the results of the W-W comparison
methodology. Such an approach also means that Ca nada and the relevant thir d parties have failed to
address the US mathematical equivalence argument on a ceteris paribus basis. In these
circumstances, and noting that the US mathematical equivalence argument has been confirmed by the
panel in US – Zeroing (EC) ,76 we accept the US mathematical equivalence argument. We therefore
agree with the United States that a general prohibition of zeroing based purely on the Appellate
Body's interpretation of the phr ase "margins of dumping" in US - Softwood Lumber V would deprive
the second sentence of Article 2.4.2 of effect.
(ii) Prospective normal value duty assessment
77
5.53 Under a prospective normal value duty assessment system, anti-dumping duties are assessed
as individual import transactions occur, by comparing a transaction-specific export price against a

75 In response to Question 9 from the Panel, Canada asserted that the "weighted average normal value"
(Article 2.4.2, first sentence) is the same as the "normal value established on a weighted average basis"
(Article 2.4.2, second sentence). Responses of Canada to Questions to the Parties following the Substantive
Meeting of the Panel, Response to Question 9. Canada "understands these terms to both refer to an aggregate
weighted-average normal value for the 'like product'." Furthermore, the only change in the data set referred to
by Canada in its discussion of targeted dumping hypotheticals concerns the export transactions, not the home
market transactions in the exporting Member. Responses of Canada to Questions to the Parties following the
Substantive Meeting of the Panel, Response to Question 5, para. 20).
76 Panel Report, United States – Laws, Regulations and Methodology for Calculating Dumping
Margins ("Zeroing") ("US – Zeroing (EC)"), WT/DS294/R, 31 October 2005 (appeal pending) at para. 7.266.
77 We have focused our analysis on the type of prospective normal value assessment system applied,
for example, by Canada. Similar issues will likely arise in respect of other prospective assessment systems
applied by other Members. For example, the issue of offsets could arise in the context of export prices
exceeding the minimum export price in the duty assessment system a pplied by Argentina, or export prices
exceeding the floor price occasionally applied by the European Communities.

prospective normal value. Article 9.3 of the AD Agreement provides that the amount of anti-dumping
duty shall not exceed the "margin of dumping" establis hed under Article 2. Canada asserts that "[a]
prospective normal value assessment system ... assesses anti-dumping duties as imports occur through
a comparison between the export price and the prosp ective normal value. An investigating authority
assesses anti-dumping duties when the export price is lower than the weighted-average normal value,
but applies no anti-dumping duties to non-dumped transactions when the opposite is true." 78 W e
therefore understand Canada to accept that, in the context of a prospective normal value duty
assessment system, the "margin of dumping" referred to in Article 9.3 is the transaction-specific
margin of dumping established in respect of the specific import transaction being assessed. This
approach is confirmed by Article 9.2 of the AD Agreement, which provides that anti-dumping duties
are levied in respect of "imports of [the relevant ] product". In the context of such transaction-specific
duty assessment, it makes no sense to talk of a margin of dumping being established for the product as
a whole, by aggregating the results of all comparisons, since there is only one comparison at issue.
5.54 If other comparisons were somehow relevant in the context of a prospective normal value
duty assessment system, the application of the Appella te Body's interpretation of the phrase "margins
of dumping" in the sense argued by Canada would require offsets for non-dumped transactions, in
light of the obligation to take all (including non-dumped) comparisons into account in determining the
margin of dumping for the product as a whole. In other words, an importer being assessed an anti-
dumping duty for a dumped transaction, i.e., one in which export price was less than the prospective
normal value, would receive an offset for non-dumped transactions, i.e., those in which export price
was more than the prospective normal value, even if those transactions are made by other importers.
79
This is illogical, as it would provide importe rs clearing dumped transactions with a double
competitive advantage vis-à-vis other importers: first, they wo uld benefit from the lower price
inherent in a dumped transaction; second, they woul d benefit from offsets, or credits, "financed" by
the higher prices paid by other importers clearing non-dumped, or even less-dumped, transactions.
5.55 When asked a question regarding this issue, Canada "observe[d]that a prospective normal
value system does not employ the practice of zeroi ng. ... An investigating authority assesses anti-
dumping duties when the export price is lower than the weighted-average normal value, but applies no
anti-dumping duties to non-dumped transactions when th e opposite is true. It is not the same as the
practice of zeroing, i.e., the changing of the results of intermed iate values prior to their aggregation
into a margin of dumping" (see Canada's reply to Question 4 from the Panel). Canada's answer
ignores the anomaly that we have identified, sin ce it is premised on the fact that investigating
authorities apply prospective normal value assessment systems on a transaction-specific basis, without
any obligation to offset for non-dumped amounts. Canada's answer does not explain how
investigating authorities may assess on a transaction- specific basis notwithstanding the alleged
obligation to calculate margins of dumping for the product as a whole. Nor does Canada explain why,
despite the establishment of margins of dumping for the product as a whole, there is no need to offset
non-dumped amounts against dumped amounts at the time of assessment.
5.56 Furthermore, the first sentence of Article 9.3.2 of the AD Agreement 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.

