UNITED STATES – MEASURES RELATING TO ZEROING AND SUNSET REVIEWS
Document: Final Report of the Panel
Date: 20 September 2006
Document codes: WT/DS322/R
Complainant: Japan
Respondent: U.S.
Third parties: Argentina, China, EU, Hong Kong, India, South Korea, Mexico, New Zealand, Norway, Taiwan, Thailand
Dispute stage: Implementation & Compliance
Agreements cited: Art. 2.1, 2.4, 2.4.2, 9.1, 9.2, 9.3, 5.8, 3, 9.5, 11.1, 11.2, 11.3, 1  Anti-dumpingArt. VI  GATT 1994Art. 18.4  Anti-dumpingArt. XVI:4  Agreement Establishing the World Trade Organization

UNITED STATES – MEASURES RELATING TO ZEROING
AND SUNSET REVIEWS

Final Report of the Panel

I. INTRODUCTION
A. COMPLAINT OF JAPAN
1.1 On 24 November 2004, the Government of Japan ("Japan") requested consultations with the
Government of the United States of America ("United States") pursuant to Article 4 of the
Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"), Article XXII:1
of the General Agreement on Tariffs and Tr ade 1994 ("GATT 1994"), and Article 17.2 of the
Agreement on Implementation of Article VI of GATT 1994 (the " AD Agreement"), regarding certain
laws, methodologies, and/or meas ures, including so-called zeroing. 1 Consultations were held on
20 December 2004, which allowed a better understanding of the positions of the parties, but failed to
achieve a mutually agreed solution of the dispute.
1.2 On 4 February 2005, Japan requested the establishment of a Panel to examine this matter.2
B. ESTABLISHMENT AND COMPOSITION OF THE PANEL
1.3 At its 28 February 2005 meeting, the Disput e Settlement Body ("DSB") established a Panel
pursuant to the request by Japan in document , in accordance with Article 6 of the DSU.
1.4 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
Japan in document , the matter re ferred to the DSB by Japan in that
document, and to make such finding s as will assist the DSB in making the
recommendations or in giving the rulings provided for in those agreements."
1.5 On 7 April 2005, Japan requested the Directo r-General to determine the composition of the
Panel, pursuant to paragraph 7 of Article 8 of the DSU. This paragraph provides:
"If there is no agreement on the panellists within 20 days after the date of the
establishment of a panel, at the request of either party, the Director-General, in
consultation with the Chairman of the DSB and the Chairman of the relevant Council
or Committee, shall determine the composition of the panel by appointing the panellists
whom the Director-General considers mo st appropriate in accordance with any
relevant special or additional rules or procedures of the covered agreement or covered
agreements which are at issue in the disput e after consulting with the parties to the
dispute. The Chairman of the DSB shall inform the Members of the composition of the
panel thus formed no later than 10 days after the date the Chairman receives such a
request."
1.6 On 15 April 2005, the Director-General accordingly composed the Panel as follows:
 Chairman: Mr. David Unterhalter
 Members: Mr. Simon Farbenbloom
 Mr. José Antonio Buencamino

1 WT/DS322/1
2 WT/DS322/8

1.7 Argentina; China; the European Communities; Hong Kong, China; India; Korea; Mexico;
New Zealand; Norway; and Thailand reserved their third-party rights.
C. P
ANEL PROCEEDINGS
1.8 The Panel met with the parties on 28- 29 June 2005, 15-16 September 2005 and on
12 June 2006.3 The Panel met with third parties on 29 June 2005.
II. FACTUAL ASPECTS
2.1 At issue in this dispute is the calculation of margins of dumping by the United States
Department of Commerce ("USDOC") based on a methodology that disregards the amounts by which
export prices for certain transactions are above the normal value in the process of establishing an overall
margin of dumping. Japan refers to this aspect of the USDOCs dumping margin methodology as
"zeroing procedures"
4 and the "standard zeroing line"5, and presents claims regarding both as such and
regarding their application, specifically, in an original investig ation, periodic reviews, and sunset
reviews.
2.2 Japan argues that these zeroing procedures can be challenged as such as a "measure" pursuant
to the AD Agreement and the DSU. The United States disputes that such a measure exists. The views of
the parties regarding the existence of the "zeroing procedures" are described in the Arguments of the
Parties.
2.3 Japan also challenges the application of zeroing procedures by the United States in the
following anti-dumping proceedings with respect to products from Japan:
Original Investigation

 Notice of Final Determination of Sales at Le ss Than Fair Value: Certain Cut-To-Length
Carbon-Quality Steel Plate Products from Japan, 64 Fed Reg. 73,215 (29 December 1999) ("CTL
Plate").

Periodic Reviews

 Tapered Roller Bearings and Parts Thereof, Fini shed and Unfinished, From Japan, and Tapered
Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan;
Final Results of Anti-dumping Duty Administrative Reviews , 66 Fed Reg. 15,078
(15 March 2001) ("Tapered Roller Bearings and Parts Thereof 1998 - 1999").

 Tapered Roller Bearings and Parts Thereof, Fini shed and Unfinished, From Japan, and Tapered
Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan;
Final Results of Anti-dumping Duty Administrative Reviews, 65 Fed Reg. 11, 767 (6 March 2000)
("Tapered Roller Bearings and Parts Thereof 1997 - 1998").

 Anti-friction Bearings (Other Than Tapered Ro ller Bearings) and Parts Thereof From France,
Germany, Italy, Japan, Romania, Singapore, Sw eden, and the United Kingdom; Final Results of
Anti-dumping Duty Administrative Reviews and Revocation of Orders in Part , 65 Fed. Reg.
49,219 (11 August 2001) ("Ball Bearings and Parts Thereof 1998-1999").

3See para. 6.2.
4 Japan First Written Submission, paras. 1-2.
5 Japan Second Written Submission, passim.

 Anti-friction Bearings (Other Than Tapered Ro ller Bearings) and Parts Thereof From France,
Germany, Italy, Japan, Romania, Singapore, Sweden, and the United Kingdom; Final Results of
Anti-dumping Duty Administrative Reviews and Revocation of Orders in Part , 65 Fed. Reg.
49,219 (11 August 2001) ("Cylindrical Roller Bearings and Parts Thereof 1998-1999").

 Anti-friction Bearings (Other Than Tapered Ro ller Bearings) and Parts Thereof From France,
Germany, Italy, Japan, Romania, Singapore, Sw eden, and the United Kingdom; Final Results of
Anti-dumping Duty Administrative Reviews and Revocation of Orders in Part , 65 Fed. Reg.
49,219 (11 August 2001) ("Spherical Plain Bearings and Parts Thereof 1998-1999").

 Anti-friction Bearings (Other Than Tapered Ro ller Bearings) and Parts Thereof From France,
Germany, Italy, Japan, Sweden, and the Unite d Kingdom; Final Results of Anti-dumping Duty
Administrative Reviews and Revocation of Orders in Part , 66 Fed. Reg. 36,551 (12 July 2001)
("Ball Bearings and Parts Thereof 1999-2000").

 Anti-friction Bearings (Other Than Tapered Ro ller Bearings) and Parts Thereof From France,
Germany, Italy, Japan, Sweden, and the Unite d Kingdom; Final Results of Anti-dumping Duty
Administrative Reviews and Revocation of Orders in Part , 66 Fed. Reg. 36,551 (12 July 2001)
("Cylindrical Roller Bearings and Parts Thereof 1999").

 Anti-friction Bearings (Other Than Tapered Ro ller Bearings) and Parts Thereof From France,
Germany, Italy, Japan, Sweden, and the Unite d Kingdom; Final Results of Anti-dumping Duty
Administrative Reviews and Revocation of Orders in Part , 66 Fed. Reg. 36,551 (12 July 2001)
("Spherical Plain Bearings and Parts Thereof 1999").

 Ball Bearings and Parts Thereof From France, Ge rmany, Italy, Japan, and the United Kingdom;
Final Results of Anti-dumping Duty Administrative Reviews , 67 Fed. Reg. 55,780
(30 August 2002), as amended by Ball Bearings A nd Parts Thereof From Japan; Amended Final
Results Of Anti-dumping Duty Administrative Review , 67 Fed. Reg. 63,608 (15 October 2002)
("Ball Bearings and Parts Thereof 2000-2001").

 Ball Bearings and Parts Thereof From France, Germany, Italy, Japan, and Singapore: Final
Results of Anti-dumping Duty Administrative Revi ews, Rescission of Administrative Review in
Part, and Determination Not To Revoke Order in Part, 68 Fed. Reg. 35,623 (16 June 2003) ("Ball
Bearings and Parts Thereof 2001-2002").

 Anti-friction Bearings and Parts Thereof From France, Germany, Italy, Japan, Singapore, and the
United Kingdom: Final Results of Anti-dumping Duty Administrative Reviews, Rescission of
Administrative Reviews in Part, and Determination To Revoke Order in Part, 69 Fed. Reg. 55,574
(15 September 2004) ("Ball Bearings and Parts Thereof 2002-2003").

Sunset Reviews

 Final Results of Expedited Sunset Revi ews: Anti-friction Bearings From Japan
, 64 Fed. Reg.
60,275 (4 November 1999) ("Expedited Sunset Review of Anti-friction Bearings").

 Corrosion-Resistant Carbon Steel Flat Products From Japan; Final Results of Full Sunset Review
of Anti-dumping Duty Order , 65 Fed. Reg. 47,380 (2 August 2000) ("Full Sunset Review of
Corrosion-Resistant Carbon Steel Flat Products").

III. REQUESTS FOR FINDINGS AND RECOMMENDATIONS
(a) Japan
3.1 Japan requests that the Panel find that th e United States' zeroing procedures are " as such "
inconsistent with
6:
(1) Articles 2.1 and 2.4.2 of the AD Agreement and Articles VI:1 and VI:2 of the
GATT 1994 because, in any type of anti-dumping proceeding, the determination of dumping,
and the calculation of the dumping margin, is not for the product as a whole;

(2) Article 2.4 of the AD Agreement because, in any type of anti-dumping proceeding, the
zeroing procedures are inherently biased, distor t the comparison of normal value and export
price and, thus, deprive exporters of a "fair comparison";

(3) Articles 3.1, 3.2, 3.3, 3.4 and 3.5 of the AD Agreement because the injury determination
in original investigations is not based on an "objective examin ation" of "positive evidence"
regarding the existence and amount of dumping and dumped imports;

(4) Article 5.8 of the AD Agreement because the USDOC does not have "sufficient
evidence" of dumping to assess whether it must terminate original investigations;

(5) Articles 9.1, 9.2, 9.3 and 9.5 of the AD Agreement because margins calculated in
periodic and new shipper reviews are not establis hed consistently with Articles 2.1, 2.4 and
2.4.2 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994, and the United States
fails to ensure that duties collected do not exceed the proper margin of dumping established on
a fair comparison basis for the product as a whole;

(6) Articles 11.1, 11.2 and 11.3 of the AD Agreement because changed circumstances and
sunset reviews are not conducted on the basis of dumping margins calculated through a fair
comparison for the product as a whole, as required by Articles 2.1, 2.4 and 2.4.2 of the
AD Agreement, and Articles VI:1 and VI:2 of the GATT 1994; and

(7) Article 1 of the AD Agreement as they are inconsistent with various provisions of the
AD Agreement as referred to in (1) – (6) above.

(8) Japan also requests that the Panel find that, by maintaining the model and simple
zeroing procedures, the United States acts inconsistently with Article 18.4 of the AD Agreement
as well as Article XVI:4 of the Marrakesh Agreement Establishing the World Trade
Organization ("WTO Agreement").

3.2 Japan further requests that Panel find that, thro ugh the application of the zeroing procedures,
the anti-dumping measures
7:
 (1) in CTL Plate , 64 Fed Reg. 73,215, an original in vestigation, are inconsistent with
Articles 1, 2.1, 2.4, 2.4.2, 3.1, 3.2, 3.3, 3.4, and 3.5 of the AD Agreement and Articles VI:1 and
VI:2 of the GATT 1994;

6 Japan First Written Submission, paras. 194-197.
7 The full citations to the following anti-dumping proceedings can be found in the Table following
para. 2.3 of this Report.

 (2) in Tapered Roller Bearings and Parts Thereof 1998 - 1999 , 66 Fed Reg. 15,078, a
periodic review, are inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 9.1, 9.2, and 9.3 of the
AD Agreement and Articles VI:1, and VI:2 of the GATT 1994;

 (3) in Tapered Roller Bearings and Parts Thereof 1997 - 1998 , 65 Fed Reg. 11, 767, a
periodic review, are inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 9.1, 9.2, and 9.3 of the
AD Agreement and Articles VI:1, and VI:2 of the GATT 1994;

 (4) in Ball Bearings and Parts Thereof 1998-1999 , 65 Fed. Reg. 49,219, a periodic review,
are inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 9.1, 9.2, and 9.3 of the AD Agreement and
Articles VI:1, and VI:2 of the GATT 1994;

 (5) in Cylindrical Roller Bearings and Parts Thereof 1998-1999 , 65 Fed. Reg. 49,219, a
periodic review, are inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 9.1, 9.2, and 9.3 of the
AD Agreement and Articles VI:1, and VI:2 of the GATT 1994;

 (6) in Spherical Plain Bearings and Parts Thereof 1998-1999 , 65 Fed. Reg. 49,219, a
periodic review, are inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 9.1, 9.2, and 9.3 of the
AD Agreement and Articles VI:1, and VI:2 of the GATT 1994;

 (7) in Ball Bearings and Parts Thereof 1999-2000
, 66 Fed. Reg. 36,551, a periodic review,
are inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 9.1, 9.2, and 9.3 of the AD Agreement and
Articles VI:1, and VI:2 of the GATT 1994;

 (8) in Cylindrical Roller Bearings and Parts Thereof 1999 , 66 Fed. Reg. 36,551, a periodic
review, are inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 9.1, 9.2, and 9.3 of the AD Agreement
and Articles VI:1, and VI:2 of the GATT 1994;

 (9) in Spherical Plain Bearings and Parts Thereof 1999 , 66 Fed. Reg. 36,551, a periodic
review, are inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 9.1, 9.2, and 9.3 of the AD Agreement
and Articles VI:1, and VI:2 of the GATT 1994;

 (10) in Ball Bearings and Parts Thereof 2000-2001 , 67 Fed. Reg. 55,780, as amended by, 67
Fed. Reg. 63,608, a periodic review , are inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 9.1, 9.2,
and 9.3 of the AD Agreement and Articles VI:1, and VI:2 of the GATT 1994;

 (11) in Ball Bearings and Parts Thereof 2001-2002 , 68 Fed. Reg. 35,623, a periodic review,
are inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 9.1, 9.2, and 9.3 of the AD Agreement and
Articles VI:1, and VI:2 of the GATT 1994;

 (12) in Ball Bearings and Parts Thereof 2002-2003 , 69 Fed. Reg. 55,574, a periodic review,
are inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 9.1, 9.2, and 9.3 of the AD Agreement and
Articles VI:1, and VI:2 of the GATT 1994;

 (13) in Expedited Sunset Review of Anti-friction Bearings , 64 Fed. Reg. 60,275, are
inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 11.1, and 11.3 of the AD Agreement and
Articles VI:1, and VI:2 of the GATT 1994; and

 (14) in Full Sunset Review of Corrosion-Resistant Carbon Steel Flat Products , 65 Fed. Reg.
47,380, are inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 11.1, and 11.3 of the AD Agreement and
Articles VI:1, and VI:2 of the GATT 1994.

3.3 Pursuant to Article 19.1 of the DSU, Japan requests that the Panel recommend that the
United States bring its measures, found to be inconsistent with the WTO Agreement, the AD Agreement
and the GATT 1994, into conformity with its obligations under those Agreements.
3.4 Japan draws to the Panel's particular attention the urgency of this dispute. While the dispute is
pending before the Panel, the United States will seek to determine the final anti-dumping duty liability
in the "as applied" periodic reviews, by liquidating these cases one-by-one. Under United States law,
following the liquidation of entries, anti-dumping duties paid will not be refunded. In addition, further
periodic and sunset reviews for these cases are currently being conducted in reliance upon the standard
zeroing procedures. Japan wishes to ensure "prompt" resolution of this dispute, consistent with
Article 3.3 of the DSU, to avoid further WTO dis putes regarding the over-payment of duties in these
cases.
(b) United States
3.5 The United States requests that the Panel reject Japan's claims in their entirety.
8
IV. ARGUMENTS OF THE PARTIES
4.1 This section of the Report contains a summary of the arguments submitted by the Parties. As
noted in paragraph 6.2, infra, the Panel invited the Parties, afte r considering the Parties' specific
requests relating to the Interim Report of the Panel, but before issuance of its Final Report, to submit
comments on any relevant issues of law relating to the Appellate Body Report in US – Zeroing (Japan)9
- the summary of the comments submitted by the Parties is reflected in paragraph 6.4 et seq.
A. BURDEN OF PROOF AND STANDARD OF REVIEW
1. Burden of Proof
(a) United States10
4.2 The United States states that, under the WTO, the burden of proving that obligations have not
been satisfied is on the complaining party. In US – Carbon Steel, the Appellate Body explained that the
complaining party bears the burden of proof with respect to an "as such" claim as well as an "as applied"
claim. 11 Accordingly, the burden is on Japan to prove that the United States acted in a
WTO-inconsistent manner with respect to both its "as applied" and its "as such" claims. The burden is
not on the United States as a respondent to prove that it acted in a WTO-consistent manner.
2. Standard of Review
(a) United States12
4.3 The United States states that the standard of review of an investigating authority's
establishment and evaluation of facts is set forth in Article 17.6(i) of the AD Agreement. The applicable
standard of review is whether the authority's establishment of facts was proper and whether its
evaluation of those facts was objective and unbiased, not whether the panel would have made the same

9 The Appellate Body Report in US – Zeroing (EC) was issued to Members on 18 April 2006, that is,
before the Panel could circulate its Final Report in this matter to the Parties.
10 US First Written Submission, paras. 16-17.
11 Appellate Body Report, US – Carbon Steel, paras. 156-157.
12 US First Written Submission, paras. 18-24.

establishment and evaluation. The United States cites US – Steel Plate which is among a number of
panels that have summed up the role of a panel under Article 17.6(i):
"The standard requires us to assess the fact s to determine whether the investigating
authorities' own establishment of facts w as proper, and to assess the investigating
authorities' own evaluation of those facts to determine if it was unbiased and objective.
What is clear from this is that we are precluded from establishing facts and evaluating
them for ourselves – that is, we may not engage in de novo review."
13
4.4 With regards to Article 17.6(ii), the United States asserts that a panel must consider whether an
investigating authority's interpretation of the AD Agreement is a permissible interpretation.
Article 17.6(ii) acknowledges that there may be provisions of the AD Agreement that "admit[] of more
than one permissible interpretation." Where that is the case, and where the investigating authority has
relied upon one such interpretation, a panel is to find that interpretation to be in conformity with the
Agreement.14
4.5 The United States argues that the negotiators of the AD Agreement saw fit to make specific
provision for those instances in which the custom ary rules of treaty interpretation would find a
provision of the AD Agreement susceptible to more than one permissible reading. That very fact
provides context for the interpretation of the AD Agreement. It reflects the negotiators' understanding
that they had left a number of issues unresolved, a nd that customary rules of interpretation would not
always yield only one permissible reading of a given provision. The negotiators also recognized that
they could not possibly foresee ever y interpretive question in the c onduct of highly technical and
complex anti-dumping proceedings. They understood that, with re gard to many of these complex
issues, the established practices of national authorities at the time of the AD Agreement's conclusion
differed, and that the AD Agreement should allow sufficient flexibility for authorities to continue their
different practices.
4.6 The United States states that, in applying Artic le 17.6(ii) to the present case, the Panel should
recall that there may be multiple permissible in terpretations of particular provisions in the
AD Agreement. Accordingly, the Panel should reject Japan's claims where the position of the
United States is the result of a permissible interpretation.
B. "AS SUCH" CLAIMS
1. Zeroing Procedures Challenged as Measures
(a) Japan15
4.7 Japan argues that zeroing is an integral part of USDOC procedures for calculating margins of
dumping.

13 Panel Report, US – Steel Plate, para. 7.6; see also Panel Report, Argentina – Poultry Anti-Dumping
Duties, para. 7.45 (Under Article 17.6(i), panels "may not engage in de novo review"); Panel Report, Egypt – Steel
Rebar, paras. 7.8 and 7.14 (acknowledging that Article 17.6(i) precludes de novo review); Panel Report,
Guatemala – Cement II, para. 8.19 ("We consider that is not our role to perform a de novo review of the evidence
which was before the investigating authority in this case.").
14 Panel Report, Argentina – Poultry Anti-Dumping Duties , para. 7.341 and n. 223 ("We recall that, in
accordance with Article 17.6(ii) of the AD Agreement, if an interpretation is 'permissible', then we are compelled
to accept it.").
15 Japan First Written Submission, para. 11-64; Japan Executive Summary to First Written Submission,
paras. 2-10; Japan Second Written Submission, paras. 6-39, 72-82; Japan Executive Summary to Second Written
Submission, paras. 5-17.

4.8 Japan argues that in calculating dumping margins in any anti-dumping proceeding, the USDOC
compares normal value and export price using one of the three methods set forth in Article 2.4.2 of the
AD Agreement: the comparison of "a weighted average normal value with a weighted average of prices
of all comparable export transactions" ("W-to-W" comparison); the comparison of a normal value and
export prices on a transaction-to-transaction basis" ("T-to-T" comparison), and the comparison of a
weighted average normal value to prices of individual export transactions ("W-to-T" comparison).
4.9 Japan argues that Zeroing is an integral part of the USDOCs procedures for each of the three
methods of comparison. Specifically, the USDOC maintains two different zeroing procedures which
Japan labels: "model zeroing", which is part of the W-to-W comparison method, and "simple zeroing",
which is part of the T-to-T and W-to-T comparison methods.
16 Zeroing is part of the standard
calculation procedures used by the USDOC in calculating dumping margins under all three comparison
methods and in all types of anti-dumping proceedings.
4.10 Japan underlines that its claims regarding the WTO-inconsistency of the model and simple
zeroing procedures are not tied to the use of these pr ocedures in any particular type of anti-dumping
proceeding, or as part of any particular method of comparison. Japan claims that both of the zeroing
procedures are "as such" WTO-inconsistent irrespective of the type of proceeding and also the method
used to compare normal value and export price. Japan explains "model zeroing" and "simple zeroing"
in turn.
4.11 Japan posits that, in calculating a dumping margin on a W-to-W basis, the United States
proceeds in three steps. In the first step, the USDOC sub-divides the product as a whole into a series of
"averaging groups"17 or "models." An averaging group consists of goods that are identical or virtually
identical in all physical characteristics. 18 A W-to-W comparison between normal value and export
price is made within these models. 19 There are three possible outcomes to these model-based
comparisons.20 Normal value may exceed export price for a particular model, in which case there is a
positive price difference for the model (what United States' domestic law calls a "dumping margin"21);
export price may exceed normal value, in which case the price difference or amount of dumping for the
model is negative; or, finally, normal value and ex port price may be equal, in which case the price
difference or margin 22 is zero. The overall margin of dumping for the product is obtained by
aggregating the multiple model-based comparisons a nd expressing the result as a percentage. In the
second step of the calculation procedures, the USDOC calculates both the numerator and denominator
for the fraction from which the overall percentage is derived. The numerator is the total amount of
dumping23 by model and the denominator is the total value of all comparable export transactions.
Under the model zeroing procedures, in summing the comparison results by model to calculate the

16 As part of its explanation of the US' margin calculation procedures, Japan submits the testimony of
Valerie Owenby, an expert in the US' computer programming procedures. Japan First Written Submission, para.
12; Exhibit JPN-1 ("Owenby Statement").
17 19 C.F.R. section 351.414(d)(1) (Exhibit JPN-3).
18 19 C.F.R. section 351.414(d)(2) (Exhibit JPN-3).
19 19 C.F.R. section 351.414(d)(1) (Exhibit JPN- 3); USDOC Anti-Dumping Manual, Chapter 7, pages
27-28 (Exhibit JPN-5.B); and Chapter 9, pages 23 and 27 (Exhibit JPN-5.C).
20 Japan First Written Submission, para. 18; Exhibit JPN-1 ("Owenby Statement").
21 Title VII of the Tariff Act of 1930, as amended by the Uruguay Round Agreements Act (1994), Section
771(35)(A) ("Tariff Act") (Exhibit JPN-2).
22 Initially Japan refers to "price difference" an d "price difference or amount of dumping", but
subsequently refers to "intermediate comparison re sult". See Japan Response to Panel Questions, dated
19 October 2005 ("Japan 19 October 2005 Answers"), pa ra. 90, and Japan Comments on US Response to Panel
Questions, dated 19 October 2005 ("Japan Comments on US 19 October 2005 Answers"), para. 41.
23 At first Japan refers to "the total amount of dumping", but subsequently referred to "an aggregation of
the comparison result". See Japan 19 October 2005 Answers, para.90, and Japan Comments on US
19 October 2005 Answers, para. 41.

numerator, the USDOC includes so lely the results for models with positive differences. All
comparisons with negative differences are disregarde d in the calculation of the numerator. Thus, for
models with negative results, the USDOC purposefully ignores the results of the comparison of normal
value and export price. As a result, the sum total amount of dumping in the numerator is inflated by an
amount equal to the excluded negative results. In calculating the denominator of the fraction, the
USDOC includes the total value of all comparable export transactions for all models. In the final step of
the calculation procedures, the USDOC expresses th e fraction as a percentage overall margin of
dumping, known in the United States' law as the "weighted average dumping margin".24
4.12 Japan states that simple zeroing is very similar to model zeroing. The key difference stems
from the differences between the W-to-W comparison, on the one hand, and the T-to-T and W-to-T
comparisons, on the other. Whereas the W-to-W comparison is based on a comparison of export
transactions grouped by model, the other two methods are based on comparisons with individual export
transactions. Thus, instead of zeroing by model, the USDOC zeroes by individual export transaction
under the simple zeroing procedures. After iden tifying comparable export transactions, the USDOC
compares export price for these transactions with eith er a weighted average normal value (W-to-T) or
transaction-specific normal value (T-to-T). Thus, the USDOC calculates the price difference (what
United States' law calls the "dumping margin") for each comparable export transaction. Again, there
are three possible outcomes to these comparisons. Normal value may exceed export price for a
particular transaction, in which case the United St ates considers that there is a positive "dumping
margin" or intermediate comparison result for the transaction; export price may exceed normal value, in
which case the difference or intermediate comparison result for the transaction is negative; or, finally,
normal value and export price may be equal, in wh ich case the difference or intermediate comparison
result is zero. As in the W-to-W comparison, in step two, to derive a margin of dumping or an overall
"weighted average dumping margin" for the produc t, the USDOC aggregates the multiple transaction
comparisons undertaken and expresses the result as a pe rcentage. Again, the USDOC sums the price
differences exclusively for those comparisons for wh ich there was a positive intermediate comparison
result. All comparisons with negative differences are disregarded from the calculation of the numerator
of the overall margin fraction. Thus, where ther e is a negative difference, the USDOC purposefully
ignores the results of the comparisons of export tran sactions and normal value. As a result, the sum
total of dumping is inflated by an amount equal to the excluded negative differences. As with model
zeroing, the USDOC retains the total sales value of all comparable export transactions in the
denominator. In the final step of the calculati on procedures, the USDOC expresses the fraction as a
percentage overall margin of dumping or "weighted average dumping margin".
4.13 In light of this overview of the United St ates' procedures for calculating the margins of
dumping, Japan turns to the descr iption of the measures at issue.
25 Japan explains that the USDOC
relies on computer programmes to manipulate the large quantity of data that it obtains in anti-dumping
proceedings. In order to execute dumping calculati ons efficiently, it maintains standard computer
programmes, which act as a model for use whenever the USDOC develops a specific computer
programme in a particular anti-dumping proceeding. The nature and purpose of these standard
computer programmes are described in the USDOCs Import Administration Anti-Dumping Manual
("Manual").
26 The Manual demonstrates that the USDOC maintains standard computer programmes to
conduct and manage the entire process of calculating margins of dumping in anti-dumping proceedings.
The Manual notes that "consistency is achieved by insuring that the standard programmes conform with
current AD calculation methodology".27 The Manual further states that "calculation consistency occurs
when every programme uses the same standard cal culation methodology" – presumably the "proper"

24 Tariff Act, Section 771(35)(B) (Exhibit JPN-2).
25 Exhibit JPN-1 – Owenby Statement.
26 Exhibits JPN-5 to 5.C.
27 Exhibit JPN-5.C, page 8.

methodology.
28 In other words, Japan argues, every programme that is applied by the United States in
a particular proceeding must use "the same sta ndard calculation methodology", and that methodology
must "conform" to the Administration's current methodological requirements, which are set out in the
standard programmes.
29 The Manual also indicates that one of the standard computer programmes that
the USDOC maintains is the AD Margin Calculation Programme.30 The Manual, therefore, shows that
the USDOC maintains standard computer progr ammes, including the AD Margin Calculation
Programme, that apply on a generalized and prospective basis.
4.14 Japan posits that the USDOC maintains standa rd computer programmes for both original
investigations and periodic reviews, which contain computer code that executes every procedure and/or
combination of procedures applicable to an anti-dumping proceeding.31 The model and simple zeroing
procedures are contained in these programmes.
4.15 The United States' overall "weighted average dumping margin" calculation in original
investigations, periodic reviews and new shipper reviews32, Japan argues, involves a three-step process.
In Step 1 , the United States executes the procedures n ecessary to carry out the multiple W-to-W,
W-to-T, or T-to-T comparisons on a model- or transaction-specific basis. Under the variables
UMARGIN and EMARGIN, the USDOC captures the per-unit (UMARGIN) and total (EMARGIN)
difference between normal value and export price fo r each of the multiple comparisons. In model
zeroing, UMARGIN and EMARGIN reflect the per-un it and total intermediate comparison result for
each model, and in simple zeroing they reflect the per-unit and total intermediate comparison result for
each export transaction. Where normal value exceeds export price, UMARGIN and EMARGIN are
positive values. Where export price exceeds norma l value, UMARGIN and EMARGIN are negative,
and where export price and normal value are e qual, UMARGIN and EMARGIN are zero. The
United States retains data for export price, normal value, UMARGIN, EMARGIN, and numerous other
variables, in a dataset called "MARGIN".
4.16 According to Japan, Steps 2 and 3
 of the overall dumping margin calculation are executed
pursuant to the procedures in the "Calculate Ov erall Margin" section of the standard computer
programmes. Japan points out that, unlike a number of other sections in the standard programmes, the
"Calculate Overall Margin" section does not cont ain computer-coded "switches" that permit the
USDOC to turn the procedures in this section "off" or "on". This is because the procedures for
calculating the overall percentage "weighted average dumping margin", including the standard zeroing
procedures, are always part of the programming proc edures, and are used in every margin calculation.
Moreover, since at least 1993, the USDOC has not altered the essence of the procedures for calculating
the overall "weighted average dumping margin", including the standard zeroing procedures.
4.17 Japan argues that, in Step 2, the USDOC derives the denominator and numerator for a fraction
that is used to calculate the overall percentage weighted average dumping margin for the product. First,
the USDOC derives the denominator of the fraction, which is the total value of all comparable export
transactions. To do this, the programming procedures extract from the MARGIN dataset, and sum, the
sales values of all models or transactions. Next, the USDOC derives the numerator of the fraction,
which is the total positive intermediate comparison result for all models or transactions. This time, the
programme extracts from the MARGIN dataset, and sums, the positive EMARGIN values, by model or
transaction. The programme selects from among a ll of the multiple model or transaction-specific

28 Exhibit JPN-5.C, page 8.
29 Exhibit JPN-5.C, page 8.
30 Referred to at Exhibit JPN-5.C, pages 9 and 30.
31 Exhibits JPN-6 and 7.
32 Japan notes that in both changed circumstances reviews and sunset reviews, the US generally does not
determine a new dumping margin, but instead relies on a margin calculated in the original investigation or a
previous periodic review.

comparisons those with positive intermediate compar ison result. Japan argues that the United States
thus disregards all negative intermediate comparison results by inserting into this step a specific line of
programming code: WHERE EMARGIN GT 0. This line instructs the SAS application to ignore all
negative intermediate comparison results when deri ving the numerator. This single line of computer
programming represents the zeroing procedure at issue. Japan refers to this as the "standard zeroing
line".
33
4.18 Japan asserts that, using the va riables created in Step 2 , in Step 3 of the procedure the overall
percentage "weighted average dumping margin" is computed. The United States divides the total
positive intermediate comparison result (i.e. the numerator) by the total value of all comparable export
transactions (i.e. the denominator), and multiplies the result by 100 to express the ratio as a percentage.
This final percentage figure is the overall "weighted average dumping margin" for the product.
4.19 In periodic reviews, Japan claims, the United States always calculates two types of margins: an
overall "weighted average dumping margin" for each exporter, and importer-specific assessment rates.
The overall "weighted average dumping margin" is calculated using the programming procedures
described, including the standard simple zeroing pro cedures. That margin becomes the duty deposit
rate that the United States applies to future entries of the product for the purpose of collecting estimated
duties, until completion of the next periodic review. The standard computer programme for a periodic
review includes an extra section of programming c ode to calculate the importer-specific assessment
rates. The importer-specific assess ment rates are used by the Un ited States to collect definitive
anti-dumping duties for the review period. The duties are collected from the importers of goods, rather
than the exporters. However, as the overall "weight ed average dumping margin" is calculated for an
exporter, the USDOC must "allocate" an exporte r's dumping margin among the importers of that
exporter's subject merchandise. In essence, throu gh the importer-specific calculation procedures, the
USDOC divides among the importers the total amount of dumping duties due for the product (i.e. the
numerator in the overall dumping fraction is divided among the different importers). This sub-divided
figure is the numerator in a new fraction for each im porter. The denominator is based on the total
entered value of imports, by importer, as declared to United States Customs. The standard computer
programme for periodic reviews contains program ming procedures to calculate both, and each section
of the computer programme includes the standard zeroing line by which all negative dumping amounts
are disregarded.
4.20 Japan asserts that the standard programmes serve as models whenever the USDOC develops a
case-specific programme for use in anti-dumping proceedings. When a case-specific computer
programme is formulated, however, the integrity of the standard programme is retained, and crucially,
the standard zeroing line is always included unchanged.
4.21 Japan claims that, in terms of Article 6.2 of the DSU, the standard model and simple zeroing
procedures as well as the standard zeroing line are the specific "measures" that are challenged "as such"
in this dispute. These measures are "administrative procedures" within the meaning of Article 18.4 of
the AD Agreement. In recent anti-dumping disputes the Appella te Body clarified the interpretation of
the word "measure" as used in Article 6.2 of the DSU, in the context of "as such" claims. Japan points
out that the Appellate Body explained three important points for the current dispute.
4.22 First, in US – Corrosion-Resistant Steel Sunset Review, the Appellate Body stated that the word
"measure" extends to any act or omission by a Member and that "acts setting forth rules or norms that
are intended to have general and prospective application" "could constitute a 'measure'". The Appellate

33 When the USDOC uses the per-unit difference (UMARGIN) instead of the total difference
(EMARGIN), a specific line of programming code inserted into this step is "WHERE UMARGIN GT 0".

Body further observed that this view "serv es the purpose of preventing future disputes".
34 Second, in
US – Oil Country Tubular Goods Sunset Reviews and in US – Corrosion-Resistant Steel Sunset Review,
the Appellate Body suggested that an alleged "measure" is assessed in WTO law irrespective of its legal
character or status in domestic law.35
4.23 In other words, claims Japan, the determin ation in WTO law is based on the "content and
substance" of an act and not its "form and nomenclature". 36 Japan points out that the United States
appears to consider that the standard zeroing procedures and the standard zeroing line cannot be
measures if they are not manifested in US domestic laws and regulations. 37 Japan notes that the
United States has advocated the contrary position in EC – Approval and Marketing of Biotech Products,
in which it has argued that an "unwritten pro cedure" is a measure for purposes of WTO dispute
settlement.38 The same reasoning applies in the case of the AD Agreement as in the case of the
SPS Agreement, the covered agreement involved in the EC – Approval and Marketing of Biotech
Products dispute.39 Japan argues that it would be all too easy for Members to evade their obligations
under the AD Agreement – and other covered agreements – if unwritten rules and procedures could
escape WTO scrutiny.40
4.24 Third, the Appellate Body in Guatemala – Cement I and US – Corrosion-Resistant Steel Sunset
Review and the Panel in Korea – Commercial Vessels suggested that a "measure" need not be binding or
mandatory in domestic law.41
4.25 Japan states that it brought the present dispute pursuant to the AD Agreement, Article 17 which,
together with the DSU, sets fort h the rules applicable to the set tlement of anti-dumping disputes.
Nothing in the Agreement limits the types of measures that may, as such, be the subject of dispute
settlement.42 Furthermore, under Article 18.4 of the AD Agreement, Members are required to ensure the
conformity of their "laws, regulations and administrative procedures" with that Agreement. As the
Appellate Body explained, the quoted phrase "seems to us to encompass the entire body of generally
applicable rules, norms and standards adopted by Members in connection with the conduct of
anti-dumping proceedings".43 An "as such" dispute under the AD Agreement may, therefore, concern
"administrative procedures", which are rules, norms or standards of general and prospective
application.
4.26 Japan also argues that the ordinary meaning of the word "administrative," in Article 18.4 of the
AD Agreement, refers to the "conduct or management of a ffairs"; and a "procedure" is "a system of
proceeding; proceeding, in reference to its mode or method". 44 In particular, the meaning of the word

36 Japan Second Written Submission, para. 9; US – Corrosion-Resistant Steel Sunset Review ,
footnote 87.
37 Japan Second Written Submission, para. 9; US Re sponse to the Panel's Questions after the First
Substantive Meeting of the Panel with the Parties ("US 20 July 2005 Answers"), para. 2.
38 Japan Second Written Submission, para. 10; Japan Executive Summary to Second Written
Submission, para. 8; US First Written Submission, EC – Approval and Marketing of Biotech Products, para. 82.
39 Japan Executive Summary to Second Written Submission, para. 8.
40 Japan Executive Summary to Second Written Submission, para. 8.
41 Japan Executive Summary to First Written Submission, para. 7; Appellate Body Report, US –
Corrosion-Resistant Steel Sunset Review, paras. 81-88; Appellate Body Report, US – Oil Country Tubular Goods
Sunset Reviews, para. 187. See also Panel Report, Korea – Commercial Vessels, para. 7.63.
42 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 86.
43 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 87.
44 New Shorter Oxford English Dictionary , 1993 edition (Lesley Brown, ed.), Vol. 1, p. 28
("administrative"); Vol. 2, p. 2363 ("procedure") (Exhibit JPN-4). The New Shorter Oxford English Dictionary

"procedure" includes "computers: a set of in structions for performing a specific task". 45 Thus, an
"administrative procedure", in Article 18.4, is a system or method, including a set of computer
instructions, used by investigating authorities to conduct or manage anti-dumping proceedings.
4.27 Japan argues that the standard model and simp le zeroing procedures set forth in the USDOCs
standard computer programmes, as well as the standard zeroing line in the programmes, are
"administrative procedures" under Article 18.4 of the AD Agreement that are "as such" measures. In
particular, the zeroing procedures are a pre-dete rmined, standardized system or method for
mechanistically conducting and managing, on a unif orm and predictable basis, an aspect of the
USDOCs margin calculations in all anti-dumping proceedings, irrespective of the method of
comparison used. Through standard computer-coded instructions, the procedures automatically select
only positive price differences between normal value and export price for inclusion in the calculation of
the dumping amount in the numerator of the overall dumping margin calculation.
4.28 Japan argues there is overwhelming and uncontest ed record evidence that the United States
maintains standard zeroing procedures that are measures for purposes of WTO dispute settlement and
that constitute "administrative procedures" within the meaning of Article 18.4 of the AD Agreement.

Japan points out that the United States has not provided evidence of a single instance in which it did not
use its zeroing procedures. The continued use of zeroing procedures in a T-to-T comparison by the
USDOC in the implementation of the recommendation and ruling of the DSB in US – Softwood
Lumber V 46 further confirms that the zeroing procedures are rules, norms or standards of general and
prospective application.
4.29 Among the evidence that Japan uses to show the existence and the substance of the standard
zeroing procedures, Japan points to numerous statements by the USDOC, the United States Department
of Justice ("USDOJ") and the United States domes tic courts, which confirm the existence and the
substance of the standard zeroing procedures that Japan challenges as "as such" measures. These
official US government statements also explain the operation of the zeroing procedures in a manner that
is fully consistent with Japan's description of these measures. Thus, the passages cited by Japan from
the United States Government and from the US dom estic courts contain unequivocal statements
attesting to the long-standing existence and the content of the zeroing procedures as a general and
prospective rule in margin calculations.
4.30 Japan also submits that the USDOC Import Administration Anti-Dumping Manual
demonstrates that the USDOC has developed and maintains a standard calculation methodology and
that this methodology is reflected in the standa rd programme. Japan asserts that the standard
programmes are written in such a way that the zer oing procedure is executed automatically in the
margin calculation process. As a part of the standard programmes, the standard zeroing line is found in
every margin calculation programme applied by the USDOC in specific anti-dumping proceedings,
including the 26 case-specific computer programmes submitted by Japan. The consistent application of
zeroing procedures demonstrates the generalized, norma tive and prospective nature of the application
of these procedures. Japan presents testimony from Ms. Valerie Owenby, an expert in the US
anti-dumping computer programming procedures, who stated that, since 1993, she is unaware of any

defines a "method" as "[a] mode of procedure; a (defined or systematic) way of doing anything, esp. (w.
specifying wd or wds) in accordance with a particular theory or as associated with a particular person".
45 New Shorter Oxford English Dictionary , 1993 edition (Lesley Brown, ed.), Vol. 2, p. 2363
("procedure") (Exhibit JPN-4).
46 See Notice of Determination Under Section 129 of the Uruguay Round Agreements Act:
Anti-Dumping Measures on Certain Softwood Lumber Products From Canada, 70 Fed. Reg. 22636 (2 May 2005).
Exhibit JPN-27. See also Original Investigation Computer Programm e: URAA Section 129 Proceeding on
Softwood Lumber from Canada (Final Determination), Exhibit JPN – 24.

case-specific margin calculation programme in any US anti-dumping proceeding, in which the standard
zeroing line did not feature. In short, Japan submits that the totality of the evidence in this dispute
demonstrates that the standard zeroing procedur es constitute a general rule, norm or standard
susceptible of challenge under the Anti-Dumping Agreement and the DSU.
4.31 Japan argues that the standard zeroing line is an instrument setting forth rules or norms that are
intended to have general and prospective application
47. As noted, according to its ordinary meaning, the
term "administrative procedures" includes "a set of [computer] instructions for performing a specific
task". The United States acknowledges that the computer programmes at issue and the specific lines of
computer code in them are "a set of computer instructions".48 The standard zeroing line is comprised of
computer-coded instructions that expressly direct the execution of the standard zeroing procedures and,
therefore, forms a part of the USDOCs "administrative procedures" for calculating margins of dumping.
4.32 Japan acknowledges that the United States points out a small, but unspecified, number of cases,
in which the USDOC did not use the standard zeroing line because it did not use SAS computer
software. Even in the handful of instances when the standard zeroing line was not applied, Japan states
that the standard zeroing procedures were always used. In particular, the United States admits that, in
these instances, negative comparison results were excluded using other software or, even, manually. 49
Japan argues that the fact that the standard zeroing line is not used in every investigation does not
deprive these computer-coded instructions of thei r quality as a rule, norm or standard of general
application. A rule may, by definition, be gene ral in character although not necessarily applied.
without exception, in all circumstances.
4.33 Japan observes the United States' argument that the standard computer programme cannot be a
measure because, first, Japan has "not even identified a 'standa rd computer programme'" and "there is
no single computer programme to be challenged as such for every programme is tailored to each case";
and, second, Japan has not shown that the standard programmes in their entirety are generally
applicable. In response, Japan argues that, first, it had identified and submitted two programmes that
the USDOC itself styles as "standard programmes". Japan also demonstrated that the standard zeroing
line features in the two standard programmes a nd is also included in a series of case-specific
programmes. Second, where the contested measure constitutes a small part of a larger instrument, Japan
asserts that it is unnecessary to look beyond the measure and examine other parts of the instrument that
are not part of the dispute. Third, as explained, the standard zeroing line is a rule, norm or standard of
general and prospective application.
4.34 Japan argues that the United States is incorrect in suggesting that Japan has not demonstrated
that the zeroing procedures mandate a viola tion of the United States' WTO obligations. 50 Although
Japan firmly believes that a measure does not have to be mandatory to be inconsistent as such with
WTO law, Japan has submitted ove rwhelming and uncontested evidence that the standard zeroing
procedures and the standard zeroing line mandate a violation of WTO obligations. Japan notes that the
Appellate Body has not yet opined definitively on the relevance of the mandatory/discretionary
doctrine51, and that the mandatory/discretionary distinction is, at most, an "analytical tool" to assist in
deciding if a measure is WTO-consistent, but that this tool must not be applied "mechanistically".52 In
US – Corrosion-Resistant Steel Sunset Review , US – Carbon Steel and US – 1916 Act , the

47 Appellate Body Report, US – OCTG from Argentina, para.187.
49 US 20 July 2005 Answers, para. 9.
50 See Japan Second Written Submission, paras. 72-82; US 20 July 2005 Answers, paras. 13-16.
51 Japan Opening Statement, First Substantive Meeting of the Panel with the Parties, paras. 14-18; 24.
Japan 20 July 2005 Answers, para. 28-39. Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review,
para. 93.
52 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 93.

Appellate Body found that the mandatory/discretionary distinction must be analyzed in the light of the
burden of proof and, therefore, of the evidence as a whole.53
4.35 In short, Japan argues, the zeroing procedures and the standard zeroing line preclude the
United States from complying with its WTO obligations. The zeroing procedures and the standard
zeroing line prevent the United States from calcula ting a margin of dumping for the "product" as a
whole on the basis of a "fair comparison", as required by the AD Agreement and the GATT 1994. The
evidence of the consistent application of the measur es confirms this and also demonstrates that the
USDOC treats the zeroing procedures as well as the standard zeroing line as a binding part of its margin
calculation procedures.
4.36 Japan notes that, in its 20 July 2005 Answers, the United States argues that a measure does not
mandate a violation of WTO law if an executive au thority retains discretion to avoid a breach of
WTO.54 The United States goes on to argue that the USDOC Assistant Secretary has the discretion to
decide whether to provide "offsets" in any particular investigation. 55 In other words, according to the
United States, the zeroing procedures are as such WTO-consistent because the USDOC Assistant
Secretary could decide not to apply them in an investigation or could change them. Japan states that the
United States is incorrect that executive discretion not to apply or to change a measure necessarily
renders the measure WTO-consistent. In US – 1916 Act , the measure at issue permitted the US
Department of Justice ("USDOJ") to initiate crim inal enforcement proceedings on a discretionary
basis.56 The United States argued that the criminal provisions of the measure were not, as such,
WTO-inconsistent because violations could be a voided through the USDOJs di scretion not to enforce
these provisions.57 The Appellate Body disagreed, finding that the criminal provisions of the measure
were WTO-inconsistent, even though they might not be applied by the USDOJ.58
4.37 Japan argues that, in reaching this conclusion, the Appellate Body cited approvingly the
adopted GATT panel report in US – Malt Beverages . In that dispute, an executive authority also
enjoyed discretion not to apply the contested measures. Indeed, in contrast to the circumstances of this
dispute, one of the measures was not applied at all and the other only "nominally" so.59 Despite this, the
Panel found that the executive discretion not to apply the measures did not render them
GATT-consistent.60
4.38 Japan asserts that there is, therefore, a di stinction between two types of measure: first, a
measure that, in terms of its substantive content, mandates WTO-inconsistent action as a rule, with the
executive enjoying discretion not to apply the measure in any individual case; and, second, a measure

53 Japan 20 July 2005 Answers, paras. 28 – 39.
54 US 20 July 2005 Answers, para. 3. The US cited a statement by the Appellate Body in US – Section
211 Appropriations Act (para. 259) to support its position that the mere existence of discretion to avoid a WTO
violation renders a measure WTO-consistent. However, contrary to the US' assertion, the Appellate Body framed
the issue as a matter of a presumption of compliance that can be rebutted by evidence relating to the consistent
application of the measure. Japan emphasizes that there is no room for such a presumption in this case because the
standard zeroing procedures and the Standard Zeroing Li ne are measures that, in terms of their substantive
content, mandate WTO-inconsistent action as a rule. See Japan Second Written Submission, para. 78. It is also
worth noting that, in US – Section 211 Appropriations Act , the Appellate Body rejected the US' argument that
"discretionary regulations, issued under a separate law, cured the discriminatory aspects of the [mandatory]
measure at issue." See Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, footnote 94.
55 US 20 July Answers, para. 11.
56 Appellate Body Report, US – 1916 Act, paras. 90 and 91.
57 Appellate Body Report, US – 1916 Act, para. 84.
58 Appellate Body Report, US – 1916 Act, para. 91.
59 Panel Report, US – Malt Beverages, paras. 5.58 and 5.60.
60 Panel Report, US – Malt Beverages, paras. 5.39 and 5.60.

that, by its own terms, does not require (but permit s) the executive to take WTO-inconsistent action.
The substantive content of the first measure is WT O-inconsistent, whereas the substantive content of
the second is not defined in the absence of executive action. According to US – 1916 Act and US – Malt
Beverages, the first measure is WTO-inconsistent, despite the possibility that the executive may or may
not apply the measure in certain cases.
4.39 Japan argues that the distinctions established in US – 1916 Act and US – Malt Beverages serve
a valuable anti-circumvention purpose. Members could very simply and indefinitely evade their WTO
obligations, maintaining and consistently applying WTO-inconsistent general rules, if these rules were
held to be as such WTO-consistent on the grounds that the Member's executive might, one day, decide
not to apply them. This is particularly so for "administrative procedures" under the AD Agreement that,
by their very nature, are often adopted by an executive authority that could easily retain discretion not to
apply them.
4.40 Japan argues that this line of GATT and WTO case-law is particularly apposite in the
circumstances of the current dispute. The zeroi ng procedures have been maintained by the USDOC
since before the AD Agreement entered into force in 1995. Although the United States asserts that the
USDOC Assistant Secretary has discretion not to appl y the procedures in a particular investigation, it
has failed to show a single instance where this happe ned. The alleged discretion is, therefore, more
theoretical than real. In any event, following US – 1916 Act and US – Malt Beverages , the
USDOC discretion not to apply the zeroing procedures in a particular investigation is irrelevant.
4.41 Japan argues that the issue is not whether the USDOC Assistant Secretary could decline to
apply the zeroing procedures in a particular investig ation; nor is the issue whether the USDOC could
change the zeroing procedures. All laws, regulati ons and procedures are subject to change, whether
they are mandatory or not. Instead, the issue is whether the zeroing procedures themselves – in terms of
their substantive content – mandate a violation of WTO obligations as a rule. As the evidence shows,
the answer to this question is plainly, "yes". Under the zeroing procedures, negative comparison results
are systematically and mechanically discarded in the calculation of the numerator, representing the
apparent total amount of dumping. In terms of the zeroing procedures, there is no other alternative. As
the USDOC put it, notwithstanding the USDOC Assistant Secretary's alleged discretion, " we do not
allow" "offsets" that compensate for negative comparison results.
61 This is also borne out by the
uncontested evidence of the consistent application of the zeroing procedures, which shows that the
USDOC treats the measure as a binding part of its procedures. There can, therefore, be no presumption
that the USDOC Assistant Secretary will not apply the zeroing procedures.
4.42 In response to the Panel's questions regarding how the consistent application of a procedure of
zeroing can establish the existence of a measure a nd whether the measure challenged "as such" can be
identified simply by reference to its consistent ap plication, Japan argues th at it does not identify the
zeroing procedures "simply by reference" to their consistent application. 62 Japan argues that it has
relied on several categories of evidence – the US DOC Anti-Dumping Manual; standard zeroing line;
statements by the USDOC, USDOJ, and United States courts; the Valerie Owenby Statement; and the
consistent application of the zeroing procedures demonstrated in 26 case-specific programmes – which
taken together demonstrate that the zeroing proced ures constitute a general rule, norm, or standard
maintained by the United States for calculating dumping margins. Japan argues that, in a case such as
this, where a Member has failed to publish a gene ral measure in written form, a Member can draw
evidence from other sources to establish the existence of the measure, and challenge it "as such".