78 See Responses of Canada to Questions to the Parties following the Substantive Meeting of the
79 This is because margins of dump ing are established per exporter/pr oducer, not per importer. Thus,
"the single margin of dumping for the product as a whole" referred to by Canada is actually a margin specific to
a given exporter/producer, on the basis of all import transactions by all importers sourcing the product from that
exporter/producer.

5.57 If the Appellate Body's interpretation of "margi ns of dumping" were to apply throughout the
AD Agreement in the sense argued by Canada, this provi sion, which expressly applies in respect of
prospective duty assessment system s, 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 results of all intermediate compar isons, without zeroing. Again, this makes no sense
in the context of a prospective normal value duty assessment system, because (as even Canada
acknowledges) the "margin of dumping" at issue is a transaction-specific price difference calculated
for a specific import transaction. And if other co mparisons for the product as a whole were somehow
relevant, offsets would have to be provided fo r non-dumped transactions, with the result 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. We are unable to accept that the Appellate Body could
have intended such absurd results to follow from its interpretation of the phrase "margins of dumping"
in US - Softwood Lumber V.
(iii) Article 2.2
5.58 Article 2.2 provides:
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 the 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 appropriate third country, pr ovided 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)
5.59 The Panel asked the parties the following question regarding this provision:
Would the parties, and third parties, please describe how their investigating
authorities would apply the provisions of Article 2.2 in a case involving multiple
allegedly dumped models of a product under consideration, where there are no sales
in the home market of some of those models? Specifically, would the parties
consider it obligatory, under that provision, to determine normal value on one single
basis for all models, or would the parti es consider that Article 2.2 permits the
determination of normal value on, for instance, the basis of home market sales for
some models, and constructed normal value for others?
5.60 Canada replied in relevant part that:
most investigating authorities, including CBSA, examine whether there are sufficient
“like product” sales in the ordinary course of trade for a particular sub-group or
model when these authorities conduct a we ighted-average-to-weighted-average
calculation. Canada does not believe that th is practice is problematic – investigating
authorities are simply conducting a more detailed analysis to ensure that the “margin
of dumping” is calculated in a more accu rate manner. If investigating authorities
failed to conduct such an analysis it could lead to less accurate sub-group calculations
with the weighted-average export price being compared to a weighted-average
normal value that is comprised of a handf ul of normal value transactions. The
Appellate Body found that the general langua ge of Article 2.4.2 permitted the use of
“multiple averaging” or “model matching” provided that the intermediate values are
properly aggregated. Article 2.2 also uses general language that should be interpreted
in a permissive manner. Article 2.2 provides a conceptual description of the practice
of using constructed normal values or third country sales. It should not be interpreted

to prohibit a more detailed form of this an alysis that increases the accuracy of the
calculation methodology.
5.61 This provision governs, inter alia, the use by investigating authorities of a constructed normal
value. If the reference in Article 2.2 to "mar gin of dumping" were understood to mean a single
margin of dumping for the product as a whole, this would suggest to the Panel that a constructed
normal value would have to be used to establish a single margin of dumping for the product as a
whole "[w]hen 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 the e xporting country, such sales do not permit a proper
comparison". In other words, 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.
5.62 In our view, Canada's suggestion that Article 2. 2 may be applied on a model basis to increase
the accuracy of the calculation methodology is not consistent with its view that investigating
authorities must calculate a single margin of dumping for the product as a whole. For example, if
there were ten models of the like product, and the Article 2.2 trigger conditions applied with respect to
only one model, Canada asserts that an investigating authority may use a constructed normal value for
only that one model (by making a "sub-group calculation"). However, Article 2.2 stipulates that the
"margin of dumping" shall be established using a constructed normal value whenever the trigger
conditions are fulfilled. If "margin of dumping" in Article 2.2 means a single margin of dumping for
the product as a whole (and not for a specific model) , this must mean that the margin of dumping for
the product as a whole must be calculated using a constructed normal value for all models, even if the
trigger conditions only apply in respect of one mode l. In other words, there would never be a "sub-
group calculation" of the sort envisaged by Canada. We can see nothing in the text of Article 2.2 that
would require this result, and, as Canada indicat es, investigating authorities do not understand it to
require this result. Indeed, the use of different methods for establishing normal value for different
models or sub-groups of product is an integral part of model averaging, which itself is permitted under
Article 2.4.2 of the AD Agreement.
80 Moreover, such mandatory use of constructed normal value in
respect of all models would run counter to the principle that constructed normal value is an alternative
to be used only in the limited circumstances provide d for in Article 2.2. It would also increase the
burden on respondents, who would be required to produce cost data for all models, rather than just
one or a few for which constructed normal value is necessary. We are not convinced that the
Appellate Body could have intended its US - Softwood Lumber V findings to be applied in this
manner. We also note that this approach is at odds with Canada's description of its own application of
Article 2.2. These considerations serve to confirm our doubts regarding the broader application of the
Appellate Body's US - Softwood Lumber V interpretation of the term "margins of dumping" sought by
Canada.
(iv) Past GATT Discussion
5.63 On 27 May 1960, GATT Contracting Parties adopted the Second Report of the Group of
Experts on Anti-Dumping and Countervailing Duties . That Report discussed what was referred to as
the "pre-selection system" in the following terms:
 The pre-selection system

 7. In considering the pre-selection system in comparison with other systems the Group of
Experts thought it desirable to re-affirm the following principles:

80 Appellate Body Report, US - Softwood Lumber V, supra note 9, at para. 80.

 (a) Anti-dumping duties should never be used for the purpose of ensuring normal
protection for a domestic industry; such protection was the task of the tariff.

 (b) The imposition of anti-dumping duties was justified only:

 (i) where a product was in fact found to be dumped, and,
 (ii) where the dumping caused or threaten ed material injury to a domestic industry
- the judgment of which rested with the governmental authorities of the importing
country.

 8. The Group considered that the ideal method of fulfilling these principles was to make a
determination in respect of both dumping and mate rial injury in respect of each single
importation of the product concerned. This, however, was clearly impracticable, particularly as
regards injury.

 9. Failing such a method, the pre-selection system seemed to be the most satisfactory,
since under such a system anti-dumping duties were applied only after a specific complaint had
been investigated and a finding of dumping a nd material injury made. Provided the pro-
selection system was administered at a high level, it could subs tantially reduce the number of
cases in which anti-dumping duties were actually applied. An additional advantage of the
system was that it involved a certain amount of publicity which in itself might serve as a
deterrent to dumping.