61 See Issues and Decision Memorandum for the An ti-Dumping Duty Administrative Reviews of
Anti-friction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof from France, Germany, Italy,
Japan, Singapore, and the United Kingdom for the Period of Review 1 May 2002, through 30 April 2003,
Comment 1 (at 12-14) (15 Sept. 2004) (emphasis added). Exhibit JPN-21.D.
62 Japan 19 October 2005 Answers, paras. 2-12.

4.43 Further, where a Member has failed to publish a general rule, a consistent pattern of regulatory
behaviour can indicate that the Member adopted, in the past, a general and prospective rule,
particularly, for example, when the pattern of be haviour is extremely cons istent, over an extended
period of time, in a variety of regulatory situations. In answering a question by the Panel whether Japan
contends that the zeroing procedure at issue can be challenged as a practice, Japan answers that the
Panel should not attach too much significance to the description by the USDOC, the USDOJ, and the
United States courts of zeroing as a "practice" as a matter of domestic legal parlance, but should instead
focus on the substance and content of the measure at issue. In this connection, Japan also asserts that its
request for the establishment of a panel specifically identifies the zeroing procedures as the measure at
issue and describes their substantive content. Wh ether or not the request includes "practice" is
irrelevant because Japan is not challenging mere practice. 63 Japan also submits, in response to a
question of the Panel, that a "policy" of system atically applying the same methodology in dumping
margin calculations can be found to be WTO-incons istent if the policy is a general rule, norm or
standard with prospective application.64
(b) United States65
4.44 The United States argues that the Panel should re ject Japan's "as such" claims, that USDOCs
"standard computer programme" is not a measure, and that USDOCs "standard computer programmes"
are tailored to each proceeding and do not mandate any action. The United States argues that the "as
such" claims set forth in Japan's panel request ar e limited to one so-called measure – the "computer
programme". Identified as "USDOCs AD Margin Calculation computer programme" in section B.1(a)
prior to the listing of articles allegedly violated
66, Japan's first submission only addresses what it refers
to as the "computer programmes" as the measures subject to dispute settlement. 67 The United States
interprets the core of Japan's argument as being limited to the "standard zeroing line" in the "computer
programmes".68
4.45 The United States discusses whether the "standard computer programme" as alleged by Japan is
a "measure" as understood under Article 6.2 of the DSU. The Appellate Body has indicated that an
instrument setting out rules or norms of gene ral application could be challenged "as such". 69 First,
Japan variously refers to "computer programme" an d "computer programmes". This distinction is
important. In fact, there is no single computer programme to be challenged "as such". USDOC staff do

63 Japan 19 October 2005 Answers, paras. 13-17 (citing Appellate Body Report, US –
Corrosion-Resistant Steel Sunset Review, footnote 87).
64 Japan 19 October 2005 Answers, para. 18.
65 US First Written Submission, para. 29-37; US Executive Summary to First Written Submission, paras.
4-9; US Second Written Submission, paras. 5-22; US Executive Summary to Second Written Submission, paras.
2-13.
66 That section of the panel request vaguely refers to "other related procedures" and states that these are
collectively referred to as "zeroing", but Japan never id entifies what these "other related procedures" are.
Moreover, in specifying the articles violated, Japan refers to "the Zeroing procedure" but does not explain what
"the Zeroing procedure" is. Paragraph 2 refers to "United States laws, regulations and administrative procedures
described above . . . ", yet no laws, regulations, or administrative procedures were described above (except
perhaps the computer programme, which is not a law, regulation, or administrative procedure).
68 See Japan First Written Submission, paras. 60-61. Moreover, the US argues that Japan has failed to
identify any measure to which its claims concerning the issue of offsets when using the transaction-to-transaction
methodology apply. The US has not used the transaction-to-transaction methodology in any of the measures
Japan challenges "as applied". In addition, none of the computer programmes identified by Japan utilize the
transaction-to-transaction comparison methodology.
69 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 187; Appellate Body
Report, US – Corrosion-Resistant Steel Sunset Review, para. 82.

not apply a uniform computer programme to every case; instead, the computer programmes are tailored
to each one. Japan implicitly acknowledges as much in its exhibits; if there were only one computer
programme, then Japan would not have had to include the computer programme for each determination
in its exhibits.
70 Accordingly, Japan has not even identif ied a "standard computer programme", and it
would thus be difficult to conclude that it has identified a measure at all.
4.46 Further, argues the United States, Japan's argument on the "computer programmes" themselves
are limited to one line in the programmes, the so -called "standard zeroing line". The United States
claims that Japan does not even attempt to argue that the "standard computer programmes" meet the
criteria to be measures. For example, Japan argues that the "standard zeroing line" is "generalized and
prospective", without addressing the computer programmes in their entirety.71 For this reason as well,
Japan has not met its burden of demonstrating that the computer programmes are measures subject to
dispute settlement.
4.47 The United States states that in any event, even in the context of a particular proceeding,
whether one looks at an entire computer programme or one line in the computer programme, these are
simply convenient tools to allo w USDOC official s to calculate dumping margins accurately and
efficiently. USDOC officials tell the computer programmes what to do, rather than the opposite. In that
regard, it is difficult to see how a computer progra mme, or one line of a computer programme, is an
instrument that sets out rules or norms, nor do they have general or prospective application. They do
not have general application because they are tailo red for each case. Similarly, they do not have
prospective application because they apply only to the particular case and do not apply to future cases.
4.48 The United States argues also that USDOCs "Standard Computer Programmes" are tailored to
each proceeding and do not mandate any action. If a particular instrument is challenged as such, then, to
be found WTO-inconsistent, it must mandate a breach. The mandatory/discretionary doctrine has been
consistently applied in GATT and WTO dispute settlement proceedings. The test reflects the fact that,
as the Appellate Body has noted, panels may not presume bad faith on the part of Members.
72 Thus, if a
measure provides a Member with the discretion to act in a WTO-consistent manner, it may not be
presumed that the Member will exercise that discretion in bad faith. 73 Therefore, even if USDOC
computer programmes were considered to be measures, they cannot be found to be inconsistent with the
WTO Agreements because they do not mandate any action, and Japan has not argued that they do.
These programmes do not preclude the USDOC deci sion-maker from offsetting negative dumping
margins, nor do they require the USDOC decision- maker to ignore negative dumping margins. If the
USDOC decision-maker decided to offset negative dum ping margins in a particular case, his decision
would be implemented simply by using a different set of computer instructions.
4.49 The United States thus argues that Japan has referred to nothing in US law which would support
the conclusion that computer programmes are an ything but the means by which decision-makers
implement their decisions, or that such programmes require decision-makers to act in any particular
way.
4.50 Moreover, the United States argues that neither Jap an's first submission, its statements before
the Panel, nor its answers to Panel questions de monstrate how what it refers to as the "zeroing

70 The US notes, in this regard, that Ms. Owenby testifies that USDOC may have "anywhere from two to
five separate standard programmes to calculate a dumping margin." Owenby Statement, para. 8 (Exhibit JPN-1).
72 Appellate Body Report, Brazil – Aircraft, para. 114.
73 The US argues that this does not preclude the possib ility that a particular obligation, by its terms,
prohibits such discretion.

procedures" and the "standard zeroing line" are me asures, let alone whether they mandate a breach. 74
Instead, Japan's submissions gloss over key issues while making a series of unsubstantiated assertions.
4.51 The United States argues that, in its attempt to secure an "as such" finding against the
United States, Japan challenges so-called "zeroi ng procedures" as a measure subject to dispute
settlement. However, Japan still has not identifie d any actual measure of the United States that
corresponds to these "zeroing procedures," nor could it. Indeed, Japan in its first submission
acknowledged that the very term "zeroi ng procedures" is Japan's invention 75 – and in that submission
Japan failed to explain just how these "procedures" are a measure of the United States, and therefore
subject to WTO dispute settlement. Japan's answers to Panel questions further acknowledge that what it
terms "zeroing procedures" do not actually exist, except to the extent that they are supposedly "applied"
via the so-called "standard zeroing line." In other words even if these "zeroing procedures" exist, they
have no "functional life of their own".76
4.52 The United States argues that Japan attempts to avoid the obvious conclusion that these
procedures do not exist and are not measures at all by inaccurately conflating the discussion of what
may constitute a measure for dispute settlement pu rposes generally with what constitutes a law,
regulation, or administrative procedure for purposes of the AD Agreement . Japan states that "the
measure at issue must be an act attributable to the United States ... and it must form part of the generally
applicable rules, norms or standards maintain ed by USDOC in connection with the conduct of
anti-dumping proceedings"77 Not only does Japan fail to explain how something that doesn't exist is an
"act"78, but Japan also omits one component of the analytical framework on which it relies: Under that
approach, an "act" can be a measure subject to di spute settlement, without regard to a particular
application of the alleged measure, only if that "act" sets forth rules or norms intended to have
generalized and prospective application. Japan has provided no analysis as to how these non-existent
procedures set forth rules or norms intended to have generalized and prospective application; Japan
simply states that it is so.79

74 The US notes Japan's statement in its answers to the Panel questions that it "reserves its right" to
pursue arguments against several additional "measures:" an alleged "invariable practice," "the Manual," and US
legislation and regulations. However, Japan's "reservation" contains several flaws. First, "practice" is not an
alleged measure within the Pane l's terms of reference, and second, at this point, Japan may not introduce any
evidence with respect to the Anti-Dumping Manual and US legislation and regulations.
With respect to the Panel's terms of reference, Article 6.2 of the DSU requires a Member, in its panel
request, to "identify the specific measures at issue". Japan did not identify "practice" (or "invariable practice") as
a "measure" in its panel request. Therefore, any claim against "practice" would be beyond the terms of reference
of this dispute.
With respect to "the Manual", US legislation, or US regulations, Japan did not present any evidence in its
first written submission, and paragraph 14 of the Panel's Working Procedures precludes Japan from doing so in the
future. Paragraph 14 states that parties shall submit factual evidence no later than during the first substantive
meeting. In addition, were Japan to present evidence at this late stage of the proceedings, this would deprive the
US of a full opportunity to defend its interests.
76 See Panel Report, US – Export Restraints, para. 8.85.
77 Japan 20 July 2005 Answers, para. 7.
78 The US also argues that Japan simply offers the conclusory statement that "the standard zeroing
procedures ... are certainly an 'act' that can constitute 'measures' for dispute settlement purposes." Japan 20 July
2005 Answers, para. 2. Not only does Japan fail to substantiate this assertion, but it seems to indicate that there is
more than one procedure, more than one act, and more than one measure, all encompassed within the invention
"zeroing procedures". This supports the view that the so-called "zeroing procedures" are no more than the
repeated response to a particular set of circumstances – the very situation the panel in US – Steel Plate considered
not to be a measure(Para. 7.22.) (emphasis added).
79 Japan 20 July 2005 Answers, para. 26.

4.53 The United States asserts that, because these "zer oing procedures" do not exist, they cannot
mandate a breach of any WTO obligation.
80 Nevertheless, Japan attempts to argue to the contrary by
misapplying the Appellate Body's analysis of whether a measure mandates a breach. Japan argues that
"evidence of the 'consistent app lication' of the measure" may be relevant for purposes of the
mandatory/discretionary analysis. 81 But Japan's answer to Questi on 11 reveals the flaw in its
application of this analysis to the "zeroing procedures": The starting point of the analysis is the "'text of
the relevant legislation or legal instruments '",82 which "may be supported " by other evidence. 83 The
Appellate Body later stated that when "a measure is challenged 'as such,' the starting point for an
analysis must be the measure on its face". 84 Nothing in the DSU, nor in any Appellate Body report,
suggests that "consistent application" can supplant the analysis of the measure itself, or obviate the need
even to identify the measure which is supposedly be ing applied, which is what Japan would have the
Panel do. The United States points out that a closer review of the Appellate Body's reasoning in
US – Carbon Steel reinforces the conclusion that Japan is si mply distorting the concept of "consistent
application" as it may legitimately be used to assist in determining the meaning of a measure. The
Appellate Body explained:
"[s]uch evidence [of the scope and mean ing of municipal law] will typically
 be
produced in the form of the text of the rele vant legislation or legal instruments, which
may be supported, as appropriate , by evidence of the consistent application of such
laws, the pronouncements of domestic cour ts on the meaning of such laws, the
opinions of legal experts and the writings of recognized scholars. The nature and
extent of the evidence required to satisfy the burden of proof will vary from case to
case."85
4.54 The United States argues that the Appellate Body's emphasis on the case-by-case nature of the
evidence necessary to determine the scope and mean ing of a measure reflects both the differences
among the municipal legal systems of Members as well as the different types of measures they
maintain. For example, the Appellate Body noted that "pronouncements of domestic courts on the
meaning of such laws" may be relevant in some case s. In the US municipal legal system, such court
decisions are a fundamental interpretive tool.
86 For example, if the US Supreme Court were to interpret
the term "black" in a particular statute as including "dark grey", an examination of the text of the statute
alone could easily yield an incorrect result, as the US Supreme Court interpretation would be binding on
US authorities.
4.55 Likewise, the United States states, an examination of the "consistent application" of a law must
be undertaken "as appropriate", and in a manne r which reflects the actual manner in which the
municipal legal system of a Member operates. For example, if a complaining party were to argue that a
statute requires a defending Member's authorities to do X, but the authorities in applying that law had
consistently interpreted it as requiring Y, the consistent application could be relevant to disproving the
complainant's interpretation. Likewise, if courts had consistently interpreted a statute in the same

80 The US asserts that Japan states that whether an act is mandatory is not relevant for purposes of
whether the act is a measure. Japan 20 July 2005 Answers, para. 8. It is, however, relevant for purposes of
evaluating whether the "act" – if a measure – breaches a Member's WTO obligations.
81 Japan 20 July 2005 Answers, para. 31.
83 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 156 ( emphasis added).
Further, the US argues that Japan attempts to apply wholesale the Appellate Body's analysis of the Sunset Policy
Bulletin to these "zeroing procedures", including whether USDOC "treats" the unidentified "zeroing procedures"
as "mandatory and/or binding". Japan 20 July 2005 Answers, paras. 28 and 31. The US is unable to deduce any
logic in the proposition that USDOC would, or could, "treat" non-existent procedures as "mandatory".
84 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 168.
85 Appellate Body Report, US – Carbon Steel, para. 156 (emphasis added).
86 See, e.g., Marbury v. Madison, 5 US 137 (Cranch) (1803).

manner, that would provide a strong indication of the statute's meaning, even if a definitive
interpretation had not been issued by a Member's highest-level court. Neither of these approaches,
however, is the way in the which Japan is using "consistent application". Japan is simply applying the
term "consistent application" to an anal ysis which consists of nothing more than assuming there is a
measure, "zeroing procedures", which caused a similar result in past proceedings. Japan is thus simply
misappropriating a phrase used by the Appellate Body and applying it to an illegitimate attempt to have
the Panel make findings on a non-existent measure.
4.56 The United States argues that Japan resorts to creating a straw man in an attempt to rebut the US
position. Japan states that "[e]ssentially, the Un ited States argues that, because the USDOC Assistant
Secretary is free to abandon the zeroing procedures, the procedures are not binding. However, the
United States confuses the binding character of th e existing 'administrative procedures' with the
USDOC Assistant Secretary's authority to vary those procedures in the future". 87 The United States
first notes that, notwithstanding Japan's insistence that computer programmes are separate measures
from "zeroing procedures," and that each is WTO-inconsistent "as such",88 Japan cites a US discussion
about computer programmes in support of its argument about zeroing procedures. 89 More
fundamentally, Japan's argument is simply illogical. There is nothing "binding" about something that
USDOC is free not to do.
4.57 The United States says that Japan's statement th at "at the oral hearing, the United States
admitted that ... there is no single instance where the USDOC did not apply the standard zeroing
procedures"
90 mischaracterizes the US statement as recogni zing the existence of so-called "zeroing
procedures", which it did not. Again, however, clai ms the United States, Japan fundamentally misses
the point: there was no measure – "standard zeroi ng procedures" or otherwise – which caused the
USDOC Assistant Secretary to refrain from providing an offset in past investigations. Had the
USDOC wished to provide an offset in an indi vidual case, he or she could have, and should the
USDOC Assistant Secretary wish to do so in the future, he or she could.91

87 Japan 20 July 2005 Answers, para. 36.
88 Japan 20 July 2005 Answers, para. 13 ("in add ition to challenging the standard zeroing line itself,
Japan challenges the standard zeroing procedures more generally".) The US argues that if the "standard zeroing
line" is the expression of the "standard zeroing pro cedures," then it is unclear how the "standard zeroing
procedures" can be challenged "more generally".
89 The US asserts that in the cited paragraph, the US says that even if "computer programs were found to
be measures" such programmes cannot be found WTO- inconsistent because they do not mandate action.
(emphasis added) In that paragraph, the US says nothing about "zeroing procedures". Indeed, the US noted in its
First Submission that it considered Japan to have limited its claims to the "computer line" and not some
unidentified "zeroing procedures". US First Written Submission, para. 29.
90 Japan 20 July 2005 Answers, para. 22.
91 The US also argues that Japan has noted that in US – Countervailing Measures on Certain EC
Products, a "USDOC calculation method" was found to be "as such" inconsistent with the Subsidies and
Countervailing Measures Ag reement. Notwithstanding that the "method" in question was not a "calculation
method", there was no consideration in that dispute of whether that "method" was a measure for dispute settlement
purposes. Neither the parties, the panel, nor the Appellate Body analyzed whether such a method could be a
measure, and it is incorrect for Japan to suggest otherwise. Moreover, as the panel in US – Anti-Dumping
Measures on Oil Country Tubular Goods noted when presented with analog ous circumstances, "[w]e do not
consider that Members are limited in presenting their arguments in a particular dispute by the arguments made, or
not made, in previous disputes, even if those previous disputes involved a related or similar topic". Panel Report,
US – Anti-Dumping Measures on Oil Country Tubular Goods, para. 7.176.
The US further points out that, to the extent Japa n is arguing that the US DOC Assistant Secretary's
decisions not to provide offsets in each prior determination transform those individual decisions collectively into a
measure that mandates a breach, the panel in US – Steel Plate already considered, and dismissed, such an
approach, stating that just because "a particular response to a particular set of circumstances has been repeated,

4.58 The United States argues that Japan also asserts that it has submitted "overwhelming evidence"
that the "zeroing procedures" and the "standard zeroing line" are "mandatory and/or binding"
92 and that
the "United States has not only failed to offer 'persu asive evidence in rebuttal', it has not offered any
evidence whatsoever".93 Not surprisingly, Japan provides no citation to this supposedly overwhelming
evidence. Indeed, Japan has offered no evidence that the "zeroing procedures" or the "zeroing line" are
mandatory.
4.59 The United States posits that Japan's quest for an "as such" finding against the United States
also leads it to challenge a so-called "standard zeroing line". In short, Japan has failed to establish that
a single line of computer programming sets forth rules or norms that are intended to have generalized
and prospective application. Indeed, Japan cannot do so: By its very nature, a computer line is applied
in a particular determination; it cannot set fort h rules or norms intended to have generalized and
prospective application.
4.60 The United States asserts that Japan's answers to the Panel's questions only reinforce the
analytical flaws in its results-oriented approach, not only with respect to whether the computer line is a
measure but also with respect to whether the "measure" mandates a breach. For example, Japan argues
that "[o]n the face of the measure, inclusion of negative results is simply not an option ... . The evidence
drawn from the terms of the measure, therefore, demonstrates that the measure mandates certain
regulatory conduct".
94 This analysis is simply wrong. It ignores the fact that a line in a computer
programme, or even a computer programme itself, cannot "mandate" regulatory behaviour. Nothing in
the "terms" of the computer line requires USDOC to refrain from providing an offset. Rather, it is
USDOC that decides whether the "lin e" will be applied or not and that decision is made in each and
every determination precisely because there is no re quirement that is general and prospective in
nature.
95
4.61 In response to the Panel's question asking the United States to identify its law, regulations, and
administrative procedures which govern the calcu lating of dumping margins and any published or
publicly available documents that explain these, the United States claims that there are no laws,
regulations, or administrative procedures which govern offsets for non-dumped transactions in margin
calculations.96 The United States points out that, while section 771(35) of the Tariff Act of 1930
defines the terms "dumping margin" and "weighted average dumping margin", domestic courts have
found this section not to govern this issue and the US Court of Appeals for the Federal Circuit has held
that this section neither prohibits nor requires the USDOC to grant offsets.
4.62 In response to a question of the Panel, with r espect to "as such" claims, how a Member could
establish the existence of a measure that is not writte n down independently of its repeated application

and may be predicted to be repeated in the future, does not, in our view transform it into a measure". Panel Report,
US – Steel Plate, para. 7.22.
92 Japan 20 July 2005 Answers, paras. 28 and 34.
93 Japan 20 July 2005 Answers, paras. 34.
94 Japan 20 July 2005 Answers, para. 35.
95 The US argues that Japan appears to be attempting to use the Appellate Body's analysis of an actual
document, such as the Sunset Policy Bulletin, to justify its argument that the "zeroing line" is a measure. A review
of the Appellate Body's analysis of the text of the Sunset Policy Bulletin exposes the flaw in Japan's approach. In
US – Corrosion-Resistant Steel Sunset Review, the Appellate Body evaluated whether it could "complete the
analysis" as to whether the Sunset Policy Bulletin was inconsistent with Article 11.3 of the AD Agreement. "At
issue is whether the [the Sunset Policy Bulletin] goes further and instructs USDOC to attach decisive or
preponderant weight to [certain] factors in every case ... ." Appellate Body Report, US – Corrosion-Resistant
Steel Sunset Review , para. 176 ( emphasis added ). Nothing in the "text" of the "zeroing line" contains an
instruction to USDOC to refrain from providing offsets in every case.
96 US 19 October 2005 Answers, paras. 1-3.

and absent an admission of its existence, the United States argues 97 that a Member may present
circumstantial evidence to demonstrate the existence of an unwritten measure. Thus, in EC – Approval
and Marketing of Biotech Products , the United States cited to references and statements by senior EC
and member State officials regarding the EC's moratorium on granting approvals to products made with
biotechnology to demonstrate the existence of the mo ratorium. The United States also argues that the
Appellate Body acknowledged in US – Countervailing Duty Investigation On DRAMS that it was not
inappropriate for the US administering authority to look to circumstantial evidence that the Government
of Korea had directed Korean banks to provide advantageous loans to the domestic industry.98 Second,
the United States argues that, while a party may estab lish the existence of a measure independently of
its repeated application, finding the existence of a measure based on consis tent application is an
exercise in circular reasoning – to state that a so -called "measure" has been "consistently applied"
presupposes the very existence of that "measure". As a result, there must be evidence establishing the
existence of a measure that is independent of its "repeated application". Third, the United States argues
that Japan is confusing the concept of "consistent application" with "consistent results" and is assuming
that there is a measure that is causing those results. Fourth, the United States claims that Japan is
erroneously asking the Panel to rule on a Member's exercise of discretion in a uniform manner by
inferring the existence of a measure that does not exist, in order to make findings against the
non-existent measure. The United States argues that such a request undermines the credibility of the
WTO dispute settlement system.
4.63 In response to a question of the Panel whether a policy systematically applying a particular
dumping calculation could be found to be WTO-incons istent, the United States argues that if the term
policy is used to describe the fact that an act has been repeated in a given number of cases, there is in
fact no instrument independent of the individual acts and therefore no measure subject to dispute
settlement. By contrast, if the term policy is u sed in the sense of an instrument which exists
independently of its application in individual cases and which may cause the act to occur in individual
cases, that policy might be a measure and could be examined for its WTO-consistency if found to be a
measure. The United States also claims that, with re gard to a policy that exists independently of its
application, the policy would be WTO-inconsistent only if it required authorities to use a methodology
which, when applied, would be WTO-inconsistent.
2. "As such" Claims under Article 2 of the AD Agreement with respect to original
investigations
4.64 Japan argues that the United States' maintaining of zeroing procedures in original investigations
is inconsistent with Article 2 of the AD Agreement and Article VI of the GATT 1994. Japan argues that
first, dumping and the margin of dumping should be determined for the product as a whole; second, a
dumping determination must be based on a fair comparison of normal value and export price for the
product as a whole, and, third that model and simple zeroing are inconsistent with both these
obligations, respectively.
4.65 The United States argues that Japan has not identified any textual support for its contention that
Article VI of the GATT 1994 and the AD Agreement require investigating authorities to offset dumping
with export transactions that exceed normal value. Neither Japan's reliance on the "fair comparison"
provision of Article 2.4, its references to Artic le 2.4.2, nor its "product as a whole" arguments
(arguments based on prior Appellate Body reports limited to the use of average-to-average comparisons
in investigations) support the broad offset obligation Japan argues exists.99

97 US 19 October 2005 Answers, paras. 6-10.
98 Appellate Body Report, US – Countervailing Duty Investigation On DRAMS, para. 150.

4.66 The arguments of the Parties regarding these issues will be discussed infra.
(a) Margin of Dumping for the Product as a Whole
 Japan
100

4.67 Japan argues that Article 2 of the AD Agreement sets forth the "agreed disciplines" for
determining the existence of dumping and also calculating the margin of dumping.
101 Japan points out
that the Appellate Body held that there are "no other provisions in the AD Agreement according to
which Members may calculate dumping margins".102 Article 2.1 of the AD Agreement states that:
For the purpose of this Agreement, a product is to be considered as being dumped, i.e.
introduced into the commerce of another count ry at less than its normal value, if the
export price of the product exported from one country to another is less than the
comparable price … for the like product when destined for consumption in the
exporting country. (emphasis added)
4.68 Japan asserts that this definitio n reiterates the definition of "dumping" in Article VI:1 of the
GATT 1994.
103 Japan explains that Article VI:1 sets forth a definition of dumping and, significantly, it
defines dumping by reference to "a product". It states that "a product" is dumped "if the [export] price
of the product" is less than the comparable domestic price "for the like product", or less than "the cost of
production of the product". Each one of these textual indications in Article VI:1 shows that dumping is
determined for the product as a whole and that the determination is based on a comparison of prices for
the product. There is nothing in the text to suggest that dumping is determined for individual
transactions or groups of transactions. The text of Artic le VI:1 is reflected, of course, in the text of
Article 2.1 of the AD Agreement, which also refers to the dumping of "a product" and also provides that
the determination is based on a comparison of "the export price of the product" and "the comparable
price … for the like product".
4.69 The Appellate Body has held that Artic le 2.1, – which "applies to the entire AD Agreement" –
makes "clear … that dumping is defined in relation to a product as a whole," and not in relation to "a
type, model, or category" of a product. 104 Interpreting the term "margin of dumping," as defined by
Article VI:2 of the GATT 1994, the Appellate Body held 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 type, model, or
category of that product".105 Because Article 2.1 applies to the "entire" AD Agreement, it also applies to
Article 2.4.2 and, in consequence, "margins of dumping" in Article 2.4.2 must also be established for
the product as a whole.106
4.70 Japan argues that, although the margin of dumping must be established for the product as a
whole, an investigating authority is entitled to calculate that margin on the basis of "multiple

100 Japan First Written Submission, para. 76-80, 92 -101; Japan Executive Summary to First Written
Submission, paras. 12-13; Japan Second Written Submission, paras. 18-26, 42-55; Japan Executive Summary to
Second Written Submission, paras. 40-55.
101 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 127.
102 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 127.
103 Appellate Body Report, US – Softwood Lumber V, para. 92.
104 Appellate Body Report, US – Softwood Lumber V , para. 93; Appellate Body Report,
US – Corrosion-Resistant Steel Sunset Review, para. 126.
105 Appellate Body Report, US – Softwood Lumber V, para. 96, 94. This definition is further supported by
Article 9.2 and 6.10.
106 Appellate Body Report, US – Softwood Lumber V, paras. 93 and 96.

comparisons" for sub-divisions of the product. 107 However, Japan states that the Appellate Body
emphasized that:
"[T]he results of the multiple comparis ons at sub-group level are, however, not
'margins of dumping' within the meaning of Article 2.4.2. Rather, those results reflect
only intermediate calculations made by an investigating authority … . Thus, it is only
on the basis of aggregating all these 'intermediate value' that an investigating authority
can establish margins of dumping for the product under investigation as a whole.

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."
108
4.71 Japan argues that the Appellate Body in US – Softwood Lumber V held that this interpretation of
margins of dumping is confirmed by other provisions of the AD Agreement.109 Article 6.10 expressly
states that "an individual margin of dumping" sh all be calculated for each known producer or exporter
of the "product under investigation". Articles 6.10.2 and 9.5 contain similar language. These
provisions demonstrate that a single margin of dumping is calculated for the product and not multiple
margins, one for each transaction or for each group of transactions. Additionally, Article 9.2 of the
AD Agreement, as well as Article VI:2 of the GATT 1994, provide that anti-dumping duties are
imposed in respect of a "product". Duties are, therefore, applied to a product, as a whole, in all its forms
– and not to a sub-grouping of a product. The Appellate Body concluded its reasoning as follows:
"Our view that 'dumping' and 'margins of dumping' can only be established for the
product under investigation as a whole is in consonance with the need for consistent
treatment of a product in an anti-dumping i nvestigation. Thus, having defined the
product under investigation, the investigating authority must treat that product as a
whole for, inter alia, the following purposes: determination of the volume of dumped
imports, injury determination, causal li nk between dumped imports and injury to
domestic industry, and calculation of the margin of dumping. Moreover, according to
Article VI:2 of the GATT 1994 and Article 9.2 of the AD Agreement, an anti-dumping
duty can be levied only on a dumped product. For all these purposes, the product under
investigation is treated as a whole …"
110
4.72 Japan states that this is a clear statement that the product scope of an anti-dumping action
remains constant from the investigation through to the imposition of duties. The "product" subject to
dumping and injury determinations is the same as the product subject to duties, and it always refers to
product as a whole. Japan claims that the Appe llate Body's finding bears out not only Japan's
interpretation of the term "margin of dumping" in Article 2.4.2 for purposes of an original investigation,
but also its interpretation of that term in Article 9 for purposes of periodic and new shipper reviews.
Equally, the Appellate Body's ruling highlights that , in reviews under Articles 11.2 and 11.3, margins
relied upon must be calculated for the "product" as a whole.
4.73 Japan argues that model and simple zeroing as well as the standard zeroing line prevent the
USDOC from making a dumping determination for the product as a whole. In an original investigation,

107 Appellate Body Report, US – Softwood Lumber V, para. 97.
108 Appellate Body Report, US – Softwood Lumber V, paras. 97- 98 (emphasis in original).
109 Appellate Body Report, US – Softwood Lumber V, para. 94.
110 Appellate Body Report, US – Softwood Lumber V, para. 99.

the USDOC generally uses a W-to-W comparison, including model zeroing, to compare normal value
and export price. Japan submits that model zeroing is "as such" inconsistent with the requirements in
Articles 2.1 and 2.4.2 of the AD Agreement, and Articles VI:1 and VI:2 of the GATT 1994, because the
USDOC fails to determine the existence of dumpi ng, and calculate a margin of dumping, for the
product as a whole. Japan argues that this issue was explicitly addressed by the Appellate Body in
US – Softwood Lumber V, albeit on an "as applied" basis. In that dispute, the Appellate Body examined
the United States' use of model zeroing in an original investigation. It held that an investigating
authority is entitled to compare normal value an d export price through multiple comparisons, by
model.
111 However, the Appellate Body underscored that:
"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."
112

The Appellate Body concluded that it was inconsistent with Article 2.4.2 for the USDOC to exclude the
results of comparisons for certain models (i.e. thos e with a negative price difference) in creating an
aggregate result for the product. 113 Equally, because the Appellate Body's reasoning derived from the
language in Article 2.1114, the failure to establish the margin of dumping for the product as a whole, as
defined in Article 2.1, as well as in Articles VI:1 and VI:2 of the GATT 1994, is inconsistent with those
Articles. In reaching its conclusion, the Appellate Body noted that the AD Agreement does not
"express[ly] … permit[] an investigating authority to disregard the results of multiple comparisons at
the aggregation stage".115 It added that, "when the negotiators sought to permit investigating authorities
to disregard certain matters, they did so explicitly".116

4.74 Japan argues that the same reasoning equally app lies to the instant case. Model zeroing is "as
such" inconsistent with Articles 2.1 and 2.4.2 of the AD Agreement and with Articles VI:1 and VI:2 of
the GATT 1994. Through the standard zeroing line, after identifying comparable export transactions
and grouping them into models, and after comparing export price for each model with normal value, the
USDOC automatically disregards all negative results of comparisons where export price for the model
is higher than normal value for that model. In other words, negative comparison results are not included
in the calculation of the total amount of dumping. However, the Appellate Body held that, if the results
of all comparisons are not taken into account, the dum ping determination and the margin of dumping
are not for the product as a whole.
117 Therefore, by maintaining the model zeroing procedures, the
United States does not and cannot determine a margin of dumping for the product as a whole; instead,
the United States' zeroing procedures are designed a nd structured to determine the existence of
dumping, and calculate a dumping margin, on a partial basis, taking account of only certain comparison
results and not the entirety of the comparison results for the product as a whole.
4.75 Japan argues that the same reasoning also dictat es that the simple zeroing procedures, in an
original investigation, are "as such" incons istent with Articles 2.1 and 2.4.2 of the AD Agreement and
also with Articles VI:1 and VI:2 of the GATT 1994. By way of illustration, Japan provides an example
in which the United States used simple zeroing in an original investigation.
118 That was in the
re-determination of the dumping margin for impor ts of softwood lumber from Canada, where normal

111 Appellate Body Report, US – Softwood Lumber V, para. 97.
112 Appellate Body Report, US – Softwood Lumber V, para. 98 (emphasis in original).
113 Ibid, para. 102.
114 Ibid, para. 93.
115 Ibid, para. 100.
116 Ibid, para. 100.
117 Ibid, paras. 93 and 98.
118 Exhibit JPN-8.

value and export price were compared on a T-to-T basis. 119 As illustrated in this example, the simple
zeroing procedures also operate in circumstanc es where the USDOC has engaged in "multiple
comparisons" of normal value and export price, this time on the basis of individual export transactions
and corresponding individual normal values that the USDOC has identified as comparable. Once again,
after identifying comparable export transactions a nd normal values, and comparing export price for
these transactions with the relevant normal value, the USDOC maintains a procedural "filter" that
automatically discards the results of comparisons from the calculation process where export price
exceeds normal value. Thus, for simple zeroin g, in calculating the overall margin, the USDOC
aggregates the results of only certain of the "multiple comparisons" it undertakes, disregarding others.
The overall margin of dumping does not, therefore, reflect all of the multiple comparisons undertaken.
However, as the Appellate Body held, if the results of all comparisons are not taken into account, the
dumping determination and the margin of dumping are not for the product as a whole.120
4.76 Thus, as with model zeroing, by maintaining the simple zeroing procedures, the United States
does not and cannot determine a dumping margin for the product as a whole; instead, the United States'
procedures are structured to determine the existence of dumping, and calculate a dumping margin, on a
partial basis of only certain comparison results, overlooking the entirety of the comparisons for the
product as a whole. In consequence, the model and simple zeroing procedures are "as such"
inconsistent with Article s 2.1 and 2.4.2 of the AD Agreement and Articles VI:1 and VI:2 of the
GATT 1994.
4.77 Japan states that by ignoring the Appellate Body's interpretation of Articles 2.1, 2.4.2, 6.10 and
9.2 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994, the United States
disingenuously counters that neither the "GATT 1994 [n]or the AD Agreement create an obligation to
calculate a margin of dumping for the product as a whole".
121 This is plainly wrong and, in effect,
invites the Panel to reverse panel and Appellate Body reports adopted by the DSB. According to Japan,
on the United States' view, dumping determinations deliberately confined to a sub-grouping of a
product – even a single transaction – could justify the imposition of duties on the product as a whole.
4.78 Japan lays out that the United States also ar gues that margins of dumping under Article 2.4.2
and Article VI may be transaction-specific because they involve a comparison of prices which "are
established and exist on a transaction-specific basis".122 This is an absurd argument, claims Japan. The
fact that prices can be determined in the marketplace on a transaction-specific basis does not mean that
the words "product", "dumping" and "margin of dumping" have a transaction-specific ordinary
meaning under the Vienna Convention. Japan points out that investigating authorities, including the
USDOC, routinely aggregate prices for transactions into prices for a product, and, as a result, there is no
necessity to determine margins for individual transactions simply because prices can be
transaction-specific.
4.79 Japan also claims that the United States' argument on Ad Article VI:1 suffers from the same
misconception. Ad Article VI:1 does not indicate that margins of dumping are calculated for
sub-groupings of a product; rather, it addresses the price that may be used for certain export transactions
in calculating the margin of dumping for the product. The Ad Article does not purport to alter the
requirement in Article VI:1 that dumping, and ma rgins of dumping, are determined for a product.
Instead, consistent with Article VI, the term "margin of dumping" in the Ad Article can, and must, be
read to refer to the margin for the "product".

119 Owenby Statement, para. 20 and Exhibit JPN-8.
120 Appellate Body Report US – Softwood Lumber V, paras. 93 and 98.
121 US 20 July 2005 Answers, para. 60.
122 US 20 July 2005 Answers, paras. 46, 47 and 52.

4.80 Japan notes, in that regard, that the definition of "margin of dumping" in Article VI:2 of the
GATT 1994 is consistent with the definitio n of "dumping" in Article 2.1 of the AD Agreement and in
Article VI:1 of the GATT 1994, namely that the ex istence and magnitude of dumping are determined
for the product as a whole. The second sentence of Ar ticle VI:2 states that the margin of dumping is
"the price difference" determined in accordance with Article VI:1. Article VI:1 sets forth a definition of
dumping and, significantly, it defines dumping by refe rence to "a product". Also, in language that
speaks unmistakably of a product-wide dumping margin, the first sentence of Article VI:2 clarifies that
"an anti-dumping duty" levied on "a ny dumped product" shall not exceed "the margin of dumping in
respect of such product ". These provisions demonstrate that "the price difference" in question is the
price difference for the "product", not for individual transactions or for sub-groups of transactions.
4.81 Japan further argues that the requirement to determine a margin of dumping for the product is
consistent with the fact that the dumping margin h as product-wide consequences, in particular: for the
determination of the volume of dumped imports; the pursuit of the investigation; and the imposition and
collection of duties.
123 If the United States were correct th at the price difference for an individual
transaction constitutes a margin, the result would be that product-wide consequences – including the
imposition of duties in excess of bound tariff rates – can be derived from the uncertain foundation of the
price of a single export transaction. Japan recalls that in EC – Tube or Pipe Fittings, the Appellate Body
emphasized that, through the duration of the period of investigation, the Anti-Dumping Agreement aims
to avoid subjecting dumping determinations "to market fluctuations or other vagaries that may distort a
proper evaluation." 124 The requirement to determine a ma rgin for the product pursues the same
objective because relying on the price difference for an individual transaction, or for an
unrepresentative group of transactions, would inevitably subject determinations to the "vagaries" of the
marketplace.
4.82 Japan argues that, although the United States attempts to ignore the Appellate Body's rulings on
the meaning of the word "product", in its arguments on Article 5.8 of the AD Agreement the
United States is forced to acknowledge that its interpretation is untenable.125 Article 5.8 provides that
the authorities must terminate an investigation if "the margin of dumping is de minimis". Japan points
out that, if the United States were correct that a margin is established for each transaction, the
authorities would have to terminate an investigation if any of the multiple margins were de minimis. To
avoid this consequence, the United States propo ses that, for purposes of Article 5.8 alone, the
comparison results must be aggregated to produce a margin of dumping for the product as a whole.
4.83 Japan observes that the United St ates argues that this "aggregation" obligation applies only to
Article 5.8. However, nothing in the text of the AD Agreement justifies such an obligation in Article 5.8
but not in Articles 2, 9 and 11. Article 2 is the sole provision setting forth "agreed disciplines" for
calculating dumping margins "for the purpose of" the Agreement.
126 The duty to aggregate comparison
results stems from the word "product" in Article 2, not from Article 5.8, and, therefore, applies
throughout the AD Agreement.
4.84 Japan argues that the United States' proffered ju stification for the allegedly unique duty in
Article 5.8127 applies with equal – if not greater – force to other aspects of anti-dumping proceedings.
Indeed, it is difficult to see any distinction with respect to the suggested justification between a de
minimis margin and a non- de minimis margin. By determining a greater than de minimis margin, the
authorities establish that dumping exists, as a result of which they continue the investigation and,

123 Japan's Opening Statement at the Second Substa ntive Meeting of the Panel with the Parties,
paras. 34-39.
124 Appellate Body Report, EC – Tube of Pipe Fittings, para. 80.
125 See, e.g., US 20 July 2005 Answers, para. 60.
126 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 127.
127 US 20 July 2005 Answers, para.56.

ultimately, may impose duties. Japan states that there is, therefore, no rational basis for conceding that
termination of an investigation under Article 5.8 requires a margin of dumping to be calculated for the
product as a whole but that no such requirement is imposed by Articles 2, 9 and 11. To the contrary, the
Appellate Body concluded that there must be "c onsistent treatment" of the "product" as a whole,
throughout an anti-dumping action, from initiation to the imposition of duties.
4.85 With respect to the United States arguments that the Appellate Body's interpretation of the term
"margins of dumping" in Softwood Lumber V is limited to situations involving the W-to-W comparison
under the first sentence of Article 2.4.2, Japan coun ters that nothing in that decision supports this
narrow view. To the contrary, Japan explains in detail that the structure of the Appellate Body's
analysis involved separate consideration, under separate headings, of the phrase "all comparable export
transactions" in Article 2.4.2, and of the terms " dumping" and "margins of dumping". The Appellate
Body noted that there was "no basic disagreement among the participants"
128 regarding the phrase "all
comparable export transactions" in Article 2.4.2. Under a new heading, it therefore shifted its analysis
to the terms "dumping" and "margins of dumping" in Article VI:1 of the GATT 1994 and Articles 2.1
and 2.4.2 of the AD Agreement . In that analysis, it relied primarily on the definition of the term
"dumping" in Article 2.1 and Article VI that, it held, "applies to the entire" 129 AD Agreement .
Moreover, in concluding that "dumping" and "margins of dumping" are determined for the product, the
Appellate Body never referred to the ph rase "all comparable export transactions". 130 Thus, in Japan's
view, the United States ignores entirely the detailed structure of the Appellate Body's reasoning in order
to reach a conclusion not supported by that reasoning.
 United States 131

4.86 The United States argues that there is no obligation in the AD Agreement to calculate one
margin of dumping for the "product as a whole". Article 2.4.2 establishes an obligation for the
administering authority to determine whether dumping "exists" for purposes of the Article 5
investigation phase based on certain methodological c onstraints. The text of Article 2.4.2 of the
AD Agreement does not require Members to calculate a margin for the "product as a whole" and Japan
does not establish that such an obligation otherwise exists. Article 2.4.2 provides three methodologies
for comparing export prices to normal values in an i nvestigation: (1) weighted-average-to-weighted-
average comparisons; (2) transaction-to-transaction comparisons; and, (3) under certain
circumstances, weighted-average-to-transaction co mparisons. In most circumstances, each of these
methodologies will result in multiple comparisons. This is self-evident with respect to the second and
third methodologies, as neither one is limited to the extremely rare circumstance of investigations
involving only one export transaction. Under these methodologies, each export transaction will result
in a separate comparison. Article 2.4.2 simply does not address the issue of aggregating the results of
multiple comparisons. While the specified met hodologies will, in most cases, lead to multiple
comparisons between export transactions and nor mal values, Article 2.4.2 does not provide any
guidance as to how the results of those comparisons ar e to be aggregated to determine a single overall
margin. In fact, Article 2.4.2 itself does not require that the results of those multiple comparisons be
aggregated at all. Emblematic of the narrow scope of Article 2.4.2 is the fact that nothing in
Article 2.4.2 requires the expression of the margin of dumping as a percentage. Article 5.8 is the only
place in the AD Agreement where the amount of dumping must somehow be expressed as a percentage
margin so that it may be measured against the de minimis standard.

128 Appellate Body Report, US – Softwood Lumber V, para. 90.
129 Ibid, para. 93.
130 See Japan 19 October 2005 Answers, paras. 60-73.
131 US First Written Submission, para. 59-71; US Second Written Submission, paras. 51-64, 68-70.

4.87 The United States argues that Japan's argument th at offsets are required by the obligation to
calculate a margin of dumping for the product as a whole is based on Articles 2.1 and 2.4.2 of the
AD Agreement, and Article VI of the GATT 1994. However, the text of Article VI of the GATT 1994
and Articles 2.1 and 2.4.2 do not refer to the "produ ct as a whole". Indeed, historically, dumping has
been viewed as permitting a transaction-oriented analysis. For example, a group of experts in 1960
considered that the "ideal method" for applying anti-dumping duties "was to make a determination of
both dumping and material injury in respect of each single importation of the product concerned".
132
The AD Agreement implements Article VI and did not amend this definition of the margin of dumping.
4.88 The United States argues that Japan's argument relies exclusively on its assumption that the
terms "margin of dumping" and "margins of dumping" must mean the same thing wherever they are
mentioned in the GATT 1994 and the AD Agreement; namely that a "margin of dumping" can only exist
with respect to all of the export transactions of a single producer or exporter. The text of the
GATT 1994 and the AD Agreement, however, show otherwise. Th e terms "margin of dumping" and
"margins of dumping" may apply di fferently, depending on the context in which the term is used.
Specifically, a margin of dumping can exist when th e price of a single export transaction is less than
normal value.
4.89 The United States asserts that the terms "margin of dumping" and "margins of dumping" are
used at times in the GATT 1994 and the AD Agreement to refer to the situation where the price of a
single export transaction is less than normal value.
133 By focusing on "price" in Article VI:2,
GATT 1994 plainly envisions a margin of dumping being established with respect to individual
transactions. This is confirmed by GATT Note Ad Article VI:1, which uses the term "margin of
dumping" in a manner which can only be reasonably interpreted to apply on a transaction basis.
134 With
respect to the AD Agreement, Article 2.4.2 permits the use of three comparison methodologies: (1)
average-to-average, (2) transaction-to-transaction, and (3) average-to-transaction. With respect to at
least two of these methodologies, there will be multiple comparisons. If the comparisons reflect a price
difference where normal value is gr eater than export price, the pri ce difference will be a margin of
dumping within the meaning of Article VI:2.
4.90 The United States argues that the use of the te rm "margin of dumping" in connection with
assessment proceedings further demonstrates that th e term may refer to the result of a comparison
involving a single export transaction. Article 9.3 concerns "[t]he amount of the anti-dumping duty ... ."
A duty is specific to an import transaction, and is often calculated based on the specifics of that
transaction. Moreover, some Members utilize a prospective normal value system. In such a system, the
investigating authority establishes the normal value in the investigation and may update that normal
value as appropriate. The Member compares each export transaction with that normal value, and
determines whether and to what extent that norma l value exceeds the export price. The amount by
which normal value exceeds the export price is the margin of dumping for that transaction.
4.91 The United States further argues that Article 2.4.2 of the AD Agreement does not oblige
Members to offset positive and negative dum ping margins and that Japan offers no textual analysis in
support of its claim that offsetting is required by Article 2.4.2. Japan's failure to provide a textual basis
for its argument is unavoidable because the scope of the AD Agreement and GATT 1994, with respect to
the measurement of dumping, is limited by its terms to instances in which there are positive differences
between normal value and export prices. The United States argues that, in the AD Agreement, the word
"margin" is modified by the word "dumping", giving it a special meaning. Paragraph 2 of Article VI of

132 Anti-Dumping and Countervailing Duties, Second Report of the Group of Experts, L/1141, adopted
on 27 May 1960, BISD 9S/195.
133 US 20 July 2005 Answers, paras. 46-59.
134 Notably, Japan dismisses the use of the term "margin of dumping" as used in the Note Ad Article VI
without any analysis of the text of the article itself. Japan 20 July 2005 Answers. para. 98.

GATT 1994 provides that "[f]or the purposes of this Article, the margin of dumping is the price
difference determined in accordance with the provisions of paragraph 1". When read with the
provisions of paragraph 1, the "margin of dumping" is the price difference when a product has been
"introduced into the commerce of an importing country at less than its normal value", i.e. the price
difference when the product has been dumped. The United States points out that the provisions of the
AD Agreement must be read in conjunction with Article VI of GATT 1994.135 While the AD Agreement
does not provide a definition of "margin of dumping", it does define "dumping" in a manner consistent
with the definition of "margin of dumping" provided in Article VI. Article 2.1 provides:
For the purpose of this Agreement, a product is to be considered as being dumped, i.e.
introduced into the commerce of another country at less than its normal value, if the
export price of the product exported from one country to another is less than the
comparable price, in the ordinary course of trade, for the like product when destined for
consumption in the exporting country. (emphasis added)
The express terms of GATT 1994 provide that the margin of dumping is the amount by which normal
value "exceeds" export price, or alternatively the amount by which export price "falls short" of normal
value. Consequently, there is no textual support in Article VI of the GATT or the AD Agreement for the
concept of "negative dumping".

4.92 Accordingly, the Appellate Body and panels have never found in the text of the AD Agreement
an independent obligation to offset margins. The Appellate Body has, however, twice articulated its
view that an obligation exists to provide offsets, in EC – Bed Linen and US – Softwood Lumber V. In
both reports, the Appellate Body focused its analysis on the phrase "all comparable export
transactions"
136 in Article 2.4.2, which applies only to the use of the average-to-average methodology to
determine "the existence of margins of dumping during the investigation phase."137 In US – Softwood
Lumber V, the Appellate Body found only that "zeroing is prohibited when establishing the existence of
margins of dumping under the weighted-ave rage-to-weighted-average methodology". 138 The

135 The US submits that this interpretative principle has been underscored by the Appellate Body. In
Korea - Dairy the Appellate Body stated that:

"[T]he GATT 1994 was incorporated in to the WTO Agreement as one of the
Multilateral Agreements on Trade in Goods contained in Annex 1A to the WTO
Agreement. … The Agreement on Safeguards is one of the thirteen Multilateral
Agreements on Trade in Goods contained in Annex 1A of the WTO Agreement. It is
important to understand that the WTO Agreement is one treaty." (paragraph 75)

and in Argentina – Footwear(EC) the Appellate Body stated that:

"Therefore, the provisions of Article XIX of the GATT 1994 and the provisions of the
Agreement on Safeguards are all provisions of one treaty, the WTO Agreement. …
[A] treaty interpreter must read all applicable provisions of a treaty in a way that gives
meaning to all of them, harmoniously." (paragraph 81)

According to the US this basic principle applies equally to Article VI of the GATT 1994 and the AD Agreement.
The official title of the AD Agreement is "Agreement on Implementation of Article VI of the General Agreement
on Tariffs and Trade 1994." As an agreement whose obj ect is to implement Article VI of GATT 1994, the
AD Agreement is, by its very title, anchored in Article VI of the GATT 1994.
136 Appellate Body Report, US – Softwood Lumber V , paras. 104, 105, 108; Appellate Body Report,
EC – Bed Linen (Article 21.5 – India), paras. 55-60.
137 US Second Written Submission, para. 65, Appellate Body Report, US – Softwood Lumber V , para.
108; Appellate Body Report, EC – Bed Linen (Article 21.5 -- India), para. 66.
138 Appellate Body Report, US – Softwood Lumber V, para. 108.

Appellate Body discussed both the terms "margins of dumping" and "all comparable export
transactions" as they are used in Article 2.4.2.
139 While the Appellate Body discussed both, however,
the textual basis for the Appellate Body's finding lies in the phrase "all comparable export transactions"
used in Article 2.4.2.
4.93 In this regard, argues the United States, the Appellate Body's conclusion that "dumping is
defined in relation to a product as a whole", at mo st, relates only to the determination of whether
dumping exists when using the average-to-average methodology under Article 2.4.2.140 The phrase "all
comparable export transactions" does not apply to the transaction-to-transaction methodology or the
average-to-transaction methodology. The United Stat es claims that any offsets that occur in this
context reflect the use of averages of all export prices and normal values. That is, in applying the
average-to-average methodology, the Appellate Body found that a Member may make multiple
intermediate comparisons.141 However, in order to establish the weighted average margin of dumping
for "all comparable export transactions", the Appe llate Body concluded that the Member must
aggregate all of the results of those intermediate comparisons including those comparisons which are
not dumped. The offsets, therefore, are tied to the use of the average-to-average methodology in an
investigation, and do not arise out of any independent obligation to offset prices.
4.94 The United States explains that its argument th at offsets do not arise out of any independent
obligation is based on the same interpretive reasoning that the United States has identified with respect
to the relevance of the "fair comparison" provisions of Article 2.4 discussed below. Specifically, the
targeted dumping (weighted average to transacti on) methodology provided for in the second sentence
of Article 2.4.2 is provided as an exception to th e symmetrical comparison methodologies in the first
sentence of Article 2.4.2. The targeted dumping methodology is an exceptional basis of comparison to
the normal bases of comparison found in the first sentence – nothing more. It is not an exception to the
"fair comparison" provisions of Article 2.4.2, nor is it an exception to the "margins of dumping"
language contained in the first sentence. Thus, unless the Appellate Body's conclusion was based on the
phrase "all comparable export transactions", a phrase which is unique to the
weighted-average-to-weighted-average comparis on methodology, the Appellate Body would have
rendered the targeted dumping provision a nullity as a matter of mathematics.
4.95 The United States argues that Japan's argument that the United States must provide some
recognition of so-called "negative results" has no basis in either Article VI of the GATT 1994 or the
AD Agreement. Nowhere in the text of Article VI or the AD Agreement is there any reference to a
"negative result", as argued by Japan, or a "negative margin of dumping". Because neither Article VI of
the GATT 1994, nor any provisions of the AD Agreement , recognize the existence of "negative
margins," neither provides any guidance by which a Member would offset its calculations of dumping
by "negative margins" for distinct comparisons. This is evident from the manner in which Members
with a prospective normal value system assess anti-dumping duties. Members who utilize a prospective
normal value system assess anti-dumping duties on each transaction where normal value exceeds export
price. In a transaction where export price is equal to, or exceeds, normal value there is no margin of
dumping, and thus no anti-dumping duty assessed. Nonetheless, such Members are not required to
provide a refund or a credit for any amount by which the export transaction exceeds normal value. The
United States points out that Japan argues that in a prospective system a party may obtain a refund of
anti-dumping duties pursuant to an Article 9.3.2 assess ment proceeding, upon request, and that such a
proceeding would reflect the offset of non-dumped transactions.
142 However, Article 9.3.2 specifically
provides that a refund will be granted to "an importe r of the product subject to the anti-dumping duty"
should a request for such refunds be "duly supported by evidence." Such language does not support the

139 Ibid, paras. 86 - 103.
140 Ibid, para. 93, 96.
141 Ibid, para. 97.
142 Japan 20 July 2005 Answers, para. 104.

conclusion that refund proceedings necessarily co ver all importers and require offsets for any
non-dumped export transactions of the exporter, as Japan implies in its "product as a whole" argument.
Moreover, the United States argues that there is nothing in the AD Agreement that suggests that
Members operating a retrospective duty assessment system have different and, in fact, greater
obligations to recognize non-dumped transacti ons than Members operating prospective duty
assessment systems. There is nothing in Article 9. 3 that requires that duty assessment proceedings be
conducted over some period of time, rather than on an entry-by-entry basis. The United States'
assessment system operates in a manner comparable to a prospective normal value system, examining
individual export transactions, albeit using contempor aneous normal values. Japan has identified no
textual basis for requiring anything more.
4.96 The United States argues that the scope of the AD Agreement and the GATT 1994, with respect
to the measurement of dumping, is limited to instances in which there are positive differences between
normal value and export prices. Because neither Article 2.4.2, nor any other provision of the
AD Agreement or the GATT 1994, requires a Member to reduce the amount of dumping found based on
non-dumped comparisons, Japan's claim should therefore be rejected.
4.97 Finally, the United States argues that the Appellate Body's Report in US – Softwood Lumber V
is flawed and should not be followed by this Panel.
143 In US – Softwood Lumber V, the Appellate Body
found that due to the failure of the USDOC to account for non-dumped comparisons in an anti-dumping
investigation on softwood lumber from Canada, th e United States had acted inconsistently with
Article 2.4.2 of the AD Agreement .144 The United States believes that the Appellate Body erred in
finding that the AD Agreement requires Members, in the investigation phase, to calculate and give credit
for weighted average comparisons when the export pr ice exceeds the normal value. The Panel is not
obligated to follow the Appellate Body's reasoning.
4.98 The United States argues that the Appellate Body's finding in US – Softwood Lumber V was
based on a perceived obligation within Article 2.4.2 to provide an offset in an investigation when the
investigating authority uses the average-to-average methodology. 145 The Appellate Body's finding,
however, is contradicted by the text and negotiating history of the AD Agreement. Article 2.4.2 restricts
the use of the average-to-transaction method, a method that was commonly used in anti-dumping
investigations before the Uruguay Round. Article 2.4.2 was not intended to require an offset for
non-dumped sales in an anti-dumping investigation.
4.99 The United States asserts that the negotiating hi story confirms that Article 2.4.2 does not
require an offset for negative dumping. Pursuant to customary principles of treaty interpretation, as
reflected in Article 32 of the Vienna Convention on the Law of Treaties, the Panel may have recourse to
this preparatory material to confirm the meaning arrived at through the application of the rules reflected
in Article 31 or to determine the meaning should an Article 31 analysis leave the meaning ambiguous or
obscure, or leads to an absurd or unreasonabl e result. The United States argues that the
Appellate Body's analysis would have benefited from a consideration of this negotiating history.
4.100 The United States points out that, prior to the en try into force of the WTO Agreement, many
users of the anti-dumping remedy, including the United States and the EC, determined the existence of
dumping margins by using the average-to-transaction comparison method. 146 Several delegations

143 US First Written Submission, paras. 88-94.
144 Appellate Body Report, US – Softwood Lumber V, para. 183(a).
145 Appellate Body Report, US – Softwood Lumber V, para. 104, 105, 108.
146 Communication from Japan Concerning the Anti-Dumping Code , MTN.GNG/NG8/W/81
(9 July 1990), at 2; Submission of Japan on the Amendments to the Anti-Dumping Code, MTN.GNG/NG8/W/48
(3 August 1989), at 5; Communication from the Delegation of Hong Kong , MTN.GNG/NG8/W/51/Add. 1

sought to negotiate a change in this practice in the Uruguay Round negotiations.
147 The negotiations
over this "asymmetry" issue were protracted and difficult.
4.101 The United States explains that Article 2.4.2 of the AD Agreement was ultimately agreed upon
specifically to address this "asymmetry" issue. Article 2.4.2 established the major new requirement that
in anti-dumping investigations, investigating aut horities would normally establish the existence of
margins of dumping on the basis of either the average-to-average method or the
transaction-to-transaction method. Under Article 2.4.2, the use of the average-to-transaction method is
limited to "targeted dumping" situations; i.e. situ ations involving "a pattern of export prices which
differ significantly among different purchasers, regions or time periods". 148 If the
average-to-transaction method is used in an inves tigation, Article 2.4.2 provides that Members must
explain "why such differences cannot be taken into account appropriately by the use of a weighted
average-to-weighted average or transaction-to-transaction comparison".
4.102 The United States argues that, separately, a number of signatories to the Tokyo Round
Anti-Dumping Code, including the United States a nd the EC, calculated the final overall margin of
dumping for a company by aggregating the positiv e dumping amounts for comparisons where normal
value exceeded export price and dividing that number by the aggregate of all export prices.149 So-called
"negative margins" (for those comparisons where export price exceeded normal value) were not taken
into account in aggregating the overall amount of dumping. This approach was well-known by the
Uruguay Round negotiators and was referred to as ze roing. Concurrent with the negotiations, zeroing
was reviewed by two dispute settlement panels and was found to be consistent with the
Anti-Dumping Code.150 In the Uruguay Round negotiations, sev eral delegations sought to prohibit
zeroing and to require an offset for "negative dumping". 151 The negotiators did not agree to any such
requirement. While negotiators reached agreement to address the "asymmetry" issue through, and to
the extent provided for in, the language of Article 2.4.2 of the AD Agreement, the Agreement ultimately
did not address the zeroing issue.
(b) "Fair Comparison" in Article 2 of the AD Agreement
 Japan 152

4.103 Japan argues that, in terms of Article 2.1 of the AD Agreement, in order to determine whether
dumping has occurred, a comparison must be undertak en between "normal value" and "export price."
Although Article 2.1 does not state how that compar ison should be undertaken, other provisions in

(22 December 1989), at 4; Communication from the Delegation of Singapore , MTN.GNG/NG8/W/55
(13 October 1989), at 8.
147 Id.
148 AD Agreement, Article 2.4.2.
149 With respect to the term "margins of dumping" as it is used in Article 2.4.2, the US notes that both the
GATT 1994 and the AD Agreement reflect the drafters' use of the term to refer both to the results of particular
comparisons between normal value an d export price AND to the overall results of those comparisons. As
previously discussed, Article 2.4.2 provides three different comparison methodologies and each will often result
in multiple "margins of dumping" as the term is used in Article 2.4.2. It is only with respect to Article 5.8, wherein
it is provided that the investigating authority must terminate an investigation if it determines that the margin of
dumping is de minimis, that the AD Agreement requires Members to determine a single percentage-based margin
of dumping based on the export price.
150 See GATT Panel Report, EEC – Cotton Yarn , paras. 500-501; GATT Panel Report, EC – Audio
Cassettes, para. 356.
151 See Communication from the Delegation of Singapore, MTN.GNG/NG8/W/55 (13 October 1989), at
7; Communication from the Delegation of Hong Kong, MTN.GNG/NG8/W/46 (3 July 1989), at 7.
152 Japan First Written Submission, paras. 82-91; Japan Second Written Submission, paras. 56-65;
Japan Second Written Submission, paras. 66-71.

Article 2 do. In particular, among the "agreed discip lines" in Article 2 for determining the margin of
dumping, the first sentence of Article 2.4 of the AD Agreement states that:
A fair comparison shall be made between the export price and the normal value.
(emphasis added)
4.104 Japan asserts that a "comparison" is the "acti on … of observing and estimating similarities,
differences, etc." between two or more things.153 Consistent with this dictionary meaning, and also with
the context in Article 2.1 of the AD Agreement and Article VI:2 of the GATT 1994, the "comparison" in
Article 2.4 refers to the "action" by which the aut horities determine, in the words of Article VI:2, "the
price difference" between normal value and export price for the product as a whole, i.e. the margin of
dumping. Thus, as the Panel in Egypt – Steel Rebar found, "Article 2.4, on its face, refers to the
comparison of export price and normal value, i.e. the calculation of the dumping margin … ". 154 This
comparison process for calculating the dumping ma rgin begins when the "basic establishment" 155 of
normal value and export price is complete, and ends when "the price difference" for the product as
whole has been calculated.
4.105 Japan argues that the AD Agreement imposes certain obligations on investigating authorities as
to how the "comparison" is to be undertaken. For instance, under the third sentence of Article 2.4, the
authorities must make "due allowance" in the comparison for any factors that affect "price
comparability". Accordingly, normal value and/or ex port price may need to be adjusted upwards or
downwards to render them properly comparable. However, the "comparison" does not end when these
adjustments have been made. Rather, these adjustments enable the authorities to conduct the process of
comparing the adjusted figures for normal value and export price.
4.106 Japan further points out that Article 2.4.2 offe rs three methods by which the adjusted normal
value and export price can be compared (W-to-W, T-to-T and W-to-T) and the particular method
chosen by the authorities is a defining feature of the comparison. Further, in making the comparison
under one of these methods, authorities may conduct "multiple comparisons", based on sub-divisions of
the product or individual transactions that disaggregate the product as a whole.156 When the authorities
decide to make multiple comparisons, the process by which they sub-divide and then re-aggregate the
product as a whole is also a defining feature of th e comparison because it is central to the manner in
which "the price difference", or the margin of dumping, is established for the product as a whole.
4.107 Japan claims that, throughout the "comparison" of normal value and export price, Article 2.4
imposes a fundamental obligation that limits the discr etion of the investigating authorities. That
obligation is to ensure a " fair comparison". According to the Appellate Body, the requirements of a
"fair comparison" involve "a general obligation" that "informs all of Article 2 …". 157 In light of the
panel's findings in Egypt – Steel Rebar, the fairness obligation applies to the provisions of Article 2 that
relate to "the calculation of the dumping margin …". 158 The scope of this general obligation is defined
by reference to the word "fair." A ccording to dictionary meanings, a " fair" comparison is one that is
"unbiased" and "impartial,," and that "offer[s] an equal chance of success" to all parties affected by an
investigation.159 The Panel in EC – Tube or Pipe Fittings held, in the context of Article 2.4, that an

153 New Shorter Oxford English Dictionary , 1993 edition (Lesley Brown, ed.), Vol. 1, page 457
(comparison) (emphasis added) (Exhibit JPN-4).
154 Panel Report, Egypt – Steel Rebar, para. 7.333 (underlining added).
155 Panel Report, Egypt – Steel Rebar, para. 7.333.
156 Appellate Body Report, US – Softwood Lumber V, para. 97.
157 Appellate Body Report, EC – Bed Linen, para. 59 (emphasis added).
158 Panel Report, Egypt – Steel Rebar, para. 7.333.
159 New Shorter Oxford English Dictionary , 1993 edition (Lesley Brown, ed.), Vol. 1, page 907
(emphasis added) (Exhibit JPN-4).

"investigating authority must act in an unbiased, even-handed manner and must not exercise its
discretion in an arbitrary manner".
160 This suggests a meaning that is rooted in the basic requirements
of good faith and fundamental fairness. 161 The Appellate Body has observed that "fundamental
fairness" is known in many jurisdictions "as due process of law or natural justice".162
4.108 Japan argues that the context of Article 2.4 supports this reading. Indeed, in the AD Agreement,
Article 2.4 is far from unique in requiring that an investigating authority act fairly in making its
determinations; the context provided by other provisions of the AD Agreement offers useful guidance
for the proper construction of the "fairness" obligation in Article 2.4. First, other provisions of Article 2
impose similar requirements. For example, in US – Hot-Rolled Steel , the Appellate Body stated that
Articles 2.1 and 2.2.1 require investigating aut horities to assess whether home-market sales are in the
ordinary course of trade "in an even-handed way that is fair to all parties affected by an anti-dumping
investigation".163 The Appellate Body held that there was a "lack of even-handedness" in the USDOC
procedures at issue because the "combined applicati on of [the measures] operated systematically to
raise normal value", which "disadvantaged exporters".164
4.109 Second, Japan argues that panels and the Appellate Body have consistently held that, in making
"injury" determinations under Article 3.1, investigating authorities must respect "the basic principles of
good faith and fundamental fairness".165 This finding is based on the need for authorities to conduct an
"objective examination". In EC – Bed Linen (Article 21.5 – India) , the Appellate Body ruled that this
language requires authorities to reach a result that is " unbiased, even-handed, and fair".166 In US –
Hot-Rolled Steel , the Appellate Body found that it would not be "even-handed" for investigating
authorities:
"[T] to conduct their investigation in such a way that it becomes more likely that, as a
result of the fact-finding or evaluation process, they will determine that the domestic
industry is injured."
167
Japan describes that the Appellate Body also opine d, in that appeal, that fairness precludes an
investigating authority from " favouring the interests of any interested party, or group of interested
parties, in the investigation".168

4.110 Third, Japan argues that through the standard of review in Article 17.6(i), the AD Agreement
effectively imposes a duty on investigating authorities to evaluate facts in an " unbiased and objective"
manner.
169

160 Panel Report, EC – Tube or Pipe Fittings, para. 7.178 (emphasis added).
161 The fairness requirement in Article 2.4 is another expression of the principle of good faith, which, the
Appellate Body observed, "is, at once, a general principle of law and a principle of general international law, that
informs the provisions of the AD Agreement …". Appellate Body Report, US – Hot-Rolled Steel, para. 101. See
also Appellate Body Report, US – Shrimp, para. 158 and n. 156.
162 Appellate Body Report, EC – Hormones , para. 133; Appellate Body Report, EC – Bed Linen
(Article 21.5 – India), para. 179.
163 Appellate Body Report, US – Hot-Rolled Steel, para. 148 (underlining added).
164 Appellate Body Report, US – Hot-Rolled Steel , para. 154. (underlining added). See also para. 155
("the lack of even-handedness … created prejudice to exporters.") (emphasis added).
165 Appellate Body Report, US – Hot-Rolled Steel, para. 193; Appellate Body Report, EC – Bed Linen
(Article 21.5 – India) , para. 114; Panel Report, EC – Tube or Pipe Fittings , para. 7.226; Panel Report, US -
Softwood Lumber VI, para. 7.28.
166 Appellate Body Report, EC – Bed Linen (Article 21.5 – India), para. 133 (emphasis in original).
167 Appellate Body Report, US – Hot-Rolled Steel, para. 196 (emphasis added).
168 Appellate Body Report, US – Hot-Rolled Steel, para. 193 (emphasis added).

4.111 Therefore, Japan argues that, under Article 2.4 of the AD Agreement, the process by which
authorities identify "the price difference" between normal value and export price for the product as a
whole must not be biased, lack even-handedness, favour particular interests or outcomes, or otherwise
distort the facts, in particular to the detriment of exporters or foreign producers.
4.112 Turning to the specific measures at issue, Japan argues that model and simple zeroing as well as
the standard zeroing line prevent a fair compar ison by the USDOC when aggregating multiple
comparison results into a single, overall margin. Jap an points out that the Appellate Body has already
held that the application of model zeroing – which operates in the same manner and produces the same
effects as simple zeroing – is inconsistent with Articles 2.4 of the AD Agreement . In
US – Corrosion-Resistant Steel, the Appellate Body identified two unfair elements in a comparison that
includes zeroing:
(1) Zeroing may lead to an affirmative determ ination that dumping exists in circumstances
where no dumping would have been established in the absence of zeroing170; and,

(2) Zeroing "inflates" the margin of dumping by always excluding from the aggregation
stage the results of negative comparisons that would reduce the overall amount of
dumping if they were included.171

4.113 Immediately after noting these unfair elements, th e Appellate Body found that there is an
"inherent bias in a zeroing methodology … of this kind".172 Unsurprisingly, Japan argues, the Appellate
Body took the view that such a comparison "is not a 'fair comparison' between export price and normal
value, as required by Articles 2.4 and 2.4.2".173
4.114 Japan argues that the model and simple zeroing procedures as well as the standard zeroing line
at issue involve the same unfair comparison. Under the measures at issue, the United States aggregates
multiple comparison results into a single, overall margin. However, by excluding the negative results of
any comparisons from the aggregation of total du mping, the zeroing procedures overstate the total
amount of dumping by an amount equal to the excluded negative values. As a result, the dumping
margin is inflated. Moreover, in situations wh ere the aggregate value of excluded negative results
exceeds the aggregate value of the included positive results, the zeroing procedures produce a dumping
determination where the product as a whole is not du mped. In consequence, the USDOC conducts its
investigation "in such a way that it becomes more likely that [it] will determine that" there is
dumping.
174 By rendering a dumping determination more lik ely, and by systematically inflating the
dumping margin, the zeroing procedures deprive the comparison of normal value and export price of
even-handedness. Instead, the pr ocedures systematically favour the interests of petitioners, and
systematically prejudice the interests of exporters.
4.115 Japan states that the Appellate Body has also described the unfairness of zeroing in terms of its
distorting effects on export price in the comparison of normal value and export price:
"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,

170 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 135, quoting the panel
report in that dispute, at para. 7.159.
171 Ibid, para. 135.
172 Ibid, para. 135.
173 Ibid, para. 135 (emphasis in original). See also Appellate Body Report in EC – Bed Linen, para. 55.
174 Appellate Body Report US – Hot-Rolled Steel, para. 196 (emphasis added).

therefore, does not take into account the entirety of the prices of some export
transactions … ."
175
4.116 These same price-based distortions result, in the same fashion, from both the model and simple
zeroing procedures. By improperly excluding all negative comparison results from the aggregation
stage, the USDOC effectively attributes a zero value to the excluded comparisons in question, instead of
a negative value. This means that, for the excl uded comparisons, the USDOC treats normal value as
equal to export price, whereas, in fact, export price is greater than normal value. Accordingly, as a
result of zeroing, the export transactions considered in the excluded comparisons are systematically
"treated as if they were less than what they actually are".
176 Another way to express the same
price-distortion is that the zeroing procedures systematically treat normal value as if it is higher than it
actually is.177 On either view (reduced export price or raised normal value), through the model and
simple zeroing procedures, the USDOC distorts th e comparison of normal value and export price by
interfering with price-based data for home-market or export sales.
4.117 In other words, Japan claims, like the adjustments envisaged in Article 2.4, zeroing has the
effect of altering normal value or export price. However, whereas adjustments to be made under
Article 2.4 are designed to ensure "price comparability", zeroing ensures price distortion. Although the
United States purposefully disregards the negative r esults of comparisons of normal value and export
price, it does not provide any compensation in the process of aggregating dumping amounts that
counter-balances the exclusion of negative results. Instead, the standard zeroing procedures are
designed and structured always to be biased in favour of a particular outcome and particular interests
(i.e. existence of dumping and the inter ests of petitioners), and conversely are always biased against
exporters' interests.
4.118 Japan argues that, as the zeroing procedures are formulated with an in-built bias that distorts the
comparison of normal value and export price, they ar e inconsistent with the dictates of fundamental
fairness. As a result, the model and simple zeroing procedures in original investigations, as well as the
standard zeroing line, are "as such" inconsistent with Article 2.4.
4.119 Japan submits that the failur e to establish a margin of dumping for the product as a whole,
through the standard zeroing procedures, is also inc onsistent with the dictates of fundamental fairness
as it necessarily results in an unfair comparison, i.e. price distortion and an inflated dumping margin. In
other words, by systematically excluding the results of certain comparisons, the United States fails to
determine a margin of dumping for the product as a whole and, simultaneously, engages in an unfair
comparison, for the reasons stated above. Therefore, the model and simple zeroing procedures entail a
failure to establish a margin of dumping for the product as a whole and also violate the fairness
requirement in Article 2.4.
4.120 Japan states that it appears that Japan and the United States, in fact, agree that Article 2.4
establishes a "general obligation" on investigating authorities to conduct a fair comparison of export
price and normal value.
178 This is not surprising as the Appella te Body has already reached the same
conclusion, says Japan. 179 Nonetheless, overlooking the significan ce of that ruling, the United States
adds that the content of the general requirements of fairness are "exhaust[ed]" by the second through

175 Appellate Body Report US – Softwood Lumber V, para. 101 (underlining added).
176 Appellate Body Report US – Softwood Lumber V, para. 101.
177 Appellate Body Report US – Hot-Rolled Steel, para. 144.
179 Appellate Body Report, EC – Bed Linen, para. 59.

fifth sentences of Article 2.4, and asserts that those requirements cannot be "divorce[d]" from the
adjustments required to establish price comparability.180
4.121 Japan argues that there are two levels of respon se to this assertion. First, as an interpretive
matter, it is incorrect. As Japan stated in its 20 July 2005 Answers, Article 2.4 prohibits the myriad
possibilities for unfairness that could taint the comparison of normal value and export price. 181 In its
ordinary meaning, the word "comparison", in Article 2.4, refers to the process or action of discerning
the difference between normal value and export price. 182 The generality of the obligation in the first
sentence of Article 2.4 applies, therefore, to the entire comparison process and not just to price
adjustments. The way in which the authorities elect to disaggregate and re-aggregate the "product" for
purposes of the comparison is an integral part of the process of comparing prices for the product.183 The
authorities cannot, therefore, structure the comparis on in a manner that necessarily inflates the margin
of dumping and may even generate a margin where there would otherwise be none. Further, confining
the first sentence of Article 2.4 to a duty to ma ke price adjustments would render that sentence
redundant because the duty to make adjustments is already set forth in the remainder of Article 2.4. The
first sentence of the provision would, therefore, add nothing to the rest.
4.122 Japan states that the United States' interp retation would also nullify the disciplines in
Articles 2.2, 2.3 and 6.6 of the AD Agreement on calculation and verification of normal value and
export price. After carefully calculating and confirming these values, authorities would be permitted to
structure the comparison process in such a way that, irrespective of the normal value and export price,
dumping is found. This is an absurd result that drafters avoided by intr oducing a general fairness
requirement.
4.123 Second, Japan argues that, even if the United States is correct (quod non) that the requirements
of fairness in Article 2.4 cannot be "divorce[d]" from the duty to make price adjustments, Japan
prevails.
184 Japan recalls that the zeroing procedures, in substance, involve an adjustment to the prices
of excluded export transactions. In the words of the Appellate Body, these transactions are "treated as if
they were less than what they actually are." 185 Thus, the zeroing procedures involve an adjustment to
the prices being compared. Japan argues that, under the third sentence of Article 2.4, the authorities are
required to adjust for differences between export price and normal value to ensure price comparability.
The provision also gives a non-exhaustive list of factor s that may give rise to an adjustment to ensure
price comparability. These adjustments are intended to guarantee a "fair comparison". However, if
there are no differences affecting price comparability that compel an adjustment, the authorities are not
permitted to interfere with prices because the result of such interference is that the values to be
compared cease to be the producer's or exporter's ow n prices. Japan argues that, taking the contrary
position, the United States appears to believe that Article 2.4, on the one hand, requires authorities to
make adjustments that promote fairness and, on the other hand, permits them to make any other
adjustments to prices they see fit. Japan asserts that it is absurd, how ever, to interpret the Article to
require the authorities to give with one hand to ensure fairness that which they can simply remove with
the other to deny it. Nothing in the text supports so peculiar an interpretation.
4.124 Japan asserts that, as a result, the fair comparison requirement in Article 2.4 does not permit the
authorities to interfere with normal value and/or export price to arbitrarily produce desired results. Such
adjustments are not made to ensure price comparability and, instead, impermissibly distort prices. Far

180 US 20 July 2005 Answers, para. 73.
181 Japan 20 July 2005 Answers, para. 113.
183 See Japan Opening Statement, First Substantive Meeting of the Panel with the Parties, paras. 37 - 38.
184 US 20 July 2005 Answers, para. 73.
185 Appellate Body Report, US – Softwood Lumber V, para. 101.

from "divorce", Japan's interpretation "marries" the general obligation in Artic le 2.4 with the specific
requirements in the remaining sentences. In particular, the general obligation is interpreted to preclude,
among other things, interference by the authorities with prices in a manner that undermines adjustments
made to ensure price comparability.
4.125 In response to the United States' arguments that the unfairness of the zeroing procedures cannot
be demonstrated merely by the fact that zeroing would result in a higher dumping margin, Japan recalls
that the Appellate Body has noted the use of a zeroing methodology "will tend to inflate the margins
calculated" and "could, in some instances, turn a negative margin of dumping into a positive margin of
dumping". Thus Japan argues that the effect of a given methodology in inflating margins, or generating
margins that would not otherwise exist, is indeed a relevant consideration in examining whether the
methodology is fair under Article 2.4. In this case, that fact is coupled with the fact that the inflation of
the margins is a deliberate, and not merely incide ntal, consequence of the methodology and it occurs
systematically.
4.126 Japan asserts that the United St ates also incorrectly argues that the Appellate Body has only
stated that zeroing is WTO-inconsistent in disput es involving original investigations, but not in the
context of reviews under Articles 9 and 11. Japan states that in US – Corrosion-Resistant Steel Sunset
Review, the Appellate Body examined a claim that the United States acted inconsistently with
Articles 2.4 and 11.3 of the AD Agreement by relying, in a sunset review, on dumping margins that were
calculated in administrative reviews using zeroing.
186 The Appellate Body stated:
"When investigating authorities use a zeroing methodology such as that
examined in EC – Bed Linen to calculate a dumping margin, whether in an
original investigation or otherwise, that methodology will tend to inflate the
margins calculated. Apart from inflating the margins, such a methodology could,
in some instances, turn a negative margin of dumping into a positive margin of
dumping."187

4.127 Japan further argues that the Appellate Body in that case envisaged that, in sunset reviews,
Members would violate Articles 2.4 and 11.3 if they were to rely on "legally flawed" dumping margins
calculated, in investigations or reviews, using a zeroing methodology. 188 Japan emphasizes that these
findings have particular significance for this dispute because the Appellate Body noted in
US – Corrosion-Resistant Steel Sunset Reviews that the "flawed" dumping margins in question had
been calculated in administrative reviews, pursuant to Article 9. Therefore, the Appellate Body also
envisaged that Members would violate the Agreement by using zeroing to calculate dumping margins in
administrative reviews.
4.128 Japan claims that, in light of the Appellate Body's recognition that zeroing would have the same
distortive effects, "whether in an investigation or otherwise", i.e. in reviews as well as investigations, it
would be strange indeed to conclude that the Appe llate Body held that zeroing is WTO-inconsistent
when used in investigations, but is permissible wh en used in reviews. Also the Appellate Body
concluded that "in the absence of uncontested facts on the Panel record, it is not possible for [the
Appellate Body] to assess whether the meth odology in the administrative reviews [in
Corrosion-Resistant Steel] was equivalent in effect to the methodology [used] in EC – Bed Linen ."189
Japan argues that these statements show that, if zeroing in investigations and reviews produce
"equivalent" distortive effects, Article 2.4 would be violated in both situations.

186 Appellate Body Report, US – Corrosion Resistant Steel Sunset Review, para. 133.
187 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 135 (emphasis added).
188 Appellate Body Report, EC – Bed Linen, para. 127. See also para. 4.194, below.
189 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 137 (emphasis added).

4.129 Japan further urges the Panel to focus on the f eatures of the measures at issue, and not on
alternative methodologies that the United States mi ght have adopted to calculate dumping margins.
Japan argues that the salient features of the zeroing measures at issue are that the United States makes
an initial comparison for all comparable export transactions, but in aggregating the initial comparison
results into an overall margin, the United Stat es includes solely the positive comparison results,
disregarding negative results. The United States ther eby distorts the prices for the disregarded export
transactions, and it does so precisely because this will generate and inflate the overall dumping margin.
Finally, the United States applies the determination resulting from the "partial" comparison of selected
transactions to all export transactions on a product-wide basis. This is so whether the determination is
used for purposes of an injury determination; to te rminate or pursue an inves tigation; to justify the
imposition of duties; or to assess the amount of duties due. Japan recalls that, in US – Softwood
Lumber V , the Appellate Body observed that under th e United States' system, the product is
consistently treated as a whole at a ll stages, except for purposes of zeroing. 190 Japan submits that, in
light of these features, the "partial" comparison that results from the zeroing measures is "inherently
biased" and not fair, whether it is used in "an original investigation or otherwise".191 Japan insists that
the fairness of the United States' measures cannot be assessed in light of other methodologies that the
United States might have chosen, but did not.
4.130 Japan responds to what it calls the central pillar of the United States' defence that prohibiting
zeroing would render the third method of comparison in Article 2.4.2 a nullity. In its Opening
Statement during the First Meeting of the Panel with the Parties and in answers to the Panel's questions,
Japan has demonstrated the fallacy of this argument. 192 The second sentence of Article 2.4.2
contemplates a different comparison from the symme trical methods that is focused on the export
transactions making up the pricing pattern that jus tifies recourse to this me thod. Japan has also
provided numerical examples that demonstrate th at the second sentence does not necessarily yield the
same results as the symmetrical methods of comparison, whether Japan's interpretation of that sentence
applies or not. 193 In the United States' answers to the Panel's questions, it asserts that Japan's
interpretation of the second sentence has no textual support. In fact, Japan has provided a careful
textual analysis of the words of the provision. Japan relies, for example, on the ordinary meaning of the
following words and phrases: "pattern of export prices"; "differ significantly"; "different purchasers,
regions or time periods"; and "why such di fferences cannot be taken into account" under the
symmetrical methods. In addition, the absence of the word "all" in the second sentence provides
additional textual grounds for Japan's interpretation.
4.131 Japan argues that it is the United States that fails to provide any textual basis for its
interpretation. The United States asserts baldly th at the second sentence permits a comparison "using
the same universe of export transactions as the other two methodologies".
194 I t a d d s t h a t t h e
asymmetrical comparison "by its very nature" addresses targeted dumping. 195 Beyond this, there is
nothing to indicate what the United States considers the "nature" of the third method to be nor how it
believes that this method addresses pricing patterns based on purchasers, regions or time periods. Japan
posits that a comparison that uses the entire universe of export transactions cannot, "by its very nature",
address pricing patterns, or the possibility of targeted dumping, confined to a certain group of
transactions. A comparison that relies on all expor t transactions necessarily addresses the prices, and
any positive comparison results, in all these transactions. The use of zeroing does not alter this fact. For

190 Appellate Body Report, US – Softwood Lumber V, para. 99.
191 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 135 (emphasis added).
192 Japan Opening Statement, First Substantive Meeting of the Panel with the Parties, paras. 45-58; Japan
20 July 2005 Answers, paras. 43-53, 56-63 and 66-83.
193 Japan 20 July 2005 Answers, paras. 69-72 and 78-82.
194 US 20 July 2005 Answers, para. 25.
195 US 20 July 2005 Answers, para. 25.

example, an examination of prices across the Un ited States may disclose a pricing pattern among
purchasers in Texas. The United States would inv estigate the possibility of targeted dumping within
this pricing pattern in Texas by examining transac tion prices in Maine, Oregon, Alaska and, indeed,
everywhere else in the United States. By necessity, the resulting determination would have nothing to
do with the pricing pattern in Texas. Rather, any dumping determination would be based on positive
comparison results from export transactions scattered through the entire universe of transactions. There
is no basis in the text of the second sentence of Article 2.4.2 for a comparison that is disconnected in this
way from the pricing pattern.
4.132 Thus, contrary to the United States' arguments, the express language of the second sentence of
Article 2.4.2 mandates a comparison based on a subset of transactions. That express language identifies
the subset in question: those transactions that constitute the pricing "pattern" among "purchasers,
regions or time periods". A targeted selection of transactions is permitted to take into account the price
differences within this pattern. That targeted selection addresses the possibility that the pattern may be
the result of targeted dumping. When the pattern has been identified, and the selection made, the
authorities must conduct a fair comparison of all transactions within the pattern. As the Appellate Body
held in US – Softwood Lumber V , the express language of Article 2.4.2 does not permit authorities to
disregard the results of the pricing comparisons undertaken.
196 Accordingly, Japan argues that the
United States' argument that a prohibition on zeroing would nullify the third method of comparison is
without merit.
4.133 In response to the Panel's question asking why Japan regards it as permissible to exclude export
transactions that are not a part of a "pattern" pur suant to the second sentence of Article 2.4.2 from the
denominator of the dumping margin calculation, Japan argues that the purpose of the second sentence of
Article 2.4.2 is to allow Members to combat ta rgeted dumping that might be indicated through
particular pricing patterns among different purchasers, regions, or time periods.197 Japan states that by
explicitly requiring the authorities to explain why a W-to-W or T-to-T comparisons will not take
"appropriate account" of the prices differences, the second sentence of Article 2.4.2 presupposes that
the third comparison methodology, which uses a pricing pattern to establish the existence of the margin
of dumping on the basis of the specific transactions within the pricing pattern, will enable the authorities
to take appropriate account of those differences.
4.134 Japan submits that its interpretation is c onsistent with the USDOCs targeted dumping
regulation. This regulation recognizes that, in a situation that may involve "targeted dumping," the
W-to-T comparison is confined to the export transact ions making up the pricing pattern. Specifically,
the Regulations state that where "there is targeted dumping in the form of export prices ... that differ
significantly among purchasers, regions, or periods of time" " the Secretary normally will limit the
application of the average-to-transaction method to those sales that constitute targeted dumping ... ".198
In other words, Japan claims, the United States appe ars to agree that the W-to-T method in the second
sentence is confined to the export transactions making up the pricing pattern and does not extend to the
entire universe of export transactions.
4.135 The United States replies that its Regulations do not support Japan's position because, in
addition to applying the W-to-T method to the tr ansactions in the pattern, the USDOC will apply a
W-to-W comparison method to the remaining export transactions 199, and argues that, without zeroing,
this combination of methodologies would produce the same result as a single W-to-W comparison. In
response, Japan argues that for the United States' redundancy argument to be correct as a matter of law,

196 Appellate Body Report, US – Softwood Lumber V, para. 100.
197 Japan 19 October 2005 Answers, paras. 50-54.
198 USDOC Anti-dumping regulations, 19 C.F.R. § 351.414(f)(2) (emphasis added). Exhibit JPN-03.
199 Response of the US to Japan's Opening Statement at the Second Substantive Meeting of the Panel
with the Parties, para. 3.

a Member must be required to conduct a further symmetrical comparison for the remaining transactions
(i.e. W-to-W or T-to-T). That is, the AD Agreement must compel authorities to conduct a combined
comparison using two of the methodologies in Article 2.4.2. Nothing in Article 2.4.2 indicates any such
requirement. In terms of Article 2.4.2, each of the methods of comparison constitutes, on its own, a
basis for determining "the existence of margins of dumping". Thus, Japan argues that the "individual
margin of dumping"200 established for an exporter or producer under any one of the three comparison
methods201 constitutes a valid and sufficient dumping determination on its own.202 Japan points out that
the United States' argument is contradictory because, while it insists that there is no obligation to
calculate a single margin for all export transactions pertaining to the product, to preserve its redundancy
argument under the second sentence of Article 2.4.2, the United States also ar gues that the authorities
are obliged to conduct a comparison for all export transactions pertaining to the product.
4.136 Furthermore, Japan holds the position that the second sentence of Article 2.4.2 constitutes an
exception to the requirement to determine the margin of dumping for a product as a whole 203. Finally,
when asked by the Panel whether in a situation where the third method of comparison is used to
determine the anti-dumping duty, the AD Agreement permits the imposition of duties to be imposed on
all imports of the subject product, Japan answers in the affirmative.204 Japan argues that, according to
the Appellate Body "the rules on the determination of the margin of dumping are distinct and separate
from the rules on the imposition and collection of anti-dumping duties."205 Japan explains that when a
Member makes a determination of a dumping ma rgin under any of the three methodologies under
Article 2 and an affirmative injury and causation de termination under Article 3, Article 9 permits the
imposition of duties on all entries of the product into the territory of the importing Member. Japan adds,
however, that the liability for duties imposed on the basis of a dumping determination under the second
sentence of Article 2.4.2 would be subject to review under either Article 9.3.1 or 9.3.2. While Japan
notes that it has not taken a position with regards to the applicability of Article 2.4.2 to review
proceedings, Japan argues that a question may arise whether authorities would be permitted to use such
a W-to-T method in its exceptional form in review proceedings(i.e. confined to a limited group of
transaction making up a pricing pattern).
4.137 Leaving aside its interpretation of the second sente nce of Article 2.4.2, Japan argues that the
United States "nullity" argument places a very high burden on the United States. To show that the
prohibition of zeroing "nullifies" the second senten ce of Article 2.4.2, the United States must
demonstrate that, without zeroing, Members are requi red to calculate margins in a manner that will
always result in the same outcome for the two comparison methods. There is no nullity just because the
two methods may produce the same outcome in some circumstances. Japan argues that it has shown,
however, that without zeroing, the W-to-W and W- to-T methods would produce different results in
certain circumstances – for example, when Me mbers base the comparison on a weighted average
normal values determined for different time peri ods. Specifically, Japan provides numeric examples
demonstrating that the results differ as between the comparison methodologies authorized by the
anti-dumping statute of the United States itself – i.e. a W-to-W comparison methodology in which the
weighted average normal value is calculated over th e entire period of investigation, and a W-to-T
comparison methodology in which the weighted average normal value is calculated on a monthly basis.

200 Article 6.10 of the AD Agreement.
201 This assumes that, for the third methodology, the prerequisites in the second sentence of Article 2.4.2
have been satisfied.
202 Japan considers that, in situations in which the third methodology is used to calculate the margin of
dumping on the export sales that comprise the pricing pattern, the AD Agreement does not preclude Members from
conducting a separate symmetrical comparison (though it does not compel the Member to do so either), as the US
says it would for the export transactions that do not form part of the pattern.
203 Japan Opening Statement, First Substantive Meeting of the Panel with the Parties, para. 54.
204 Japan 21 September 2005 Answers, paras. 55-57.
205 Appellate Body Report, EC – Bed Linen (Article 21.5), para. 124.

4.138 The United States responds that "Japan offers no te xtual analysis to support its theory that the
methodologies set on in Article 2.4.2 were crafte d on the assumption that Members would be using
different bases for calculating the weighted average normal value" in W-to-W and W-to-T comparisons,
respectively.
206 Japan argues that this is an incorrect way to present the issue. Japan submits that the
text does not suggest an "assumption" that a singl e "basis for calculating the weighted average normal
value" must be used under Article 2.4.2. The signifi cant point is that the text of the Article itself does
not prohibit a Member from using "different bases" for calculating the weighted average normal value
in the two situations. In other words, Article 2.4.2 was crafted on the "assumption" that Members could
choose to use different bases for calculating the we ighted average normal value in the W-to-W and
W-to-T comparisons. So long as Members are not prohibited from using different bases (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 b ecause the groups of transactions making up the
weighted average normal value will differ.
4.139 Japan points out that the United States does not suggest that the AD Agreement compels
Members to use the same time bases in the two situations. Indeed, the United States' domestic law itself
authorizes the contrary because the USDOC is perm itted to use different time "bases" for calculating
the "W" in the W-to-W comparison in investigations and in the W-to-T comparison in administrative
reviews.207 Moreover, Japan argues that the United Stat es does not deny that different outcomes will
result from the use of different time bases. Japan asser ts that the fact that methods overlap in those
circumstances does not nullify the third method because a Member may also choose to do otherwise, as
the United States itself has done.
 United States 208

4.140 The United States argues that Article 2.4 of the AD Agreement does not contain obligations
with respect to zeroing. The United States argues that the obligation to make a "fair comparison" under
Article 2.4 does not create an obligation to provide for offsets. Article 2.4 addresses only the required
adjustments that must be made to export price and normal value in order to account for "differences
which affect price comparability". Not only does the text of Article 2.4 itself not provide an obligation
with respect to offsets, but to interpret the obliga tion to make a "fair comparison" – as Japan does – as
the basis for a general requirement to provide offsets would render the targeted dumping methodology
in Article 2.4.2 superfluous. As such, the Unite d States asserts that Japan's claims based on the
obligation to make a "fair comparison" under Article 2.4 should be rejected.
4.141 The United States argues that an an alysis of Japan's claims necessarily begins with the text of
Article 2.4. From the text, it is clear that Article 2.4 establishes the obligation that a fair comparison be
made between normal value and e xport price and provides detailed guidance as to how that fair
comparison is to be made. Article 2.4 recognizes th at the normal value and export transactions to be
compared may occur, inter alia, (a) with respect to models with differing physical characteristics, (b) at
distinct levels of trade, (c) pursuant to different terms and conditions, and (d) in varying quantities. The
United States argues that the first sentence of Ar ticle 2.4 creates a general obligation to make
appropriate adjustments to ensure that export pri ces and normal values are comparable before margin
calculations are undertaken.
209 The remainder of Article 2.4 provides examples of the types of
adjustments that the administering authority is obliged to make in pursuit of price comparability. There
is no basis for an interpretation of Article 2.4 th at divorces the obligation to make a fair comparison

207 Compare Section 777A(d)(1)(A) of the Tariff Act of 1930, as amended, with Section 777A(d)(2).
208 US First Written Submission, paras. 44-53; US Second Written Submission, para. 34, 36-37, 26-32¸
US First Written Submission, paras. 54-58; US Second Written Submission, paras. 39-47.
209 US 20 July 2005 Answers, paras. 70-73.

from the allowances required to establish price comp arability. Article 2.4 itself does not specifically
address the establishment of the margin of dumping.
4.142 The United States argues that the focus of Article 2.4 is on how the authorities are to select
transactions for comparison and make the appropria te adjustments for differences that affect price
comparability. As the panel in Egypt – Steel Rebar explained:
"... [A]rticle 2.4 in its entirety, including its burden of proof requirement, has to do with
ensuring a fair comparison, through various adjustments as appropriate, of export price
and normal value."
210

The panel's discussion in Egypt- Steel Rebar of the scope of the fair comparison language in Article 2.4
was expressly quoted and supported by the panel in Argentina – Poultry Anti-Dumping Duties .211
Every Appellate Body and panel report that has tu rned on the question of price comparability has
narrowly interpreted Article 2.4 to address pre- comparison price adjustments that affect the
comparability of prices between markets. 212 The panel in US – Softwood Lumber V summarized the
scope of Article 2.4 when it found:

"An examination of a request for an Article 2.4 adjustment should therefore start with a
determination of whether a difference betw een the export price and the normal value
exists. That is, a difference between the pri ce at which the like product is sold in the
domestic market of the exporting country and that at which the allegedly dumped
product is sold in the importing country. Ultimately, this provision requires that
differences exist between two markets. If there is no difference affecting the products
sold in the markets concerned, for instance, where the packaging of the allegedly
dumped product and that of the like product sold in the domestic market of the
exporting country is identical, in our view, an adjustment would not be required to be
made by that provision."
213(emphasis added)

4.143 Accordingly, as the Appellate Body stated in US – Hot-Rolled Steel , "an examination of
whether USDOC acted consisten tly with Article 2.4 of the AD Agreement must focus on . . . whether
there were 'differences', relevant under Article 2.4, which affected the comparability of export price and
normal value". 214 Thus, Japan's proposed interpretation of Article 2.4 to encompass the results of
comparisons between export price and normal value is erroneous; Article 2.4 does not apply to the
results of comparisons.
4.144 The United States argues that Japan has not offered any argument as to how an offset to the
dumping found on one export transaction as a result of a distinct export transaction having been sold at
above normal value would be considered an adjust ment or other comparison criterion that falls under
Article 2.4. Quite the opposite, Japan itself recogni zes a distinction between the adjustments that are
required pursuant to Article 2.4 in order to make a "fair comparison", and zeroing.215 Accordingly, the
United States claims, because the "fair comparison" obligation in Article 2.4 refers to the required price

210 Panel Report, Egypt – Steel Rebar, para. 7.335.
211 See Panel Report Argentina – Poultry Anti-Dumping Duties , paras. 7.264–7.265, Panel Report,
U – Softwood Lumber V, para. 7.356; Appellate Body Report, US – Hot-Rolled Steel, para. 179.
212 See, e.g., Panel Report, US – Softwood Lumber V , para. 7.356; Appellate Body Report,
US – Hot-Rolled Steel, para. 179, Panel Report, Argentina – Poultry Anti-Dumping Duties , para. 7 265; Panel
213 Panel Report, US – Softwood Lumber V, para. 7.356.
214 Appellate Body Report, US – Hot-Rolled Steel, para. 179.

adjustments, it does not create an obligation with r espect to how the results of those comparisons are
treated.
4.145 The United States notes that Japan appears to be arguing that in addition to the appropriate price
adjustments envisioned in Article 2.4, the United States is obligated to provide some form of
compensation in the process of aggregating the results of its price comparisons to negate the effect of
not allowing an offset for sales that exceed normal value.
216 The focus of Article 2.4, however, is
limited to the selection of comparable transactions and the making of appropriate adjustments to those
transactions so as to render them comparable. Japan has not shown – and, logically, cannot show – that
the result of a comparison between two particular transactions is a difference affecting the price
comparability of two completely different transactions.
217 Even as described by Japan, an offset
requirement would be applied to the results of comparisons, and would not pertain to the comparisons
themselves.218 Consequently, it falls outside the scope of Article 2.4.219
4.146 Not content with the text of the Article 2.4 as written, argues the United States, Japan now seeks
to read into the phrase "fair comparison" the word s "good faith" in an attempt to create a new
obligation.220 However, the customary rule of interpretation reflected in Vienna Convention Article 31
calls for a "good faith" reading of the actual text of an agreement, in its context and in light of the
agreement's object and purpose; substituting or inserting words into the text that are not there – even if
those words are "good faith" – is not in fact a good faith reading. The principles of interpretation set
forth in Article 31 "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".
221 As discussed above, a proper
reading of the actual language of the AD Agreement yields the conclusion that the phrase "fair
comparison" in Article 2.4 simply has nothing to do with offsetting.
4.147 The United States argues that, in EC – Bed Linen, the Appellate Body found that the EC had an
obligation to provide offsets arising out of the use of an average-to-average comparison methodology in
an investigation pursuant to Article 2.4.2. 222 The Appellate Body, however, made no findings with
respect to Article 2.4. The Appella te Body focused its analysis on th e fact that Article 2.4.2 requires
investigating authorities to "compare the weighted average normal value with the weighted average of
prices of all comparable export transactions".223 While the Appellate Body report contains a conclusory
sentence regarding the "fair comparison" requirement, the report contains no textual analysis of the "fair
comparison" requirement nor any explanation as to how or why the EC's methodology was unfair. 224
The basis for the Appellate Body's finding was limited to the need for an investigating authority to use
"all comparable export transactions" in the app lication of the average-to-average comparison
methodology.225
4.148 The United States asserts that, in US – Corrosion-Resistant Steel Sunset Review, the Appellate
Body found that it was "unable to rule" on whet her the United States acted inconsistently with

219 The US notes that Japan's "as applied" claims include claims of inconsistency with Article 18.4 of the
AD Agreement and Article XVI:4 of the Marrakesh Agreement Establishing the World Trade Organization
("WTO Agreement"). Assuming for purposes of argume nt that Japan's positions regarding "symmetry" and
offsets for "negative dumping" are valid, Japan fails to ex plain how the obligations of these provisions relate to
determinations made in specific anti-dumping proceedings. Accordingly, the Panel should reject Japan's claims.
221 Appellate Body Report, India – Patents (US) , para. 45.
222 Appellate Body Report, EC – Bed Linen, para. 66.
223 Ibid, para. 55.
224 Ibid, para. 55.
225 Ibid, paras. 55-60.