 10. The Group was, in general, of the opinion that anti-dumping measures adopted after the
pre-selection procedure had been followed should be directed only against such firms as had
been found responsible for the dumping, or at most against those countries from which the
dumped imports came."
81

5.64 In referring to a "determination ... of ... dumping ... in respect of each single importation of the
product concerned", the Group of Experts clearly envi saged the calculation of transaction-specific
margins of dumping. This 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 that would preclude the
calculation of such transaction-specific margins. This in turn would suggest that the GATT Contracting
Parties would have disagreed with Canada's reliance on the same provision of the GATT 1994 to support
its argument that "margins of dumping" must al ways be calculated "for the product as a whole" by
aggregating all transaction-specific comparisons.
(i) Conclusion
5.65 To conclude, 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 that all
transaction-specific comparisons under the T-T comparison methodology must be treated as
"intermediate values" and aggregated, without zeroi ng, in order to arrive at a single margin of
dumping for the product as a whole. Nor is such an approach mandated – in the context of the T-T
comparison methodology – by the Appellate Body's interpretation of the phrase "margins of dumping"
in US - Softwood Lumber V . Indeed, broader contextual cons iderations demonstrate that the
application of the Appellate Body's interpre tation beyond the confines of the W-W comparison
methodology would lead to absurd results that could never have been intended by the Appellate Body,
let alone the drafters of the AD Agreement.
5.66 Conscious that Article 3.2 of the DSU precludes the DSB from "add[ing] to ... the ...
obligations" of the United States, and taking into account the standard of review provided for in

81 BISD 9S/194, para. 7 (emphasis supplied)

Article 17.6(ii) of the AD Agreement, we reject Canada's interpretation of the phrase "margins of
dumping" in the context of the transaction-to-transaction comparison methodology provided for in the
first sentence of Article 2.4.2, and find that the interpretation put forward by the United States is
permissible. We therefore find that the 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 DOC's use of zeroing in the T-T
comparison methodology at issue is inconsistent with Article 2.4.2 of the AD Agreement.
C. C
ANADA'S ARTICLE 2.4 CLAIM
5.67 Canada claims that DOC's zeroing in the Sec tion 129 Determination is inconsistent with
Article 2.4. Canada's Article 2.4 claim is b ased on the first sentence of that provision, which
provides:
A fair comparison shall be made between the export price and the
normal value.
1. Main Arguments of the Parties
5.68 Canada asserts that DOC manipulated the co mparisons where the export price was higher
than the home market price by disregarding the difference between these prices and replacing it with a
zero value. According to Canada, this manipula tion of transaction-to-transaction comparisons cannot
be considered a “fair comparison” between the ex port price and the normal value as it inflated the
margins of dumping. In support, Canada relies on the Appellate Body's statement in EC – Bed Linen
that by not taking into account all comparisons, the practice of “zeroing” does not provide a fair
comparison between the export price and the normal value and is, therefore, inconsistent with
Article 2.4 of the Anti-Dumping Agreement . Canada also argues that, according to the Appellate
Body in U.S. – Corrosion-Resistant Steel Sunset Review , zeroing 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.”
82 Canada submits that, because of such "inherent bias", the practice of zeroing in the
context of the transaction-to-transaction methodology is by definition inconsiste nt with Article 2.4 of
the Anti-Dumping Agreement.83
5.69 The US submits that the case law relied on by Canada is without relevance. The US asserts
that, because Article 2.4 was not at issue in the EC – Bed Linen dispute, any reference by the
Appellate Body in that case to Article 2.4 was obiter dictum . The US asserts that the Appellate
Body's reference to Article 2.4 in U.S. – Corrosion-Resistant Steel Sunset Review is not relevant
because it was made in the context of an average-to-transaction comparison methodology.
5.70 The United States further submits that Canada's interpretation of Article 2.4 would mean that
that provision pertains to steps an investigating authority takes after making a comparison between
export price and normal value, whereas Article 2.4 addresses only adjustments that must be made
before a comparison is performed. The United States al so submits that Canada’s suggestion that the
“fair comparison” requirement in Article 2.4 contai ns a general obligation to offset dumping margins
also cannot be reconciled with Article 2.4.2. The Un ited States asserts that, if Canada were correct in
arguing that there is a general obligation to offset , then the fair comparison obligation would also
require the investigating authority to provide for an offset for transactions that exceed normal value