Article 2.4 and Article 11.3. 226 While Japan cites to the Appellate Body's language in
US – Corrosion-Resistant Steel Sunset Review as to the "fair comparison requirement," the statements
to which Japan refers were made absent any analysis of the text of the AD Agreement, did not provide
any reasoning beyond reference to the EC – Bed Linen report, and were in the context of a dispute in
which the Appellate Body was unable to "complete the analysis." Accordingly, the reasoning of the
Appellate Body in US – Corrosion-Resistant Steel Sunset Review provides no basis to conclude that the
fair comparison requirement establishes an independent obligation to provide offsets.
4.149 The United States asserts that, in US – Softwood Lumber V, the Appellate Body specifically
recognized that the issue before it was whether off sets were required under the average-to-average
methodology found in Article 2.4.2.227 The basis for its finding was the obligation in Article 2.4.2 that
"the existence of margins of dumping during the investigation phase shall normally be established on
the basis of a comparison of a weighted average normal value with a weighted average of prices of all
comparable export transactions . . . ." 228 At no point did the Appellate Body in US – Softwood
Lumber V reference or rely upon Article 2.4 as part of its analysis. Furthermore, even though the parties
in that dispute referenced other comparison methodologies found within Article 2.4.2 in their
arguments, the Appellate Body declined to address any obligation to provide offsets in any context
other than that of the average-to-average comparison methodology before it.229
4.150 The United States argues that belying Japan's mischaracterization of the Appellate Body's prior
findings as speaking to an offset requirement pursuant to the "fair comparison" language, in
US – Softwood Lumber V the Appellate Body expressly indicated that the scope of its determination
was limited:
"[I]n this appeal, we are not required to , and do not address, the issue of whether
zeroing can, or cannot, be used under the other methodologies prescribed in Article
2.4.2, namely, comparing normal value and export prices on a
transaction-to-transaction basis (the "tra nsaction-to-transaction methodology"), or
comparing a normal value established on a weighted average basis to prices of
individual export transactions (the "weighted-average-to-individual
methodology")."
230

4.151 The Appellate Body also explained the limited scope of its findings in EC – Bed Linen:
"When examining the practice of 'zeroing' in the original dispute, we noted that the
requirements of Article 9 do not have a bearing on Article 2.4.2, because the rules on
the determination of the margin of dumping are distinct and separate from the rules on
the imposition and collection of anti-dumping duties."231
Thus, Japan's suggestion that the A ppellate Body has resolved the issu e as to offsets in contexts other
than an average-to-average methodology in an inves tigation is contradicted by the Appellate Body's
own statements.

226 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 138.
227 Appellate Body Report, US – Softwood Lumber V, paras. 104, 105, 108.
228 AD Agreement, Art. 2.4.2 (emphasis added). See Appellate Body Report, US – Softwood Lumber V,
paras. 82, 86, 98.
229 Appellate Body Report, US – Softwood Lumber V, paras. 104 - 105.
230 Appellate Body Report, US – Softwood Lumber V, para. 63.
231 Appellate Body Report, EC – Bed Linen (21.5 – India), para. 124.

4.152 The United States argues that, while the "fair co mparison" language refers to adjustments
necessary to ensure price comparab ility, even if the obligation were somehow read to have some
meaning beyond this, it would not follow that a "fair comparison" requires an investigating authority to
provide an offset to dumping for export transacti ons that exceed normal value in every anti-dumping
proceeding, no matter the method of comparison used and no matter the facts before it.
4.153 The United States argues that customary rules of interpretation of pub lic international law
require that an agreement term be interpreted in its context. Any reading of an obligation of "fairness"
should thus be informed by the specific rules in the Agreement applicable to the calculation of dumping.
An approach that conflicts with those rules, or which purports to establish a standard of fairness that in
reality is subjective and arbitrary and is not informed by those rules, is not appropriate. Fairness should
only be evaluated through an objective, discernable sta ndard of what is appropriate and inappropriate,
as found within the four corners of the Agreement. Japan argues that because the use of an offset would
result in a lower margin, the non-use of the offset mu st be unfair. This subjective conclusion makes
little sense, unless one may presume, based upon a reading of the text of the AD Agreement, that in all
cases, the objective test of a margin's "fairness" is th e level of that margin, with a higher margin being
"unfair" when a lower one is possible. Japan has pointed to no language with the AD Agreement which
would support such a reading of Article 2.4.
4.154 Further, the United States states that Japan's interpretation of the "fair comparison" requirement
in Article 2.4 to create a general obligation to o ffset dumping margins also cannot be reconciled with
the remaining text of the AD Agreement in a manner consistent with customary rules of treaty
interpretation. That is because the targeted dum ping methodology, provided for in Article 2.4.2,
mathematically must yield the same result as an average-to-average comparison if, in both cases,
non-dumped comparisons are required to offset dum ped comparisons. In this respect, an offset
requirement would render the targeted dumping exception in Article 2.4.2 a complete nullity.
4.155 The United States argues that the express terms of Article 2.4.2 demonstrate that the drafters of
the AD Agreement did not intend to require that dumped comparisons be offset with non-dumped
comparisons in determining an exporter's fina l overall dumping margin. The "targeted dumping"
methodology was drafted as an exception to the obligation to engage in a symmetrical comparison in an
investigation. By the terms of Article 2.4.2, it ma y be used "if the authorities find a pattern of export
prices which differ significantly among different purchasers, regions or time periods ... ." When the
investigating authority provides an explanation as to why these "differences cannot be taken into
account appropriately by the use of a weighted average-to-weighted average or transaction-to-
transaction comparison", it may then use the asymme trical average-to-transaction comparison to
establish the existence of margins of dumping during the investigation phase.
4.156 The United States asserts that the targeted dumping methodology is not an exception to the "fair
comparison" requirement of Article 2.4. It is only an exception to the symmetrical comparison
requirements for investigations set forth in the first sentence of Article 2.4.2. Article 2.4, on the other
hand, applies to all those comparison methodologies. Japan asserts that zeroing violates the "fair
comparison" obligations of Article 2.4 because it is "inherently biased".
232 However, if Japan is correct,
then the "fair comparison" obligation, when a pplied to the targeted dumping methodology, would
require the investigating authority to provide for an offset for tr ansactions that exceed normal value
even when using the targeted dumping methodology. If offsetting were required, the overall dumping
margin calculated for an exporter must, mathematic ally, be the same under a symmetrical comparison
of weighted averages of normal values and export pr ices, or an asymmetrical comparison of weighted
average normal values and individual export prices. The United States argues the reason for this is that,
if offsetting is required, then all non dumped sales (i.e. negative values) will offset the margins on all of
the dumped sales (i.e. positive values). It makes no difference mathematically whether the calculation

of the final overall dumping margin is based on comparing weighted average export prices to weighted
average normal values or on comparing transaction specific export prices to weighted average normal
values. In both cases, the sum total of the positive values will be offset by the sum total of the negative
values, and the results will be the same.
4.157 The United States argues that an interpretation of Article 2.4 of the AD Agreement that requires
such offsets in general would render the distin ctions between the average-to-average and the
average-to-transaction methodologies in Article 2.4.2 without meaning. A panel may not interpret a
provisions of the AD Agreement in such a way that its express provisions are rendered meaningless or
superfluous.233 As the Appellate Body has consistently found, "interpretation must give meaning and
effect to all the terms of a treaty. An interprete r is not free to adopt a reading that would result in
reducing whole clauses or paragraphs of a treaty to redundancy or inutility". 234 An interpretation of
Article 2.4 of the AD Agreement to require that dumping margins be offset by non-dumped transactions
is therefore impermissible and must be rejected.
4.158 The United States points out that Japan disputes th at its interpretation of the fair comparison
requirement would render the targeted dumping methodol ogy a nullity based on two distinct theories:
(1) that the targeted dumping methodology allows Members to disregard export transactions not within
the pattern of pricing differences, and (2) that the targeted dumping methodology does not necessitate
the same result as the average-to-average comparison methodology.
4.159 With respect to Japan's first theory, the United States has addressed the numerous interpretive
problems with that approach in respon se to several questions from the Panel.
235 Nothing in the text
indicates that the investigating authority may comp are the weighted-average normal value to only a
select subset of export transactions. Japan argues that if the investigating authority could not focus its
analysis on just those export transactions that ma ke up the different pricing pattern, the authority
"would fail to take 'appropriate account' of the pricing differences discernable in those transactions".236
Japan misreads the text of Article 2.4.2. Artic le 2.4.2 does not provide an obligation to take
"appropriate account" of the prici ng differences discernable in those export transactions. Instead,
Article 2.4.2 provides an obligation to explain why a symmetrical methodology does not take
appropriate account of such differences. Th is requirement reinforces that it is the asymmetry of the
targeted dumping methodology that addresses the pricing differences (i.e. the masked dumping that
might otherwise be missed), rather than the selection of a subset of export transactions.
4.160 The United States argues that, moreover, Japan's proposed interpretation of Article 2.4.2 defies
Japan's own analysis. When it suits its argument, Japan contends that "when the negotiators sought to
permit investigating authorities to disregard certain matters, they did so explicitly".
237 However, Japan
admits that "Article 2.4.2 does not indicate exactly how the [average-to-transaction] comparison is

233 See Appellate Body Report, US – Gasoline , p. 23; Appellate Body Report, Japan – Alcoholic
Beverages II, p. 12; Panel Report, Egypt – Steel Rebar, para. 7.277.
234 Appellate Body Report, US – Gasoline at p. 23; See also Appellate Body Report, Japan – Alcoholic
Beverages II, p. 12; Appellate Body Report, US – Underwear, p. 16.
235 US 20 July 2005 Answers, paras. 24-31.
236 Japan 20 July 2005 Answers, para. 46. The US notes that Japan also argues that an asymmetrical
comparison that includes all export transactions is not directed at the pricing pattern transactions, nor can it take
into account the pricing differences in the pattern, "as required by Article 2.4.2". Japan 20 July 2005 Answers,
para. 59. Article 2.4.2 contains no such requirements. The US submits that Japan confuses the prerequisites for
using the asymmetrical methodology (find a pricing pattern, provide an explanation as to why the other
methodologies do not take into account the relevant price differences) with the methodology itself, which Article
2.4.2 does not address.
237 Japan 20 July 2005 Answers, para. 57 (quoting Appellate Body Report, US – Softwood Lumber V ,
para. 100).

different from the other two methods of comparison ...".
238 Therefore, without any explicit textual basis
for disregarding certain export transactions pursu ant to the targeted dumping methodology, Japan
cannot reconcile its proposed interpretation with its analysis.
4.161 The United States asserts that Japan's second theo ry is no more persuasive. In response to
Question 20, Japan reaches the erroneous conclusion that the results of the average-to-average and
average-to-transaction comparisons would differ, but it does so based on a faulty comparison. In its
effort to establish some difference between the two methodologies, Japan compares how the
United States applies the average-to-average methodology in an Article 5.1 investigation with how the
United States assesses anti-dumping duties pursuant to Article 9.3.239 While Article 2.4.2 applies to the
former, it does not apply to the latter and Japan do es not even assert that the use of monthly average
normal values is the appropriate means of applying the targeted dumping methodology.
4.162 The United States argues that Japan offers no text ual analysis to support its theory that the
methodologies set out in Article 2.4.2 were crafted on the assumption that Members would be using
different bases for calculating the weighted averag e normal value when using the average-to-average
comparison than when using the average-to-tran saction comparison during the investigation phase.
Indeed, the second sentence of Article 2.4.2 merely allows a Member to engage in an asymmetrical
comparison under certain conditions. With this contex t in mind, nothing in the text of Article 2.4.2
suggests that the weighted average normal value in the second sentence is different than the weighted
average normal value in the first sentence.
4.163 The United States points out that, in response to Question 20, Japan provided a chart purporting
to demonstrate that it was possible, providing offset s, to arrive at a margin of dumping expressed as a
percentage of export price of 0.67 per cent using an average to average calculation, while arriving at a
different percentage (1.34 per cent) comparing an nual average normal values to individual export
transactions. Japan's difference, however, is solely the result of an error in its calculation of the 0.67 per
cent figure. Japan arrived at that figure by dividing the per unit difference between average normal
value and average export price by the aggregate of the export prices (1.33/198 - 0.67 per cent). Rather
than using the per unit difference as the numerator, Japan should have used the aggregate amount of
dumping (the per unit amount multiplied by the number of units (1.33 * 2 = 2. 66)) as the numerator.
Dividing the proper numerator by the aggregate of the export prices, Japan would have arrived at a
percentage margin of 1.34 per cent (2.66/198 = 1.34 per cent). This 1.34 per cent is identical to the
figure Japan obtained using the average-to-transac tion methodology with normal value averaged over
the full period.
240
4.164 The United States argues that, thus, a textual an alysis, tested by even the mathematical
examples provided by Japan, demonstrates that if offsets are required, then the results of
average-to-average and average-to-transaction comparisons would be the same, rendering the targeted
dumping provision a nullity. As the Appellate Body indicated in US – Gasoline, such an interpretation

238 Japan 20 July 2005 Answers, para. 46.
239 Japan 20 July Answers, paras. 75-77.
240 The US argues that China had a similar error in its chart that purportedly demonstrated that a different
result would be achieved as between average-to-average and average-to-transactio n comparisons. See China
Answers to Questions from the Panel, Response to Question 20, page 5. On the average-to-average chart, China
compares an average normal value of 7 to an average export price of 5, finding a per-unit amount of dumping of 2.
Like Japan, China inserted this per-unit margin to calculate what is supposed to be the overall "dumping margin"
of 2/15. If that per-unit amount is multiplied by the volume of export transactions (3), as it should be, the
"dumping margin" in China's chart would be 6/15 - the identical result arrived at in China's average-to-transaction
chart.

would not be an appropriate application of the customary rules of treaty interpretation. 241 Japan's
claims based on Article 2.4 should therefore be rejected.
3. "As such" Claims under Article 3 of the AD Agreement with respect to Original
Investigations
 Japan 242

4.165 Japan argues that maintaining zeroing procedures in original investigations is inconsistent with
Article 3 of the AD Agreement. Japan argues that, pursuant to Article 3.1 of the AD Agreement, a
determination of injury must be based on an "objective examination" of "positive evidence" concerning
the "volume of the dumped imports," their "effect " on prices of the like domestic product, and the
"consequent impact" of dumped imports on domestic producers. According to the Appellate Body,
"positive evidence" is evidence "of an affirmative, objective and verifiable character" and "must be
credible".
243 An "objective examination" is one that "con form[s] to the dictates of the basic principles
of good faith and fundamental fairness."244 Japan points out that the Appellate Body also found that the
general obligation set out in Article 3.1 "'informs th e more detailed obligations' in the remainder of
Article 3."245
4.166 Japan asserts that several of the other paragraphs of Article 3 impose more specific
requirements on the investigating authorities' evaluati on of dumped imports. In particular, Article 3.2
instructs the investigating authorities to evaluate the rate of increase in dumped imports and their price
effects. In defined circumstances, Article 3.3 allo ws for the cumulative assessment of the "effect" of
dumped imports from more than one country. Artic le 3.4 identifies a number of factors that
investigating authorities must examine in evaluating the impact of dumped imports, including the
magnitude of the dumping margin. Article 3.5 requires that "the dumped imports, through the effects of
dumping", are causing injury. Thus, in each of th ese provisions, key aspects of the investigating
authorities' injury determination are based upon evidence derived from the authorities' dumping
determination. In particular, the dumping determination provides the pertinent evidence regarding: the
volume of dumped and non-dumped imports (evaluated under Articles 3.1, 3.2, 3.3, 3.4 and 3.5); the
rate of increase of dumped imports (evaluated under Article 3.2 and, possibly, Articles 3.4 and 3.5); the
prices of dumped and non-dumped imports (evaluated under Articles 3.2, 3.3, 3.4 and 3.5); and, the
magnitude of the margin of dumping (evaluated under Articles 3.4 and 3.5).
4.167 Japan argues that the model and simple zeroing procedures as well as the standard zeroing line
systematically distort the dumping determination and, therefore, also the alleged evidence of dumping
that is derived from this determin ation and subsequently used to ev aluate the injury factors just
enumerated. Because this evidence results from a flawed dumping determination, it does not meet the
requirements of "positive evidence". First, the zeroing procedures fail to produce credible evidence of
dumping because there is no evidence of dumping for the product as a whole. In consequence, the
alleged evidence on the volume of dumped and non-dumped imports is not positive. For example, the
flaws in the calculation procedures may lead to a finding of dumping for a product where there is no
dumping. In that event, certain imports are treated as dumped, when they are not. Second, for the same
reason, the alleged evidence pertaining to the rate of increase of dumped imports is also not positive.

241 Appellate Body Report, US – Gasoline, p. 23.
242 Japan First Written Submission, paras. 111-121; Japan Opening Statement, First Substantive Meeting
of the Panel with the Parties, paras. 59-61.
243 Appellate Body Report, US – Hot-Rolled Steel, para. 192.
244 Appellate Body Report, US – Hot-Rolled Steel, para. 193.
245 Appellate Body Report, US – Hot-Rolled Steel, para. 192, quoting Appellate Body Report, Thailand –
H-Beams, para 106.

For example, due to the zeroing procedures, dumped imports may be shown to have increased sharply
during the period of investigation, whereas in fact th ere might have been: no dumping at all; a slight
increase in dumped imports; or, even a decline or disappearance of dumped imports. Third, the alleged
evidence of the price effects of dumped imports is not credible and, therefore, not positive. The
maintenance of the zeroing procedures means that the United States International Trade Commission
("USITC") has no credible basis fo r identifying the portion of imports that are, respectively, dumped
and non-dumped. Yet, the precise make-up of th ese two groups of imports determines the prices
attributed to dumped and non-dumped imports. Accordingly, under the zeroing procedures, there is no
credible basis for determining the prices, or price effects, of these two categories of imports. Fourth,
there is also no positive evidence of the magnitude of dumping because, as the Appellate Body has said
repeatedly, "zeroing … inflates the margin of dumping for the product as a whole".
246 Because of the
maintenance of the zeroing procedures, the USITC has no objective and verifiable basis for evaluating
the magnitude of the margin of dumping, if any.
4.168 In other words, Japan argues, the standard zeroing procedures, in original investigations, cannot
generate positive evidence of "dumping". As a result, due to the maintenance of the zeroing procedures,
the USITC has no objective, verifiable or credible evidence on the basis of which to evaluate the
volume, price effects and impact of dumped imports.
4.169 Furthermore, Japan points out that an "examina tion" of injury that is not based on positive
evidence of dumping is not "objective". In US – Hot-Rolled Steel , the Appellate Body noted that an
"objective examination" is one that meets the requirements of fundamental fairness. 247 Where alleged
evidence of dumping is obtained from an unfair comp arison of normal value and export price, that
unfairness does not disappear through the subsequent examination of the evidence in question under
Article 3.1. Instead, the underlying unfairness of the comparison taints equally the examination of the
alleged evidence in an injury determination.
4.170 Japan, therefore, submits that, by maintaining the model and simple zeroing procedures as well
as the standard zeroing line, the United States acts inconsistently with Articles 3.1, 3.2, 3.3, 3.4 and 3.5
of the AD Agreement because the zeroing procedures depriv e the USITC of positive evidence for an
objective examination of injury.
4.171 In responding to claims made by the United St ates, Japan points out that the United States
argues that "Japan fails to explain how USDOCs approach necessarily results in a lack of positive
evidence in any, let alone every injury determination". 248 It adds that "Japan implicitly admits that
USDOCs approach does not mandate a breach with respect to the injury determination".249 Contrary to
these assertions, Japan states that it is not required to prove that the zeroing procedures result in a
violation of Article 3 in "every inju ry determination". As the Panel in US – Export Restraints held, it
suffices that the zeroing procedures result in a violation of Article 3 in certain situations:
"… [A] measure is inconsistent with WTO rules if that measure mandates action
inconsistent with WTO rules in particular circumstances , even if in other
circumstances the action might not be inconsistent with WTO rules."250
4.172 Japan argues that it has demonstrated that the zeroing procedures do result in violations of
Article 3 in "particular circumstances", namely wh enever there is a single negative comparison result

246 See, e.g., Appellate Body Report, US – Softwood Lumber V, para. 101.
247 Appellate Body Report, US – Hot-Rolled Steel, para. 193.
250 Panel Report, US – Export Restraints, para. 8.78, citing Appellate Body Report, Argentina – Textiles
and Apparel, paras. 62-63.

that is excluded from the calculation of the dumping amount. In its First Written Submission, Japan
explained how this could occur.
251 Further, the CTL Plate investigation provides evidence from an
anti-dumping proceeding proving that the zeroing procedures do result in injury determinations that are
not based on objective, verifiable and credible evidence of dumping.
252 In that investigation, because
the zeroing procedures overstated the margin of dumpi ng, the evidence of dumpi ng used in the injury
determination was tainted. Such evidence is not "positive".
 United States 253

4.173 The United States points out that, through its arguments, Japan fails to show how the standard
computer programme can require USDOC to breach any WTO obligations. But even if Japan has
identified an actionable measure regarding USDOCs dumping determination, the United States argues,
Japan has failed to explain how USDOCs discreti on to not offset dumpi ng based on non-dumped
transactions mandates that the USITC breach any WTO obligations.
4.174 The United States argues that, with respect to its "as such" claims concerning the USITCs
injury determinations, the crux of Japan's argument is that the evidence upon which the USITC bases its
injury determinations is not "positive evidence" because it results from a flawed dumping
determination.
254 Japan fails to explain how USDOCs approach necessarily results in a lack of positive
evidence in any, let alone every injury determination. Indeed, Japan's explanation of its claim is based
on speculation about a series of consequences that ma y occur because of USDOCs approach. For
example, Japan states that "the flaws in the calculation procedures may lead to a finding of dumping for
a product where there is no dumping". 255 Similarly, Japan states that the "dumped imports may be
shown to have increased sharply during the period of investigation, whereas in fact there might have
been: no dumping at all; a slight increase in dumped imports; or, even a decline or disappearance of
dumped imports".256
4.175 In this regard the United States explains, Japan implicitly admits that USDOCs approach does
not mandate a breach with respect to the injury determination. The assertion that the approach "might"
lead to one result or another is not evidence that it mandates a breach. The United States thus argues
that Japan simply has not met its burden of showing that USDOCs application of the standard computer
programme requires the USITC to make injury determinations that are not based on positive evidence
or that are otherwise inconsistent with Articles 3.1, 3.2, 3.4 and 3.5 of the AD Agreement.257
4. "As such" Claims under Article 5 of the AD Agreement with respect to Original
Investigations
 Japan 258

4.176 Japan argues that maintaining zeroing procedures in original investigations as well as the
standard zeroing line is inconsistent with Article 5.8 of the AD Agreement.
4.177 Japan argues that the text of Article 5.8 set s forth circumstances in which investigating
authorities are obliged to terminate an investigation. In particular, authorities must terminate promptly

251 Japan First Written Submission, paras. 114-120.
252 Japan First Written Submission, paras. 167ff.
253 US First Written Submission, paras. 101-104.
257 See Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 202.
258 Japan First Written Submission, paras. 122-130.

when there is "[in]sufficient evidence of … dumping … to justify proceeding"; and they must terminate
immediately either (1) where the margin of dumping is de minimis or (2) where the volume of dumped
imports is negligible. Article 5.8 imposes an affirmative obligation on authorities because they must be
"satisfied", on an on-going basis, that there is "sufficient evidence" of dumping to "justify" pursuit of an
investigation. As with the phrase "positive eviden ce" in Article 3.1, the phrase "sufficient evidence"
indicates that the authorities' justification for pursuin g an investigation must be grounded in facts that
are at once affirmative, objective, verifiable and credible.
259 In the same vein, the panel in
US – Softwood Lumber V opined that the sufficiency of evidence, under Articles 5.2 and 5.3 of the
AD Agreement, is determined, among others, by reference to "the accuracy and adequacy of the
evidence …". 260
4.178 In US – Softwood Lumber V, the Panel also examined whether, under Articles 5.2 and 5.3, there
was sufficient evidence of dumping to initiate an investigation. Like Article 5.8, Articles 5.2 and 5.3 do
not define the word "dumping". However, following the approach of the panels in
Guatemala – Cement II and Argentina – Poultry, the panel in US – Softwood Lumber V ruled that:
"Article 2 provides guidance regarding the meaning of that term for the purpose of the
AD Agreement. We agree … that, in order to de termine whether there is sufficient
evidence of dumping, an investigating authority cannot entirely disregard the elements
that configure the existence of th at practice as outlined in Article 2 . This does not, of
course, mean that an investigating author ity must perform a full-blown determination
of dumping in order to initiate an investigation. Rather, it means simply that an
investigating authority should take into account the general parameters as to what
dumping is when inquiring about the sufficiency of the evidence . The requirement is
that the evidence must be such that an unbiased and objective in vestigating authority
could determine that there was sufficient evidence of dumping within the meaning of
Article 2 … ." 261
4.179 Japan submits that this reasoning applies also to Article 5.8. In that regard, the model and
simple zeroing procedures are inconsistent with Article 5.8 because they deprive the USDOC of
accurate, adequate or otherwise credible "evidence" of "dumping," within the meaning of Article 2 of
the AD Agreement.
4.180 Japan argues that it has explained that the zeroing procedures as well as the standard zeroing
line are inconsistent with Articles 2.1, 2.4 and 2.4.2 of the AD Agreement, and Articles VI:1 and VI:2 of
the GATT 1994, because the USDOC fails to determine the existence of dumping, or calculate a margin
of dumping, for the product as a whole, and becau se the USDOC also fails to engage in a fair
comparison of normal value and export price due to the "inherent bias in a zeroing methodology …". 262
As a result, by maintaining the zeroing procedures, the USDOC never has any accurate or adequate
evidence of "dumping," much less "sufficient eviden ce" to justify pursuit of an investigation.
Accordingly, by maintaining the zeroing measures as integral parts of the calculation procedures, the
USDOC has no adequate basis for knowing, at any point in an investigation, whether it can continue to
pursue the investigation or must terminate it. The alleged evidence of dumping upon which the
USDOC relies, under Article 5.8, is obtained with u tter disregard for the "general parameters of what
dumping is" because the zeroing procedures themselves disregard those parameters. Further, as the
alleged "evidence" stems from a biased comparison of normal value and export price, it offers no

259 Appellate Body Report, US – Hot-Rolled Steel, para. 192.
260 Panel Report, US – Softwood Lumber V, para. 7.79.
261 Panel Report, US – Softwood Lumber V , para. 7.80 (underlining added). See also Panel Report,
Guatemala – Cement II, para. 8.35 and Panel Report, Argentina – Poultry Anti-Dumping Duties, para. 7.62.
262 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 135.

grounds for "an unbiased and objective investigating au thority" to conclude that there is sufficient
evidence to pursue an investigation.263
4.181 Japan notes that, in its arguments on the meaning of the term "margin of dumping", the United
States accepts that Article 5.8 requires that the au thorities must aggregate multiple comparison results
to produce a margin of dumping for the product as a whole.264 The standard zeroing procedures and the
standard zeroing line prevent the United States from complying with the interpretation it itself
advances.
 United States 265

4.182 The United States argues that Japan contends that the denial of offsets is "inconsistent with
Article 5.8 because [it] deprive[s] the USDOC of accurate, adequate or otherwise credible 'evidence' of
'dumping,' ... ."266 The United States asserts that his argument is entirely dependent on a finding that the
denial of offsets is inconsistent with Articles 2.1, 2.4 or 2.4.2 of the AD Agreement . 267 The
United States cannot independently act in consistently with Article 5.8 of the AD Agreement , if the
denial of offsets is not inconsistent with Articles 2.1, 2.4 and 2.4.2.
4.183 The United States claims that, in addition to being dependent upon a separate violation of
Articles 2.1, 2.4 or 2.4.2, Japan's argument with resp ect to Article 5.8 is also speculative. Even if the
Panel were to find that the United States acted inconsistently with Article 2.1, 2.4 or 2.4.2, Japan has not
established a factual basis for its allegation with resp ect to Article 5.8. The United States argues that
Article 5.8 only requires termination of an inves tigation in cases where the authorities determine that
the margin of dumping is de minimis. Japan has not established that, were it to prevail with respect to its
claims that the United States acted in breach of Articles 2.1, 2.4 or 2.4.2, the only margins that could be
determined in a WTO-consistent manner must be less than de minimis.
5. "As such" Claims under Articles 2 and 9 of the AD Agreement with Respect to Periodic
and New Shipper Reviews
 Japan 268

4.184 Japan argues that maintaining zeroing procedures in periodic and new shipper reviews as well
as the standard zeroing line is inconsistent with Articles 2 and 9 of the AD Agreement.
4.185 Japan states that, under Section 751 of the Tariff Act
269, upon request, the USDOC is authorized
to conduct "administrative reviews of determinations." Pursuant to that statutory provision, the term
"administrative review" encompasses, among others, "periodic"270 and "new shipper reviews".271 Japan
explains that, in a periodic review , the USDOC determines the amount of anti-dumping duties to be
collected on the basis of a retrospective review of dumping in a defined period, usually 12 months. The
USDOC calculates two types of margin in a periodic review. First, it calculates the overall weighted
average dumping margin, which is the duty deposit ra te, for an exporter, for the period under review.

263 Panel Report, US – Softwood Lumber V, para. 7.80. See also Panel Report, Guatemala – Cement II,
264 See paras. 4.81 and 4.82.
265 US 19 October 2005 Answers, paras. 55-56.
267 Ibid, para. 127.
268 ibid, paras. 131-151.
269 Tariff Act, Section 751(Exhibit JPN-2).
270 Tariff Act, Section 751(a)(1) (Exhibit JPN-2).
271 Tariff Act, Section 751(a)(2)(B) (Exhibit JPN-2).

The United States applies this rate to future entries for the purpose of collecting estimated duties, until
the conclusion of the next review proceeding. Second, for importers, it calculates an importer-specific
assessment rate. This rate is used by the United States to assess the definitive amount of duties due for
the review period. For both types of margin, the USDOC includes simple zeroing in the standard
computer programming procedures.
4.186 Japan explains that, in a new shipper review
, the USDOC also determines an overall weighted
average margin of dumping and importer-specific assessment rates, for any exporters that did not export
the "product" during the period of investigation. The period of review in a new shipper review is also
usually 12 months. As new shipper reviews are a fo rm of "administrative review", the calculation
procedures, and programming code, are the same as for periodic reviews.
4.187 Japan states that, in both periodic and new shipper reviews, the USDOC determines the margins
of dumping on a W-to-T basis by comparing normal value and the export price of individual
comparable export transactions from the review period. Accordingly, multiple comparisons are made,
one for each comparable export transaction. The ma rgins of dumping are, therefore, based on an
aggregation of these comparisons. In both periodi c and new shipper reviews, the USDOC maintains
and always uses the simple zeroing procedures as part of its standard calculation procedures. As a
result, through the standard zeroing line, in aggr egating the results of the multiple comparisons, the
USDOC disregards all negative comparison results.
4.188 Japan argues that dumping is always as defined in Article 2 of the AD Agreement. Japan claims
that the United States also agrees that margin calculations under Article 9 are subject to the disciplines
of Article 2, with the exception of Article 2.4.2.
272 Accordingly, Japan states that there is no dispute
that, if the standard zeroing procedures and the sta ndard zeroing line violate Article 2.1, they also
violate Article 9.273
4.189 Japan understands that the United States conducts periodic and new shipper reviews pursuant to
the provisions of Articles 9.3 and 9.5, respectively, of the AD Agreement. The chapeau of Article 9.3
provides that "the amount of the anti-dumping duty shall not exceed the margin of dumping as
established under Article 2". Accordingly, this provision establishes "a maximum limit, or ceiling" on
the amount of anti-dumping duties that can be collected by a Member. 274 That ceiling is defined by
reference to "the margin of dumping as established under Article 2". Japan explains that Article 9.5 of
the AD Agreement defines circumstances in which investigating authorities may determine "individual
margins of dumping" for any exporters that did not export the "product" during the period of
investigation (i.e. new shippers). Japan understands that the USDO C calculates dumping margins in
new shipper reviews pursuant to this provision.
4.190 Thus, Japan argues that the phrase "margin of dumpi ng" appears in Articles 9.1, 9.3, and 9.5.
Although the phrase is not defined in Article 9, the chapeau of Article 9.3, as noted above, provides
expressly that the "margin of dumping" is "as establis hed under Article 2". Accordingly, although the
rules on the collection of anti-dumping duties and on the calculation of the dumping margin are distinct,
Article 2 is expressly made relevant in interpreting the term "margins of dumping" in Article 9.
275 This

272 Japan Second Written Submission, para. 86 (citing US 20 July 2005 Answers, paras. 21 and 81).
274 Appellate Body Report, US – Hot-Rolled Steel, para. 116, where the Appellate Body interpreted the
words "shall not exceed" in Article 9.3 of the AD Agreement as establishing "a maximum limit, or ceiling" for the
all others rate.
275 Japan argues that, although the Appellate Body observed that the rules relating to duty collection set
out in Article 9 may not be of relevance in interpreting provisions of Article 2, this finding has no bearing in the
reverse context, i.e. the relevance of Article 2 where the term "margins of dumping" is interpreted and applied in
Article 9. Appellate Body Report, EC – Bed Linen (Article 21.5 – India), para. 124.

cross-reference to Article 2 is in keeping with the f act that "Article 2 sets out the agreed disciplines in
the AD Agreement for calculating dumping margins".276
4.191 Japan points out that the importance of Article 2 to the AD Agreement as a whole is evident in a
series of interpretations by the Appellate Body of core concepts that are defined in Article 2 and that are
used elsewhere in the AD Agreement . Thus, the Appellate Body has given a uniform meaning,
throughout the AD Agreement , to the terms "dumping", "margin of dumping", and "product".
Consistent with these uniform inte rpretations, it has also indicated that, whenever investigating
authorities calculate "margins of dumping", they must respect the basic requirements of a "fair
comparison". Specifically, in addition to holding that Article 2 sets forth the "agreed disciplines" in the
AD Agreement for calculating dumping margins 277, Japan argues the Appellate Body has held, inter
alia, that:
(a) "the definition of dumping as contained in Article 2.1 applies to the entire AD Agreement"278,

(b) the word " dumping" in Article 11.3 (sunset reviews) has the "meaning described in
Article 2.1"
279,

(c) the word " margins" in Article 9.4 (all others rate) has a meaning that is no "different[]" from its
meaning in Article 2.4.2
280,

(d) " margins" relied upon under Article 11.3 (sunset revi ews) must be calculated through a "fair
comparison," as required by Article 2.4
281,

(e) the " product" mentioned in Articles 6.10 (sampling of exporters) and 9.2 (imposition of duty) is
the same product that is subject to dumping a nd injury determinations under Articles 2 and 3
and that product must always be "treated as a whole".
282

The consistent meanings of "dumping", "margin of dumping", and "product", define the contours of
"the constituent elements of dumping" and serve to ensure that, in terms of the obligations under
Article 18.1, "specific action against dumping" is, indeed, only taken "when [those] constituent
elements … are present". 283

4.192 Japan argues that, as a result of these uniform interpretations, the USDOCs determination of the
existence of "dumping", and calculation of "margi ns of dumping", for purposes of periodic and new
shipper reviews, under Articles 9.3 and 9.5, respectivel y, must be consistent with the definitions of
those terms in Articles 2.1, 2.4 and 2.4.2 of the AD Agreement and with Articles VI:1 and VI:2 of the
GATT 1994. Article 2.1 of the AD Agreement requires that the existence and margin of dumping be
determined for the product as a whole. Accordingl y, in the event that the investigating authorities
undertake multiple comparisons in determining a margin under Article 9.3, the results of all of the
multiple comparisons must be taken into account in calculating dumping margins for the product as a

276 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 127.
277 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 127.
278 Appellate Body Report, US – Softwood Lumber V, para. 93 (emphasis added).
279 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 126 (emphasis added).
280 Appellate Body Report, US – Hot-Rolled Steel, para. 118 (emphasis added).
281 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, paras. 126 and 127 (emphasis
added).
282 Appellate Body Report, US – Softwood Lumber V, paras 94 and 99 (emphasis added).
283 Appellate Body Report, US – 1916 Act, para. 122.

whole. If the results of some comparisons are disregarded, the margin is not calculated for the product
as a whole.
284
4.193 Japan argues that, in periodic and new shi pper reviews, when the USDOC compares normal
value and export price on a W-to-T basis, it makes multiple comparisons and aggregates the results. In
particular, for each comparable export transaction, a separate comparison is made between the price of
an individual export transaction and a weighted average normal value. The USDOC does not, however,
sum the results of all the comparisons in calcula ting the overall weighted average dumping margin or
the importer-specific assessment rate. For both type s of margin, through the standard simple zeroing
procedures and the standard zeroing lines, after identifying comparable export transactions and
comparing export price for these transactions with weighted average normal value, the USDOC
automatically disregards all negative results of co mparisons where export price is higher than normal
value. In other words, negative comparison results are not included in the calculation of the total
amount of dumping. Accordingly, the standard simple zeroing procedures, maintained by the USDOC
in the standard computer programme for use in periodic and new shipper reviews, are inconsistent with
Articles 2.1 and 2.4.2 of the AD Agreement, and also with Articles VI:1 and VI:2 of the GATT 1994,
because, as the Appellate Body h as affirmed, the existence and the margin of dumping are not
determined for the product as a whole when the resu lts of all the multiple comparisons undertaken are
not taken into account.
285
4.194 Japan recalls its argument that a "fair comparison" is one that meets the requirements of
fundamental fairness and that is, in particular, unbiased, even-handed, does not favour particular
interests or outcomes nor distort the facts. Japan has also already narrated the Appellate Body's
previous findings that a comparison that involves model zeroing is unfair. Japan claims that the model
and simple zeroing procedures are "as such" inconsiste nt with Article 2.4 because they are formulated
with an in-built "inherent bias" that distorts the comparison of normal value and export price in
calculating the margin of dumping for the product as a whole. For precisely the same reasons stated
earlier, the simple zeroing procedures maintained by the USDOC for use in comparing normal value
and export price in periodic and new shipper reviews are inconsistent with Article 2.4.
4.195 Further, Japan argues that, by maintaining the standard zeroing procedures, the United States
has thus violated Articles 9.1, 9.2, 9.3, and 9.5 of the AD Agreement. In US – Corrosion-Resistant Steel
Sunset Review, the Appellate Body was confronted by a claim that, in conducting a sunset review under
Article 11.3, the USDOC had relied on dumping margins calculated using zeroing procedures in a
periodic review, under Article 9.3.1.
286 The Appellate Body held that:
"If these margins were legally flawed b ecause they were calculated in a manner
inconsistent with Article 2.4, this could give rise to an inconsistency not only with
Article 2.4, but also with Article 11.3 of the AD Agreement."287
Accordingly, the Appellate Body held, first, that margins calculated under Article 9.3 are " legally
flawed" if the margin calculation is inc onsistent with Article 2.4; and, second, it held that, if those
"legally flawed" margins are used in a sunset review under Article 11.3, there is a violation of
Article 11.3. This follows from the Appellate Body's ruling, in that appeal, that "Article 2 sets out the
agreed disciplines in the AD Agreement for calculating dumping margins."288

284 Appellate Body Report, US – Softwood Lumber V, para. 98.
285 Appellate Body Report, US – Softwood Lumber V, paras. 93 and 98.
286 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 116.
287 Ibid, para. 127.
288 Ibid, para. 127.

4.196 Japan argues that the same reasoning is equally applicable to duty assessment and collection
procedures under Article 9 and also to new shipper reviews under Article 9.5. If the procedures for
calculating dumping margins in assessments and review s are inconsistent with Article 2, including
Articles 2.1 and 2.4, then this legal flaw "taints" the duty assessment proceedings as well. As noted, the
terms "margin of dumping" and "product" in Articles 9.1, 9.2, 9.3 and 9.5 have common meanings
throughout the Agreement that stem from Article 2. This is borne out, in particular, by the text of
Article 9.3, which expressly refers to "the marg in of dumping as established under Article 2". The
assessment of anti-dumping duties under Article 9 must, therefore, be premised on a dumping
determination, including a fair comparison, for the product as a whole that is consistent with Article 2.
4.197 Further, Japan argues that Article 9.3 specifically requires that "the amount of the anti-dumping
duty shall not exceed the margin of dumping as established under Article 2"(e mphasis added ).
Therefore, the United States is not allowed to collect anti-dumping duties in excess of the properly
calculated margin of dumping. Moreover, in light of this context, an "appropriate amount" of duty,
under Article 9.2, cannot exceed the maximum lim it of the margin of dumping established under
Article 2 as well.
289
4.198 Japan argues that it has already demonstrated, above, that the USDOC fails to calculate the
margins of dumping on the basis of a fair comparison for the product as a whole and, therefore, acts
inconsistently with Articles 2.1, 2.4 and 2.4.2. As a margin of dumping calculated in this manner is not
properly "established under Article 2", the duty assess ment proceedings are also legally flawed.
Moreover, as the zeroing procedures inflate and overstate the dumping margin, the anti-dumping duty is
assessed and collected in excess of the margins that should have been calculated under Article 2 without
zeroing.
290 Consequently, the United States fails to comp ly with the requirement to ensure that the
amount of duties collected remains within the limit of the margin of dumping for the product as a whole.
4.199 Japan argues that, in conseque nce, because the standard zeroing procedures are inconsistent
with Article 2, maintaining these procedures for dete rmining dumping margins in a periodic review is
also inconsistent with Articles 9.1, 9.2 and 9.3. For the same reasons, it also inconsistent with
Article 9.5 for the USDOC to maintain such pr ocedures for determining margins in new shipper
reviews. In addition, the United States acts inconsis tently with Articles 9.1, 9.2 and 9.3 by failing to
ensure that the amount of anti-dumping duties does not exceed the margin of dumping established
consistently with Article 2.
4.200 In response to a question of the Panel whether Japan considers that Article 2.4.2 applies to
proceedings other than investigations within the meaning of Article 5, Japan states that the claims in this
dispute are based primarily on the obligations to determine the margin of dumping for the product under
Article 2.1 and Article VI of the GATT 1994, as well as the "fair comparison" requirement under
Article 2.4 of the Agreement.
291 Japan claims that it is not disputed in the present proceedings that these
provisions apply to margin calculations undertaken both in investigations under Article 5 and in reviews
under Articles 9.3, 9.5 and 11.2. Thus, Japan argues, margins of dumping established in any
anti-dumping proceedings are subject to the disci plines in those provisions, irrespective of the
applicability of Article 2.4.2 to review proceedings. Japan states, however, that the possible application

289 Japan argues that, in Argentina – Poultry Anti-Dumping Duties, the panel found that "[i]n the absence
of any other guidance regarding the appropriateness of the amount of anti-dumping duties, it would appear
reasonable to conclude that an anti-dumping duty meeting the requirements of Article 9.3 … would be
'appropriate' within the meaning of Article 9.2." Panel Report, Argentina – Poultry Anti-Dumping Duties, para.
7.365.
290 Japan notes that the USDOC assesses and imposes anti-dumping duties in an amount equal to the full
margin of dumping it calculates. See 19 C.F.R. section 351.212 (b).
291 Japan 19 October 2005 Answers, para. 47.

of Article 2.4.2 to proceedings other than Article 5 investigations is not decisive to the outcome of this
dispute.
4.201 Japan points out that the United States wrongly asserts that, because anti-dumping duties are
usually assessed by customs authorities on individual entries of a product, this somehow demonstrates
that margins of dumping are determined by investigating authorities for individual transactions.
292 In
particular, the United States asserts that, in a prospective normal value system("PNV"), system,
Members calculate margins for individual transactions.293 Japan claims that in making this argument,
the United States confuses the distinct concepts of the "amount of anti-dumping duty" and the "margin
of dumping" under Article 9.3 of the AD Agreement . Japan recalls that in EC – Bed Linen
(Article 21.5), the Appellate Body found that "the im position and collection of anti-dumping duties
under Article 9 is a separate and distinct phase of an anti-dumping action that necessarily occurs after
the determination of dumping, injury, and causation under Articles 2 and 3 has been made 294 and it
added that "the rules on the determination of the margin of dumping are distinct and separate from the
rules on the imposition and collection of anti-dumping duties." 295 Accordingly, in Japan's view, when
the customs authorities impose and collect anti-dumping duties on individual entries they are not
calculating margins of dumping within the meaning of Article 2. Rather, the margins of dumping have
already been determined by the investigating authoriti es, on the basis of Article 2, in investigations or
reviews. In terms of Articles 9.1 and 9.3 of the AD Agreement, these margins constitute a ceiling on the
amount of duties that can be imposed and collected by the customs authorities.
4.202 Japan argues that the same misconceptions in fect the United States' assertion that in a
PNV system, the amount of duties imposed by customs authorities on each entry constitutes a margin of
dumping.296 The definitions of "dumping" and "margins of dumping" in the AD Agreement are
identical for both prospective and retrospective sy stems of duty assessment. Thus, the differences
between these systems pertain to way duties are imposed and collected. Japan notes that the Appellate
Body has ruled that these differences have no bear ing on the rules regarding the establishment of
dumping margins in Article 2, which apply in the same way to both systems.297
4.203 Japan asserts that in a prospective normal value ("PNV") system, to assess the amount of duties
due, a comparison of prices is undertaken for each individual entry and, on the basis of that comparison,
a variable duty is imposed on the individual export transaction concerned. The calculation and
imposition of variable anti-dumping duties in this way – although permissible – does not involve the
establishment of margins of dumping within the meaning of Article 2 of the AD Agreement. Instead, the
customs authorities mechanically compare import prices with a reference price; they do not and can not
undertake a comparison that respects the detailed procedural and substantive rules set forth in Article 2,
for example, in Article 2.4. Japan sets out the r easons why the imposition of variable duties in a PNV
system does not involve the calculation of a margin of dumping, as follows;
 (a) First , Article 2.4 requires that a margin be based on a comparison between "sales made at
as nearly as possible the same time". By definition, a PNV is based on sales made during the period of
investigation, which ends up to a year before duties are even imposed. This stale, historic PNV is then
applied in imposing duties throughout the life of the anti-dumping action – that is, for up to five years or
more after the imposition of anti-dumping duties begins. As a result, in imposing variable duties,
customs authorities compare a historic home market price with a contemporaneous import price. This
means that it is impossible for the customs author ities to comply with the requirement to compare

292 US Second Written Submission, paras. 50, 53 and 54.
294 Appellate Body Report, EC – Bed Linen (Article 21.5), para. 123 (underlining added).
295 Appellate Body Report, EC – Bed Linen (Article 21.5), para. 124.
296 US Second Written Submission, paras. 54, 57.
297 Appellate Body Report, EC – Bed Linen (Article 21.5), para. 124.

contemporaneous sales. As a result, the imposition of variable duties cannot involve the determination
of a margin of dumping.

 (b) Second , Article 2.4 imposes an obligation on the authorities to make price adjustments for
any differences that affect price comparability.
298 Fulfilment of this obligation requires a careful and
detailed consideration of the comparability of the respective contemporaneous home market and export
sales. In imposing variable duties on the basis of a PNV, customs authorities do not undertake any such
examination.

 (c) Third , the last sentence of Article 2.4 imposes pr ocedural obligations on the authorities:
"The authorities shall indicate to the parties in qu estion what information is necessary to ensure a fair
comparison and shall not impose an unreasonable burde n of proof on those parties." In imposing
variable duties, the customs authorities do not request any information from the parties for the purpose
of a fair comparison nor do they receive and weigh evidence in terms of a burden of proof.

4.204 Japan asserts that the United St ates is, therefore, incorrect in suggesting that "margins of
dumping" are determined for individual transactions in a PNV system.
4.205 Japan further argues that the United States overl ooks that, even in a PNV system, the final
liability for duties must be assessed in a review under Article 9.3.2. During that review, the authorities
must establish the "actual margin of dumping" for the review period consistently with the rules in
Article 2. Thus, the duties paid on the basis of the original margin must be reviewed in light of "the
actual margin" for the review period. Article 9.3.2 presupposes that, in the prospective system, the
amount of duties imposed and the margin of dumping are not necessarily equal. Indeed, if the price
difference for each transaction were "the actual margin " for that transaction, there could be no refund
and the refund procedure would, therefore, be red undant. The existence of a refund procedure for the
prospective system demonstrates that the amount of variable duties imposed on each entry is not the
margin of dumping for that entry. Instead, the amount of duties paid on each entry may exceed "the
actual margin of dumping" calculated for the product, on the basis of the transactions in the review
period, and the excessive payments, if any, must be reimbursed promptly in accordance with
Article 9.3.2.
4.206 Japan claims that, as part of its arguments on PNV systems, the United States misleadingly
attempts to portray its retrospective review as "operating" on an "entry-by-entry basis", like a PNV
system.
299 Japan argues that this comparison is inapt because the United States' assessment system does
not operate on an entry-by-entry basis. As the standard computer programmes demonstrate, in reviews,
the USDOC conducts a comparison for all US sales, for the exporters c oncerned, during the review
period and, on that basis, it inst ructs the US customs service to collect duties at fixed single rate that
apply to all entries during the review period. In Japan's view, this is not like a PNV system. Japan
claims that, instead of examining the WTO-consistency of PNV systems that are not at issue, the Panel
must pay close heed to the particular features of the zeroing measures that are at issue.
 United States
300

4.207 The United States points out that Japan contends that the Panel should not recognize a
distinction between the investigation phase and other phases of an anti-dumping proceeding.
301

298 Appellate Body Report, US – Hot-Rolled Steel, para. 178.
300 US First Written Submission, paras. 72-87; US Second Written Submission, paras. 65, 68, 71-74,
62-63.

Regardless of whether the Panel follows the reasoning in US – Softwood Lumber V , the text of the
AD Agreement and prior panel and Appellate Body reports do not support Japan's claims. The express
terms of Article 2.4.2 limit its application to the "i nvestigation phase" of a proceeding. To require the
application of Article 2.4.2 to Article 9 asse ssment proceedings would read out of the AD Agreement
Article 2.4.2's express limitation to investigations. Such a result would be inconsistent with the
principle of effectiveness, which requires that all the terms of an agreement be given meaning.
302 Japan
ignores the plain language of Article 2.4.2 and improperly seeks to expand it to other proceedings.
4.208 The United States argues that other provisions of the AD Agreement also expressly limit their
application to the investigation phase of an anti-dumping proceeding and do not apply elsewhere. For
instance, Article 5.1 refers to "an investigation to determine the existence, degree and effect of any
alleged dumping shall be initiated by or on behalf of a domestic industry." Article 5.1, thus, is the only
stage of an anti-dumping proceeding where the inves tigating authority is required to determine the
"existence" of dumping in the AD Agreement , other than Article 2.4.2. 303 Similarly, Article 5.7
provides that evidence of dumping and injury must be considered simultaneously "in the decision
whether or not to initiate an investigation" and "dur ing the course of the investigation". Panels have
consistently found that the references to "investig ation" in Article 5 only refer to the original
investigation and not to subsequent phases of an anti-dumping proceeding. 304 As the Panel found in
US – Corrosion-Resistant Steel Sunset Review:
"[T]he text of paragraph 8 of Article 5 refers expressly to the termination of an
investigation in the event of de minimis dumping margins. There is, therefore, no
textual indication in Article 5.8 that would suggest or require that the obligation in
Article 5.8 also applies to sunset reviews."305
4.209 The United States argues that the limited applicabilit y of Article 2.4.2 could not be plainer.
Article 2.4.2, by its very terms, is limited to th e "investigation phase". Thus, the text leaves no doubt
that the Members did not intend to extend these ob ligations to any phase beyond the investigation
phase. Indeed, a panel has already recognized that the application of Article 2.4.2 is expressly limited to
the investigation phase of an anti-dum ping proceeding. As the Panel in Argentina – Poultry
Anti-Dumping Duties found:
"Article 2.4.2, uniquely among the provisions of Article 2, relates to the establishment
of the margin of dumping 'during the investigation phase'."306
Thus, the ordinary meaning of the term "investigation phase", as it is used in the AD Agreement, does
not include subsequent phases.

4.210 The United States thus argues that Japan's argume nt that Article 2.4.2 applies in Article 9
assessment proceedings ignores the clear di stinctions made in the text of the AD Agreement between
original investigations and other proceedings, distin ctions that Japan itself recognizes. Specifically,
Japan acknowledges that the AD Agreement distinguishes between the purpose of investigations and
assessment proceedings, when it notes that Article 2.4.2 is concerned with establishing the "existence"

302 See, e.g., Appellate Body Report, Japan – Alcoholic Beverages II , sections G & H (discussing
fundamental principle of effectiveness in treaty interpretation); see also US – 1916 Act, para. 123.
304 Panel Report, US – DRAMS , para. 521, at footnote 519 ("... investigation" means the investigation
phase leading up to the final determination of the investigating authority); Panel Report, EC – Bed Linen
(Article 21.5 – India), para. 6.114 (Article 5.7 applies to investigations).
305 Panel Report, US – Corrosion-Resistant Steel Sunset Review, para. 7.70.
306 Panel Report, Argentina – Poultry Anti-Dumping Duties, para. 7.357.

of margins of dumping in the investigat ion phase of an anti-dumping proceeding 307, whereas Article 9
proceedings are concerned with determining the amount of duty assessed.308
4.211 The United States argues that the limited application of Article 2.4.2 to the investigation phase
is consistent with the divergent functions of investigations and other proceedings under the
AD Agreement. The Appellate Body has already recognized that investigations and other proceedings
under the AD Agreement serve different purposes and have different functions, and therefore are subject
to different obligations under the Agreement. 309 Contrary to Japan's contention, the AD Agreement
does not require Members to examine whether margin s of dumping "exist" in the assessment phase.
Article 9 assessment proceedings are not concerned with the existential question of whether injurious
dumping "exists" above a de minimis level such that the imposition of anti-dumping measures is
warranted. That inquiry would have already been resolved in the affirmative in the investigation phase.
Instead, Article 9, by its terms, focuses on the amount of duty to be assessed on particular entries, an
exercise that is separate and apart from the cal culation of an overall dumping margin during the
threshold investigation phase of an anti-dumping proceeding.310
4.212 The United States argues that the express limitation in Article 2.4.2 to the investigation phase is
also consistent with the fact that the anti-dumping systems of Members are different for purposes of the
assessment phase. The different methods used by Members include the use of prospective normal
values, retrospective normal values, and prospective ad valorem assessment. If the requirements of
Article 2.4.2 regarding comparison methods applie d to the assessment of anti-dumping duties, this
divergence of assessment systems would not be possible. For example, it is not possible to reconcile the
prospective normal value system used by some Members with a requirement to use either the
average-to-average or transaction-to-transaction method, because such systems compare weighted
average normal values to individual export prices to assess dumping duties on individual transactions.
Thus, to retain the flexibility in assessment systems re flected in Article 9, it was not only appropriate,
but necessary, to limit the requirements of Article 2.4.2 to the investigation phase.
4.213 The United States argues that, for the reasons di scussed above, an analysis of the text of
Article 2.4.2 demonstrates that Article 2.4.2 does not apply to assessment proceedings. Japan,
however, argues that Article 2.4.2 is nonetheless a pplicable to assessment proceedings by virtue of
Article 9.3 of the AD Agreement. Japan interprets Article 9.3 to mean that all the provisions of Article 2
– including Article 2.4.2 – are directly applicable in the context of assessment proceedings. 311 But
Japan's interpretation is contrary to the express terms of the AD Agreement. The general reference to
Article 2 in Article 9.3 necessarily includes any limitations found in the text of Article 2. Article 2.4.2
by its own terms is explicitly limited to the investigation phase. The text of Article 9.3, therefore, does
not support Japan's argument that the requirements of Article 2.4.2 apply in assessment proceedings.
4.214 The United States argues that the reference in Article 9.3 to Article 2 means that the amount of
anti-dumping duty assessed may not exceed the amount of anti-dumping duty calculated in accordance
with the general requirements of Article 2, such as making the various adjustments set forth in
Article 2.4 necessary to provide a fair comparison. As the Panel found in Argentina – Poultry:

309 See, e.g., Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 87.
310 See, e.g., AD Agreement, Article 9.1 ("the decision whether the amount of anti-dumping duty to be
imposed shall be the full margin of dumping or less, are decisions to be made by the importing country or customs
territory"); Article 9.3 ("the amount of anti-dumping duty shall not exceed the margin of dumping as established
under Article 2").
311 Japan First Written Submission, paras. 135-141.

"Article 9.3 does not refer to the margin of dumping established 'under Article 2.4.2',
but to the margin of dumping established 'under Article 2'. In our view, this means
simply that, when ensuring that the amount of the duty does not exceed the margin of
dumping, a Member should have reference to the methodology set out in Article 2.
This is entirely consistent with the introduc tory clause of Article 2, which sets forth a
definition of dumping 'for the purpose of this Agreement ... '. In fact, it would not be
possible to establish a margin of dumping without reference to the various elements of
Article 2. For example, it would not be possible to establish a margin of dumping
without determining normal value, as provi ded in Article 2.2, or without making
relevant adjustments to ensure a fair comparison, as provided in Article 2.4."
312

4.215 The United States argues that the context of Article 9 also demonstrates that there is no basis in
Article 9 to overcome the explicit language in Article 2.4.2, limiting its reach to investigations. As the
Panel found in Argentina – Poultry Anti-Dumping Duties:
"[N]othing in the AD Agreement explicitly identifies the form that anti-dumping duties
must take . . . . As the title of Article 9 of the AD Agreement suggests, Article 9.3 is a
provision concerning the imposition and collection of anti-dumping duties. Article 9.3
provides that a duty may not be collected in excess of the margin of dumping as
established under Article 2. The modaliti es for ensuring compliance with this
obligation are set forth in s ub-paragraphs 1, 2 and 3 of Article 9.3, each of which
addresses duty assessment and the reimbursement of excess duties. The primary focus
of Article 9.3, read together with sub-pa ragraphs 1-3, is to ensure that final
anti-dumping duties shall not be assessed in excess of the relevant margin of dumping,
and to provide for duty refund in cases where excessive anti-dumping duties would
otherwise be collected."
313

4.216 In other words, argues the United States, Article 9 contains certain procedural obligations
applicable in assessment reviews. However, Article 9 does not prescribe methodologies for assessment
proceedings such as those established in Article 2.4. 2 for the investigation phase. Instead, Article 9
establishes time limits for conducting assessment proceedings, ensuring that respondent companies
may obtain timely refund of any excess anti-dumping duties collected by a Member.
4.217 The United States argues that prior Appellate Body reports do not support an offset obligation
beyond the use of the average-to-average comparison methodology during the investigation phase. The
United States argues that Appellate Body has twice ar ticulated its view that an obligation exists to
provide offsets, in EC – Bed Linen and US – Softwood Lumber V. In both reports, the Appellate Body
focused its analysis on the phrase "all comparable export transactions"314 in Article 2.4.2, which applies
only to the use of the average-to-average methodol ogy to determine "the existence of margins of
dumping during the investigation phase. "315 The Appellate Body at no time has found that such an
obligation exists with respect to other comparis on methodologies during investigations, or in the
context of Article 9 duty assessment proceedings and new shipper reviews or Article 11 changed
circumstance reviews and sunset reviews.316

312 Panel Report, Argentina – Poultry Anti-Dumping Duties, para. 7.357.
313 Ibid, para. 7.355.
314 Appellate Body Report, US – Softwood Lumber, paras. 104, 105, 108; Appellate Body Report, EC –
Bed Linen (Article 21.5 – India), paras. 55-60.
315 Appellate Body Report, US – Softwood Lumber, para. 108; Appellate Body Report, EC – Bed Linen
(Article 21.5 - India), para. 66.
316 See Appellate Body Report, EC – Bed Linen, para. 62, n. 30 (confirming that Article 2.4.2 is not
concerned with the collection of anti-dumping duties, which is the province of Article 9 of the AD Agreement).

4.218 The United States points out, in US – Softwood Lumber V, the Appellate Body "emphasize[d]
that [the terms "all comparable export transactions" and "margins of dumping"] should be interpreted in
an integrated manner."317 Accordingly, the Appellate Body's conclusion that there was an obligation to
provide offsets when using the average-to-avera ge comparison methodology during the investigation
phase was the result of its interpretation of "all comparable export transactions" together with "margins
of dumping". The United States argues that any offset s that occur in this context reflect the use of
averages of export prices and normal values. That is, in applying the average-to-average methodology,
the Appellate Body found that in order to establis h a margin of dumping for "all comparable export
transactions", a Member has to aggregate a ll of the results of the model-specific and
level-of-trade-specific comparisons, including those comparisons that were not dumped. The offset
obligation, therefore, is tied to the use of the av erage-to-average methodology and did not arise out of
any independent obligation to offset prices.
4.219 The United States argues that therefore the Appe llate Body's analysis with respect to an
investigation, which pursuant to Article 2.4.2 concer ns a determination of the existence of margins of
dumping, does not apply to an Article 9.3 assessment proceeding, which concerns the final liability for
payment of anti-dumping duties – i.e. particular expor t transactions. Article 9.3 provides that "[t]he
amount of the anti-dumping duty shall not exceed the margin of dumping ... "(emphasis added). Duties
normally are based on the particular characteristics of the import and are often calculated based on the
value/price of that particular import. For example, duties are often calculated on an ad valorem basis,
applying the ad valorem rate to the price of the import. They are not calculated using an
average-to-average comparison methodology, and ther e is no obligation contained within Article 9.3
which would require an investigating authority to apply such a calculation in an assessment proceeding.
In fact, the only provision in the AD Agreement that provides for the use of the average-to-average
methodology is Article 2.4.2, and by its very terms, that provision applies only when determining the
existence of margins of dumping during the investigation phase.
4.220 The United States asserts that the phrase "durin g the investigation phase" is unique to
Article 2.4.2. The word "phase" is defined as "[a] distinct period or stage in a process or change or
development."
318 The use of the definite article "the" with the term "investigation phase" further
confirms that Article 2.4.2 is limited to a single, di stinct investigation phase. In fact, extending the
"investigation phase" would cover a ll proceedings and erode any mean ingful distinction between the
"investigation phase" and subsequent phases. Such an interpretation would effectively read the word
"phase" out of the text.319
4.221 Furthermore, the United States points out that the only stage of an anti-dumping proceeding
where the investigating authority is required to determine the "existence" of dumping in the
AD Agreement, other than Article 2.4.2, is in Article 5.1. This textual relationship between Article 2.4.2
and Article 5 stands in stark contrast to the terminology used in other provisions of the AD Agreement.
For example, Article 9.5 provides for a "review" of new exporters of subject merchandise, not an
"investigation," and Article 11 uses terms such as "review" and "determi ne" rather than "investigate".
Therefore, the use of the phrase "existence of margins of dumping during the investigation phase", both
in terms of its text and its context, indicates th at these words of limitation, which are unique to
Article 2.4.2, limit the application of Article 2.4.2 to Article 5 investigations.
4.222 The United States states that, wh ile Japan argues that this Panel should expand the Appellate
Body's findings to all phases of an anti-dumping proceed ing, Japan fails to cite to any text within the

317 Appellate Body Report, US – Softwood Lumber, para. 85.
318 New Shorter Oxford English Dictionary, p. 2182.
319 Appellate Body Report, US – Gasoline, p. 23 (noting that a panel may not interpret the Agreement in
a manner that would render a provision or language within the Agreement a nullity).

relevant provisions covering those procedures which supports such an interpretation of the
Anti-Dumping Agreement. The United States argues th at Japan has provided no textual or contextual
argument which would provide for an obligation for investigating authorities to provide an offset in any
Article 9 or Article 11 proceedings. With respect to Article 9.3, the language of the provision expressly
provides that the amount of anti-dumping duties "shall not exceed the margin of dumping as established
under Article 2." This general refe rence to Article 2 must necessarily include any specific limitations
contained therein. Therefore, the disciplines establis hed in Article 2 with respect to the calculation of
the margin of dumping apply to Article 9.3 assessment proceedings, except where otherwise specified.
Additionally, Japan has also provided no substantive or contextual argument arising out of the text of
Article 9.5 or Article 11 which would provide for an obligation to provide an offset in the proceedings
described in those provisions.
6. "As such" Claims under Article 11 of the AD Agreement with respect to Changed
Circumstance and Sunset Reviews
 Japan
320

4.223 Japan claims that maintaining zeroing proce dures and the standard zeroing lines in changed
circumstances and sunset reviews is inconsistent with Articles 2 and 11 of the AD Agreement. Japan
notes that, in Section 751 of the Tariff Act in additi on to periodic and new shipper reviews, the term
"administrative review" also includes "changed circumstances"321 and sunset or "five-year reviews".322
In changed circumstances reviews, upon request, the USDOC and the USITC are authorized to review
an affirmative anti-dumping duty determination, where warranted by changed circumstances, but
usually no earlier than two years after the pub lication of the notice of the determination. 323 In sunset
reviews, five years after publication of an anti-dumping duty order, the USDOC and the USITC,
respectively, review whether revocation of the or der "would be likely to lead to continuation or
recurrence of dumping … and of material injury".
324 In both changed circ umstances and sunset
reviews, the USDOC relies on dumping margins calculated in a prior original investigation or a periodic
review as the basis for the review determinati on. Accordingly, the USDOC necessarily relies on
margins that are calculated using either the model or simple zeroing procedures, one of which is always
a feature of the USDOCs margin calculations. Japan argues that dumping margins used for purposes of
Article 11 must be consistent with Article 2 of the AD Agreement . Japan understands that the
United States conducts changed circumstances and sunset reviews pursuant to the provisions of
Articles 11.2 and 11.3, respectively, of the AD Agreement.
4.224 Japan points out that, in US – Corrosion-Resistant Steel Sunset Review , the Appellate Body
confirmed that there is:
"[N]o obligation under Article 11.3 for investigating authorities to calculate or rely on
dumping margins in determining the likelihood of continuation or recurrence of
dumping. However, should investigating authorities choose to rely upon dumping
margins in making their likelihood determ ination, the calculation of these margins
must conform to the disciplines of Article 2.4 … . If these margins were legally flawed
because they were calculated in a manner inconsistent with Article 2.4, this could give

320 Japan First Written Submission, paras. 152-158; Japan 19 October 2005 Answers, para. 104.
321 Tariff Act, Section 751(b).
322 Ibid, Section 751(c).
323 Ibid, Section 751(b).
324 Ibid, Section 751(c)(1).

rise to an inconsistency not only with Article 2.4, but also with Article 11.3 of the AD
Agreement."325
4.225 Japan argues that this reasoning applies equa lly to reviews under Articles 11.2 and 11.3.
Moreover, in both cases, if an authority elects to rely on a dumping margin, that margin must be
consistent not only with Article 2.4, but also w ith the requirements in Articles 2.1 and 2.4.2 for
dumping, and dumping margins, to be calculated for the product as a whole. Accordingly, in changed
circumstances and sunset reviews, by relying on margins calculated in prior proceedings using model
and simple zeroing, the USDOC cannot comply with the obligations in Articles 2.1, 2.4 and 2.4.2,
because these margins are not based on a fair comp arison and are not calculated for the product as a
whole.
4.226 In consequence, Japan argues, the model and si mple zeroing procedures are also inconsistent
with Articles 11.2 and 11.3 of the AD Agreement because, as margins of dumping calculated using these
procedures are legally flawed, changed circumstanc es and sunset reviews that rely upon the dumping
margins are equally flawed. Also, because USDOC reviews conducted pursuant to these provisions are
flawed, the United States also fails to comply with the obligation in Article 11.1 of the AD Agreement to
ensure that anti-dumping duties "remain in for ce only as long as and to the extent necessary to
counteract dumping." Japan claims that the United States has not disagreed.326 Therefore, Japan argues,
it is undisputed that, if the standard zeroing proced ures and the standard zeroing line violate Article 2,
they also violate Article 11.327
4.227 Japan points out that the United States asserts in paragraphs 98-101 of its First Written
Submission that Japan has failed to demonstrate that the magnitude of dumping cited and relied upon by
the USDOC determinations is determinative of its likelihood determinations. However, Japan argues it
is disingenuous for the United States to argue that, in its sunset determinations, it does not rely on the
dumping margins calculated for respondents in the initial investigations and periodic reviews in light of
the fact that the US Congress has expressly manda ted that in sunset reviews, the USDOC " shall
consider ... the weighted average dumping margins determined in the investigation and subsequent
reviews ... ". 328 The mandatory nature of this obligation is further demonstrated by: (1) the specific
requirement in the USDOCs regulations that responde nts report this information in their substantive
responses to the USDOCs notice of initiation of sunset reviews329; and (2) the consistent citation by the
USDOC, in its sunset determinations, to the previous margins in concluding that dumping will recur at
the specified margin rates in the event that the anti-dumping order were revoked.330 Japan claims that it
is hard to imagine a clearer inst ance in which an authority "actually relies" on the specified types of
information.
 United States 331

325 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 127.
327 Ibid, para. 87.
328 Section 752(c)(1) of the Tariff Act of 1930, as added by the Uruguay Round Agreements Act
(emphasis added).
329 See 19 C.F.R. § 351.218d(3)(iii)(A). Specifically, the USDOC requires each respondent to report its
"individual weighted average dumping margin ... from the investigation and each subsequent completed
administrative review ... ". Id
330 See, e.g., Final Results of Expedited Sunset Reviews: Anti-friction Bearings From Japan, 64 Fed.
Reg. 60275, 60278 (4 November 1999) (Exhibit JPN-22); Issues and Decision Memorandum for the Full Sunset
Review of Corrosion-Resistant Carbon Steel Flat Products From Japan; Final Results, issue 2, comment
1(2 August 2000) (Exhibit JPN-23.A).
331 US First Written Submission, paras. 96-100.

4.228 The United States explains that Japan asserts that its "challenge encompasses the prohibition on
zeroing under any method of comparing normal value and export price" including "administrative or
periodic reviews, new shipper reviews, change d circumstances reviews and sunset reviews".
332 Japan
appears to suggest that its "as such" claims concerning investigations and assessment proceedings also
apply to the three types of reviews to which it refers. However, the United States argues that Japan does
not offer any new arguments concerning these types of reviews.
4.229 The United States argues that it has demonstrated that the Panel should reject Japan's claims
insofar as investigations and assessment proceedings are concerned. Specifically, the United States has
demonstrated that the "fair comparison" obligation of Article 2.4 cannot be read to require offsets in all
proceedings. The United States has demonstrated that the Appellate Body in US – Softwood Lumber V
only addressed whether Article 2.4.2 requires an o ffset when the investigating authority uses the
average-to-average methodology in the investigati on phase and at no time has found that such an
obligation exists with respect to other comparis on methodologies during investigations, or Article 11
changed circumstance reviews and sunset reviews. Moreover, by its own terms, the obligations of
Article 2.4.2 apply only to the investigation phase, and not to any other anti-dumping proceeding. For
the same reasons, the United States argues that the Panel should reject Japan's claims with insofar as
new shipper, changed circumstances and sunset reviews are concerned.
4.230 The United States notes that, with respect to changed circumstances reviews and sunset
reviews, Japan argues that USDOC cannot rely on margins calculated in prior proceedings, because
"these margins are not based on a fair comparison and are not calculated for the product as a whole".333
However, Japan never demonstrates that USDOC does rely on such margins. Indeed, neither USDOCs
determination of "whether the continued applica tion of anti-dumping duties is necessary to offset
dumping" under Article 11.2, nor its likelihood determ ination in a sunset review under Article 11.3 is
dependent on any specific magnitude of dumping.
4.231 The United States claims that Article 11.2 obl igates a Member to terminate an anti-dumping
duty when the Member determines "that the anti-du mping duty is no longer warranted". Specifically,
the Member is charged with determining "whether the continued application of anti-dumping duties is
necessary to offset dumping ... ". The Panel in US – DRAMS found:
"The word 'continued' covers a temporal re lationship between past and future. ... .
Thus, the inclusion of the word 'continued' signifies that the investigating authority is
entitled to examine whether imposition of the duty may be applied henceforth to offset
dumping."334
4.232 The United States states that Article 11.3 provides that a definitive anti-dumping duty must be
terminated after five years unless the authorities determine that "the expiry of the duty would be likely
to lead to continuation or recurrence of dumping and injury".
4.233 Thus, the United States argues that the focu s of a changed circumstances review under
Article 11.2 and the focus of a sunset review under Article 11.3 is on future behaviour, i.e. whether the
continued application of anti-dumping duty is necessar y to offset dumping in the future, and whether
dumping and injury are likely to continue or recur in the event of expiry of the duty. Neither the precise
amount of dumping in any one year, nor the precise amount of likely future dumping, is determinative.
Indeed, such precision is unattainable in what is inevitably a somewhat speculative projection of future

behaviour.335 Because neither determination relies on the magnitude of the margin of dumping in any
of the assessment reviews, Japan has failed to establish a prima facie case concerning USDOCs
likelihood determination in either a changed circumstances review or a sunset review.
7. "As such" Claims with respect to Articles 1 and 18.4 of the AD Agreement and
Article XVI:4 of the WTO Agreement in Relation to Original Investigations
 Japan 336

4.234 Japan argues that, as a consequence of the model and simple zeroing procedures'
inconsistencies with various provisions of Articles 2, 3, 5, 9 and 11 of the AD Agreement, the United
States also acts inconsistently with Articles 1 and 18.4 of that Agreement and Article XVI:4 of the WTO
Agreement.
4.235 Japan argues that Article 18.4 of the AD Agreement states that a Member shall "ensure … the
conformity of its laws, regula tions and administrative procedures with the provisions of this
Agreement". The standard model and simple zeroing pr ocedures are "administrative procedures" that
do not conform to various provisions of the AD Agreement. By maintaining these procedures, therefore,
the United States acts inconsistently with its obligations under Article 18.4.
4.236 In US – 1916 Act , the Appellate Body held that the first sentence of Article 1 of the
AD Agreement "states that 'an anti-dumping measure' must be consistent with Article VI of the GATT
1994 and the provisions of the AD Agreement".
337 In that appeal, the Appellate Body noted that the
term "anti-dumping measures" "seems to encompass all measures taken against dumping". 338 In
addition, the word encompasses "laws, regulations and administrative procedures" that set forth
standards for the conduct of anti-dumping pr oceedings because these are "measures" of an
"anti-dumping" character. In that respect, the measure at issue in US – 1916 Act, i.e. the 1916 Act, is a
"law" under Article 18.4 that was also held to fall with in the scope of Article 1. Article 1, therefore,
applies as much to measures taken against dumping as it does to measures taken to enforce
anti-dumping rules. Accordingly, as the standard model and simple zeroing procedures are not
consistent with various provisions of the AD Agreement, they are also inconsistent with the "principles"
set forth in Article 1.
4.237 Japan argues that, similar to Article 18.4 of the AD Agreement , Article XVI:4 of the
WTO Agreement states that a Member shall "ensure … the conformity of its laws, regulations and
administrative procedures with its obligations in th e annexed Agreements". The annexed Agreements
include the AD Agreement and the GATT 1994. By maintaining the model and simple zeroing
procedures, which are "administrative procedures" not in conformity with various provisions of the
AD Agreement and the GATT 1994, the United States fails to take all necessary steps to ensure it
complies with its WTO obligations. Accordingly, the United States also violates its obligation under
Article XVI:4 of the WTO Agreement.

335 See, e.g., Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews , para. 341
(discussing prospective nature of analysis in Article 11.3 reviews). Although there is no requirement to quantify
the amount of dumping likely to continue or recur, the US does so under its domestic law. USDOC transmits this
information to the USITC.
336 Japan First Written Submission, paras. 159-164.
337 Appellate Body Report, US – 1916 Act, para. 119.
338 Appellate Body Report, US – 1916 Act, para. 119.

B. "A
S APPLIED" CLAIMS339
 Japan 340

4.238 Japan challenges the standard model and simp le zeroing procedures, "as applied", in the
measures identified in Japan's panel request. In total, Japan challenges 14 specific measures concerning
three different types of anti-dumping proceeding: one original investigation, 11 periodic reviews and
two sunset reviews. Japan states that the United States has, essentially, failed to respond to these "as
applied" claims.
341
1. Claims with respect to an Original Investigation342
4.239 Japan challenges the application of the US DOCs procedures of zeroing in one original
investigation and claims the investigation was inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 3.1, 3.2, 3.3,
3.4, and 3.5 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994.
4.240 On 13 December 1999, the USDOC imposed anti-dumping duties in CTL Plate , 64 Fed Reg.
73,215. 343 The ad valorem rate of anti-dumping duty was 10.78 per cent for Kawasaki Steel
Corporation and all others.344 In calculating the margin of dumping in this investigation, the USDOC
used a W-to-W comparison, including its standa rd model zeroing procedures. Specifically, in
aggregating the results of the multiple model- based comparisons, the USDOC disregarded any
comparisons with negative results. The computer language by which the USDOC eliminated the
negative comparison results is the standard zeroing line: "WHERE EMARGIN GT 0". This language is
identical to the computer code in the USDOCs standard computer programme. Without the application
of the standard zeroing procedures, the margin of dumping and, hence, the respondent's deposit rate
would have been lower.
4.241 Japan argues that, for the reasons Japan has al ready presented model zeroing is inconsistent
with Articles 2.1 and 2.4.2 of the AD Agreement , and Articles VI:1 and VI:2 of the GATT 1994,
because relying on these procedures, the USDOC fails to determine the existence of dumping, or
calculate a dumping margin, for the product as a whol e. Indeed, the Appellate Body has already
considered the United States' use of its model zeroi ng procedures in an investigation, and held that,
although an investigating authority is entitled to compare normal value and export price through
multiple model-based comparisons, the "investigating authority necessarily has to take into account the
results of all those comparisons in order to establish ma rgins of dumping for the product as a whole
under Article 2.4.2".
345 The Appellate Body concluded, therefore, that the USDOCs exclusion of the
comparison results for certain models (i.e. those with a negative result) in obtaining the aggregate result
for the product as a whole, was incons istent with Article 2.4.2 of the AD Agreement .346 Equally,
because the Appellate Body's reasoning derived from the language contained in Article 2.1 347, the
failure to determine the existence of dumping, and to calculate the margin of dumping, for the product
as a whole is inconsistent with Article 2.1, as well as with Articles VI:1 and VI:2 of the GATT 1994.

339 See Table following para. 2.3 of this Report.
340 Japan First Written Submission paras. 65-74, 165-193.
342 Japan First Written Submission paras. 66-69, 167-177; Japan Opening Statement, First Substantive
Meeting of the Panel with the Parties, paras. 62-64.
343 Exhibit JPN-10.
344 Exhibit JPN-10.
345 Appellate Body Report, US – Softwood Lumber V, para. 98 (emphasis in original).
346 Ibid, para. 102.
347 Ibid, para. 93.

4.242 Japan argues that, for the same reasons, the application of the standard model zeroing
procedures in the CTL Plate investigation renders the USDOCs dumping determination inconsistent
with Articles 2.1 and 2.4.2. of the AD Agreement, and with Articles VI:1 and VI:2 of the GATT 1994.
By automatically disregarding the negative results in calculating the overall margin of dumping in
CTL Plate, the USDOC did not consider the results of all the comparisons for the product, and thus its
dumping determination and the margin of dumping are not for the product as a whole.
4.243 Japan also argues that, for the reasons Japan has stated the USDOCs standard model zeroing
procedures, as applied in CTL Plate, are inconsistent with the "fair comparison" requirements contained
in Article 2.4 of the AD Agreement. The Appellate Body has specifica lly held, in considering a claim
against these procedures, that there "is an inhe rent bias in a zeroing methodology," and that a
comparison that inflates the margin of dumping an d could even lead to an affirmative dumping
determination where no dumping would have been established without zeroing, is not a fair comparison
between export price and normal value.348 Likewise, the USDOCs use of the model zeroing procedures
in CTL Plate resulted in an unfair, biased comparison between export price and normal value. By
disregarding all model-based comparisons with a negative result, the USDOC calculated a weighted
overall dumping margin that was inflated by an amount equal to the excluded negative values. Also, by
effectively treating the negative price difference as a zero difference, the USDOC interferes with export
price for these models by artificially reducing export price. This price-distortion also renders the
comparison of normal value and export price unfair. The USDOCs application of the standard model
zeroing procedures in CTL Plate renders the USDOCs dumping determin ation inconsistent, therefore,
with the "fair comparison" requirement in Article 2.4 of the AD Agreement.
4.244 Japan argues that the USITCs inju ry determination in CTL Plate 349 is inconsistent with
Articles 3.1, 3.2, 3.3, 3.4, and 3.5 of the AD Agreement. Article 3.1 of the AD Agreement requires that
an injury determination be based on "an objective examination" of "positive evidence" concerning the
"volume of the dumped imports", their "effect" on prices of the like domestic product, and the
"consequent impact" of dumped imports on domestic producers. The Appellate Body has held that
"positive evidence" is evidence "of an affirmative, objective and verifiable character" and "must be
credible".350 An "objective examination" is one that "con form[s] to the dictates of the basic principles
of good faith and fundamental fairness".351
4.245 Japan argues that several aspects of the USIT Cs injury determination are based upon the
USDOCs dumping determination, including the volume of the dumped imports(pursuant to
Articles 3.1, 3.2, 3.3, 3.4 and 3.5), the rate of increase of dumped imports(pursuant to Articles 3.2, and
possibly Articles 3.4 and 3.5), the prices of dumped imports(pursuant to Articles 3.2, 3.3, 3.4 and 3.5),
and the magnitude of dumping (pursuant to Articles 3. 4 and 3.5). As a result of the application of the
standard model zeroing procedures, the USDOCs dumpi ng determination is flaw ed. In consequence,
the evidence of dumping produced by that flawed determination does not meet the requirements of
"positive evidence" nor permit an "objective examination". In particular, the USITC has no objective,
verifiable, credible, or otherwise reliable eviden ce regarding the volume of dumped and non-dumped
imports, the rate of increase of dumped imports, their prices and price effects, and the magnitude of
dumping.

348 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 135.
349 Cut-To-Length Carbon Steel Plate from Japan , Investigation Nos. 701-TA-387-391 and
731-TA-816-821(Final), USITC Pub. No. 3273 (January 2000) (Exhibit JPN-10.B).
350 Appellate Body Report, US – Hot-Rolled Steel, para. 192.
351 Appellate Body Report, US – Hot-Rolled Steel, para. 193.

4.246 Japan argues that as the USITC is re quired to do under United States law
352, it relied on the
USDOCs dumping determination in CTL Plate to determine the volume of dumped and non-dumped
imports, the rate of increase of dumped imports, the prices of dumped imports, and the magnitude of
dumping.
353 In so doing, the USITC relied on evidence that stemmed from the incomplete and unfair
aggregation of model-based comparisons conducte d by the USDOC pursuant to its model zeroing
procedure. That evidence is, therefore, not evidence of dumping for the product as a whole nor, because
of the biased comparison, is it a reliable indication of the existence or amount of dumping. The USITCs
injury determination in CTL Plate was, therefore, not based on an "objective examination" of "positive
evidence", as required by Article 3 of the AD Agreement.
4.247 In responding to comments by the United States with regards to injury, Japan points out that the
United States suggests that Japan's conclusion with respect to CTL Plate is "speculative and unfounded"
because "it does not follow that [USDOC] would have reported different margins of dumping to the
USITC had it applied a different approach" to the dumping determination.
354 It continues that, "[i]n the
absence of such a showing, Japan has failed to meet its burden …". 355 Japan claims that it is the United
States' argument that is "speculative". The mere possibility that USDOC would have reported the same
margin of dumping to the ITC by applying a differe nt approach, does not cure the tainted injury
determination that was not based on "positive evidence."
4.248 As a result, Japan has proved an "as applied" violation of Article 3 in the CTL Plate
investigation because the USITC relied on evidence in making its injury determination that was not
"positive". Moreover, that "as applied" violation proves that the maintenance of the zeroing procedures
necessarily results in violations of Article 3 in "particular circumstances".
4.249 Japan also states that, in US – 1916 Act , the Appellate Body held that the first sentence of
Article 1 of the AD Agreement "states that 'an anti-dumping measure' must be consistent with Article VI
of the GATT 1994 and the provisions of the AD Agreement".356 In that appeal, the Appellate Body
noted that the term "anti-dumping measures" "seems to encompass all measures taken against
dumping".357 The anti-dumping measure taken in the CTL Plate investigation is subject to Article 1. In
light of the fact that the measure is not consistent with various provisions of the AD Agreement nor with
Articles VI:1 and VI:2 of the GATT 1994, it is also inconsistent with Article 1 of the AD Agreement.
2. Claims with respect to Periodic Reviews358
4.250 Japan challenges 11 anti-dumping measures that resulted from periodic reviews and claims that
each of these is inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 9.1, 9.2, and 9.3 of the AD Agreement, and
with Articles VI:1 and VI:2 of the GATT 1994. Those cases are as follows:
(1) On 15 March 2001, the USDOC calculat ed anti-dumping duties in Tapered Roller
Bearings and Parts Thereof 1998 - 1999, 66 Fed Reg. 15,078.359 The period of review
is 1 October 1998 through 30 September 1999, and the rate of the ad valorem
anti-dumping duty was 14.86% for Koyo Seiko Co., Ltd. 360 Without zeroing, the

352 See Tariff Act, Section 771(35)(C)(ii).
353 Cut-To-Length Carbon Steel Plate from Japan , Investigation Nos. 701-TA-387-391 and
731-TA-816-821, (Final), USITC Pub. No. 3273, at 24 n.143 (January 2000) (Exhibit JPN-10.B).
356 Appellate Body Report, US – 1916 Act, para. 119.
357 Appellate Body Report, US – 1916 Act, para. 119.
358 Japan First Written Submission, paras. 70-73, 178-186.
359 Exhibit JPN-11.
360 Exhibit JPN-11.

results of the dumping margin calculation by the USDOC would have been negative,
and no anti-dumping duty would have been collected.

(2) On 6 March 2000, the USDOC imposed anti-dumping duties in Tapered Roller
Bearings and Parts Thereof 1997 - 1998, 65 Fed Reg. 1,767.361 The period of review is
1 October 1997 through 30 September 1998, and the rate of the ad valorem
anti-dumping duty was 17.94% for Koyo Seiko Co., Ltd. 362 Without zeroing, the
USDOC would have calculated a lower anti-dumping margin.

(3) On 11 August 2000, the USDOC imposed anti-dumping duties in Ball Bearings and
Parts Thereof 1998-1999, 65 Fed. Reg. 49,219.363 The period of review is 1 May 1998
through 30 April 1999, and the rate of the ad valorem anti-dumping duty was 6.14% for
NTN Corporation.364 Without zeroing, the results of the dumping margin calculation
by the USDOC would have been negative, and no anti-dumping duty would have been
collected.

(4) On 11 August 2000 the USDOC imposed anti-dumping duties in Cylindrical Roller
Bearings and Parts Thereof 1998-1999, 65 Fed. Reg. 49,219365 The period of review is
1 May 1998 through 30 April 1999, and the rate of the ad valorem anti-dumping duty
was 3.49% for NTN Corporation. 366 Without zeroing, the results of the dumping
margin calculation by the USDOC would have been negative, and no anti-dumping
duty would have been collected.

(5) On 11 August 2000, the USDOC imposed anti-dumping duties in Spherical Plain
Bearings and Parts Thereof 1998-1999, 65 Fed. Reg. 49,219.367 The period of review
is 1 May 1998 through 30 April 1999, and the rate of the ad valorem anti-dumping duty
was 2.78% for NTN Corporation. 368 Without zeroing, the results of the dumping
margin calculation by the USDOC would have been negative, and no anti-dumping
duty would have been collected.

(6) On 12 July 2001, the USDOC imposed anti-dumping duties in Ball Bearings and Parts
Thereof 1999-2000 , 66 Fed. Reg. 36,551. 369 The period of review is 1 May 1999
through 30 April 2000, and the rates of the ad valorem anti-dumping duty were 10.10%
for Koyo Seiko Co., Ltd., 9.16% for NTN Corporation, and 4.22% for NSK Ltd. 370
Without zeroing, the results of the dumping margin calculation by the USDOC for
these three respondents would have been negative, and no anti- dumping duty would
have been collected.

(7) On 12 July 2001, the USDOC imposed anti-dumping duties in Cylindrical Roller

Bearings and Parts Thereof 1999 , 66 Fed. Reg. 36,551. 371 The period of review is 1
May 1999 through 31 December 1999, and the rates of the ad valorem anti-dumping

361 Exhibit JPN-12.
362 Exhibit JPN-12.
363 Exhibit JPN-13.
364 Exhibit JPN-13.
365 Exhibit JPN-14.
366 Exhibit JPN-14.
367 Exhibit JPN-15.
368 Exhibit JPN-15.
369 Exhibit JPN-16.
370 Exhibit JPN-16.
371 Exhibit JPN-17.

duty were 5.28% for Koyo Seiko Co., Ltd. and 16.26% for NTN Corporation.
372
Without zeroing, the results of the dumping margin calculation by the USDOC for both
respondents would have been negative, a nd no anti-dumping duty would have been
collected.

(8) On 12 July 2001, the USDOC imposed anti-dumping duties in Spherical Plain
Bearings and Parts Thereof 1999 , 66 Fed. Reg. 36,551. 373 The period of review is 1
May 1999 through 31 December 1999, and the rate of the ad valorem anti-dumping
duty was 3.60% for NTN Corporation.374 Without zeroing, the results of the dumping
margin calculation by the USDOC would have been negative, and no anti-dumping
duty would have been collected.

(9) On 15 October 2002, the USDOC imposed anti-dumping duties in Ball Bearings and
Parts Thereof 2000-2001, 67 Fed. Reg. 55,780, as amended by 67 Fed. Reg. 63,608.375
The period of review is 1 May 2000 through 30 April 2001, and the rates of the ad
valorem anti-dumping duty were 6.07% for NSK Ltd., 2.51% for Asahi Seiko Co.,
Ltd., and 9.34% for NTN Corporation.376 Without zeroing, the results of the dumping
margin calculation by the USDOC for these three respondents would have been
negative, and no anti-dumping duty would have been collected.

(10) On 16 June 2003, the USDOC imposed anti-dumping duties in Ball Bearings and Parts
Thereof 2001-2002 , 68 Fed. Reg. 35,623. 377 The period of review is 1 May 2001
through 30 April 2002, and the rates of the ad valorem anti-dumping duty were 4.51%
for NTN Corporation and 2.68% for NSK Ltd. 378 Without zeroing, the results of the
dumping margin calculation by the USDOC for both respondents would have been
negative, and no anti-dumping duty would have been collected.

(11) On 15 September 2004, the USDOC imposed anti-dumping duties in Ball Bearings and
Parts Thereof 2002-2003, 69 Fed. Reg. 55,574.379 The period of review is 1 May 2002
through 30 April 2003, and the rates of the ad valorem anti-dumping duty were 5.56%
for Koyo Seiko Co., Ltd., 2.74% for NTN Corporation, 2.46% for NSK Ltd., and
3.37% for Nippon Pillow Block Co., Ltd.
380 Without zeroing, the results of the
dumping margin calculation by the USDOC for these four respondents would have
been negative, and no anti-dumping duty would have been collected.

4.251 Japan focuses on one example of these periodic reviews, Ball Bearings and Parts Thereof
1999-2000, 66 Fed. Reg. 36,551, and explains the WTO-inconsistency of that measure as a result of the
application of the standard simple zeroing procedures. The other ten measures are, for identical
reasons, also WTO-inconsistent. For all 11 measures, Japan submits evidence of the application of the
simple zeroing procedures.381

372 Exhibit JPN-17.
373 Exhibit JPN-18.
374 Exhibit JPN-18.
375 Exhibit JPN-19.
376 Exhibit JPN-19.
377 Exhibit JPN-20.
378 Exhibit JPN-20.
379 Exhibit JPN-21.
380 Exhibit JPN-21.
381 See Exhibits JPN-11 to 21.C.

4.252 Japan notes that, on 12 July 2001, the USDOC imposed anti-dumping duties in Ball Bearings
and Parts Thereof 1999-2000 , 66 Fed. Reg. 36,551. 382 To determine the anti-dumping duties to be
collected for entries made during the period of revi ew, i.e. the assessment rate, and to determine the
deposit rate for future entries, the USDOC calculated margins of dumping using a W-to-T comparison
that included the standard simple zeroing procedures. The USDOC, therefore, made multiple
comparisons between a weighted average normal valu e and export price for a series of comparable
individual export transactions. In terms of the USDOCs standard simple zeroing procedures, in
aggregating the results of the multiple transaction- based comparisons to obtain the overall weighted
average dumping margin, only those comparisons for which there were positive results were taken into
account. In other words, the USDOC disregarded any comparisons with a negative value. As a result,
the sum total amount of dumping was inflated by an amount equal to the excluded negative values.
Without zeroing, the results of those calculations would have been negative for each of these three
respondents, and no anti-dumping duties would have been assessed or collected. Japan asserts that the
computer language by which the USDOC eliminated the negative comparison results is the standard
zeroing line, namely "WHERE EMARGIN GT 0;" or "WHERE UMARGIN GT 0;".383 This language
is identical to the computer code in the USDOCs standard computer programme for periodic reviews.384
4.253 Japan argues that, under Article 9.3, "the amount of the anti-dumping duty shall not exceed the
margin of dumping as established under Article 2". Consistent with this text, margins of dumping
calculated in a periodic review under Article 9.3 mu st be calculated in accordance with the "agreed
disciplines" in Article 2. 385 Among those "disciplines", Articles 2.1 and 2.4.2 of the AD Agreement,
together with Articles VI:1 and VI:2 of the GATT 1994, require that margins of dumping be determined
for the product as a whole. As a result, wher e the investigating authority undertakes multiple
comparisons to determine the margins in a periodic review, it must take account of the results of all of
the multiple comparisons in the aggregation of co mparison results; not merely those with positive
values. Japan argues that, in Ball Bearings and Parts Thereof 1999-2000 , 66 Fed. Reg. 36,551, the
USDOC calculated the overall margin of dumping (or assessment rate) using only those
transaction-based comparisons for which there was a positive result. The USDOCs failure to establish
the margins of dumping for the product as a whole by considering all of the multiple comparison
results, including negative ones, resulted in affirmat ive dumping determinations in Ball Bearings and
Parts Thereof 1999-2000, 66 Fed. Reg. 36,551 (and the other te n periodic reviews Japan challenges).
Accordingly, the application of the standard simple zeroing procedures in this periodic review (and the
other ten periodic reviews) is inconsiste nt with Articles 2.1 and 2.4.2 of the AD Agreement and also
Articles VI:1 and VI:2 of the GATT 1994.
4.254 Japan also argues that the Appellate Body ruled, in US – Corrosion-Resistant Steel , that
margins of dumping calculated under Article 9.3 must meet the fair comparison requirements of
Article 2.4. Japan has already demonstrated that the standard model and simple zeroing procedures are
inconsistent "as such" with these requirements. In the same way, the application of the simple zeroing
procedures in Ball Bearings and Parts Thereof 1999-2000 , 66 Fed. Reg. 36,551, also resulted in an
unfair comparison that is inconsistent with Article 2.4 of the AD Agreement. In this periodic review, the
elimination of comparisons with negative results generated an overall positive dumping margin for each
respondent, whereas the inclusion of all comparisons would have resulted in a negative figure for all of
them. Such a comparison, for the product as a whole, is manifestly unfair.

382 Exhibit JPN-16. This measure is identified as Specific Case No. 8 in Japan's panel request.
383 See Exhibit JPN-1.D, which indicates that the Standard Zeroing Line may be found on lines 1268 and
1336 of Exhibit JPN-16.A, lines 2622 and 2690 of Exhibit JPN-16.B, and lines 1345 and 1413 of Exhibit
JPN-16.C.
384 Exhibit JPN-7 at 16 and 17.
385 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para 127.

4.255 Japan asserts that the application of zeroing in these reviews at issue is inconsistent with Article
9 of the AD Agreement. Two conditions must be met to satisfy the requirements of Article 9: (1) the
margin of dumping to be calculated for the purpose of the duty assessment proceedings must be
established consistently with Article 2; and (2) the amount of anti-dumping duty to be imposed and
collected must not exceed the ceiling set by such marg ins of dumping. It therefore follows that if the
procedures for calculating margins of dumping are inc onsistent with Article 2, including Articles 2.1,
2.4 and 2.4.2, the application of those same procedures in a periodic review is also legally flawed. As
explained above, the application of simple zeroing in the calculation of the margins of dumping in Ball
Bearings and Parts Thereof 1999-2000, 66 Fed. Reg. 36,551, is inconsis tent with Articles 2.1, 2.4 and
2.4.2, and therefore, the USDOC failed to establish the margin of dumping in the review at issue in a
manner consistent with Article 2 of the AD Agreement. Indeed, the USDOC would have determined
that there were no margins of dumping but for its a pplication of the simple zeroing procedures. As a
result, the USDOC seeks to collect anti-dumping duties when it is not entitled to collect any, and thus
the USDOC acts inconsistently with the second c ondition identified above. Therefore, the USDOCs
application of simple zeroing in Ba ll Bearings and Parts Thereof 1999-2000 , 66 Fed. Reg. 36,551, to
calculate the margins of dumping is also incons istent with Articles 9.1, 9.2 and 9.3 of the
AD Agreement.
4.256 Finally, Japan argues that in light of the fact that the "anti-dumping measures" applied in Ball
Bearings and Parts Thereof 1999-2000 , 66 Fed. Reg. 36,551 (and, for the same reasons, the other ten
periodic reviews challenged) are not consistent with various provisions of the AD Agreement, they are
also inconsistent with Article 1 of the AD Agreement.
3. Claims with respect to Sunset Reviews386
4.257 Japan claims that anti-dumping measures adopted pursuant to two sunset reviews 387 are
inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 11.1, and 11.3 of the AD Agreement and Articles VI:1, and
VI:2 of the GATT 1994, because, in these two reviews, the investigating authorities relied on dumping
margins calculated using the standard zeroing procedures.
4.258 Japan addresses one of these two measures in detail, Expedited Sunset Review of Anti-friction
Bearings, 64 Fed. Reg. 60,275, as the other involves precisely the same WTO-inconsistencies. For both
measures, Japan submits evidence of the reliance upon margins that were calculated using standard
zeroing procedures.388
4.259 Japan points out that, on 4 November 1999, the USDOC issued its Final Results in Expedited
Sunset Review of Anti-friction Bearings, 64 Fed. Reg. 60,275, in which it found that revocation of the
anti-dumping order on Ball Bearings from Japan would be likely to lead to continuation or recurrence of
dumping.389 In making this determination, the USDOC specifically relied on the "margins determined
in the original investigation a nd subsequent periodic reviews", and concluded that because "dumping
has continued over the life of the orders, the [USDOC] determines that dumping is likely to continue if
the orders were revoked".390 Thus, in Expedited Sunset Review of Anti-friction Bearings, 64 Fed. Reg.
60,275, the investigating authorities relied on dumping margins calculated in the original investigation
and periodic reviews. In calculating these margins, whether using model or simple zeroing procedures,
the USDOC disregarded all comparisons that gave rise to a negative result. Specifically, the

386 Japan First Written Submission, paras. 74, 187-193.
387 Exhibits JPN-22 and 23.
388 Exhibits JPN-22 to 23.D.
389 Exhibit JPN-22.
390 Exhibit JPN-22.

programmes in question contain the zeroing language: "IF EMARGIN GT 0". 391 As a result of the
USDOCs application of the standard zeroing procedures, the dumping margins were inflated.
4.260 Japan argues that margins used in a sunset revi ew must be consistent with Article 2 of the
AD Agreement. In a sunset review, investigating authorities are not entitled to rely on dumping margins
calculated using standard zeroing pr ocedures. As noted above, in US – Corrosion-Resistant Steel
Sunset Review, the Appellate Body confirmed that there is:
"no obligation under Article 11.3 for investiga ting authorities to calculate or rely on
dumping margins in determining the likelihood of continuation or recurrence of
dumping. However, should in vestigating authorities choose to rely upon dumping
margins in making their likelihood determ ination, the calculation of these margins
must conform to the disciplines of Article 2.4".392
4.261 Thus, where investigating authorities elect to rely on dumping margins calculated in an original
investigation and/or subsequent periodic reviews, those margins must be calculated for the "product" as
a whole, through a "fair comparison," as required by Articles 2.1, 2.4 and 2.4.2 of the AD Agreement.
4.262 Japan argues that, in Expedited Sunset Review of Anti-friction Bearings, 64 Fed. Reg. 60,275,
both the USDOC and the USITC chose to rely on dumping margins calculated in earlier investigations
and periodic reviews in reaching their likelihood determinations.393 However, as described above, the
USDOC used its standard zeroing procedures to calcu late these margins. According to the Appellate
Body's findings in US Corrosion-Resistant Steel Sunset Review 394, the reliance on margins in a sunset
review that are calculated in a manner inconsistent with Articles 2.1, 2.4 and 2.4.2 of the AD Agreement
means that the determinations in the sunset reviews are inconsistent with Articles 11.1 and 11.3 of the
AD Agreement . In essence, the investigating authorities' conclusions in the Anti-friction Bearings
Sunset Review, under those provisions, are deprived of legal validity because they are based, in part, on
flawed dumping margins. The same is true of the measures adopted pursuan t to the second sunset
review at issue.395
4.263 In addition, Japan argues that, in light of the fact that the "anti-dumping measure" adopted in
Expedited Sunset Review of Anti-friction Bearings, 64 Fed. Reg. 60,275 (and the second sunset review
challenged) are not consistent w ith various provisions of the AD Agreement , the measure is also
inconsistent with Article 1 of the AD Agreement.