82 Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-
Resistant Carbon Steel Flat Products from Japan (" US – Corrosion-Resistant Steel Sunset Review "),
WT/DS244/AB/R, adopted 9 January 2004, at para. 135.
83 Canada's arguments are broadly supported by Ch ina, the European Communities, India, Japan and
Thailand.

even when using the targeted dumping methodology.
84 The United States argues that if offsetting
were required, the overall dumping margin calculate d for an exporter must, mathematically, be the
same under both a symmetrical comparison of weighted averages of normal values and export prices
and an asymmetrical comparison of weighted aver age normal values and individual export prices.
According to the United States, the “general obliga tion” that Canada posits therefore cannot exist,
because if it existed it would nullify any distincti on between the average-to-average and the average-
to-transaction methodologies in Article 2.4.2. The United States notes that this approach was adopted
by the panel in US – Zeroing (EC).
85
5.71 The United States further notes that the panel in US – Zeroing (EC) found that any analysis of
the "fairness" of a methodology should be discerned from a "standard of appropriateness or rightness
within the four corners of the Antidumping Agre ement which would provide a basis for reliably
judging that there has been an unfair departure from that standard." 86 According to the United States,
that panel found that the fact that one assessment methodology may result in a higher margin than
another may only be deemed "unfair" if the othe r methodology could be determined to be the only
"correct" methodology pursuant to the text of the AD Agreement.87 88
2. Evaluation by the Panel
5.72 Canada claims that zeroing is "by definition" inconsistent with Article 2.4 because it fails to
take into account all comparisons, and because it introduces an "inherent bias" that inflates the margin
of dumping.
5.73 Canada's arguments are primarily based on statements made by the Appellate Body in EC –
Bed Linen and US – Corrosion-Resistant Steel Sunset Review. We are not persua ded of the relevance
of these statements by the Appellate Body to the case in hand. First, we note that, in the EC – Bed
Linen case, none of the legal issues before the A ppellate Body concerned Article 2.4 of the
AD Agreement. Anything the Appellate Body may have said regarding Article 2.4 was therefore
obiter dictum . Second, we note that, as relevant here, the US – Corrosion-Resistant Steel Sunset
Review case concerned the application of the W-T comparison methodology in the context of an
assessment review, as opposed to an original investigation, whereas the present Article 21.5
proceedings concern DOC's use of the T-T comparison methodology in an original investigation.
5.74 Turning to the substance of Canada's claim, we believe that a claim based on a highly general
and subjective test such as "fair comparison" should be approached with caution by treaty interpreters.
For this reason, any conception of "fairness" should be solidly rooted in the context provided by the

84 The United States asserts that, in the underlying proceeding before the Appellate Body, Canada
conceded that “zeroing is permitte d under the third methodology [ i.e., the targeted dumping methodology].”
See Appellate Body Report, US – Softwood Lumber V , supra note 9, at para. 105 n.164. We note that, in
response to the US assertion, Canada filed a letter with this Panel that it had provided to the Appellate Body on
28 September 2004. In that letter, Canada stated that it "did not take the position [during the appeal] that
zeroing is permitted under the third methodology." Canada's letter recognized that the Appellate Body report
had already been adopted, and for that reason, Canada's letter did not ask the Appellate Body to take any
specific action in this regard. According to the United States, Canada did not offer then and does not offer now
any textual basis for a distinction between the fair comparison requirement as applied to the targeted dumping
methodology and the fair comparison requirement as applied to the other two methodologies provided for in
Article 2.4.2. The United States asserts that, in fact, Canada expressly characterizes the obligation it asserts as a
“general obligation.” Canada's first written, para. 28.
85 Panel Report, US – Zeroing (EC), supra note 76, at para. 7.266.
86 Ibid, para 7.260.

87 Ibid.
88 New Zealand broadly supports the US interpretation of Article 2.4, claiming that the calculation of
margins of dumping using the T-T comparison methodology is inherently a "fair comparison" in terms of
Article 2.4 of the AD Agreement..

AD Agreement, and perhaps the WTO Agreement more generally. As such, there must be a
discernable standard within the AD Agreement, and perhaps the WTO Agreement, by which to assess
whether or not a comparison has been "fair" or "unfair". Thus, 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.
89 If,
however, the AD Agreement were to permit either comparison methodology A or B, this would not be
the case.
5.75 Since we have already concluded that T-T with zeroing (resulting in higher margins) is not
inconsistent with Article 2.4.2, one can not conclude that failure to use a comparison methodology
that would have resulted in lower margins (i.e., T-T without zeroing) is "unfair". For the same reason,
one can not conclude that failure to use a comp arison methodology that would have reflected all
comparisons, by offsetting non-dumped amounts against dumped amounts ( i.e., T-T without zeroing),
is "unfair". The 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 trump the more specific
provisions of Article 2.4.2.90
5.76 The principle of effective treaty interpretation is also relevant to Canada's argument that
zeroing is "by definition" inconsiste nt with Article 2.4. Since Cana da's argument (that zeroing when
comparing normal value and export price is unfair) is unqualified, it must apply to zeroing under any
of the three comparison methodologies set forth in Article 2.4.2. We have already established,
however, that a prohibition of zeroing under the targeted dumping comparison methodology would
render the second sentence of Article 2.4.2 meaningless, in the sense that it would result in a margin
of dumping mathematically equivalent to that established under the W-W comparison methodology.
Since zeroing therefore can not be prohibited as "by de finition" unfair in the context of Article 2.4.2,
Article 2.4 can not provide for the unqualified, "by definition" prohibition suggested by Canada.
5.77 In addition, we recall our discussion of certain contextual considerations when examining
Canada's Article 2.4.2 claim.
91 In our view, these contextual considerations suggest that there is no
general obligation under the AD Agreement to offset non-dumped amounts against dumped amounts.
Indeed, any such general obligation would have profound implications for prospective normal value
duty assessment procedures of the sort applied by Cana da. In light of these contextual considerations,
we are unable to accept that mandatory offsets estab lish a standard by which to assess fairness for the
purpose of Article 2.4.
5.78 For the above reasons, we reject Canada's clai m that the United States has violated the fair
comparison obligation provided for in the first sentence of Article 2.4 of the AD Agreement.

89 This approach was set forth in the dissenting opinion in the original panel report, see, Panel Report,
US - Softwood Lumber V, supra note 5, at para. 9.16-9.22, and was also followed by the panel in Panel Report,
US – Zeroing (EC), supra note 76, at para. 7.260.
90 In its reply to Question 22 from the Panel, Canada appears to endorse such an approach to the issue.
Responses of Canada to Questions to the Parties followi ng the Substantive Meeting of the Panel, Response to
Question 22. In particular, having cited the statement of the panel in US – Zeroing (EC) regarding the
"discernable standard" (cited above), Canada asserts that "[i] t follows that the concept of 'fairness' relates to the
substantive rules concerning the calculation of margins of dumping under the methodologies found in
Article 2.4.2 – rules which prohibit zer oing when aggregating intermediate comparisons." In other words,
Canada agrees that the fairness obligation in Article 2.4 may be interpreted in light of the substantive rules of
Article 2.4.2. Canada errs in its conclusion, however, because, as we concluded above, Article 2.4.2 does not
prohibit zeroing in the context of the T-T comparison methodology.
91 See paras. 5.31 - 5.64 above.

VI. CONCLUSIONS AND RECOMMENDATION
6.1 Based on the foregoing, we conclude that the determination of the DOC in the section 129
proceeding investigation is not inco nsistent with the asserted provisi ons of Articles 2.4 and 2.4.2 of
the AD Agreement.
6.2 We therefore consider that the United St ates 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 AD Agreement.
6.3 Having found that the United States did not act inconsistently with its obligations under the
asserted WTO Agreements, we consider that no recommendation under Article 19.1 of the DSU is
necessary, and we make none.