391 See Exhibits JPN-22.A at 2 and JPN-22.B at 3, for the zeroing language in Koyo Seiko and NTN's
original investigation computer programmes.
392 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , para. 127 ( underlining
added).
393 Exhibit JPN-22; Determination of the USITC in Certain Bearings from China, France, Germany,
Hungary, Italy, Japan, Romania, Singapore, Sweden, and the United Kingdom, Investigation Nos. AA-1921-143,
731-TA-341, 731-TA-343-345, 731-TA-391-397, and 731-TA-399 (Review), at 20 n.128, and 94 (Exhibit
JPN-22.C).
394 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 127.
395 See USDOC, Issues and Decision Memo for the Full Sunset Review of Corrosion-Resistant Carbon
Steel Flat Products from Japan; Final Results at Comment 1 (2 August 2000) (Exhibit JPN-23.A); Determination
of the USITC in Certain Carbon Steel Products from Australia, Belgium, Brazil, Canada, Finland, France,
Germany, Japan, Korea, Mexico, Netherlands, Poland, Romania, Spain, Sweden, Taiwan, and United Kingdom,
Investigations Nos. AA-1921-197, 701-TA-231, 319-320, 322, 325-328, 340, 342, and 348-350, and
731-TA-573-576, 578, 582-587, 604, 607-608, 612, and 614-618 (Review), at 53 n.369 (Exhibit JPN-23.B).

 United States
396

4.264 With regards to Japan's "as applied" claims, the United States addresses both a claim made by
Japan in the original investigation, the CTL Plate
, 64 Fed Reg. 73,215, injury determination,397 and the
sunset reviews that Japan challenges.
4.265 With regards to the original investigation in CTL Plate , 64 Fed Reg. 73,215, the United States
argues that the speculative nature of Japan's Article 3 challenges is further confirmed by its arguments
suggesting that the USITC acted inconsistently with the provisions of that Article in reaching certain
injury determinations. The United States explains that Japan contends that USDOCs calculation of
dumping margins in CTL Plate , 64 Fed Reg. 73,215, rendered the USITCs corresponding injury
determination inconsistent with Articles 3.1, 3.2, 3.3, 3.4, and 3.5 of the AD Agreement .398 Japan
argues that the USITC investigation was not objective and its determination was not based on positive
evidence because the USITC had "no objective, verifiable, credib le, or otherwise reliable evidence
regarding dumped import volumes and prices, and the magnitude of dumping".399
4.266 The United States argues that the Panel should dismiss Japan's claims concerning the CTL
Plate, 64 Fed Reg. 73,215, injury determination, wh ether or not USDOCs decision not to offset was
inconsistent with the AD Agreement . First, as noted above, the Unite d States disagrees with the
Appellate Body's conclusion that offsets are required when using the average-to-average methodology
under Article 2.4.2. Therefore, the United States disagrees that USDOCs decision not to "offset" in this
investigation was WTO-inconsistent. Second, Japan's assertion that the margins calculated pursuant to
the average-to-average approach in this investigation caused the USITC to act in a manner inconsistent
with Articles 3.1, 3.2, 3.3, 3.4, and 3.5 is speculative and unfounded.
4.267 The United States argues that, even assuming that the margin calculations were inconsistent
with the AD Agreement , it does not follow that USDOC woul d have reported different margins of
dumping to the USITC had it applied a different approach. Because the AD Agreement provides more
than one permissible comparison methodology by which dumping margins may be calculated
(average-to-average, transaction-to-transaction, or in certain circumstances, average-to-transaction),
Japan cannot presume or establish that USDOC ne cessarily would have calculated different dumping
margins in CTL Plate, 64 Fed Reg. 73,215. In the absence of such a showing, the United States argues
that Japan has failed to meet its burden to demonstr ate that the USITCs injury determination in CTL
Plate, 64 Fed Reg. 73,215, is inconsistent with Articles 3.1, 3.2, 3.4 and 3.5 of the AD Agreement.
4.268 The United States rejects Japan's arguments made with respect to the sunset reviews in Sunset
Review of Anti-friction Bearings , 64 Fed. Reg. 60,275, 400 and Full Sunset Review of
Corrosion-Resistant Carbon Steel Flat Products , 65 Fed. Reg. 47,380401. The United States points out
that Japan also asserts that USDOCs calculati on of dumping margins resulted in certain sunset
determinations by the USITC that were inconsistent with Article 11.3 of the AD Agreement. Japan

396 US First Written Submission, paras. 105-108.
397 Cut-To-Length Carbon Steel Plate from Japan , Investigation Nos. 701-TA-387-391 and
731-TA-816-821, (Final), USITC Pub. No. 3273 (January 2000) (Exhibit JPN-10.B).
398 Japan First Written Submission, paras. 69, 173-175.
400 Certain Bearings from China, France, Germany, Hungary, Italy, Japan, Romania, Singapore,
Sweden, and the United Kingdom , Investigation Nos. AA-1921-143, 731-TA-341, 731-TA-343-345,
731-TA-391-397, and 731-TA-399 (Review), USITC Pub. No. 3309 (June 2000) (Exhibit JPN-22.C).
401 Certain Carbon Steel Products from Australia, Belgium, Brazil, Canada, Finland, France, Germany,
Japan, Korea, Mexico, Netherlands, Poland, Romania, Spain, Sw eden, Taiwan, and United Kingdom ,
Investigations Nos. AA-1921-197, 701-TA-231, 319-320, 322, 325-328, 340, 342, and 348-350, and
731-TA-573-576, 578, 582-587, 604, 607-608, 612, and 614-618 (Review), USITC Pub. 3364 (Nov. 2000)
(Exhibit JPN-23.B).

alleges that the USITCs determinations of the likel ihood of continuation or recurrence of injury in
Sunset Review of Anti-friction Bearings , 64 Fed. Reg. 60,275, and Full Sunset Review of
Corrosion-Resistant Carbon Steel Flat Products , 65 Fed. Reg. 47,380, are invalid because the USITC
relied on flawed dumping margins.402 Japan's claims on this issue, like those regarding the CTL Plate,
64 Fed Reg. 73,215, injury determination, are speculative and unfounded.403
V. ARGUMENTS OF THE THIRD PARTIES
A. ARGENTINA
1. "As such" Claims
(a) Zeroing Procedures Challenged as Measures404
5.1 Argentina points out that Japan contends that the USDOC maintains what it calls standard
computer programmes, one of which is the an ti-dumping margin calculation programme. These
programmes are in and of themselves "measures" for the purposes of the DSU, and henceforth,
susceptible of being challenged "as such" before the WTO dispute settlement system. Whether the
measure at issue is the programme in its entirety, or a single line of it, is irrelevant for the purpose of the
decision to be made by the Panel.
5.2 Argentina argues that whether there is "a" single computer programme or "several" does not
seem to be of relevance for the matter the Panel has to resolve provided that all of them contain the line
that Japan has came to call "the zeroing line" 405. That line mandates the programme to execute the
zeroing procedures and is what renders the programme, or this part at least, a measure inconsistent with
the AD Agreement.
5.3 With regards to the argument of the United Stat es that the programme (or the line) is not a
measure because it does not set forth rules or nor ms, of general and prospective application 406, or
mandate a breach of any WTO provision407. Argentina considers that, throughout its submission, Japan
has clearly demonstrated otherwise. It seems cl ear enough that, as Japan has said, "the USDOC relies
on computer programmes to manipulate the da ta and execute the required calculations". 408 Moreover,
that line is –as Japan has clearly demonstrated - built into the programme itself, self-executing, and
beyond any possibility of being turned off by the "operator". 409 The Appellate Body in US –
Corrosion-Resistant Steel Sunset Review clarified broadly enough the scope under which the definition
of "measure" is construed for the purposes of defini ng what is challengeable under the DSU, and the
standard anti-dumping programme (s) certainly falls into that category.

403 The US further notes its disagreement with Japa n's characterization that the USITC relied on the
dumping margins reported by USDOC in the cited cases. In US – Corrosion-Resistant Steel Sunset Review, the
Appellate Body recognized that Article 11.3 does not ev en require investigating authorities to rely on dumping
margins in making their determination of likelihood of continuation or recurrence of dumping. Appellate Body
Report, US – Corrosion-Resistant Steel Sunset Review, para. 127. Likewise, there is nothing in Article 11.3 that
creates an obligation for investigating authorities to rely on dumping margins in making their determination of
likelihood of continuation or recurrence of injury.
404 Argentina Oral Statement at Third Party Session ("Argentina Oral Statement"), paras. 4-9.

5.4 Argentina argues that it is a well established principle in WTO dispute settlement that the party
asserting the affirmative of a claim bears the burden to prove it. Argentina is of the opinion that Japan
has satisfied its burden of proof regarding whether the programme, is a measure subject to challenge in
the WTO. Japan has submitted enough evidence to raise the presumption that the standard
anti-dumping programme(s) is/are "as such" inconsistent with the AD Agreement, every time that they
contain a line which invariably produces the same ef fect: the distortion of the margin of dumping by
inflating it and, eventually, even inventing dumping where there is none. As the Appellate Body has
stated, once a party has made a prima facie case, the burden of proof switches onto the responding
party
410 and, hence, it is up to the United States to prove wh at it has sustained, that is, that an operator
could depart from executing the zeroing procedure, if he deems it necessary.
5.5 Argentina asks, contrary to the United States' as sertion, what is the so called "zeroing line" if
not a general rule intended to have general and prospective application. Argentina claims that it is clear
that these computer programmes are intended to a pply every time the USDOC has to calculate a
dumping margin and, consequently, is of general and prospective application.
(b) "As Such" Claims under Article 2 of the AD Agreement with respect to Original
Investigations411
5.6 Argentina argues that the practice and methodology of zeroing out negative margins is always
inconsistent with the AD Agreement. Article 1 establishes that only the anti-dumping measures that are
in accordance with the provisions of the AD Agreement would be considered legitimately and
consistently applied. Article 2, read in conjunc tion with Article VI GATT 1994, defines exactly what
can be considered dumping for the purpose of the AD Agreement: the introduction of a product into the
territory of another Member at less than the norma l value, which is according to Article VI.1(a) of
GATT 1994 less than the comparable price, in the normal course of trade.
5.7 Argentina argues that Article 2.4 indicates that not any comparison could give rise to a
determination of dumping but only a fair comparison, providing for all the necessary adjustments to
allow a fair comparison of the products to take place, be it on the characteristics of the products
themselves, be it on the different items incorporated into their prices that could distort their value
affecting the fairness of the process itself. With all the elements, and after making all the comparisons
needed, the authority must determine whether: (a) there is any dumping taking place (Article 2.1) and,
(b) its magnitude (margin) is in accordance with Article 2.4.2, being ob liged to terminate the
investigation in case that the latter do not reach the de minimis threshold established in Article 5.8.
5.8 Argentina asserts that, in acco rdance with the terms of Article VI, which only permits the
imposition of duties if the existence of injury or th reat of injury has been demonstrated, Article 3.1
demands that an injury determination must be based on positive evidence involving an objective
examination (emphasis added) of both, the volume of the dumped imports and its impact on the
domestic industry. The margin of dumping determined according to the provisions referred above, is by
virtue of Article 3.4, one in a list of many factors that the authority shall examine (emphasis added).
This list is not exhaustive but indicative, and although some other factors could be included depending
on the particularities of each individual case, no single factor of the list should be left without
consideration
412. However, the thorough assessment by th e authority on the factors related to the
dumped imports must not stop there, the prices and volumes of imports not sold at dumping prices are
two of the several factors that Article 3.4 indicates must constitute part of the analysis.

410 Appellate Body Report, US – Wool Shirts and Blouses, para. 14.
411 Argentina Oral Statement, paras. 10-20.
412 Panel Report, Argentina – Poultry Anti-Dumping Duties, paragraph 7.314.

5.9 Argentina explains that, only after these two processes have been completed, the authority must
decide whether or not anti-dumping duties will be imposed, and, as long as it is practicable, impose a
duty less than the full margin that has been determin ed, pursuant to Article 9.1. However, Argentina
argues that under no circumstance can the anti-dumping duty exceed the margin of dumping established
in accordance with Article 2, that is, taking into account the considerations mentioned above.
5.10 Given that injurious dumping is a sine qua non condition for granting the imposition of duties,
and each of the two determinations (dumping and injury) are subject to the conditions outlined:
- how could the deliberate "write-off" of so me transactions be consistent with any
concept of fairness?
- how could a determination of injury based on an inflated margin of dumping fulfill
the requirement of being the result of an objective examination of the positive
evidence?
- finally, how could the duty assessed using a dumping margin calculated using a
zeroing methodology be consistent with the requirement of not exceeding the
margin of dumping?

5.11 Argentina argues that zeroing always produces a dumping margin which is not the actual one,
and hence, cannot be considered neither fair nor a positive evidence, all the less so the grounds for any
determination which requires to be based on an objective examination of the factors supporting it. Just
for the sake of better illustrating the point against zeroing, is enough to say that the effect of zeroing is
the same to that of cutting the export prices that enter in the comparison, having none of both a
justification under any of the provisions in the AD Agreement.
5.12 Argentina argues that, as several panels and the Appellate Body have successively stated,
zeroing leads to fatal flaws which render the determ inations based on them, inconsistent with the
provisions of the AD Agreement . The Appellate Body, in EC-Bed Linen , established clearly and
univocally that the fair comparison in Article 2.4 is a general obligation that informs all Article 2, and
that applies specifically to the establishment of margins of dumping in accordance with Article 2.4.2.
Argentina argues that Article 2.4 is not narro wly confined to the pre-comparison-price-
adjustment-stage, as the United States pretends
413. The scope of the obligation in Article 2.4 has been
defined as "a general obligation that informs all Article 2". This general obligation is part of Article 2,
which bears the title "Determination of dumping", a determination which according to Articles 2 itself
and VI of GATT 1994, cannot be established otherw ise than through a comparison between Normal
Value and Export Price. Had it been intended that fairness be restricted only to the adjustment stage, the
choice of this term in lieu of the term "comparison" would have been more appropriate.
5.13 Argentina asserts that the apparent attempt of the United States to reduce the whole argument
concerning the fair comparison to the question of whether it fits the requirements of the so called
targeted dumping or whether offsettin g is required or not is remarkable 414. However, this case is not
about those subjects. The core of the practice under scrutiny in this case is not the offsetting per se, but
what it implies: not taking into account all the comparable transactions for the calculation of the margin
of dumping.
5.14 Argentina points out that the Appellate Body in US – Softwood Lumber V clearly stated that: "
... the word 'all' in 'all comparable export transactions' makes it clear that Members cannot exclude from
a comparison any transaction that is 'comparable'. Thus, we agree with the Panel that the term 'all

414 US First Written Submission, paras. 54 – 58.

comparable transactions' means that a Member 'may only compare those export transactions which are
comparable, but ... it must compare all such transactions'".'
415.
5.15 Moreover, this could not be otherwise, Argentin a argues, since according to the very wording
of Article 2.1, it is clear that dumping can only be found for a product, and not only for some of the
transactions on the product under investigation and not others. This has been recognized by the
Appellate Body in EC – Bed Linen . Assuming, arguendo, that there is no obligation to calculate a
margin of dumping for the product "as a whole", and that Article 2.4.2 would not accommodate for that
obligation, the United States would still have to explain how a calculation in which some of the
transactions are simply put aside on account of the sign accompanying the figure would constitute a
fair comparison in the terms of Article 2.4.
(c) "As Such" Claims under Article 11 of the AD Agreement with respect to Original
Investigations.
416
5.16 Argentina states that, apart from the methodology of zeroing in itself, it has a particular interest
in all the aspects concerning the Unite d States' sunset review procedures. 417 Argentina states that, as
Japan has correctly pointed out in its submission 418 , the Appellate Body stated in
US – Corrosion-Resistant Steel Sunset Review that, even in proceedings that do not impose the
obligation to calculate a margin of dumping, such as in sunset reviews under Article 11.3, the margin
chosen to rely on must conform to the fair comparison requirement of Article 2.4 even if calculated at
some other stage in the proceeding, like, for example, the original investigation.
B. C
HINA
1. "As such" Claims
(a) Zeroing Procedures Challenged as Measures419
5.17 China argues that model and simple zeroing pro cedures are measures that can, as such, be the
subject of dispute settlement proceedings. China understands that the Panel shall first examine whether
the target of this claim, USDOCs model and simple zeroing procedures, are measures challengeable as
such.
5.18 China points out that, in US – Corrosion-Resistant Steel Sunset Review , the Appellate Body
stated that "any act or omission attributable to a WTO Member can be a measure of that Member …" 420
It then further stated that the measure can be challenged "as such" before the DSB if it sets forth rules or
norms that are intended to have ge neral and prospective application. With respect to Article 18.4 of
AD Agreement, the words of the Appellate Body in US – Corrosion-Resistant Steel Sunset Review 421
make China believes that the "measure" under Artic le 6.2 of the DSU may be an "administrative
procedure" which encompasses the entire body of ge nerally applicable rules, norms and standards
adopted by Members in connection with the condu ct of anti-dumping proceedings. In sum, China
understands that a measure challenge d on an "as such" basis under the AD Agreement can be an
"administrative procedure" which encompasses the entire body of generally applicable rules, norms and

415 Appellate Body Report, US – Softwood Lumber V, para.86.
416 Argentina Oral Statement, para. 21.
417 Argentina Oral Statement, para. 1.
419 China Executive Summary of Third Party Submission ("China Exec. Summary"), paras. 2-8.
420 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 81.
421 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 87 ("The phrase 'laws,
regulations and administrative procedures' seems to us to encompass the entire body of generally applicable
rules, norms and standards adopted by Members in connection with the conduct of anti-dumping proceedings.").

standards that are intended to have general and prospective application and are adopted by Members in
connection with the conduct of anti-dumping proceedings.
5.19 China notes that Japan argues th at the USDOCs model and simple zeroing procedure is not
developed for one or several certain cases, but is a pre-determined, standardized system or method for
mechanistically conducting and managing, on a unif orm and predictable basis, an aspect of the
USDOCs margin calculation in all anti-dumping proceedings, irrespective of the method of comparison
used, it is designed to set forth rules or norms th at are intended to have general and prospective
application. In this regard, China understands that the model and simple zeroing procedure may be a
measure challengeable as such before th e Panel. China also notes that, in US – Corrosion-Resistant
Steel Sunset Review, the Appellate Body observed that the issue does not depend on "the label given" to
an instrument in domestic law, nor upon its "form or nomenclature", but on the "substance and content
of the instrument".422
5.20 As a third party, China takes no view on facts, but China understands that to determine whether
or not the USDOCs model and simple zeroing pr ocedure (standard computer programmes) is
inconsistent with the AD Agreement, the Panel should examine the s ubstance and practice/adoption of
this computer programme.
(b) "As Such" Claims under Article 2 of the AD Agreement with respect to Original
Investigations423
5.21 China argues that model and simple zeroing are in consistent with Article 2.4 and 2.4.2 of the
AD Agreement.
5.22 China argues that "margins of dumping" referred to in Article 2.4.2 must be established for the
product as a whole. Using model zeroing, the investigating authority disregards some of the results of
multiple comparisons at the aggregation stage by maintaining model zeroing procedures, which makes
China views that such practice is inconsistent w ith Article 2.4.2 because the investigating authority
cannot establish a dumping margin for the product as a whole. By adopting simple zeroing, the
investigating authority directly disregards those tr ansactions for which the export sales price is higher
than the normal value, which has the same effect as model zeroing.
5.23 In sum, China argues that an investigating authority does not determine a dumping margin for
the product as a whole either by model zeroing or by simple zeroing. Therefore, China views that the
model and simple zeroing are inconsistent with Articles 2.4 and 2.4.2 of the AD Agreement.
5.24 China argues that the basis of "fair comparison" shall cover all comparable transactions for
export. By adopting zeroing, the investigating au thorities exclude the relevant export transactions
which export prices are higher than normal value. For the excluded comparisons, the investigating
authority treats normal value as equal to export price, whereas, in fact, export price is greater than
normal value. Moreover, China argues, by adopting zeroing, an investigating authority disregards the
negative results of any comparisons from the aggregation of total dumping by zeroing. As a result, the
dumping margin is inflated or an affirmative de termination that dumping ex ists may be made in
circumstances where no dumping would have been established in the absence of zeroing.
424

422 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para.87, n.87.
423 China Exec. Summary, paras. 13-16, 9-12.
424 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 135.

5.25 China understands that, as the zeroing is formul ated with an inherent bias that distorts the
comparison of normal value and export price, it is inconsistent with the "fair comparison" requirement
in Article 2.4 of the AD Agreement.
(c) "As Such" Claims Under Article 9 of the AD Agreement
425
5.26 China argues that Articles 2.4 and 2.4.2 apply to retrospective assessment (periodic review)
based on Article 9 of the AD Agreement. China considers that the "r etrospective assessment" carried
out in the United States must be consistent with the provisions of Article 9, particularly Articles 9.3 and
9.3.1 of the AD Agreement.
5.27 China further argues that retrosp ective assessment is not a review. "Review" is referred to in
Articles 11.2 and 11.3 of the AD Agreement. According to these articles, the main purpose of "review"
is to determine the necessity for the continued imposition of the anti-dumping duty. China understands
that the main purpose of retrospective assessment is determining the definitive amount of duties instead
of judging the necessity for the continued imposition of the anti-dumping duty.
5.28 China then argues that dumping margins used for purposes of Article 9 must be consistent with
Article 2 of the AD Agreement. The chapeau of Article 9.3 provides that "the amount of the
anti-dumping duty shall not exceed the margin of dumping as established under Article 2". The
cross-reference to Article 2 is in keeping with the f act that "Article 2 sets out the agreed disciplines in
the AD Agreement for calculating dumping margins". 426 Whenever investigating authorities calculate
"margins of dumping", they must respect the basic requirements of a "fair comparison". The USDOCs
determination of the existence of "dumping", and cal culation of "margins of dumping", for purpose of
periodic review, under Article 9.3, must be consistent with the definitions of those terms in Articles 2.4
and 2.4.2 of the AD Agreement.
5.29 China argues that the term "during the investigation phase" in Article 2.4.2 is not limited to the
original or initial investigation. Other investig ations which include dumping margin calculation, e.g.,
duty assessment are also covered by the phrase "investigation phase" under Article 2.4.2. Even if the
express terms of Article 2.4.2 limit its application to the original or initial investigation phase,
Article 2.4.2 still applies to retrospective assess ment because the retrosp ective assessment is the
continuation of investigation phase instead of revi ew phase. China argues that the exercise conducted
by the United States in the retrospective assessment corresponds, objectively, to an investigation by an
investigating authority. In both cases the procedures are virtually identical: questionnaires are sent out;
verification visits take place; and hearings are or ganized. The main procedural difference between
original investigation and retrospective assessment li es in the period of investigation. Furthermore,
retrospective assessment is applied to ascertain the dumping duty. China thus considers the
retrospective assessment to be a continuation of the investigation phase to make definitive
anti-dumping duties payable.
C. E
UROPEAN COMMUNITIES
5.30 The European Communities points out to the fact that it has itself been a claiming party in
another case against the United States concerning zeroing. In that case, the European Communities also
brought challenges against the very same United States measures that are subject to the present
proceeding.427

425 China Exec. Summary, paras. 17-26.
426 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para.127.
427 European Communities Third Party Submission("EC Submission), para. 1.

1. Burden of Proof 428
5.31 In the proceeding before this Panel, the European Communities observes that Japan has set out
and evidenced the facts, explained which obligations of the WTO Agreements the measures at issue are
inconsistent with, and why. The burden of proof and persuasion lies with or has been shifted to the
United States.
5.32 In particular, the European Communities observ es that the United States relies on the phrase
"during in the investigation phase" in Article 2.4.2 of the AD Agreement as a key part of its defence,
arguing that as a result of that phrase, in connection with Article 5.1 of the AD Agreement , the
disciplines of Article 2.4.2 are limited to original investigations only, and that Article 9 of the
AD Agreement does not incorporate the requirements of Article 2.4.2 of the AD Agreement . The
European Communities submits that in the circumst ances of this case, the United States bears the full
burden of persuasion in that regard.429
2. "As such" Claims
(a) Zeroing Procedures Challenged as Measures430
5.33 The European Communities considers that th e model and simple zeroing procedures,
challenged by Japan, do constitute a measure or a part of a measure, or, at a minimum, an administrative
practice within the meaning of Article 18.4 of the AD Agreement, in particular because they are referred
to in the US Anti-Dumping Manual and other regulat ory instruments of the United States and because
there is an automatic, predictable and prospective application of these procedures or "practice". In other
words, in the view of the European Communities, there can be no doubt that the procedures and
computer programmes set out norms. These norms are "set out" in the sense that they are expressed in
the particular computer language used by the Unite d States, and recorded both electronically and on
paper.
431
(b) "As Such" Claims under the provisions of Article 2 of the AD Agreement
5.34 As a preliminary remark 432, the European Communities submits that the use of misleading
premises and vocabulary by the United States should not bring the focus of this Panel away from
addressing the root of the dispute. The European Communities describes this dispute as concerning the
requirement, embodied in Article 2.4 of the AD Agreement to make a fair comparison between normal
value and export price; the rule in Article 2.4 that adjustments may only be made for differences that
affect price comparability; and the requir ement embodied in Article 2.4.2 of the AD Agreement, to
conduct a weighted average to weighted average comparison that takes account of "all comparable
export transactions"; and not to conduct an asymmetrical comparison, unless there is targeted dumping.
The legal issue is not therefore whether or not the United States is required to "grant" an "offset", but
rather that it is prohibited from making the adjustments it is making; and is not entitled to ignore those
export transactions that exceed "normal value" in in termediate calculations of "margins of dumping",
but must treat those transactions the same way as the export transactions that are below the "normal
value" (unless special circumstances warrant otherwise).

428 European Communities Executive Summary of Third Party Submission ("European Communities
Exec. Summary"), para. 2.
429 EC Submission, para. 6.
430 EC Exec. Summary, para. 23.
431 EC Submission, paras. 211-214.
432 Ibid, paras. 8-12.

 Article 2 applies to the entire AD Agreement
433

5.35 The European Communities is of the view that the terms "dumping" and "margin of dumping"
are defined in Article VI of the GATT 1994, which definitions are further implemented and elaborated
in Article 2 of the AD Agreement, which sets forth disciplines for the determination of dumping that are
applicable and have to be respected throughout the AD Agreement. This is supported by the text, logic
and the overall construction of the AD Agreement.
5.36 The European Communities thus considers that Article 2 provides a valuable and persuasive, if
not a primary, context for the interpretation of Article 2.4.2, the scope of which is at the root of the
present dispute. In particular, Article 2 provides by far a more persuasive context for the interpretation
of Article 2.4.2 than, for example, Article 5 of the AD Agreement.
 "Model" and "simple" zeroing is inconsistent with Article 2.4, first sentence, of the
AD Agreement
434

5.37 Within Article 2, Article 2.4, first sentence, of the AD Agreement imposes an overarching and
independent obligation of fair comparison. This obligation informs all the other provisions of
Article 2.4, including Articles 2.4.1 and 2.4.2. Th e character of this obligation is not exhausted by
either the second to fifth sentences of Article 2.4 or by paragraphs 2.4.1 and 2.4.2.
5.38 The European Communities argues that "model" and "simple" zeroing is inconsistent with
Article 2.4, first sentence. Fairness, in the context of a comparison between domestic sales and export
sales, requires that, under normal circumstances, the same treatment be applie d to both domestic and
export sales, i.e. that such sales be treated in a symmetrical way. Because zeroing, which consists in an
arbitrary and artificial reduction of the price, is only applied to the export sales, there is no symmetrical
treatment. The use of an asymmetrical compar ison and the "simple" zeroing method without any
justification is thus inconsistent with the obligation to make a fair comparison pursuant to Article 2.4 of
the AD Agreement. There is also ample evidence that the zeroing methods used by the United States
have a dramatic effect on the calculation of the dumping margin; an effect that may be far more
significant than the effects associated with the due adjustments referred to in Article 2.4 of the
AD Agreement. A methodology that systematically inflates the margins of dumping is to be considered
unfair. This is also confirmed by the existing case law.435
5.39 Further, such a methodology also lacks any minimal consistency, essential for any economic
analysis, on which the AD Agreement necessarily is premised.436
 Article 2.4, second to fifth sentences of the AD Agreement437

5.40 The European Communities argues that zeroing constitutes an "undue" adjustment, contrary to
Article 2.4, second to fifth sentences of the AD Agreement. Article 2.4, particularly the second to fifth
sentences thereof, expressly obliges Members to make due allowance or adjustment for "differences
which affect price comparability". At the same time, there is an obligation not to make an allowance or
adjustment when there is no difference affecting price comparability. When zeroing, the United States
makes an "allowance" or "adjustment" literally simply because of a sign (negative) of an intermediate
difference between what are considered a "normal value" and an "export price". Such an adjustment is
not made for a difference that affects price comparability, rather the difference it is part of the very price

433 Ibid, paras. 13-20.
434 EC Submission, paras. 21-42.
435 Ibid, paras. 38-42.
436 Ibid, paras. 31-36.
437 Ibid, paras. 43-62.

comparison that the United States is supposed to make. The United States is therefore not making a
"due" allowance, and reverses the effects of the allo wances or adjustments that indeed affect price
comparability, both in violation of its obligations un der Article 2.4, second to fifth sentences, of the
AD Agreement.
5.41 The European Communities does not, however, excl ude the possibility that an adjustment or
allowance in the context of targeted dumping might be "due", within the meaning of the third sentence
of Article 2.4, if it is made under the conditions laid out in the second sentence of Article 2.4.2. Where
there is a difference between two distinct export markets (A and B), based on different patterns among
different purchasers, regions or time periods, and a comparison with normal value (market C) shows,
for instance, dumping in market A, but not market B, an investigating authority might be justified in not
"setting-off" the "negative dumping" in market B ag ainst the dumping in market A, since such an
adjustment would be made for a difference (between markets A and B) that affected price comparability
(between markets A and B; and between AB and C).
 Article 2.4.2 of the AD Agreement

5.42 The European Communities is of the view that Article 2.4.2 of the AD Agreement applies to all
types of investigations undertaken pursuant to Article VI of the GATT 1994 and the AD Agreement in
which margins of dumping are calculated or relied upon, including original investigations, periodic
reviews, new shipper reviews, changed circumstances reviews and sunset reviews, for several distinct
reasons.
438
5.43 First, neither the word "investigation", nor the words "during the investigation phase" limit the
scope of the application of Article 2.4.2 to origin al investigations. Absent a definition or a meaning
assigned to it by the Members, these words have to be interpreted in accordance with the
Vienna Convention and be given their ordinary meaning, having regard to context, object and purpose.
5.44 The European Communities points out that the or dinary meaning of the word "investigation",
referring to a dictionary, is the nature of the activit y carried out by the investigating authority, not the
material scope of what is examined. When assessing the amount of duty to be paid under its system of
retrospective assessment, an investigating authority is required to engage in a "systematic examination"
or a "careful study". Article 2.4.2 of the AD Agreement contains no limiting language in that regard. To
read any other limiting language – such as that found in Article 5.1 of the AD Agreement – into
Article 2.4.2 of the AD Agreement , when there is no such language there, would be a legal error.
Article 5.1 of the AD Agreement is limited to an investigation to determine the existence, degree and
effect of any alleged dumping – that is, to an original investigation. It is the presence of the words "to
determine the existence, degree and effect of any alleged dumping" that limit the meaning of the word
"investigation" in Article 5.1 of the AD Agreement. The presence of those words in Article 5.1 does not
say anything about the scope of the word "investigation" in Article 2.4.2, however.
5.45 In any event, the European Communities st ates, it cannot be argued that the word
"investigation" in Article 2.4.2 refers to "an investigation to determine the existence, degree and effect
of any alleged dumping", as is referred to in Article 5.1. That would mean that the word "investigation"
is monolithic, in the sense that it can only ever refer to a careful examination and scrutiny of all of the
three matters referred to in Article 5.1 of the AD Agreement . That is not supported by the
AD Agreement. For instance, it is uncontroversial that in referring to the "effect of any alleged
dumping", Article 5.1 of the AD Agreement refers to injury. Yet, provisions of Article 3 may be applied
independently from those of Article 2 – for exam ple in a changed circumstances review, or when
implementing a panel report, or even by a separate investigating authority, as in the United States.

5.46 The European Communities argues that the wo rds "during the investigation phase" in
Article 2.4.2 of the AD Agreement do not limit the scope of Article 2.4.2 of the AD Agreement to
Article 5.1 of the AD Agreement. Rather than Article 5.1, referring to "an investigation to determine the
existence, degree and effect of any alleged dumping", it is Articles 2 and 9.3 of the AD Agreement that
provide a far more convincing context for the interpretation of Article 2.4.2. For instance, the French
and Spanish versions of the AD Agreement confirm that the retrospective assessment under Article 9
also concerns the existence of dumping, elaborated in Article 2 as a whole.
5.47 In this respect, the European Communities also recalls Article 31(4) of the Vienna Convention
according to which "[a] special meaning shall be given to a term if it is established that the parties so
intended". The European Communities is of the view that it is up to the United States to establish that
the words "investigation" or "during the investigation phase" have a limited or defined meaning.
5.48 The European Communities explains that the above deliberations do not mean that the phrase
"during the investigation phase" in Article 2.4.2 is without meaning. The European Communities
suggests four different alternative, but not necessarily mutually exclusive, interpretations of that phrase.
The phrase may mean: during the investigation period; during the period in which the particular type of
investigation must be concluded; not during the pr e-investigation phase; or the words may be merely
descriptive.
5.49 Second, in the view of the European Communities, Article 2.4.2 of the AD Agreement states
what it does apply to, not what it does not apply to. In this regard, unlike the United States municipal
law, particularly the Statement of Administrative Action, Article 2.4.2 of the AD Agreement does not
contain the words "(not reviews)". If the Members had really wanted to achieve a limited interpretation
of Article 2.4.2, they would have used a simila r express exclusionary language, such as that in
Article 2.2.1; Article 2.7; Article 9.4(ii); or Annex II, paragraph 5. The Members did not do that. The
European Communities also argues th at the negotiating history confirms its own views: there is no
mention in the negotiating history suggesting that Article 2.4.2 should have a limited application to the
original investigations only. Similarly, the subsequent practice of WTO Members does not support the
position of the United States: the European Commun ities attaches as an exhibit to its submission
439 a
review of what it believes to be the complete lis t of 105 Members that have notified implementing
legislation to the WTO, which generally shows th at the words "during the investigation phase" are
either simply omitted from such implementing legisl ation or that there are numerous instances where
they are rendered as "during the investigation pe riod". The European Communities cites this as
"subsequent practice" within the meaning of Article 31(3)(b) of the Vienna Convention; and evidence of
the Members’ intention within the meaning of Article 31(4).
5.50 In addition, the European Communities argues that the variable duty provisions of
Article 9(4)(ii) of the AD Agreement, invoked by the United States, are irrelevant to the interpretation of
Article 2.4.2. Furthermore, these provisions do not exclude the possibility of refund under Article 9.3.2,
where the full disciplines of Article 2.4.2 will apply.
5.51 The European Communities considers that the main purpose of Article 2.4.2 of the
AD Agreement is to provide for an exception (asymmet rical comparison in the case of targeted
dumping) to the normal methods of comparison (symme trical comparison) in order to ensure a fair
comparison within the meaning of Article 2.4 of the AD Agreement. An asymmetrical comparison can
only be used if the circumstances defined in the second sentence of Article 2.4.2 of the AD Agreement
are met. To the extent that such circumstances are not available, the United States is under an obligation
to use one of the normally applicable methods provided for in the first sentence of Article 2.4.2 of the
AD Agreement.

439 Exhibit EC-9.

5.52 The model and simple zeroing methods used by the United States are therefore prohibited by
Article 2.4.2. When the United States defines the basic parameters of investigation (such as product and
time period), the United States is obliged to ensure that the margin of dumping for that product and that
period of review is calculated in conformity with that provision. The United States becomes bound by
its own logic (unless the exceptional situation describ ed in the second sentence of Article 2.4.2 of the
AD Agreement is present). 440 The United States cannot conclude, before the final calculation is
complete, that, in relation to some discrete model or type or category of exports, when "export price"
exceeds "normal value", there is no or a zero margin of dumping. As found by the Appellate Body,
"dumping" for the purposes of the AD Agreement can be found to exist only for the product under
investigation as a whole, and cannot be found to exist only for a type, model or category of that product.
5.53 The European Communities claims that this reas oning also applies whenever an investigating
authority decides to fix the parameters of its investigation, whether in relation to subject product, time,
level of trade, region, or any other parameter. In all those cases, the investigating authority becomes
bound by its own logic, and must complete its analysis on the basis of the same logic. This is also
supported by the second sentence of Article 2.4.2 of the AD Agreement , which refers expressly to
certain other parameters of the determination, including "time periods". The same is true in respect of
any other parameters of the investigation fixed by the investigating authorit y, notably the purchasers
and regions concerned, these also being matters referred to in the second sentence of Article 2.4.2 of the
AD Agreement.
5.54 The simple zeroing method used by the United Stat es is, at least potentially, offensive to any
one of these parameters, because it is performed at the most disaggregated level, that is, at the level of
individual transactions. In principle, and due acc ount being taken of all necessary adjustments, any
transaction during the period of review, at whatever time it is made, is considered by the United States
potentially comparable with any other transaction during the period of review, at whatever time it was
made. In other words, instead of treating all the relevant export transactions as a whole, the
United States methodology results in treating each export transaction individually in the same manner
as model zeroing results in treating each model separately.
5.55 In conclusion, the European Communities argues that if the United States were correct in
respect of both Articles 2.4.2 and Article 2.4 of the AD Agreement , then a vast loophole on the
fundamental issue of how to calculate a margin of dumping would be opened up in the AD Agreement.
The results of an original investigation would be made effectively worthless. According to the
European Communities, the rationale for retrosp ective assessment proceedings is not to escape the
disciplines of the AD Agreement, but to up-date the temporal frame of reference, so that data for normal
value, export price and imports are taken from the same period.
(c) "As Such" Claims with Respect to Articles 3, 5, 9, and 11 of the AD Agreement
5.56 The European Communities considers that use of the unlawful zeroing methods by the USDOC
violates the United States obligations under Article 2 and 2.4.2. It also inevitably means that the United
States is in violation of other provisions of the AD Agreement which govern the procedures for
subsequent determinations dependent on a proper establishment of dumping, namely Article 3.1, 3.2
and 3.5, 5.8, 9.3, 9.5, 11.1, 11.2 and 11.3 as well as Articles 1 and 18.4, and Articles VI:1 and VI:2 of
GATT 1994 and Article XVI:4 of the WTO Agreement.
441

440 EC Submission, para. 197.
441 EC Submission, paras. 202-209 and paras. 224-227.

D. K
OREA
5.57 In Korea's view, the zeroing procedures of the United States applied in both the initial
investigations and the subsequent reviews per se, or the manner in which they are applied in a particular
case, are inconsistent with the AD Agreement.442 Korea therefore generally supports the arguments
raised by Japan in its first submission.443
1. "As such" Claims
(a) "As Such" Claims under Article 2 of the AD Agreement with respect to Original
Investigations444
5.58 Korea points out that the United States claims that as the obligation to make a "fair comparison"
under Article 2.4 only requires the appropriate adjustment that must be made for differences that affect
prices or price comparability between normal value and export price, there is no independent obligation
to offset a "positive" dumping margin and a "negative" dumping margin in any calculation of dumping
margin under Article 2.4.445 In other words, in the absence of the independent obligation to make a "fair
comparison" under Article 2.4, zeroing in the calculation of dumping margins is not precluded. To the
contrary, Japan argues that there is a fundamental obligation that requires the investigating authority to
offset a "positive" dumping margin and a "negative" dumping margin in any calculation of dumping
margin in order to ensure a "fair comparison" requirement under Article 2.4.446
5.59 Having agreed with Japan's position on the "fai r comparison" requirement under Article 2.4,
what is more important, in Korea's view, is that such fair comparison requirement must be extended to
Article 2.4.2. Specifically, as the first sentence of Article 2.4.2 provides that the methods it describes
are "[s]ubject to the provisions governing fair comp arisons in paragraph 4", Article 2.4.2 incorporates
the "fair comparison" requirement of the chapeau of Ar ticle 2.4. With this, Korea is of the view that
from the text, it is clearly suggested that there is an obligation for the investigating authority to ensure
the "fair comparison" requirement when using any of methods described in Article 2.4.2 for comparing
export price and normal value.
5.60 Further support for Korea's view can be found in the past decisions of the Appellate Body. The
Appellate Body has consistently held that the pr actice of zeroing is inconsistent with the "fair
comparison" requirement of Article 2.4.2 (as well with the more general fair comparison requirement of
the chapeau of Article 2.4.). In EC-Bed Linen , the Appellate Body relie d on both Article 2.4 and
Article 2.4.2 in finding zeroing to be in consistent with the requirements of the AD Agreement. In this
case, the Appellate body addressed the requirement of Article 2.4.2 and found that:
"Under [the weighted average] method, the investigating authorities are required to
compare the weighted average normal va lue with weighted average prices of all
comparable export transactions … . By 'zeroing' the negative dumping margins, the
European Communities, therefore, did not take fully into account the entirety of the
prices of some export transactions, namely, those export transactions involving models
of cotton-type bed linen where 'negative dumping margins were found. Instead, the
European Communities treated those export pri ces as if they were less than what they
were. This, in turn, inflated the result from the calculation of the margin of dumping …
. Furthermore, we are also of the view that a comparison between export price and

442 Republic of Korea Third Party Submission ("Korea Submission"), para. 3.
443 Korea Submission, para. 3.
444 Korea Submission, paras. 4-14.
445 US First Written Submission, paras. 44-48.

normal value that does not take into account the prices of all comparable export
transactions – is not a 'fair comparison' between export price and normal value as
required by Articles 2.4 and 2.4.2."447
The Appellate Body's subsequent decisions in US-Corrosion-Resistant Steel Sunset Review and in
US - Softwood Lumber V reaffirmed that zeroing was inconsistent with both Articles 2.4 and 2.4.2.448

5.61 Korea argues that, in the case at hand, as Japan correctly points out, zeroing is the United States'
longstanding practice used for calculating dumping margins in all anti-dumping proceedings. As such,
by employing zeroing for calculating dumping margins, the United States always and necessarily gives
more weight to certain comparisons (those w ith a "positive" dumping margin) than to other
comparisons (those with a "negative" dumping margin). The calculation is, therefore, biased in favour
of finding dumping and not "fair". Consequently, zeroing that systemically and automatically
disregards "negative" dumping margins cannot ensure the "fair comparison" as required by Articles 2.4
and 2.4.2.
5.62 In light of the meaning of Articles 2.4 and 2.4.2 together with the past decisions of the
Appellate Body, Korea submits, therefore, that such consistent use of zeroing by the United States in
calculating the overall dumping margin is inconsis tent "as such" as well as "as applied" and is
inconsistent with the "fair comparison" requirement under Articles 2.4 and 2.4.2.
5.63 Korea also argues that zeroing must be pr ohibited under all three methods described in
Article 2.4.2 for comparing export price and normal value. The United States argues that based on the
decision of the Appellate Body in US - Softwood Lumber V , where it has found that the weighted
average-to-weighted average method incorporating zeroing is inconsistent with Article 2.4.2, zeroing is
only prohibited when establishing the margins of dumping under that weighted average-to- weighted
average method in Article 2.4.2.
449 Korea disagrees. Korea argu es that the Appellate Body in
US - Softwood Lumber V had no option but to address only the issue of whether zeroing is prohibited
under the weighted average-to-weighted average method merely because the issue of whether zeroing is
also prohibited under other two methodologies (transaction-to-transaction and weighted
average-to-transaction) was not raised. 450 Thus, Korea believes that had that issue been asked to the
Appellate Body, it would have reached the same c onclusion that zeroing is also prohibited under the
other two methodologies.
5.64 Korea submits that zeroing must be prohibited entirely and completely under all three methods
described in Article 2.4.2. When the inves tigating authorities choose to engage in multiple
comparisons, they are required to combine the resu lts of those comparisons to determine the overall
dumping margins for the product as a whole. 451 The methodology used to combine the individual

447 Appellate Body Report, EC-Bed Linen, para, 55.
448 Appellate Body Report, US-Corrosion-Resistant Steel Sunset Review, para. 134. The Appellate Body
found that the European Communities' use of this metho dology "inflated the results from the calculation of the
margin of dumping". Korea also emphasizes that a co mparison such as that und ertaken by the European
Communities in that case is not a "fair comparison" be tween export price and normal value as required by
Articles 2.4 and 2.4.2. See also, US-Softwood Lumber V, para. 63. Korea notes that, in US-Softwood Lumber V,
the Appellate Body's most recent decision concerning zeroing, the Appellate Body based its analysis solely on the
language of Article 2.4.2 – and its requirement that the calculation of dumping margins on an weighted
average-to-weighted average basis must consider "all comparable export transactions."
450 Appellate Body Report, US-Softwood Lumber V, paras. 104-105.
451 Korea notes that, in US-Softwood Lumber V , the Appellate Body held that "[i]t is clear that an
investigating authority may undertake multiple averaging to establish margins of dumping for a product under
investigation. In our view, the results of the multiple comparisons at the sub-group level are, however, not

comparisons must include all of the individual comparisons.
452 This is true whether the multiple
comparisons are made using any of all three methodologies. However, if zeroing is used in combining
the results of individual comparisons, as some i ndividual comparisons with a "negative" dumping
margin are purposefully and systemically excluded, "all" of the individual comparisons cannot be taken
into account in the calculation of dumping margin. As a result, the "fair comparison" that is required
under Articles 2.4 and 2.4.2 cannot be achieved.
(b) "As Such" Claims with Respect to Article 11 of the AD Agreement: Sunset Reviews
453
5.65 Korea argues that the term "the investigation phase" in Article 2.4.2 should not be interpreted to
limit the applicability of Article 2.4.2 only to the "investigation phase". The United States argues that
because of the term "during the investigation phase" referred to in Article 2.4.2, the provisions of
Article 2.4.2 are only applicable to the "inves tigation phrase", but not to subsequent reviews. 454 In
Korea's view, the term "investigation" can enco mpass not only the initial investigation but also
subsequent proceedings (reviews). Korea claims th at the Appellate Body's decisions clearly support
Korea's position. In US-Corrosion-Resistant Steel Sunset Review , the Appellate Body found that
reviews under Article 11 "envision a process combining both investigatory and adjudicatory aspects"455,
thereby suggesting that prohibition of zeroing imp licit in Article 2.4.2 also applied to dumping
calculations in sunset reviews under Article 11.3456 The Appellate Body's decision in this case suggests
that the term "investigation phase" is properly unders tood in the context of Article 2.4.2 to mean the
portion of the proceeding (the initial investigation or subsequent reviews) in which the authority
"investigates" whether dumping has occurred.
5.66 Furthermore, Korea argues that its position with regard to the interpretation of the term in
question is further supported by the general practice of the Members who consistently and equally apply
the provisions in Article 2 not only to the initial investigation but also to subsequent review
proceedings. The instances where the term "investigation" appears in Article 2 are as follows:
- weighted average per unit costs for the period of investigation (2.2.1)
- the exporter or producer under investigation (2.2.1.1 and 2.2.2)
- the exporter or producer in the course of the investigation (2.2.1.1.)
- costs during the period of investigation (2.2.1.1)
- other exporters or producers subject to investigation (2.2.2(ii))
- in an investigation, the authority shall allow e xporters at least 60 days to have adjusted their
export prices (2.4.1.)
- movement in exchange rates during the period of investigation (2.4.1)
- the existence of margins of dumping during the investigation phase. (2.4.2)

"margins of dumping" within the meaning of Article 2. 4.2. Rather, those results reflect only intermediate
calculations made by an investigating 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 "int ermediate values" that an
investigating authority can establish margins of dumpi ng for the product under consideration as a whole".
US-Softwood Lumber, para. 97.
452 Korea notes that the Appellate Body explained that "[t]here is no textual basis under Article 2.4.2 that
would justify taking into account the 'result' 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 necessar ily 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".
Appellate Body Report, US-Softwood Lumber, para. 98. See also, paras. 99-100.
453 Korea Submission, paras. 15-21.
454 US First Written Submission, paras. 76.
455 Appellate Body Report, US-Corrosion-Resistant Steel Sunset Review, para. 111.
456 Ibid, para. 127.

5.67 Korea claims that it is a reasonable interpretation that the term "investigation" in these instances
includes the subsequent investigati ons, such as the review investigations, as it is the general practice
that the Members usually apply tho se provisions of Article 2 in the subsequent proceedings following
the initial investigation. There is, therefore, no reason to carve out Article 2.4.2 from applying
provisions of Article 2 in all proceedings involving the calculation of a dumping margin.
5.68 Furthermore, Korea suggests that apart from the prohibition of zeroing under all three methods
described in Article 2.4.2, zeroing must also be prohibited in all anti-dumping proceedings, including
both the initial investigation as well as subsequent reviews. If the AD Agreement is interpreted
otherwise to mean that zeroing is only prohibited in the initial investigation, bu t is not in subsequent
reviews, the result is fundamentally unfair and absurd. For example, if an exporter maintains the same
pricing behaviour both in the initial investigation and subsequent reviews, the dumping margin would
be in most case higher in subsequent reviews where zeroing is employed. Particularly, in the case of a
retrospective duty assessment where zeroing is sy stemically and automatically employed in
determining the final duty liability, the result in the above example will efficiently invalidate the effect
of prohibition of zeroing in the initial investigation.
5.69 Therefore, Korea submits that the term "i nvestigation phase" should be interpreted to
encompass not only the initial investigation but also subsequent proceedings (reviews).
E. M
EXICO
1. "As such" Claims
(a) Zeroing Procedures Challenged as Measures457
5.70 Mexico argues that Japan used appropriate terms in its "as such" claims. The "as such" claims
in this case concern what Japan refers to as "standa rd model" and "simple zeroing procedures". Japan
terms these measures "administrative procedures" within the meaning of Article 18.4 of the
AD Agreement. Such procedures obviously include the computer programmes used by the USDOC.
5.71 Mexico argues that the United States would ap pear to believe that since the computer
programmes are subject to the wishes of the official using them, they may not be challenged "as such",
because "as such" they do not mandate any action.458 It should be pointed out that for the purposes of a
dispute settlement proceeding, any act or omission attributable to a WTO Member may be deemed a
"measure". Moreover, "acts setting forth rules or norms that are intended to have general and
prospective application" are measur es subject to WTO dispute settlement. 459 Normally, such acts or
omissions are attributable to State bodies, including those relating to the Execu tive. In this case the
computer programme or programmes are used by officials of the United States Executive and,
according to the United States, are means by which decision-makers implement their decisions.460 They
come under what Japan terms "administrative proce dures", i.e. they are part of the measure under
challenge. The United States has not argued that US DOC officials are free to disregard information
about the calculation of dumping margins that they obtain by using the computer programmes. It would
appear, on the contrary, that the United States fully assumes that officials using the programmes are in
one way or another required to consider the resu lts they produce. The programmes thus imply a
compulsory guideline to be followed by the United States authorities.

457 Mexico Third Party Submission ("Mexico Submission") paras. 5-6.
458 US First Written Submission, paras. 35 and 36.
459 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 187.

(b) "As Such" Claims under Article 2 of the AD Agreement with respect to Original
Investigations.
461
5.72 Mexico argues that, although zeroing has been found in previous cases to be inconsistent with
the WTO Agreements, the United States continues to argue that its methodology is permissible in
administrative reviews, and even seeks to discredit the reasoning of the panel and the Appellate Body in
US – Softwood Lumber V which noted specifically that "Article 2.4.2 requires that the existence of
margins of dumping has to be established … on the basis of a comparison of the
weighted-average-normal-value with the weighted average of prices of all comparable export
transactions, that is, for all transactions involving all types of the product under investigation".462 In the
light of that finding, Mexico agrees with Japan that the United States' zeroing procedures are
inconsistent as such with its WTO obligations.
5.73 Mexico argues that Articles 2.4 and 2.4.2 of the AD Agreement prohibit zeroing. Article 2.4 of
the AD Agreement lays down the basic principle that "[a] fair comparison shall be made between the
export price and the normal value". This implie s a separate obligation to determine the relevant
dumping margin by means of a fair method of comparison that takes into account sales of the subject
product in all export transactions, which necessaril y precludes zeroing "negative margins". This
obligation applies equally to original investigati ons and to reviews, as already confirmed by the
Appellate Body in US – Corrosion-Resistant Steel Sunset Review:463
"When investigating authorities use a zeroing methodology such as that examined in
EC – Bed Linen to calculate a dumping margin, whether in an original investigation or
otherwise, that methodology will tend to inflate the margins calculated. Apart from
inflating the margins, such a methodology c ould, in some instances, turn a negative
margin of dumping into a positive margin of dumping. As the Panel itself recognized
in the present dispute, "zeroing … may lead to an affirmative determination that
dumping exists where no dumping would have been established in the absence of
zeroing". Thus, the inherent bias in a zeroing methodology of this kind may distort not
only the magnitude of a dumping margin, but also a finding of the very existence of
dumping." (emphasis added and footnote omitted)
5.74 Mexico also refers to Article 2.4.2 of the AD Agreement. Thus, in determining the margin of
dumping for a product under investigation, the inves tigating authority must include in the comparison
the prices of all comparable export transactions, otherwise it would not be making a "fair comparison",
in breach of Article 2.4 and 2.4.2 of the AD Agreement. Mexico agrees with Japan that unless the results
of all the comparisons are taken into account, the determination of dumping and the margin of dumping
cannot be applied to the product as a whole. This would amount to non-fulfilment of obligations under
Article 2.1 and 2.4.2 and under 2.4 as regards the fair comparison obligations.
(c) "As Such" Claims with Respect to Article 9 of the AD Agreement
464
5.75 Mexico argues that Article 2.4.2 applies to duty assessment procedures under Article 9.
Besides advising against following panel and Appellate Body findings concerning Article 2.4.2 of the
AD Agreement,465 Mexico argues that the United States seeks to confine the scope of those findings to
original investigations, arguing that a reading of Article 2.4.2 shows that this provision does not apply
to administrative reviews because it contains the re strictive phrase "during the investigation phase".

461 Mexico Submission, paras. 7-10.
462 Panel Report, US – Softwood Lumber V , para. 7.224.
463 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 135.
464 Mexico Submission, paras. 11-13.
465 US First Written Submission, paras. 89-95.

Mexico asserts that it is clear from Article 9 of the AD Agreement, however, that the obligations under
Article 2 likewise apply when the amount of a duty is determined in an administrative review, since
Article 9.3 prescribes that "the amount of the anti-dumping duty shall not exceed the margin of dumping
as established under Article 2". Article 9 thus refers to Article 2 as a whole and without restrictions. It
therefore requires investigating authorities to a pply Article 2.4.2 in determining the amount of
anti-dumping duties in their reviews. In Mexico's opinion, all the obligations set in Article 2 of the
AD Agreement are directly applicable in US administrative reviews, since the requirement in Article 9.3
to determine the amount of an anti-dumping duty (if one is imposed) at a level that does not exceed the
margin of dumping established under Article 2 applies retrospectively as well as prospectively.
F. N
EW ZEALAND
1. "As such" Claims
(a) "As Such" Claims under Article 2 of the AD Agreement with respect to Original
Investigations466
5.76 New Zealand argues that it is recognised that dumping is to be condemned if it causes or
threatens material injury to an established industry. The purpose of the imposition of dumping duties
therefore is to provide a remedy to redress the unfair pricing practices of private companies. It is aimed
at protecting against unfair competition. The de tailed procedures for how Members are to go about
determining whether dumping has taken place and whether a remedy may be applied were initially laid
out in Article VI of GATT and have been progressively developed through negotiating rounds since that
time. The current text set out in the AD Agreement is a product of the Uruguay Round negotiations –
negotiations which were often fraught with the fi nal text being a "compromise" between opposing
positions. New Zealand believes that this negotiating history should be borne in mind by the Panel in
assessing the validity of the Japanese arguments in this dispute.
5.77 New Zealand argues that there appears to be a difference of view on what the negotiating
history of the AD Agreement shows. For New Zealand it is clear that the AD Agreement gave some
latitude to Members in deciding which methodology to use to calculate dumping margins because the
circumstances for different export products can diffe r. Article 2.4.2 refers to three methodologies –
weighted average to weighted average; transaction-to-transaction; and weighted average to transaction.
Curbs were placed on the situations in which the third methodology might be used, but these were not
applied to the other two methodologies. These met hods are used to calculate whether dumping has
occurred, in other words whether unfair trade has occurred as a result of pricing practices. New Zealand
has a systemic interest in ensuring that the right to use the transaction-to-transaction methodology is
preserved as a fair way of making a comparison of the export price and the normal value of the product
in the exporting country and establishing a dumping margin.
5.78 New Zealand argues that by concentrating on the calculation of dumping margins under
Article 2.4, Japan loses sight of the process as a whole. The text of the AD Agreement lays out the
elements that must be met to enable a remedy to be applied to address dumping. There must be a
determination of whether dumping has occurred. An analysis must be undertaken of whether there is
material injury to the domestic industry. If these conditions are met, there must be a causal analysis of
the effect of the dumped imports, and the effect of other factors, including un-dumped imports, on the
domestic industry. If it is established that the dumpe d imports are causing material injury or threat
thereof to the domestic industry, a remedy may be applied to dumped imports. This process as a whole
has relevance when one is assessing the validity of cer tain actions taken by a Member in applying a
remedy to redress dumping. It means that how dumping margins are calculated has implications for the

466 New Zealand Oral Statement, paras. 2-7.

determination of material injury, the causation analysis, and the remedy that may or may not be applied.
In New Zealand's view, a proper interpretation of the AD Agreement must take this holistic perspective.
5.79 New Zealand expresses its concerns regarding the attempts of some Members to reinterpret the
decisions of the Appellate Body and to give them wider application than is the case. The
Appellate Body in US – Softwood Lumber V upheld the 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'".
467 The Appellate Body
expressly confined the issue in that case to the weighted average to weighted average methodology, not
the transaction-to-transaction methodology.468 Furthermore, the Appellate Body based its reasoning in
part on the particular wording of Article 2.4.2 as it relates to the weighted average to weighted average
methodology.469 To make the same analogy in the case of the transaction-to-transaction methodology
would be to read words into the AD Agreement which are not there. New Zealand is of the view that
attempts to misinterpret the decisions of the Appella te Body should be seen for what they are. Such
misinterpretation will not assist in the resolution of this dispute.
5.80 In conclusion, New Zealand believes that the negotiating history on the particular matters
before the Panel is relevant to the interpretation of the AD Agreement on these matters. New Zealand
also submits that the Panel should consider carefully the text of the AD Agreement as it relates to the
different methodologies used to calculate dumping margins and view the calculation of dumping
margins as but one element in the process which allows the legitimate application of dumping remedies.
In New Zealand's view, the conclusions in respect of one methodology are not necessarily the same for
another methodology.
G. NORWAY
1. "As such" Claims
(a) Zeroing Procedures Challenged as Measures470
5.81 Norway argues that the referen ce to measures, and types of measures, that can be challenged
before a WTO panel in a case concerning the AD Agreement can be found in many provisions.
5.82 Norway points out that the scope of Article 3.3 of the DSU is very broad. It follows from the
interpretation of this Article by the Appellate Body in US-Corrosion-Resistant Steel Sunset Review that
in principle any act or omission attributable to a WTO Member can be assumed to be a measure by that
Member for the purposes of dispute settlement proceedings. Norway argues that the wide reach of the
notion of "measure" is also evident from Article 18.4 of the AD Agreement, which refers not only to
laws or regulations, but also to "administrative procedures" as measures subject to the disciplines of the
AD Agreement. Indeed, Article 17.3 of the AD Agreement, which concerns disputes relating to the
agreement, only makes reference to the "effects" of any action by another Member, and not to specific
types of measures.
5.83 Norway states that the Appellate Body has expressed itself on the reach of the notion "measure"
on several occasions with specific relevance to the AD Agreement. In US-Corrosion-Resistant Steel
Sunset Review the Appellate Body held that:

467 Appellate Body Report, US – Softwood Lumber V, para. 117.
468 Ibid, Appellate Body Report, US – Softwood Lumber V, para. 104.
469 Appellate Body Report, US – Softwood Lumber V, paras. 86-90. See also Appellate Body Report, EC
– Bed Linen, para. 55.
470 Norway Third Party Statement ("Norway Statement"), paras. 10-31.

"In addition, in GATT and WTO dispute settle ment practice, panels have frequently
examined measures consisting not only of particular acts applied only to a specific
situation, but also of acts setting forth rules or norms that are intended to have general
and prospective application. In other words, instruments of a Member containing rules
or norms could constitute a 'measure', irresp ective of how or whether those rules or
norms are applied in a particular instance . This is so because the disciplines of the
GATT and the WTO, as well as the dispute settlement system, are intended to protect
not only existing trade but also the security and predictability needed to conduct future
trade. This objective would be frustrated if instruments setting out rules or norms
inconsistent with a Member's obligations could not be brought before a panel once they
have been adopted and irrespective of any pa rticular instance of application of such
rules or norms. It would also lead to a multiplicity of litigation if instruments
embodying rules or norms could not be challenged as such, but only in the instances of
their application. Thus, allowing claims against measures, as such, serves the purpose
of preventing future disputes by allowing the root of WTO-inconsistent behaviour to be
eliminated."
471 (emphasis added)
5.84 Norway argues that the Appellate Body stated in the same ruling that there is no threshold
requirement in Article 17.3 of the AD Agreement that the measure in question be of a certain type:
"The provisions of the AD Agreement setting forth a legal basis for matters to be
referred to consultations and t hus to dispute settlement, are also cast broadly. Article
17.3 establishes the principle that when a complaining Member 'considers' that its
benefits are being nullified or impaired 'by another Member or Members', it may
request consultations. This language underlines that a measure attributable to a
Member may be submitted to dispute settle ment provided only that another Member
has taken the view, in good faith, that the measure nullifies or impairs benefits accruing
to it under the AD Agreement. There is no threshold requirement, in Article 17.3, that
the measure in question be of a certain type."472 (emphasis added)
5.85 Norway explains that the Appellate Body also held that the provisions of Article 18.4 of the
AD Agreement have a certain relevance in relation to th e question of what type of measure may be
submitted to dispute settlement under the agreement. The phrase "laws, regulations and administrative
procedures" has been interpreted very broadly to en compass all generally applicable rules, norms and
standards adopted by Members in connection with anti-dumping proceedings:
"The provisions of Article 18.4 of the AD Agreement are also relevant to the question
of the type of measure that may, as such, be submitted to dispute settlement under that
Agreement. Article 18.4 contains an exp licit obligation for Members to 'take all
necessary steps, of a general or particular character' to ensure that their 'laws,
regulations and administrative procedures' ar e in conformity with the obligations set
forth in the AD Agreement . Taken as a whole, the phrase 'laws, regulations and
administrative procedures' encompasses the en tire body of generally applicable rules,
norms and standards adopted by Members in connection with the conduct of
anti-dumping proceedings. The scope of each element in this phrase must be
determined for the purposes of WTO law and not simply by reference to the label given
to various instruments under the domestic law of each WTO Member. This
determination must be based on the content and substance of the instrument, and not
merely on its form or nomenclature. Otherwise, the obligations set forth in Article 18.4

471 Appellate Body Report, US-Corrosion Resistant Steel Sunset Review, para. 82.
472 Ibid, para. 86.

would vary from Member to Member depe nding on each Member's domestic law and
practice."473 (emphasis added)
In the same ruling the Appellate Body concluded:

"This analysis leads us to conclude that there is no basis, either in the practice of GATT
and the WTO generally or in the provisions of the AD Agreement, for finding that only
certain types of measures can as such be challenged in dispute settlement procedures
under the AD Agreement. Hence, we see no reason for concluding that, in principle,
non-mandatory measures cannot be challenged 'as such'."474

5.86 Norway argues that it is quite clear from the Appellate Body's statement that there is no
limitation on the type of measure that can "as such" be the subject of dispute settlement under the DSU
or the AD Agreement. In principle even non-mandatory measures can be challenged "as such". Because
in principle any type of measure can "as such" be challenged in dispute settlement procedures under the
AD Agreement, Norway argues that the question becomes whether the anti-dumping margin computer
programme must be considered to be a "measure" within the WTO and for the purpose of anti-dumping
proceedings. The ordinary meaning of the word "m easure" is an action taken to achieve a purpose.
There can be no doubt that the anti-dumping margin programme containing the standard zeroing
procedures qualifies as an action taken to achieve a purpose – the purpose of overstating the margin of
dumping. The only article in the AD Agreement that mentions different types of measures is
Article 18.4, which uses the term "laws, regulations and administrative procedures".
5.87 Norway argues that the phrase "laws, regulati ons and administrative procedures" has been
interpreted by the Appellate Body in US-Carbon Steel to encompass the entire body of generally
applicable rules, norms and standards adopted by Members in connection with the conduct of
anti-dumping proceedings.
475 Norway is of the view that the anti-dumping margin programme must be
considered a norm or standard adopted by the United States in connection with the conduct of
anti-dumping proceedings. In the same ruling the Appellate Body stated that the definition of the scope
of each element in the phrase must be based on the content and substance of the instrument, and not
merely on its form or nomenclature.476
5.88 Norway argues that, therefore, the fact that the zeroing procedures in the anti-dumping margin
programme are abstract; that they are not published in the Federal Register; that they do not bear the
title "law" or "regulation"; that they are not adopted by the US Congress but by the USDOC; that the
Department is entitled to change or withdraw them for the purposes of future determinations; and that
they are not relevant in US courts, cannot be decisive for whether these procedures are a "measure" for
the purpose of anti-dumping proceedings.
5.89 Norway argues that it must be quite clear that the anti-dumping margin computer program is a
norm/standard adopted by Members in connection with the conduct of anti-dumping proceedings, and
the content and substance of this instrument make this even clearer. Norway believes that the
anti-dumping margin programme and the procedures it contains may be a set of normative rules that
apply mechanistically and automatically to a given set of facts without further human intervention.
There is no room for administrative or judicial in terpretation. The effect of the standard zeroing
procedures in future cases is utterly predictable. The standard zeroing procedures in the anti-dumping
margin programme provide certainty and security (at least for US industry) for the conduct of future
trade. They mandate zeroing in all cases, and continue to do so until changed. Norway has noted the

473 Appellate Body Report, US-Corrosion Resistant Steel Sunset Review, para. 87.
474 Appellate Body Report, US-Corrosion Resistant Steel Sunset Review, para. 88.
475 Ibid, para. 87.
476 Ibid, para. 87.

arguments presented by the United States to the effect that the Assistant Secretary of Commerce for
Import Administration may change the Anti-dumping Manual, and the practices set out therein,
"without notice", and that the anti-dumping margin programme is "discretionary" as opposed to
"mandatory". This argument is false, however, as all types of measures are su bject to changes. The
important issue here is that they are prescriptive for a certain WTO-inconsistent result until they are
changed and for as long as they remain unchanged.
5.90 Norway argues that, allowing the anti-dumping margin programme to be challenged "as such"
is thus the only way to eliminate the root of the WT O-inconsistent conduct. In this regards, Norway
refers to the reasoning of the Appellate Body in US – Oil Country Tubular Goods Sunset Reviews
477
when it determined that the United States Sunset Policy Bulletin was a measure challengeable under the
WTO. For the above reasons, the anti-dumping ma rgin programme containing the standard zeroing
procedures is a "challengeable" measure under WTO law "as such".
(b) "As Such" Claims under Article 2 of the AD Agreement with respect to Original
Investigations478
5.91 While Norway agrees with Japan in its line of argumentation with respect to the inconsistency
of zeroing with Article 2 of the AD Agreement –that the margin of dumping must be determined for the
product as a whole and that a dumping determination must be based on a fair comparison, it is Norway's
view that it has already been established by the Appellate Body in a number of cases479 that the practice
of zeroing is inconsistent with the AD Agreement. The Appellate Body has clearly stated that there is
only one method of calculating dumping margins in the AD Agreement and that is in accordance with
the provisions of Article 2.4 and 2.4.2 of the Agreement.
(c) "As Such" Claims with Respect to Articles 9 and 11 of the AD Agreement480
5.92 Norway states that one of the questions in this case is whether Articles 2.1, 2.4 and 2.4.2, of the
AD Agreement apply not only to original investigations but, also to reviews. The United States argues
that this is not the case, essentially on the basis of two arguments: (1) that Article 2.4.2 is the provision
that eventually prohibits zeroing, and (2) that Article 2.4.2 is not applicable to "retrospective assessment
reviews" or "new shipper reviews", "changed circumstances reviews" and "sunset reviews" as they are
not "investigations". Norway states that these argum ents are without merit. The Appellate Body has
clearly stated that there is only one met hod of calculating dumping margins in the AD Agreement and
that is accordance with the provisions of Article 2.4 of the Agreement – which includes Article 2.4.2.
This was most recently stated in the US-Corrosion- Resistant Steel Sunset Review in connection with
the interpretation of Article 11.3 of the Agreement concerning "sunset reviews":
"However, should investigating authorities choose to rely upon dumping margins in
making their likelihood determination, the calculation of these margins must conform
to the disciplines of Article 2.4. We see no other provision in the AD Agreement
according to which Members may calculate dumping margins. In the CRS sunset
review, USDOC chose to base its affirma tive likelihood determination on positive
dumping margins that had been previously cal culated in two particular administrative
reviews. If these margins were legally fl awed because they were calculated in a

477 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 187.
478 Norway Statement, para. 7.
479 See, e.g., Appellate Body Report, EC – Bed linen, para. 55; Appellate Body Report, US – Corrosion
Resistant Steel Sunset Review, paras. 127-135; Appellate Body Report, US – Softwood Lumber V, para. 101.
480 Norway Statement, paras. 32-44.

manner inconsistent with Article 2.4, this could give rise to an inconsistency not only
with Article 2.4, but also with Article 11.3 of the AD Agreement."481 (emphasis added);
"It follows that we disagree with the Pane l's view that the disciplines in Article 2
regarding the calculation of dumping margins do not apply to the likelihood
determination to be made in a sunset re view under Article 11.3. Accordingly, we
reverse the Panel's consequential finding, in paragraph 8(1)(d)(iii) of the Panel Report,
that the US did not act inconsistently with Article 2.4 of the AD Agreement in the CRS
sunset review by relying on dumping margins alleged by Japan to have been calculated
in a manner inconsistent with Article 2.4."482 (emphasis added);
and
"As explained above, if a likelihood dete rmination is based on a dumping margin
calculated using a methodology inconsistent with Article 2.4, then this defect taints the
likelihood determination too. Thus, th e consistency with Article 2.4 of the
methodology that USDOC used to calculate the dumping margins in the administrative
reviews bears on the consistency with Article 11.3 of USDOCs likelihood
determination in the CRS sunset review. In the CRS sunset review, USDOC based its
determination that "dumping is likely to continue if the [CRS] order were revoked" on
the "existence of dumping margins" calculated in the administrative reviews. If these
margins were indeed calculated using a methodology that is inconsistent with
Article 2.4 – an issue that we examine below – then USDOCs likelihood determination
could not constitute a proper foundation fo r the continuation of anti-dumping duties
under Article 11.3."483 (emphasis added)
5.93 Norway points out that the Appellate Body in US-Corrosion-Resistant Steel Sunset Review
went on to recall its findings in the EC-Bed Linen case, and stated that:
"When investigating authorities use a zeroing methodology such as that examined in
EC-Bed Linen to calculate a dumping margin, whether in an original investigation or
otherwise, that methodology will tend to inflate the margins calculated. Apart from
inflating the margins, such a methodology c ould, in some instances, turn a negative
margin of dumping into a positive margin of dumping. As the Panel itself recognised
in the present dispute, 'zeroing … may lead to an affirmative determination that
dumping exists where no dumping would have been established in the absence of
zeroing'. Thus, the inherent bias in a zeroing methodology of this kind may distort not
only the magnitude of a dumping margin, but also a finding of the very existence of
dumping."
484 (emphasis added)
Norway argues that the word "o therwise" makes it particularly clear that the findings of the
Appellate Body in this case are just as valid whenever a margin of dumping is calculated, and not just in
original investigations.

5.94 Norway argues that, with regard to retrospec tive assessment reviews, this is furthermore,
abundantly clear from the chapeau to paragraph 3 of Article 9, which states that "[t]he amount of the
anti-dumping duty shall not exceed the margin of dumping as established under Article 2". This creates

481 Appellate Body Report, US-Corrosion Resistant Steel Sunset Review, para. 127.
482 Ibid, para. 128.
483 Ibid, para. 130.
484 Ibid, para. 135.

a clear and unambiguous link between the dumping duty imposed, reassessed or collected and the
disciplines in Article 2 governing the calculation of dumping margins.
5.95 Norway states that the United States tries to escape the reach of this chapeau by arguing that
Article 2.4 applies, but not sub-paragraph 4.2, due to the existence of the word "investigation" in
Article 2.4.2, and by arguing that the disciplines on methodologies and the prohibition against zeroing
are only based on this sub-paragraph. These arguments are also flawed, claims Norway. First, there is
nothing in Article 9.3 that bars the application of Article 2.4.2. To the contrary, there is a clear
reference to calculations of dumping margins, an i ssue squarely within Article 2.4.2. Second, the
Appellate Body has interpreted the prohibition of zeroing based not on Article 2.4.2 as such but on the
requirement of a "fair comparison" in Article 2.4. No rway refers in this regard to a statement by the
Appellate Body in EC-Bed Linen.
485 Third, because what the United States is doing in its retrospective
assessment reviews, new shipper reviews, changed circumstances reviews and sunset reviews is similar
to what it does in original investigations. For all practical purposes it is a new investigation. If the reach
of Article 2.4.2 is excluded from all but original in vestigations there would be no disciplines left to
ensure fairly computed dumping margins. This would be contrary not only to the "fair comparison"
requirement, but also to the explicit statement by the Appellate Body in US-Corrosion-Resistant Steel
Sunset Review486 referred to above.
5.96 In conclusion, Norway argues that it is clear from the above that the prohibition on zeroing also
applies to retrospective assessment reviews, new sh ipper reviews, changed circumstances reviews and
sunset reviews as they are not "investigations".
H. THAILAND
1. "As such" Claims
(a) Zeroing Procedures Challenged as Measures487
5.97 Thailand agrees with Japan that the United States' zeroing methodology constitutes a "measure"
subject to WTO dispute settlement. Thailand ge nerally agrees with Japan's description of the
United States' practice of zeroing. However, Thaila nd does not consider that the distinction made by
Japan between so-called "model" zeroing and "simple zeroing" has any practical meaning or relevance
to the legal issues in this case. These terms are labe ls created by Japan itself. In practice, the zeroing
methodology is exactly the same regardless of whether the initial comparisons between export price and
normal value are done on a transaction-to-transaction, average-to-average, or transaction-to-average
basis.
5.98 Thailand recalls that the Appellate Body has stat ed that "in principle, any act or omission
attributable to a WTO Member can be a measure of that Member for purposes of dispute settlement
proceedings".488 The Appellate Body has also explained that Article 18.4 of the AD Agreement is
relevant to the determination of what measur es may be subject to dispute settlement. In US – Oil
Country Tubular Goods Sunset Reviews , the Appellate Body found that the sunset policy bulletin at
issue in that dispute was a measure with "norma tive value, as it provides administrative guidance and
creates expectations among the public and among private actors". The Appellate Body also emphasised

485 Appellate Body Report, EC-Bed Linen, para. 55.
486 Appellate Body Report, US-Corrosion Resistant Steel Sunset Review, para. 135.
487 Thailand Executive Summary of the Third Party Submission ("Thailand Exec. Summary"), paras. 3,
6-11.
488 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 81.

that the sunset policy bulletin constituted a "me asure" because it was "intended to have general
application, as it is to apply to all the sunset reviews conducted in the United States".
5.99 Thailand argues that these factors apply equally to the zeroing methodology. This measure is
not laid out either in the United States' anti-dumpi ng laws or the administra tive regulations of the
USDOC. However, the manner in which an inves tigating authority promulgates and implements
normative, generally applicable administrative procedures cannot be dispositive of the classification of
those procedures for the purposes of the AD Agreement. In this case, Japan has shown that the zeroing
methodology – reflected in the same computer pr ogramming language – has been applied in every
determination by the United States since at least 1993. The USDOC has (successfully) defended the
methodology before the US courts and the United States has apparently not departed from the practice
in any anti-dumping determination. The USDOC t hus apparently treats the zeroing methodology as
binding. Thus, the zeroing methodology has, like the sunset policy bulletin at issue in US – Oil Country
Tubular Goods Sunset Reviews, normative value, in that it has both general and prospective application.
In these circumstances, the zeroing methodology is cl early one of the "generally applicable rules,
norms, and standards adopted by [the United States ] in connection with the conduct of anti-dumping
proceedings" and therefore a "measure" subject to WTO dispute settlement.
5.100 Thailand states that the zeroing methodology has been applied, explained, and defended in
innumerable US anti-dumping determinations, including all of those listed by Japan in its request for the
establishment of a panel. Thus, the computer programming language is one aspect of an "administrative
procedure" within the meaning of Article 18.4 of the AD Agreement that has been adopted by the
United States with normative and general application.
5.101 Thailand argues that the fact that the same pr ogramming language is used in every computer
programme to determine dumping margins by the United States is sufficient to establish that it is one of
the United States' "laws, regulations and administrative procedures" within the meaning of Article 18.4
of the AD Agreement and a measure that may be challenged as such in dispute settlement proceedings.
Also, the fact that other aspects of the computer programmes change from case to case, while the
Standard Zeroing Line does not, supports Japan 's contention that the zeroing methodology has
normative and general application. In addition, the United States has failed to provide any evidence to
suggest that the zeroing methodology is not general or prospective in its application – that it is not
applied or even that it applies differently in certain instances.
5.102 Thailand claims that the United States has not provided any evidence that under the zeroing
methodology there is any discretion or flexibility as to how or whether to use the methodology in the
determination of dumping margins. In these circumst ances, therefore, there is no need to perform the
additional qualitative analysis of individual instances of the applica tion of the challenged measure of
the kind described by the Appellate Body in US – Oil Country Tubular Goods Sunset Reviews .
Assuming, arguendo, however, that a qualitative analysis is required, Japan has provided sufficient
evidence regarding the specific anti-dumping determina tions it challenges on an "as applied" basis to
enable the Panel to conduct that analysis.
(b) "As Such" Claims under Article 2 of the
AD Agreement with respect to Original
Investigations489
5.103 Thailand argues that the zeroing methodology at issue is inconsistent with Articles 2.4 and
2.4.2 of the AD Agreement. The requirement of a fair comparison in Article 2.4 of the AD Agreement
imposes a fundamental obligation on investigat ing authority to avoid biased and inaccurate
determinations of dumping margins. The Appellate Body has confirmed that this obligation "informs

489 Thailand Exec. Summary, paras. 12-19.

all of Article 2". 490 This includes Article 2.4.2, which, in any event, specifically incorporates by
reference the fair comparison requirement of Article 2.4 ("subject to the provisions governing fair
comparison in paragraph 4 ...").
5.104 Moreover, Thailand claims, the Appellate Body h as also stated that "the inherent bias in a
zeroing methodology of this kind may distort not only the magnitude of a dumping margin, but also a
finding of the very existence of dumping".491 Systematically excluding non-dumped transactions from
the calculation of overall dumping margins under the zeroing methodology is the equivalent of treating
tall people as being of average height in calculating the average height of a larger group. In both cases,
the result is distorted and inaccurate. Article 2.4 of the AD Agreement prohibits the use of such an
inherently distorted methodology to make a fair comparison between export price and normal value.
5.105 Thailand argues that the United States attempts to portray Japan as seeking an "offset" to a
previously-calculated dumping margin to tilt the co mparison in favour of the Japanese exporter.
However, at one point in the calculation of dumping margins – and it does not matter when this occurs –
the United States adjusts at least some of the prices for the export transactions at issue so that the export
price is no longer greater than the normal value for those transactions. Rather than Japan seeking an
adjustment, therefore, the US practice constitutes an adjustment that is neither permitted under
Article 2.4 of the AD Agreement nor, by any definition of the term, can be considered fair.
5.106 Thailand expresses that Articles VI and VI:2 of the GATT 1994, and Article 2.1 of the
AD Agreement all refer to dumping and the determination of dumping margins in terms of a "product"
rather than selected transactions in that product. Thus, neither Article VI of the GATT 1994 nor the
AD Agreement authorises WTO Members to unfairly influence the calculation of dumping for a product
by not fully accounting for certain export transactions in that product simply because they may exceed
normal value.
5.107 In effect, the United States argues that aspects of the determination of dumping margins are not
subject to the rules of Article 2. However, Th ailand argues that the United States has not explained
what constraints, if any, apply to those aspects of the determination, or how its position is consistent
with the requirements of Articles 1 and 18.1 of the AD Agreement.
5.108 Thailand also points out that the Appellate Body found in US – Softwood Lumber V that the
reference to "margins of dumping" in Article 2.4.2 refers to the calculation of overall dumping margins
for the product as a whole, rather than transaction- or model-specific comparisons. The Appellate
Body's finding did not differentiate between any typ es of zeroing or otherwise suggest that its finding
that zeroing was not permissible was dependent on which methodology the United States used under
Article 2.4.2 to make multiple comparisons at the sub-group level.
5.109 Thailand asserts that the targeted dumping provisi on of Article 2.4.2 does not permit zeroing.
A failure to use the zeroing methodology would not render this provision inutile by cancelling out the
differences between the different comparison methodol ogies. Thailand claims that the United States
has not explained how it makes any of the necessary fi ndings described in this provision in using the
zeroing methodology. The fair comparison requirement applies to all of Article 2.4.2, including the
targeted dumping provision. The text of the targeted dumping provision does not authorise an
additional zeroing adjustment after the selection of the appropriate comparison methodology and before
the calculation of the overall dumping margin for the product under consideration. Thus, Article 2.4.2
contains no textual support for the United States' argument that the zeroing methodology is essential to
the operation of that provision.

490 Appellate Body Report, EC – Bed Linen, para. 59.
491 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 135.

(c) "As Such" Claims with respect to Articles 1, 2, 9 and 11 of the AD Agreement and Article VI of
the GATT 1994
492
5.110 Thailand submits that margins of dumping must be determined in accordance with Article 2 in
all circumstances, including both original investigations and subsequent reviews under Article 9. This
is consistent with both the definitions of terms of Articles 1 and 2 of the AD Agreement and Article VI
of the GATT 1994, as discussed above. It is also cons istent with the provisions of Article 9.3, which
expressly refers to "the margin of dumping established under Article 2.
5.111 Thailand disagrees, therefore, with the United States' argument that Article 9 reviews are
concerned with fundamentally different matters than original investigations.493 The margins calculated
by the United States in its Article 9 reviews may affe ct not just the amount of duties an exporter must
ultimately pay (although that itself is an important consideration that requires close adherence to the
provisions of the AD Agreement) but also decisions whether to terminate anti-dumping measures in
reviews under Article 11.2, changed circumstance reviews, or under Article 11.3, sunset reviews.
VI. INTERIM REVIEW
A. INTRODUCTION
6.1 The Panel submitted its interim report to the parties on 8 March 2006. On 22 March 2006, both
parties requested that the Panel revise precise aspects of the interim report. Neither party requested an
interim meeting. On 5 April 2006, both parti es submitted comments on the other party's request for
interim review. The Panel has carefully considered the arguments made by the parties in their request
for interim review and addresses them in paragraph 6.65 et seq., infra, in accordance with Article 15.3
of the DSU.494
6.2 On 20 April 2006, the Panel informed the parties that it had completed its review of the
comments made by the parties during the interim review process and was now in a position to issue its
final report to the parties. The Panel also indicated that it was aware of the findings of the Appellate
Body in its report issued on 18 April 2006 in US – Zeroing (EC) and that it recognized that these
findings had a direct bearing on the contents of the interim report. The Panel therefore requested the
parties to convey their views on whether the Panel should proceed to reconsider the findings in the
interim report in light of the Appellate Body Report in US – Zeroing (EC) and, if so, how the Panel
should adjust its timetable and working procedures in order to provide the parties with an opportunity to
express views on any relevant issues of law addressed in that Appellate Body Report. In their responses
to this communication of the Panel both parties indica ted that they wished to have an opportunity to
submit comments on the Appellate Body Report in US – Zeroing (EC). In light of these responses, the
Panel on 26 April 2006 invited the parties to subm it their written comments on any relevant issues of
law addressed in the Appellate Body Report in US – Zeroing (EC) by 10 May 2006 and to submit
comments on each other's comments by 17 May 2006. Following a request by the United States on
17 May 2006, the Panel decided to hold a meeting with the parties, which took place on 12 June 2006.
6.3 The comments by the parties on the Appellate Body Report in US – Zeroing (EC) are
summarized in paragraph 6.4 et seq., infra.

492 Thailand Exec. Summary, paras. 20-21.
493 US First Written Submission, paras. 79-80.
494 Section VI of this report, entitle d "Interim Review" therefore forms part of the final findings of the
panel report, in accordance with Article 15.3 of the DSU.

B. COMMENTS OF THE PARTIES ON ANY RELEVANT ISSUES OF LAW ADDRESSED IN THE APPELLATE
BODY REPORT IN US - ZEROING (EC)
1. Japan
(a) Whether the Panel should follow the Appellate Body's findings in US – Zeroing (EC) 495
6.4 Although Japan recognizes that the Panel in th e present dispute is not bound to follow the
Appellate Body’s ruling in US – Zeroing (EC), it argues that the close similarity between the measures
in the two disputes means that it would be appropriate for the Panel to do so. Japan asserts that it is the
Panel's task, pursuant to Articles 3.2 and 3.3 of the DSU, to facilitate the prompt settlement of this
dispute in a manner that promotes the security and predictability of the trading system. These ends
would not be served by acceding to a request from one party to the dispute in US – Zeroing (EC) to
disregard the Appellate Body’s findings unfavourable to it on the ground that that party considers the
findings “not persuasive”496.
6.5 Japan contends that the Appellate Body Report in US – Zeroing (EC) is significant for this
dispute in two broad ways. First, the Appellate Body upheld the panel’s finding that the “zeroing
methodology” used by the United States in W-to-W comparisons in original investigations constitutes a
rule of general and prospective application th at can be challenged “as such” in WTO dispute
settlement.497 Second, the Appellate Body held that the United States’ application of the zeroing
methodology in W-to-T comparisons in certain periodic reviews 498 is inconsistent with Article 9.3 of
the AD Agreement and Article VI:2 of the GATT 1994 because “dumping” and “margins of dumping”
must be determined for the “product” as a whol e, not individual transactions, and all multiple
comparison results must, therefore, be taken fully into account in the dumping determination. Japan
argues that these rulings have several important consequences for the present dispute.
(b) the zeroing procedures maintained by the Un ited States for use in W-to-W and T-to-T
comparisons in original investigations are as such inconsistent with Articles 2.1 and 2.4.2 of the
AD Agreement and Article VI:1 of the GATT 1994; the anti-dumping investigation of imports
of certain cut-to-length carbon quality steel produc ts from Japan is inconsistent with the same
provisions
(i) Weighted Average-to-Weighted Average Comparisons - Model Zeroing499
6.6 Japan comments that the Appellate Body in US – Zeroing (EC) upheld the panel’s finding that
the “zeroing methodology” used by the United States in weighted average-to-weighted
average("W-to-W") comparisons in original investigations constitutes a rule of general and prospective
application that can be challenged “as such” in WTO dispute settlement.500 The Appellate Body held
that to establish the existence of a rule or nor m that can be challenged as such in WTO dispute
settlement, the complainant must prove: (1) that the rule or norm is attributable to the responding

495 Japan Comments on the relevant issues of law addressed in the Appellate Body Report in
U – Zeroing (EC) (WT/DS294/AB/R) ("Japan Comments"), paras. 2-3; Japan Response to US Comments on the
Appellate Body Report in US – Zeroing (EC) ("Japan Response to US Comments"), para. 17.
496 US Comments on the relevant issues of law addressed in the Appellate Body Report in US – Zeroing
(EC)(WT/DS294/AB/R)("US Comments"), para. 3.
497 Appellate Body Report, US – Zeroing (EC), paras. 204 and 205. Japan refers to the “panel” in US –
Zeroing (EC), as distinct from the “Panel” in this dispute.
498 In US – Zeroing (EC), the Appellate Body refers to reviews conducted pursuant to Article 9.3 of the
AD Agreement as “administrative” or “duty assessment reviews”. The Panel refers to these as “periodic reviews”.
499 Japan Comments, paras 4-9, 19-20.
500 Appellate Body Report, US – Zeroing (EC), paras. 204 and 205.

Member; (2) the precise content of the rule; and (3) that the rule or norm has general and prospective
application.
501 The Appellate Body agreed with the parties and third participants that it was not
necessary for the alleged rule or norm to be “e xpressed in the form of a written instrument”. 502 The
Appellate Body also held that the evidence substant iating the existence of such a rule or norm can
include “proof of the systematic application of the challenged ‘rule or norm’”.503
6.7 According to Japan, the Appellate Body's ruling indicates that the Panel in the present dispute
correctly found in its interim findings that the model and simple “zeroing procedures” are “as such”
measures, particularly because the evidence relied on by the Panel in this dispute is more extensive than
the evidence of record in US – Zeroing (EC). In this respect, Japan contends that all the categories of
evidence which the Appellate Body considered important in US – Zeroing (EC) are also before the
Panel in the present dispute and, in addition, the Panel in the present dispute has statements available to
it from United States’ government agencies and c ourts that were not in the record of US – Zeroing
(EC).
504 In these circumstances, Japan believes that the Panel in this dispute should affirm its interim
findings on this issue505, relying on the categories of evidence to which the Appellate Body referred.
6.8 On the basis of the Appellate Body’s reasoning in US – Zeroing (EC), Japan sees no reason for
the Panel to reconsider its conclusion that model ze roing is inconsistent w ith Article 2.4.2 of the
AD Agreement. Additionally, because the A ppellate Body emphasized in US – Zeroing (EC) that the
prohibition against zeroing stems from Article 2.1, as well as Article 2.4.2 506, Japan submits that the
Panel should find that the maintenance of model zeroing in original investigations is inconsistent with
both Articles 2.1 and 2.4.2. Furthermore, because the definition of “dumping” derives from
Article VI:1 of the GATT 1994 as well as Article 2.1, the Panel should find that the United States acts
inconsistently with Articles 2.1 and 2.4.2 of the AD Agreement, and Article VI:1 of the GATT 1994, by
maintaining model zeroing procedures in the context of original investigations. It follows that the Panel
should also find that the application of these pr ocedures renders the anti-dumping investigation of
imports of certain cut-to-length carbon quality steel products from Japan inconsistent with the same
provisions.
(ii) Transaction-to-Transaction Comparisons - Simple Zeroing
507
6.9 According to Japan, although the Appellate Body in US – Zeroing (EC) was not asked to rule
upon whether zeroing is prohibited in original in vestigations when using a T-to-T comparison
methodology, the reasoning underlying its findings dictates that the maintenance of simple zeroing
procedures in the context of T-to-T comparisons in original investigations is inconsistent with Articles
2.1 and 2.4.2 of the AD Agreement and Article VI:1 of the GATT 1994.
6.10 In US – Zeroing (EC) , the Appellate Body emphasized that “the definition of ‘dumping’ as
contained in Article 2.1 applies to the entire Agreement”. 508 Relying on this de finition, the Appellate
Body held that “under the AD Agreement and Article VI of the GATT 1994, ‘dumping’ and ‘margins of
dumping’ must be established for the product under investigation as a whole.”509 The Appellate Body’s
interpretation is, therefore, that the pr oduct-wide definition of “dumping” applies throughout the

501 Appellate Body Report, US – Zeroing (EC), para. 198.
502 Appellate Body Report, US – Zeroing (EC), paras. 193 - 194.
503 Appellate Body Report, US – Zeroing (EC), para. 198.
505 Interim Panel Report, paras. 6.45 – 6.50 (final report, paras. 7.50-7.55).
 506 Appellate Body Report, US – Zeroing (EC) , para. 126 (“This finding was based not only on
Article 2.4.2, first sentence, but also on the context found in Article 2.1 of the AD Agreement.”)
507 Japan Comments, paras. 21-30; Japan Response to US Comments, paras. 8-9
508 Appellate Body Report, US – Zeroing (EC), para. 125 (quoting US – Softwood Lumber V , para. 93)
(footnote omitted).
509 Appellate Body Report, US – Zeroing (EC), para. 126.

AD Agreement. Moreover, Japan notes that this interpretation of Article 2.1 was applied in the context
of the first sentence of Article 2.4.2 in US – Softwood Lumber V, which contains both the W-to-W and
T-to-T comparison methods.510
6.11 Consistent with these statements, the Appellate Body in US – Zeroing (EC) applied the
definition of "dumping" to determinations made in two different types of anti-dumping proceedings that
occur at different stages of an anti-dumping action – original investigations and periodic reviews. The
Appellate Body has additionally stated that the same interpretation applies to dumping determinations
made for purposes of sunset reviews.511
6.12 The Appellate Body’s reasoning also contradicts the contention that the W-to-W and T-to-T
comparison methods are fundamentally different because the former envisages a weighted average
comparison of “all comparable export prices”, whereas the latter envisages a comparison with a single
export price in an individual export transaction. In US – Zeroing (EC), the periodic review measures at
issue involved comparisons made with a single export price for an individual export transaction.
Nonetheless, the Appellate Body held:
"… [I]f the investigating authority establis hes the margin of dumping on the basis of
multiple comparisons made at an intermedia te stage, it is required to aggregate the
results of all of the multiple comparisons, including those where the export price
exceeds the normal value. If the investigating authority chooses to undertake multiple
comparisons at an intermediate stage, it is not allowed to take into account the results of
only some multiple comparisons, while disregarding others."
512
6.13 Thus, according to Japan, the fact that th e comparison methodology involves a series of
intermediate comparisons made with the prices of individual export transactions does not alter the
definition of “dumping” and “margin of dumping”, which is derived from Article 2.1 and not Article
2.4.2. Rather, where multiple comparisons are made with the prices of individual export transactions,
the authorities must take fully into account all comparison results. It follows that the USDOCs
maintenance of the simple zeroing procedure for use in T-to-T comparisons in original investigations is
inconsistent with Article s 2.1 and 2.4.2 of the AD Agreement and Article VI:1 of the GATT 1994
because it fails to result in a “margin of dumping” for the “product” as a whole.
6.14 According to Japan, the objections expressed by the United States to this aspect of the
Appellate Body's findings in US – Zeroing (EC) ignore the fact that the Appellate Body’s statements are
based on an interpretation of the text of Article 2.1 of the AD Agreement and Article VI:1 of GATT
1994, in particular, the word “product(s)”. Moreover, the previous reports to which the Appellate Body
referred, themselves provided an interpretation of the text and context of the relevant provisions.
Specifically, in US – Softwood Lumber V, the Appellate Body’s interpretation of Article 2.1 and Article
VI:1 is based on the text of these two provisions, as well as the context in Articles 2.4.2, 6.10 and 9.2.513
In Japan's view, it is, therefore, simply incorrect to suggest that the Appellate Body’s interpretation does
not stem from treaty text.514

510 Appellate Body Report, US – Zeroing (EC), para. 126.
511 Appellate Body Report, US – Zeroing (EC) , paras. 263(a)(i) (periodic reviews) and (b) (original
investigations), and footnote 220 para. 129 (sunset reviews).
512 Appellate Body Report, US – Zeroing (EC), para. 127 (quoting US – Softwood Lumber V, para. 99).
See also para. 132.
513 See Japan Answers to the Second Set of Questions by the Panel of 21 September 2005, paras. 60 to 73.
514 Japan Response to US Comments, para. 8.

6.15 In addition, according to Japan, the United States' critique of the Appellate Body’s reliance on
Article 6.10 of the AD Agreement subtly alters the text of Article 6.10. Article 6.10 requires the
determination of “an individual margin of dumping for each known exporter or producer concerned of
the product”. The word “individual” qualifies the word “margin”, and not “exporter or producer” as the
United States suggests. The provision, therefore, envisages that a single margin is determined for a
single producer/exporter, for the product. Japan argues that this provides contextual confirmation of the
Appellate Body’s reading of Articles 2.1 and 9.3. Mo reover, in Japan's view, the text of Article 6.10
cannot support the view that “dumping” and the “margin of dumping” can be determined for each and
every transaction or model. Otherwise, if every transaction- or model-specific comparison constituted a
“margin of dumping”, there would be multiple margins – one for each transaction or model – and not
“an individual margin of dumping” for “the product”.
515
6.16 In response to the United States arguments that the Appellate Body reasoning in US – Softwood
Lumber V was limited to comparisons relating to “mu ltiple averaging”, Japan argues that it was the
United States that failed to appreciate the importance in the repeated references by the Appellate Body
to “multiple comparisons”. The Appellate B ody noted that, under a W-to-W comparison, the
authorities may conduct “multiple averaging” rather than a single weighted average normal value and
export price. When the authorities choose to enga ge in multiple averaging, they make multiple
comparisons, one for each averaging group. The dispute in US – Softwood Lumber V concerned the
treatment of the results of these multiple comparisons. Based on Article 2.1 and VI:1, the Appellate
Body ruled that in determining the margin of dumping for the “product”, negative multiple comparison
results cannot be disregarded, but must be aggregated together with the positive results.
516 By applying
the same interpretation of these provisions in US – Zeroing (EC) , the Appellate Body engaged in
consistent interpretation of the AD Agreement and the GATT 1994, and not in “distortion” of the
previous reports.517 Indeed, contrary to the United States’ argument, if the Appellate Body had upheld
the panel report, it would have invol ved a departure from its rulings in US – Softwood Lumber V and
EC – Bed Linen.
(c) Withdrawal of claims relating to zeroing procedures in the context of Weighted
Average–to–Transaction comparisons518
6.17 Japan's claims in respect of the USDOC simp le zeroing procedures initially covered both
T-to-T and W-to-T comparison methodologies. However, in Japan's comments to the Appellate Body
Report in US – Zeroing (EC) , Japan withdrew its claims against simple zeroing procedures in the
context of the application of the W-to-T comparison methodology. In doing so, Japan noted that
although the Appellate Body’s findings did not expr essly address the permissibility of zeroing in the
exceptional circumstances set forth in the second sentence of Article 2.4.2 of the AD Agreement, Japan
considered that zeroing is prohibited in the situa tion contemplated in the second sentence of Article
2.4.2. Nonetheless, given the fact that the USDOC Regulations addressing pricing patterns have never
been applied, and also given the uncertainti es regarding the United States’ rules for dumping
comparisons where there is a relevant pricing pattern , Japan considered it appropriate to withdraw its
complaint regarding the use of zeroing under the second sentence of Article 2.4.2.
6.18 Japan disagrees with the argument of the United States that the withdrawal of this claim
supports its view that the zeroing procedures are not an “as such” measure, particularly in T-to-T
comparisons in original investigations. Japan notes that the uncertainty surrounding the United States’
“targeted dumping” methodology relates to aspects of the comparison method other than the use of
zeroing. Japan maintains that the zeroing proce dures apply to W-to-T comparisons under the second

515 Japan Response to US Comments, para. 9.
516 Appellate Body Report, US – Softwood Lumber V, paras. 97, 98 and 99.
517 US Comments, para. 48.
518 Japan Comments, paras. 31-32; Japan Opening Statement at the Third Meeting with the Panel, para. 9.

sentence of Article 2.4.2 - the United States’ oft-stated and vigorous defence of its right to zero under
this sentence suggests that Japan might be correct. Japan also clarifies, for the record, that it did not and
does not make any claims regarding the "targeted dumping" regulations of USDOC.
6.19 Japan also explains that the USDOC standard zeroing procedures constitute a single rule of
general and prospective application, that mandates the systematic disregard of negative intermediate
comparison results determined on a model- or tr ansaction-specific basis in calculating dumping
margins under any method of comparison and in any type of anti-dumping proceeding. 519 Thus
referring to the Panel’s interim finding that the zeroing procedures do, indeed, constitute “a single rule
or norm” maintained for use by the United States 520, Japan clarifies that there is a single measure that
applies to W-to-W comparisons, T-to-T comparisons and W-to-T comparisons, used in any type of
anti-dumping proceeding, rather than a separate zeroing measure applicable to each of these
comparison methods, as the United States suggested. With respect to the single zeroing measure, Japan
makes a series of claims, that necessarily differentiate between the different treaty provisions that apply
to the different types of comparison and to the different types of anti-dumping proceeding.
6.20 Japan further argues that the fact that the zeroing procedures have been applied only once under
a T-to-T comparison does not support the view that the procedures do not constitute a general rule; nor
does this fact suggest that the zeroing procedures do not apply to T-to-T comparisons. Indeed, to the
contrary, the application of zeroing in a T-to-T comparison in implementing the DSB’s
recommendations and rulings in US – Softwood Lumber V confirms the generality of the United States’
zeroing rule. In any event, an “as such” challenge can be made even if a rule has never been applied.
521
(d) the zeroing procedures maintained by the United States for use in periodic reviews are as such
inconsistent with Articles 2.1 and 9.3 of the AD Agreement and Articles VI:1 and VI:2 of the
GATT 1994; the eleven periodic reviews challenge d by Japan are inconsistent with the same
provisions522
6.21 Japan argues that the methodology applied by the United States in the periodic reviews found to
be WTO-inconsistent in US – Zeroing (EC) is exactly the same as the simple zeroing procedures that
Japan challenges “as such” and “as applied” in the cont ext of periodic reviews in this dispute. The
reasons that led the Appellate Body to conclude that the periodic reviews were WTO-inconsistent
should, therefore, lead this Panel to the same conclusion with respect to Japan’s “as such” and “as
applied” challenges in periodic reviews.
6.22 In US – Zeroing (EC), the panel did not examine whether the United States maintains an as such
“zeroing” measure for purposes of periodic reviews and instead ruled that, in any event, zeroing is
permissible in periodic reviews. 523 The EC appealed this finding. The Appellate Body ruled that, in
light of its findings that certain periodic reviews were WTO-inconsistent because of the application of
the zeroing methodology,
"… we declare moot, and of no legal effect, the Panel's finding, in paragraph 8.1(g) of
the Panel Report, that the zeroing methodology used by the United States in
administrative reviews is not inconsistent, as such, with Articles 1, 2.4, 2.4.2, 9.3, 11.1,

519 See further Japan Rebuttal Submission of 12 August 2005, Section II.
520 Interim Panel Report, para. 6.48. See also footnotes 546 and 557.
521 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Reviews, para. 87.
522 Japan Comments, paras. 33-40; Japan Response to US Comments, paras. 11-16.
523 Panel Report, US – Zeroing (EC), paras. 7.91 to 7.106.

11.2, and 18.4 of the Anti-Dumping Agreement, Articles VI:1 and VI:2 of the GATT
1994, and Article XVI:4 of the WTO Agreement."
524 (emphasis added)
6.23 Thus, according to Japan, the Appellate Body did not uphold the Panel’s “as such” findings
and, instead, declared them null. However, beca use the panel had made no factual findings that
demonstrated the existence of an “as such” zeroing measure in periodic reviews, the Appellate Body
was unable to complete the analysis of the EC’s “as such” claims on this issue.525
6.24 Japan contends that the Panel’s interim findings avoid this unsatisfactory failure to resolve the
dispute because the Panel found that the zeroing pro cedures constitute a general rule, regardless of the
method of comparison used and regardless of the type of proceeding in which margins are calculated.526
The Panel held in its interim findings that “the terms ‘model zeroing’ and ‘simple zeroing’ used by
Japan do not correspond to two different rules or norms but simply refer to different manifestations of a
single rule or norm.”527
6.25 Japan considers that the Panel’s findings are corr ect in view of the totality of the evidence of
record. As a result, there is a single measure that applies to W-to-W comparisons, T-to-T comparisons
and W-to-T comparisons, used in any type of anti-dumping proceeding.
6.26 In light of the Appellate Body’s findings in US – Zeroing (EC) , Japan submits that the Panel
should find that the simple zeroing procedures in pe riodic reviews are "as such" inconsistent with
Articles 2.1 and 9.3 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994. The reasoning
that led the Appellate Body to conclude that the application of zeroing to periodic reviews leads
inescapably to the conclusion that the zeroing pro cedure itself is “as such” WTO-inconsistent in
periodic reviews.
6.27 As regards the eleven periodic review determinations that it has challenged, Japan notes that it
has submitted evidence showing that, absent the system atic disregard of negative comparison results,
the margin of dumping and, hence, the level of de finitive duties in each peri odic review would have
been lower. 528 Pursuant to US – Zeroing (EC) , the Panel should find that these measures are
inconsistent with Article 9.3 and Article VI:2. Furthermore, because the violations of these provisions
stem from the definition of “dumping” in Article 2.1 and Article VI:1, the Panel should also find a
violation of these provisions.
6.28 Japan rejects the United States contention that the Appellate Body failed to “to address and
consider important contextual arguments” in relation to this issue, specifically the arguments relating
to: targeted dumping; importer-specific assessmen t; prospective normal value (“PNV”) systems; and
the construction of normal value. 529 The fact that the Appellate Body did not address all of the
contextual arguments in the manner that the Unite d States wishes, does not, according to Japan, mean
that the arguments were not fully considered by the Appellate Body. In Section II of the report, the
Appellate Body summarized the “important contextual arguments” that the parties elected to make in
writing.530 There are no grounds for suggesting that the Appellate Body failed to consider arguments it
summarized in its report. It is also not tenable to suggest that the Appellate Body heard oral argument

524 Appellate Body Report, US – Zeroing (EC), para. 227.
525 Appellate Body Report, US – Zeroing (EC), para. 228.
527 Interim Panel Report, footnotes 540, 546 and 557 (Final Report, footnotes 688,694 and 708).
528 Japan First Written Submission, paras. 178 ff.
529 US Comments, paras. 25, 26, 29, 34, 38, 39 and 48.
530 See, e.g., Appellate Body Report, US – Zeroing (EC), paras. 38, 44, 45, 71 and 77.

on Article 2.2 but did not consider that argument. In Japan's view, the Appellate Body’s findings
expressly respond to contextual arguments that were allegedly ignored.531
6.29 Specifically, Japan is of the view that the Appellate Body expressly rejected the United States’
argument that margins can be determined on an import- or importer-specific basis in periodic
reviews.532 Nonetheless, it ruled that Members are entitled to assess liability for anti-dumping duties on
an import- or importer-specific basis. 533 In keeping with this finding, the Appellate Body held that
Members are entitled to assess liability fo r duties on the basis of a PNV. 534 In making these findings,
the Appellate Body effectively distinguished between the rules governing the determination of margins
and the rules governing the imposition of duties, as it has done before.535 Therefore, the amount of duty
imposed on a particular import does not necessarily equal the margin of dumping. In short, as the
Appellate Body has held, the rules on the imposition of duties in Article 9 have no bearing on the rules
on determination of margins in Article 2. 536 Therefore, the United States’ arguments on import- and
importer-specific assessment, and PNV systems, are red-herrings.
6.30 However, Japan argues, because of the chapeau of Article 9.3, the rules on the determination of
margins do have a bearing on the imposition of duties. As the Appellate Body held, the total amount of
anti-dumping duties cannot exceed the margin of dump ing established for all transactions covered by
the review period. 537 The chapeau of Article 9.3 applies equally to reviews conducted under the
prospective and retrospective duty imposition systems. Thus, under both systems, the maximum level
of protection afforded by anti-dumping duties is equal to the margin of dumping for the product, for the
review period. There is no “disparity” between the two systems of duty imposition.
538
6.31 With respect to the “contextual arguments” relating to targeted dumping, Japan considers that
there was no need for the Appellate Body to expressly address that issue. The second sentence sets forth
an exceptional method of comparison that applies sole ly in the exceptional situation in which the two
conditions set forth in that provision are met. Absent fulfilment of these two conditions, the second
sentence of Article 2.4.2 is simply irrelevant: an exception cannot justify the maintenance or application
of a measure in circumstances where the exception does not apply. This is the conclusion reached by
the Appellate Body in EC – Bed Linen , in which the EC attempted to justify zeroing in a W-to-W
comparison by reference to the second sentence of Artic le 2.4.2. The Appellate Body dismissed this
argument, observing that the second sentence applies solely in limited circumstances that were not
applicable in that dispute. 539 In this dispute, the zeroing procedures apply without regard to the
existence of the two conditions in the second sentence of Article 2.4.2. Indeed, to Japan’s knowledge,
the United States has never found that these two conditions have been satisfied. In these circumstances,
the exceptional comparison methodology under the sec ond sentence of Article 2.4.2 cannot justify the
zeroing procedures.

531 Japan Response to US Comments, paras. 11-16.
532 Appellate Body Report, US – Zeroing (EC), para. 128.
533 Appellate Body Report, US – Zeroing (EC), para. 131.
534 Appellate Body Report, US – Zeroing (EC), footnote 234.
535 Appellate Body Report, EC – Bed Linen (Article 21.5 – India), para. 124.
536 Appellate Body Report, EC – Bed Linen (Article 21.5 – India), para. 124.
537 Appellate Body Report, US – Zeroing (EC), para. 130.
538 US Comments, para. 33.
539 Appellate Body Report, EC – Bed Linen, para. 62.

(e) the zeroing procedures maintained by the United States for use in new shipper reviews are as
such inconsistent with Articles 2.1, 9.3 and 9.5 of the AD Agreement and Articles VI:1 and VI:2
of the GATT 1994
540
6.32 According to Japan, the USDOC determines ma rgins of dumping in the same way in new
shipper and periodic reviews. For purposes of both proceedings, the USDOC maintains simple zeroing
procedures that exclude negative comparison results, thereby preventing the determination of a margin
of dumping for the product as a whole. 541 Thus, Japan argues that in the case of new shipper reviews,
the legal issue that the Panel in the present dispute must address is whether the term “individual margins
of dumping” in Article 9.5 refers to a marg in for the “product” as a whole. Following US – Zeroing
(EC), Japan believes that it must.
6.33 The Appellate Body in US – Zeroing (EC) stated that the product-wide definition of “dumping”
and “margin of dumping” applies throughout the AD Agreement. It also held that this definition applied
to periodic and sunset reviews. 542 In the view of Japan, there is no alternative definition of the term
“margin of dumping” suggested in Article 9.5 of the AD Agreement and no basis for considering that the
Agreement-wide definition in Article 2.1 does not apply to Article 9.5.
6.34 Japan argues that the text of Article 9.5 is si milar to the text of Article 6.10 because both
provisions refer to “individual” margins of dumping established for an exporter or foreign producer.
Thus, for each exporter or foreign producer, the Agreement expressly contemplates the determination of
a single margin of dumping for the product. In Japan's view, this language underscores that a single,
overall dumping determination is made for the product as a whole, even if based on multiple
comparisons undertaken at the sub-product level. In contrast, Japan argues that this language cannot
support the view that “dumping” and the “margin of dumping” can be determined for each and every
transaction or model. Otherwise, there would be multiple margins for each exporter or foreign producer
– one for each transaction or model – and not “an individual margin of dumping” for “the product”.
6.35 In these circumstances, Japan s ubmits that Article 9.5 requires that investigating authorities
establish margins of dumping for the “product” as a whole. Thus, if the investigating authorities elect to
determine a margin on the basis of multiple compar isons, they must aggregate the results of all
comparisons. Under the simple zeroing procedures, the USDOC systematically disregards all negative
results of multiple comparisons. In consequence, the simple zeroing procedures mandate that USDOC
fails to determine “individual margins of dumping” for exporters or foreign producers for the “product”
as a whole. Japan contends that this violates Articles 2.1 and 9.5 of the AD Agreement and Article VI:1
of the GATT. Furthermore, by maintaining the simp le zeroing procedures in new shipper reviews, the
United States also acts inconsistently with Article 9.3 and Article VI:2 of the GATT, because the
systematic disregard of negative comparison results necessarily results in an amount of anti-dumping
duties that exceeds the margin of dumping for the new shipper for the “product” as a whole.
(f) the two sunset reviews challenged by Japan are inconsistent with Articles 2.1 and 11.3 of the
AD Agreement and Article VI:1 of the GATT 1994
543
6.36 Japan challenges two sunset reviews on the gr ounds that the USDOC relied on margins of
dumping determined in original investigations and periodic reviews using the zeroing procedures. 544
Because the margins on which the USDOC relied we re “legally flawed” through the use of zeroing,
they cannot constitute a proper fou ndation for a determination in a sunset review. As a result, the

540 Japan Comments, paras. 41-44.
541 Japan First Written Submission, paras. 16, 133-134.
542 Appellate Body Report, US – Zeroing (EC), paras. 127 and footnote 220.
543 Japan Comments, paras. 45-50.
544 See Exhibits JPN-22 and JPN-23.

challenged sunset reviews are tainted by the same legal flaws that infect the margins of dumping from
earlier proceedings on which the USDOC relied.
6.37 With respect to these two sunset reviews, the Panel found that:
"[T]here is sufficient evidence before us to conclude that in making its determinations
that revocation of anti-dumping order would result in continuation or recurrence of
dumping, USDOC did rely on margins of dumping established in prior proceedings."
545
6.38 The Panel continued:
"We also note, however, that since in these two sunset reviews USDOC relied upon the
continued existence of margins of dumpi ng after the issuance of the anti-dumping
order as support for its determination of lik elihood of continuation or recurrence of
dumping, the margins of dumping relied upon by USDOC were margins calculated
during periodic reviews, not margins calculated in the original investigations."
546
6.39 However, the Panel rejected Japan’s claims in its interim findings for the following reason:
"Since we have found that the AD Agreement does not proscribe simple zeroing in
periodic reviews within the meaning of Artic le 9.3, we cannot find that by relying on
margins of dumping calculated in periodic reviews on the basis of simple zeroing
USDOC acted inconsistently with the AD Agreement."
547
6.40 Thus, the sole reason for rejecting Japan’s “as applied” claims was a perception that zeroing is
permissible in periodic reviews. The Appellate Bo dy has now held that zeroing “is not allowed” in
periodic reviews under Articles 2.1 and 9.3 of the AD Agreement , and Article VI:1 of the
GATT 1994.548 Thus, following US – Zeroing (EC), the Panel should find that the two sunset reviews
challenged by Japan violate Article 11.3 of the AD Agreement because the USDOC improperly relied
on margins of dumping calculated in periodic reviews using zeroing. Because the violations of Article
11.3 stems from Article 2.1 and Article VI:1, Japan submits the two challenged sunset reviews also
violate these provisions.
2. United States
(a) Whether the Panel should follow the Appellate Body's findings in US – Zeroing (EC)
 549
6.41 According to the United States, adopted prio r panel and Appellate Body reports create
legitimate expectations among WTO Members 550, and it is for that reason that the reasoning and
findings in such reports should be taken into account. Although the Appellate Body found in
US – Zeroing (EC) that the USDOC assessment of anti-dumping duties as applied in certain
administrative proceedings challenged by the European Communities was inconsistent with Article 9.3

548 Appellate Body Report, US – Zeroing (EC), para. 127.
549 US Comments on the Appellate Body Report in US – Zeroing (EC) ("US Comments"), paras. 4-9; US
Opening Statement at the Third Meeting of the Panel, para. 3.
550 Appellate Body Report, Japan – Alcohoic Beverages II, p. 14.

of the AD Agreement and Article VI:2 of the GATT 1994, this Panel is not bound to follow the
reasoning of the Appellate Body in that report.
551
6.42 The United States is of the view that the reasoning of the Appellate Body in US – Zeroing (EC)
is simply not persuasive. The United States asserts that the Appellate Body findings in
US – Zeroing (EC) were not based on a reasoned analysis of the text of the applicable agreements, but,
rather primarily, on prior Appellate Body reports – and a misapprehension of those reports, at that.
According to the United States, the Appellate Body grafted inapposite findings from one set of factual
circumstances onto another, and failed to consider contextual arguments demonstrating that such an
approach would create severe logical problems of interpretation not only with respect to the
AD Agreement, but also with respect to the GATT 1994. The United States asserts that, by contrast, in
its Interim Report, the Panel in this dispute provi ded a detailed, reasoned analysis of the text of
Article VI of the GATT 1994 and the AD Agreement, as have two other panels addressing the USDOCs
denial of offsets in various phases of the antidumping proceeding. These reports, drafted by panellists
with substantial experience in the administration of antidumping laws, all come to the same conclusion
– that the AD Agreement does not require offsets in assessment reviews. Thus, in the view of the United
States, the Appellate Body in US – Zeroing (EC) simply erred and the Panel in this dispute should not
adopt either its reasoning or its findings.552
(b) The Appellate Body’s Conclusion that Author ities Must Provide Offsets Whenever They
Conduct Multiple Comparisons is erroneous553
6.43 The United States argues that the Appellate Body Report in US – Zeroing (EC) fails to address
fully the terms of the covered agreements, in light of their context, and in light of the object and purpose
of the agreements. Instead, according to the United States, the Appellate Body interprets its own report
language, removed from the context of the agreement' s provisions to which it related, in order to
achieve the result of requiring offsets in all contexts. The United States asserts that the Appellate Body
in US – Zeroing (EC) based its analysis less on the text of the AD Agreement than on its prior reports,
particularly US – Softwood Lumber V . The United States contends that one example of this is the
Appellate Body's heavy reliance on its interpretation of the term “product as a whole”, which according
to the United States, is a term that is nowhere found in the AD Agreement or Article VI of the
GATT 1994.
6.44 The United States submits that in US – Zeroing (EC), the Appellate Body divorced the phrase
“product as a whole” (a phrase which was the creation of the Appellate Body) from its original context
– use of average-to-average comparisons in an inv estigation. In so doing, the Appellate Body also
divorced the creation of that concept from its limited applicability in the context of Article 2.4.2. The
Appellate Body simply decided that the applicability of the concept “product as a whole” is not limited
to the interpretation of obligations relating to mu ltiple averaging. It did so by asserting that in US -
Softwood Lumber V the requirement to calculate margins of dumping for the “product as a whole”
meant that offsets must be provided not only when aggregating intermediate values in the context of
multiple averaging, but when undertaking “multiple comparisons” more generally.554 In the view of the

551 Appellate Body Report, US – Zeroing (EC), para. 263(a)(i).
552 US Comments on the Appellate Body Report in US – Zeroing (EC) , paras. 4-9; US Opening
Statement at the Third Substantive Meeting of the Panel with the Parties, paras. 4-16, 21.
553 US Comments, paras. 10-18; US Comments on Japan's Comments on the Appellate Body Report in
US – Zeroing (EC), paras. 1-10.
554 The Appellate Body in US – Zeroing (EC) states that the “Appellate Body specified that, while an
investigating authority may choose to undertake multiple comparisons or multiple averaging at an intermediate
stage to establish margins of dumping, ‘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.”
Para. 126, citing the Appellate Body Report in US – Softwood Lumber V, para. 97. To the contrary, however, in

United States, that statement is simply wrong555, because the reasoning in US – Softwood Lumber V was
expressly limited to comparisons in connection with multiple averaging, not all so-called “multiple
comparisons” more generally.
6.45 The United States argues that Appellate Body’s assumption that the analysis in US – Softwood
Lumber V is applicable to all instances when there are multiple comparis ons, rather than just multiple
averaging, is particularly egregious because although the Appellate Body has suggested that Members
have a choice as to whether to use “multiple comp arisons” in calculating the margin of dumping, the
inevitable consequence of the Appellate Body’s reasoning would be that Members must, in fact,
aggregate transactions in order to calculate a margin of dumping. Thus, United States argues that not
only is the Appellate Body’s assertion that “an investigating authority may choose to undertake multiple
comparisons”556 simply wrong, but it means that the Appellate Body, based on a phrase it created and
that is not in the text of the AD Agreement, has prohibited zeroing in ev ery circumstance in which a
Member calculates a margin of dumping.
6.46 The United States recalls that the Panel in this dispute expressly recognized that the reasoning
in US – Softwood Lumber V is limited to multiple averaging in the context of the first sentence of Article
2.4.2 of the AD Agreement and is therefore simply inappli cable in the context of assessment
proceedings. Furthermore, the United States argues that in its Interim Report, the Panel correctly found
that the expression ‘product as a whole’ does not appear in Article 2.1 of the AD Agreement and
Article VI:1 and VI:2 of the GATT 1994, and that these provisions contain no language that explicitly
addresses the issue of whether dumping can only be found to exist at an aggregate level. 557 Rather,
according to the United States, the Panel noted that, pursuant to the text of Article VI, dumping is
essentially a price difference. 558 Pursuant to Article VI:1 and VI:2 of the GATT 1994, a margin of
dumping exists when the price of a product is less than its normal value. The Panel found that this
definition of the margin of dumping as a price di fference could “easily be applied to individual
transactions and does not require an examination of export transactions at an aggregate level.”559 In this
light, the United States submits that the Panel’s analysis is based firmly on the text of the AD Agreement
and the GATT 1994 and should therefore be confirmed.560
6.47 The United States also notes that if the Appellate Body’s analysis were correct, and zeroing is
inconsistent with Article 2.1 of the AD Agreement and Article VI of the GATT 1994, then it begs the
question: Why did the Appellate Body’s analysis in EC - Bed Linen and US - Softwood Lumber V hinge

paragraph 97 of that report, the Appellate Body expressly referenced “multiple averaging” and “multiple
comparisons at the sub-group level.” (emphasis added).
555 The Appellate Body now considers zeroing to be prohibited whenever a Member engages in “multiple
comparisons” but declined to address whether zeroing is also prohibited in transaction-to-transaction comparisons
in investigations. Notwithstanding the logical flaw in that view, to the extent the Appellate Body may consider
zeroing to be prohibited only where “multiple comparisons” occur, it is worth recalling that the US has
demonstrated that its assessment system results in the same assessment of antidumping duties as a
transaction-by-transaction, prospective normal value system , but only if the US. system is permitted to “zero.”
See US Comments on Japan Answers to 2nd Panel Questions, para. 36. See Interim Report, n. 624. Otherwise, to
equalize the two systems, zeroing would have to also be prohibited in transaction-by-transaction assessment
systems, which is akin to requiring authorities to compensate an individual for individual importations for which
normal value is less than the export price.
556 Appellate Body Report, US – Zeroing (EC), para. 126 (emphasis added).
560 This Panel’s finding concerning the definition of the “margin of dumping” as a price difference in
Articles VI:1 and VI:2 is echoed by a recently circul ated panel report concerning Canada’s recourse to
Article 21.5 of the DSU in the softwood lumber dispute, US – Softwood Lumber V (Article 21.5), para. 5.27.

on Article 2.4.2, and specifically the phrases “mar gins of dumping” and “all comparable export
transactions”? More perplexing still, according to the United States, is the fact that in Softwood
Lumber V , the Appellate Body declined to consider contextual arguments about the other two
comparison methodologies because it would first have to determine whether offsets were required in
those comparison methodologies. Similarly, in the US – Zeroing(EC) report, the Appellate Body
contends that its analysis therein does not necessarily mean that offsets are required in the other two
methodologies under Article 2.4.2. Thus, the Unite d States argues that the Appellate Body’s careful
restraint with respect to the other comparison met hodologies in Article 2.4.2 is difficult to reconcile
with the broader assertions in US – Zeroing(EC) regarding Article 2.1 and Article VI of the
GATT 1994.
6.48 In response to Japan's comments on the Appellate Body's findings in US – Zeroing (EC) , the
United States argues that Japan continues to cite to the Appellate Body Report, without discussing the
actual text of the GATT 1994 or the AD Agreement. According to the United States, Japan fails to
demonstrate how the Appellate Body’s reasoning is based on a textual analysis of the agreements and
Japan fails to engage in any textual analysis itself. Furthermore, the United States contends that Japan's
comments not only show that it misunderstands the A ppellate Body Report, but also that zeroing is a
permissible interpretation of the AD Agreement.
6.49 The United States asserts that Japan and the Appellate Body (and the EC) cannot agree as to
why “zeroing” is allegedly prohibited outside of th e context of original investigations using the
average-to-average comparison methodology, and that this discrepancy exposes the basic fact that those
seeking to find a prohibition on zeroing in all contex ts have a very difficult time identifying precisely
where in the AD Agreement that prohibition is found. The United States argues that the logical
conclusion of all of the arguments regarding zeroing – including the fact that the complaining parties
and the Appellate Body cannot agree as to how zeroing is prohibited
561 – indicate that the
AD Agreement does not prohibit zeroing, and these arguments are simply results-driven. In the
United States view, the plain fact is that the AD Agreement at the very least permits the interpretation of
the United States (and of Members such as the EC, at least in the past) and, as a result, the use of zeroing
cannot be found inconsistent with United States obligations.
(c) The Appellate Body’s Conclusion that the Margin of Dumping Cannot be Transaction-Specific
is erroneous562
6.50 The United States submits that the Appellate B ody’s conclusion that the margin of dumping
cannot be transaction-specific because Article 6.10 of the AD Agreement requires the margin of
dumping to be calculated for each exporter is without basis. According to the United States, the
Appellate Body’s analysis proceeds on the false pr emise that a margin of dumping cannot both be
exporter-specific and transaction-specific. The United States submits that Article 6.10 simply provides
that a Member must calculate a margin for each i ndividual exporter or prod ucer – as opposed to one
margin for all exporters or producers (or, as it was described in Mexico – Anti-Dumping Measures on
Rice, “company-specific” versus “country-wide”).563 It says nothing about whether the margin must be
based on more than one transaction, and it does not prohibit the calculation of a margin of dumping on a
transaction-specific basis. The United States also argues that the Spanish text of Article 6.10 supports
its interpretation.
6.51 The United States is of the view that the result of the Appellate Body’s assertion that the margin
cannot be calculated on a transaction-specific basis is that an investigating authority must calculate the

561 According to the US, Japan does not even agree with itself, as evidenced by its sudden about-face on
zeroing in the targeted dumping context in Article 2.4.2.
562 US Comments, paras. 19-24; US Opening Statement at the Third Meeting of the Panel, paras. 17-20.
563 Appellate Body Report, Mexico – Anti-Dumping Measures on Rice, paras. 208, 217.

margin of dumping based on all of the exporter’s tr ansactions. However, the United States contends
that it is difficult to see how this can be done without requiring the aggregation of multiple comparisons.
In this sense, according to the United States, the Appellate Body’s interpretation of Article 6.10 as
precluding transaction-specific margins of dumping renders hollow its suggestion that authorities
undertake multiple comparisons as a matter of choice. 564 Furthermore, the Appellate Body's approach
cannot be reconciled with its own assertion that it makes no finding with respect to the other two
methodologies under Article 2.4.2. 565 In this regard, the United States notes that the Appellate Body
states that Article 6.10 applies in investigations. However, the transaction-to-transaction and targeted
dumping methodologies under Article 2.4.2 will, unless there is only one export transaction, always
result in multiple comparisons. The United States argues that if, as the Appellate Body contends,
Article 6.10 requires not simply the calculation of a margin of dumping for an individual exporter but
rather a margin of dumping for an individual exporter based on all of that exporter’s transactions, then it
is impossible for a Member to calculate a margin of dumping without aggregating multiple
comparisons.
6.52 The United States submits that the Appella te Body’s reasoning has other perverse
consequences for Article 2.4.2. For example, it renders the phrase “all comparable export transactions,”
as the Appellate Body has understood it, redundant. The United States recalls that the Appellate Body
has argued that Article 6.10 requires not just margins of dumping for individual exporters, but margins
of dumping based on all of the exporter’s transactions. According to the United States, if that is true,
then it calls into question the meaning the Appellate Body ascribed to the phrase “all comparable export
transactions” in US – Softwood Lumber V . If Article 6.10 requires consideration of all export
transactions, and Article 2.1 requires offsets when making multiple comparisons of those transactions,
then it is unclear why the Appellate Body in US – Softwood Lumber V considered the phrase “all
comparable export transactions,” in conjunction with the phrase “margins of dumping,” to require the
very same outcome.
6.53 The more logical interpretation of the AD Agreement, according to the United States, is the one
the Panel followed in this dispute, namely: that the requirement to provide offsets articulated in
US – Softwood Lumber V is limited to the weighted-average to weighted-average methodology in
investigations based on the phrases “margins of dumping” and “all comparable export transactions” in
the first sentence of Article 2.4.2; that margins of dumping elsewhere in the Agreement may be
calculated on a transaction-specific basis, consiste nt with Article VI of the GATT 1994 and the
common understanding of that Article as expressed by the Group of Experts in 1960; and that Members
are not obliged to give refunds on non-dumped transactions.
(d) The Appellate Body Failed to Consider Key Contextual Arguments
 566
6.54 The United States contends that the Appellate Body failed to address contextual arguments
demonstrating that the terms “dumping” and “margi ns of dumping” cannot invariably refer to the
product as a whole. Specifically, the United States submits that the Appellate Body failed to address the

564 Appellate Body Report in US – Zeroing (EC), para. 127. Further, even on its own terms, the Appellate
Body’s statement that Members “choose” to engage in “m ultiple comparisons” is simply incorrect. It will be
difficult for authorities to avoid having to undertake multiple comparisons, whether in the form of multiple
averaging of sub-groups or transaction-specific calculations. Here again, the Appellate Body is removing from its
original context a statement it made in an earlier report and applying that statement more broadly in a manner that
makes no sense. Specifically, the Appellate Body’s discussion of “choosing” multiple comparisons in the Lumber
report was related to the choice of multiple averaging i.e . “multiple comparisons at the subgroup level. ” -
paras. 97-98 (emphasis added). However, in the US – Zeroing (EC) report, the Appellate Body characterizes its
statement regarding “choosing” as applying to multiple comparisons, and not multiple averaging.
565 Appellate Body Report, US – Zeroing (EC), para. 203.
566 US Comments, paras. 25-39.

nullification of the targeted dumping provision of Article 2.4.2, the argument that margins of dumping
may be calculated on a transaction-specific basis, the implications for prospective normal value
systems, and the consequences of invariably de fining “dumping” and “margins of dumping” in
reference to the product as a whole for the third co untry and constructed norma l value provisions of
Article 2.2.
6.55 The United States argues that a general obligation to establish margins of dumping for the
product as a whole, regardless of the comparison me thodology used and regardless of the phase of the
antidumping proceeding, would nullify the targeted dumping provision of the second sentence of
Article 2.4.2. Whereas the Panel in this dispute
567, and the panels in two other disputes 568, recognized
this consequence, and that such an interpretation is inconsistent with the principle of effective treaty
interpretation, the Appellate Body in US – Zeroing (EC) failed to address the text of the agreements and
the logical analysis leading to this conclusion. The Appellate Body thereby ignored customary rules of
treaty interpretation.
6.56 In addition, the United States contends that the Appellate Body's finding that the margins of
dumping to which Article 9.3 refers must be est ablished on an exporter/producer-specific basis,
aggregating all of the exporter’s transactions, lacks persuasive reasoning. In particular, the United
States argues that the Appellate Body failed to identify an applicable textual basis for its conclusion.
Moreover, the Appellate Body failed to address the significant change in duty assessment obligations
that its finding would create. Thus, the United St ates argues that the Appe llate Body's ruling cannot
serve as a basis to alter the Panel's finding in this dispute that nowhere in the text of Article 9 is there any
support for the conclusion that an exporter-oriented procedure, based on aggregated export transactions,
is required in a prospective duty assessment system.
6.57 The United States also argues that the Appellate Body’s finding cannot be reconciled with
prospective normal value systems. In this regard, the United States contends that the implications of the
Appellate Body’s reasoning extend beyond what appear s to have been contemplated. The Appellate
Body asserts that its analysis does not mean that Members are prevented from using a prospective
normal value system to calculate liability for payment.569 However, prospective normal value systems,
to the extent that they calculate a margin of dumping at all after the imposition of the order, do so on a
transaction-by-transaction basis. According to the United States, if the Appellate Body is correct, and
margins of dumping must be calculated on the b asis of all of the exporter’s transactions, then
prospective normal value systems have been based on the erroneous premise that updating the normal
value is an appropriate substitute for subsequent refund proceedings. Without such a proceeding, there
would be no way to calculate the margin of dumping on the basis of all of the exporter’s transactions.
But with such a proceeding, the prospective normal value system would become indistinguishable from
the US retrospective assessment system. The only alternative is that prospective normal value systems
are somehow exempt from the obligation to calculate a margin of dumping for “all” of the exporter’s
transactions. But if that is true, then prospectiv e normal value systems are effectively permitted to
“zero” – the result of which would be that prospective normal value systems are permitted to assess
greater duties than other assessment systems are permitted to assess. 570 Nothing in the text of the
AD Agreement suggests that the Members intended to create such a disparity.

567 Interim Panel Report, paras. 6.101, 6.110, 6.124, 6.134, 6.137 (Final Report, paras. 7.108, 7.159,
7.127,7.137 and 7.140).
569 Appellate Body Report, US – Zeroing (EC), para. 234.
570 The comparison of transaction-by-transaction a ssessment and the US assessm ent system in the US
comments on Japan Answers to the Second Set of Panel Questions demonstrates that if zeroing is prohibited with
respect to the US system, then greater duties are assessed on a transaction-by-transaction basis. This is simply
because in a transaction-by-transaction basis, no refund is given for non-dumped transactions, which is, of course,
another way of setting the comparison at zero. It is unclear why setting the comparison at zero would be

6.58 Finally, the United States asserts that the Appe llate Body’s finding is inconsistent with the
manner in which Members use third country transac tions and calculate cons tructed normal value as
alternatives to home market sales as the basis for no rmal value in accordance with Article 2.2 of the
AD Agreement. In particular, recalling the Article 21. 5 panel's finding on this question in
US – Softwood Lumber V , the United States argues that if the term “margin of dumping” as used in
Article 2.2 of the AD Agreement referred to a margin established for the product as a whole, this would
radically alter the way Members applied Article 2.2. The United States notes that it presented this
argument to the Appellate Body in US – Zeroing (EC), and that the Appellate Body failed to address it,
or provide any reasoning to refute it.
6.59 Because the Appellate Body in US – Zeroing (EC) failed to address the contextual arguments
demonstrating that the terms “dumping” and “margi ns of dumping” cannot invariably refer to the
product as a whole, the United States argues that the Appellate Body's report provides no guidance, let
alone compelling reasoning, for this Panel to reconsider these issues.
(e) the “as such” finding against zeroing procedures
571
6.60 The United States recalls that the Appellate Body in US – Zeroing (EC) explained that dispute
settlement can include not only acts applying a law, but also “‘acts setting forth rules or norms that are
intended to have general and prospective application.’”572 Furthermore, according to the United States,
the Appellate Body in US – Zeroing (EC) noted that “‘acts setting forth rules or norms that are intended
to have general and prospective application’ are measures subject to WTO dispute settlement.”573 Thus,
the United States contends that the Appellate Body held that a rule or norm must be part of an act or
instrument taken by a Member in order to be a measure – even if that act or instrument is unwritten, or is
not transparent. According to the United States, th e Appellate Body found that it is not sufficient to
identify a rule or norm in the descriptive sense, that is to say, that the Member has done something “as a
rule” or “normally.” The Member must have done something that creates a rule or norm that is
prescriptive, that is intended to have general and prospective application.
6.61 The United States notes that the Appellate Body in US – Zeroing (EC) emphasized that a panel
“must not lightly assume” the existence of a measure providing a rule or norm of general application
that is not in the form of a written document 574, emphasizing that “particular rigour” is required on the
part of a panel to support a conclusi on as to the existence of a measure. 575 The Appellate Body
explained that the complaining party must meet a “high threshold” in demonstrating such a measure.576
6.62 Although the United States finds the standards articulated by the Appellate Body to be correct,
it argues that the Appellate Body did not apply them in US – Zeroing (EC) . Thus, the United States
submits that the Panel in this dispute should not follow the Appellate Body's model of how to apply the
analytical approach it described. Nevertheless, th e Panel in this dispute should apply the standards
articulated by the Appellate Body; and in doing so, the United States contends that the Panel should
reject Japan's "as such" claim. According to the United States, Japan identified no act or instrument of
the United States, and failed to demonstrate in any wa y that there is any measure of the United States
with general and prospective application that pr escribes “zeroing.” Thus, the United States requests

permissible at the time of importation, but not during an assessment proceeding that examines past transactions on
an aggregate basis.
571 US Comment, paras. 40-47; US Comments on Japan's Comments, paras. 11-26; US Opening
Statement at the Third Meeting of the Panel, paras. 25-26.
572 Appellate Body Report, US – Zeroing(EC), para. 188.
573 Ibid, para. 189.
574 Ibid, para. 196.
575 Ibid, para. 198.
576 Ibid, para. 198.

that the Panel reconsider its findings in light of th e correct standard articulated in the Appellate Body
report.
6.63 In response to Japan's comments on the releva nce of the Appellate Body's findings in
US – Zeroing (EC) to its "as such" claims, the United States argues that Japan’s abandonment of its "as
such" claim in relation to the W-to-T comparison methodology fundamentally contradicts, and thereby
undermines, its arguments in this dispute, particul arly with respect to its “as such” challenge to a
so-called “methodology” of “zeroing” in T-to-T calculations in investigations. The United States notes
that Japan is purportedly dropping a claim against an actual measure (the USDOC targeted dumping
regulation) and instead pursuing a claim against a “methodology” evidenced by its use by USDOC in
exactly one instance. Thus, according to the United St ates, Japan admits that it lacks the evidence to
establish a prima facie case for its as-such claim against an act ual regulatory provision of a Member –
an actual, undisputed measure – which has not been applied. In the view of the United States, this only
reinforces the lack of a prima facie case for Japan’s as-such claim against a supposed T-to-T
“methodology” which is not reflected in any act or instrument of the responding Member and for which
the sole evidence for its existence is the fact that the United States has used a T-to-T approach once.
6.64 The United States also contends that the Panel in this dispute should dismiss Japan's "as such"
claim in relation to simple zeroing in new shipper reviews because as with its other “as such” claims,
Japan is seeking an as-such finding against a descrip tion, and not a measure. According to the United
States, Japan never identifies any act or instrume nt setting forth a rule or norm of prospective
application concerning zeroing in new shipper review s; it merely says that the USDOC has done this.
Moreover, Japan supports this assertion on the basis of a single example of a determination that is not
even the subject of this dispute.
577 None of the determinations that Japan has challenged in this dispute
was a new shipper review. Furthermore, the United States contends that Japan makes no effort to
explain how there is an “as such” measure which caused the single example of zeroing in a new shipper
review it cites, let alone any broader use of zeroing in new shipper reviews. Thus, the United States
argues that Japan’s request for an as-such finding in new shipper reviews does not meet even the most
basic requirements for a prima facie case, and it should be rejected.
C. COMMENTS OF THE PARTIES ON THE INTERIM REPORT
1. Comments of Japan
6.65 Japan requests that the Panel amend paragraph 6.22 of the interim report 578 to include a
reference to the USDOC Anti-Dumping Manual. Since it is factually correct that Japan has referred to
this Manual as additional evidence to support its pos ition on the nature of the zeroing procedures, we
have amended this paragraph as requested by Japan.
6.66 Japan requests that the Panel delete the fifth sentence of paragraph 6.41 of the interim report579
because in Japan's view this sentence can be considered to suggest that the existence of discretion not to
apply the standard zeroing line is important to the Panel's finding that the zeroing line is not a measure,
which is in contradiction with the Panel's finding in paragraph 6.52 of the interim report 580 that the
Assistant-Secretary's discretion to decide not to a pply the zeroing procedures in a particular instance
has no bearing on the normative character of the zeroing methodology. The United States disagrees
with this proposed change.

577 Japan First Submission, para. 133.
578 Paragraph 7.22 of the Final Report.
579 Paragraph 7.46 of the Final Report.
580 Paragraph 7.57 of the Final Report.

6.67 The point made in paragraph 6.41 of the interim report 581 is that what Japan has termed the
standard zeroing line is simply a line of computer code which can only be executed in a particular case
if a decision is taken to apply it in that case. By contrast, paragraph 6.52 of the interim report582 pertains
not to the standard zeroing line but to the zeroing methodology which, as explained in paragraph 6.42 of
the interim report583, is distinct from the standard zeroing line. Since paragraphs 6.41 and 6.52 of the
interim report thus address different issues, there is no inconsistency between the statement in the fifth
sentence of paragraph 6.41 of the interim report and our finding in paragraph 6.52 of the interim report
that the existence of discretion does not affect th e character of the zeroing methodology as a rule or
norm of general and prospective app lication. We therefore decline to make the change requested by
Japan to paragraph 6.41 of the interim report.
6.68 Japan requests that the Panel amend the first sentence in paragraph 6.48 of the interim report584
because in Japan's view this sentence uses a formulation that suggests that the concept of dumping can
be applied in relation to individual transactions. Specifically, Japan proposes that "which provides that
non-dumped export sales are not allowed to offset margins found on dumped export sales" be replaced
with "i.e. not allowing the negative price differences found on US sales that were priced below normal
value to offset the positive price differences found on other US sales..." 585 Japan proposes the same
amendment to the text of footnote 540 of the interim report.586 The United States opposes these changes
proposed by Japan.
6.69 In the first sentence of paragraph 6.48 of the interim report587 the Panel finds that the statements
referred to in the preceding paragraph provide evidence of the existence of a norm "which provides that
non-dumped export sales are not allowed to offset margins found on dumped export sales". Our
characterization of this norm reflects the terminol ogy used in the statemen ts quoted in the preceding
paragraph upon which we rely as evidence demonstrating the existence of that norm. Thus, we do not
believe it would be appropriate to change this sente nce as suggested by Japan. However, in order to
accommodate Japan's concern, we have added a footnote to the first sentence of paragraph 6.48 of the
interim report to explain the reason for our use of this terminology.
6.70 Japan proposes an amendment to paragraph 6.57 of the interim report 588 to reflect the fact that
Japan's argument regarding the need for consistent treatment in terms of the product scope is not limited
to the original investigation. Japan suggests that the last part of the paragraph be amended to read "and
the need for consistent treatment of a product in an anti-dumping investigation and throughout the life
of an anti-dumping action". The United States opposes this suggestion.
6.71 Although the United States is correct that stric tly speaking the change proposed by Japan is
perhaps unnecessary because this sec tion only addresses the issue of wh ether zeroing is prohibited in
the context of original investigations, it is also true that this proposed change is consistent with the
arguments presented by Japan in these proceedings. 589 Since paragraph 6.57 of the interim report is
simply intended to provide a brief summary of Japan's arguments, we have accepted the change
proposed by Japan.

581 Paragraph 7.46 of the Final Report.
582 Paragraph 7.57 of the Final Report.
583 Paragraph 7.47 of the Final Report.
584 Paragraph 7.53 of the Final Report.
585 There is a manifest error in the suggestion of Japan regarding the first sentence of paragraph 7.48 in
that, as noted by the US, "negative price differences found on US sales that were priced below normal value"
obviously should read "negative price differences found on US sales that were priced above normal value".
586 Footnote 688 of the Final Report.
587 Paragraph 7.53 of the Final Report.
588 Paragraph 7.62 of the Final Report.
589 See, e.g., Japan Second Written Submission, para. 43.

6.72 Japan proposes a change to paragraph 6.60 of the interim report
590 to clarify that Japan argues
that a review under Article 9.3.2 of the AD Agreement involves a determination of a margin of dumping
for the 'product'. Japan specifically proposes that the penultimate sentence of the paragraph be changed
as follows:
"In addition, even in a prospective normal value system final liability for payment of
anti-dumping duties, must, if requested, be determined in a review under Article 9.3.2
that involves a determination of the margin of dumping for the product, for the review
period."
We note that the penultimate sentence of paragraph 6.60 of the interim report is based on paragraph 32
of the oral statement of Japan at the second meeting of the Panel and that the change proposed by Japan
is consistent with that paragraph except for the addition of the words "if requested". We have therefore
accepted Japan's proposal to change the penultimate sentence of paragraph 6.60 of the interim report
except for the words "if requested".
6.73 Japan proposes that in the first sentence of paragraph 6.61 of the interim report 591 and in the
second sentence of paragraph 6.70 of the interim report592 the word "necessarily" be inserted between
"comparison" and "produces" to better reflect Japan 's argument. We agree that Japan's suggested
change would render these sentences more accurate a nd we have therefore made the change requested
by Japan.
6.74 Japan proposes a change to the third sentence of paragraph 6.61 of the interim report593 to make
it clear that Japan refers to the determination of normal value for different time periods merely as an
example to demonstrate that without zeroing the average-to-average and average-to-transaction
comparisons still produce different results. Japan proposes that this sentence be changed to read: "Thus,
an average-to-transaction comparison will produce a result different from that of an average-to-average
comparison for example if the average normal values in the two comparisons are calculated on different
bases." The United States disagrees with this change.
6.75 We decline to make the change requested by Japan. Paragraph 6.61 of the interim report 594
identifies the two bases advanced by Japan as support for its argument that an average-to-transaction
comparison without zeroing does not necessarily yield a result identical to that of an average-to-average
comparison: first, the use of a normal value estab lished for a different time period and second, the
limitation of the comparison to those export transactions that constitute the pattern of targeted dumping.
Since Japan has not described any other scenario in which, without zeroing, the average-to-transaction
method would yield a result different from the aver age-to-average comparison, the addition of the
words "for example" would be factually incorrect.
6.76 Regarding paragraph 6.90 of the interim report 595, Japan observes that the primary thrust of
Japan's claims stems from the definition of "dumping" and "margin of dumping" in Article 2.1 of the
AD Agreement and from the "fair comparison" requirement in Article 2.4 and not from Article 2.4.2 of
the AD Agreement. Japan therefore urges the Panel to address what it characterizes as its main claims.
The United States disagrees with this request.

590 Paragraph 7.65 of the Final Report.
591 Paragraph 7.66 of the Final Report.
592 Paragraph 7.146 of the Final Report.
593 Paragraph 7.66 of the Final Report.
594 Paragraph 7.66 of the Final Report.
595 Paragraphs 7.87 and 7.152 of the Final Report.

6.77 We explain in paragraphs 6.90-6.92 of the interim report596 our view that, having found that by
maintaining model zeroing procedures in the cont ext of original investigations USDOC acts
inconsistently with Article 2.4.2 of the AD Agreement, it is appropriate to exercise judicial economy
with respect to Japan's claims under Articles 2.1 and 2.4 of the AD Agreement and Article VI:1 and VI:2
of the GATT 1994. Japan does not advance any argument to demonstrate that this exercise of judicial
economy was not within our discretion. In partic ular, Japan does not explain why additional findings
under Articles 2.1 and 2.4 of the AD Agreement and Article VI:1 and VI.2 of the GATT 1994 would be
necessary to resolve the dispute. We therefore decline to address the claims of Japan under these
provisions.
6.78 Japan proposes to change to the first senten ce of paragraph 6.125 of the interim report 597 as
follows: "Japan does not contest that the averag e-to-transaction method in the second sentence of
Article 2.4.2 would be redundant if the United States demonstrated that it always and necessarily
yielded a result identical to that of the average-to -average comparison method in the first sentence of
Article 2.4.2." Japan explains that this change is necessary to reflect that it is the United States which
has advanced the argument that without zeroing the average-to-transaction method will always produce
the same results as the averag e-to-average comparison. The United States opposes the change
requested by Japan.
6.79 We decline to make this suggested change. That it is the United States that makes the argument
that without zeroing the average-to-transaction comp arison will always yield the same results as the
average-to-average comparison is sufficiently clear from the context, particularly the immediately
preceding paragraph. Therefore, Japan has not offered a compelling explanation of why the suggested
change is necessary.
6.80 Japan requests that the Panel delete the last sentence of paragraph 6.126 of the interim report598
because in Japan's view this sentence gives a misleading impression of Japan's argument. Japan points
out that it has argued that the text of Article 2.4.2 itself does not prohibit a Member from using different
bases for calculating the weighted average normal va lue and that this argument is a legal argument
based on text that does not require Japan to adduce evid ence. Japan also points out that in stating that
Article 2.4.2 that Article 2.4.2 was crafted on the assumption that Members could use different bases for
calculating normal values Japan used terminology (" crafted") and ("assumption") used by the United
States but was making an argument based on the text of the AD Agreement. The United States opposes
this proposed change.
6.81 We agree with Japan that the last sentence of paragraph 6.126 of the interim report does not
correctly reflect Japan's argument. By stating that Japan failed to adduce "evidence" to substantiate its
assertion that the second sentence of Article 2.4.2 was crafted on the assumption that Members could
apply the average-to-transaction method by calcula ting an average normal value on a basis different
from the basis used to calculate the average normal value in the av erage-to-average comparison, the
sentence suggests that this assertion of Japan was a factual assertion separate from Japan's interpretation
of the text. In light of our review of the relevant paragraphs of Japan's opening statement at the second
meeting, we conclude that Japan's statement that "Article 2.4.2 was crafted on the assumption that
Members could choose to use different bases for calcu lating the weighted average in the W-to-W and
W-to-T comparisons" is based on its argument that the text of Article 2.4.2 does not prohibit a Member
from using different bases for calculating the weighted average normal value in the two situations. To

596 Paragraphs 7.87-7.88 and 7.152 of the Final Report.
597 Paragraph 7.128 of the Final Report.
598 Paragraph 7.129 of the Final Report.

properly reflect the legal character of Japan's ar gument, we have redrafted the last sentence of
paragraph 6.126 of the interim report.
 599
6.82 Japan suggests that the Panel amend the first tw o sentences of paragraph 6.128 of the interim
report600 to clarify that Japan's statement on the si gnificance of the word "individual" in the second
sentence of Article 2.4.2 was made in response to a question of the Panel. Japan is factually correct that
it only addressed this issue in response to a question of the Panel. We have therefore made the changes
suggested by Japan.
6.83 Japan requests the Panel to delete the first sen tence of paragraph 6.130 of the interim report601
because Japan fails to see why the fact that Japan's interpretation may yield significantly higher margins
of dumping renders that interpretation logically in consistent. The United States disagrees with this
proposed change.
6.84 We consider that we have fully explained our view on the various logical inconsistencies in
Japan's position in paragraphs 6.130-6.132 of the interim report. Thus, contrary to what Japan asserts,
the source of the logical inconsistency is not solely the fact that Japan's interpretation would lead to
higher margins. We thus decline to make the change requested by Japan.
6.85 Japan suggests that the third sentence of paragraph 6.136 of the interim report 602 would be
clearer if it read:
"In particular, we see no textual difference between the average-to-transaction method
and the transaction-to-transaction method that can sustain the view that zeroing is
prohibited under one of these methods of comparison but not the other
".
We do not consider that the change proposed by Japan is appropriate. Following the conclusion drawn
in the preceding paragraphs that the average-to-transaction method would be inutile if zeroing were
prohibited, paragraph 6.136 of the interim report ra ises the question whether there is a basis to argue
that zeroing is prohibited under the average-to-ave rage and transaction-to-transaction methods but not
under the average-to-transaction method. In this regard, the paragraph discusses in particular the
question whether it is possible to argue that zeroing, while not prohibited under the
average-to-transaction method, is prohibited under th e transaction-to-transaction method. It does not
deal with the question of whether it can be argued that zeroing is prohibited under the
average-to-transaction method but not under the transaction-to-transaction method. While Japan's
proposed change is thus not appropriate, we have made a change to the third sentence of the paragraph
to clarify that the question raised in this sentence is whether it is possible to argue that zeroing, while not
prohibited under the average-to-transaction method, is prohibited under the transaction-to-transaction
method.

6.86 Japan requests us to change para graph 6.159 of the interim report
603 to better reflect Japan's
argument regarding Article 2.4 by changing " ... because it inflated the margin of dumping and
artificially reduced export prices" to ".. because it results in an unfair, biased comparison between
export price and normal value". This change co rresponds to paragraph 172 of the First Written
Submission of Japan. We have therefore accepted it.

599 Paragraph 7.129 of the Final Report.
600 Paragraph 7.131 of the Final Report.
601 Paragraph 7.133 of the Final Report.
602 Paragraph 7.139 of the Final Report.
603 Paragraph 7.180 of the Final Report.

6.87 Japan suggests that, in order to properly refl ect Japan's argument, the third sentence of
paragraph 6.168 of the interim report604 be amended to include the words "as a result of the definitions
in Article 2.1 and Article VI," before "the terms ...". We have accepted this change since it is consistent
with the arguments of Japan before the Panel.
6.88 Japan proposes that the first two sentences of paragraph 6.169 of the interim report605 be deleted
because in Japan's view these sentences do not correctly characterize Japan's arguments. Japan points
out that it has repeatedly stated before the Panel that it takes no position on the issue of the applicability
of Article 2.4.2 to reviews. The United States opposes this proposal.
6.89 The United States is factually correct when it points out that the first two sentences of
paragraph 6.169 of the interim report reflect statements that Japan has actually made in this proceeding.
However, we consider that it is appropriate to clarify that Japan made these statements only in response
to a Panel Question and to stress that Japan has stated that in its view it is not necessary for the Panel to
address the issue of whether Article 2.4.2 of the AD Agreement applies only to "original investigations".
We have redrafted paragraph 6.169 of the interim report accordingly.
6.90 Japan requests that the Panel delete para graphs 6.190-6.193 of the interim report
606 because
they deal with an issue – whether Article 2.4.2 of the AD Agreement applies to proceedings other than
investigations - that in Japan's view is not before the Panel and the disposition of which is not necessary
for the resolution of this dispute. Alternatively, Japan requests that the Panel clarify that Japan takes no
position on this issue because it believes that zeroi ng is prohibited by Articles 2.1 and 2.4 of the
AD Agreement. The United States opposes this request.
6.91 Article 2.4.2 of the AD Agreement is one of the provisions relied upon by Japan as support for
its claim that simple zeroing in the context of periodic reviews and new shipper reviews is inconsistent
with the AD Agreement . It is true that we consider th at zeroing is prohibited only where the
average-to-average comparison is used to determ ine the existence of margins of dumping during the
investigation phase and that, as a consequence, whether Article 2.4.2 applies to proceedings other than
investigations does not affect our conclusion that si mple zeroing is not prohibited in periodic reviews
and new shipper reviews. This does not mean, howev er, that it is inappropriate for us to address the
issue of the applicability of Article 2.4.2 on an arguendo basis 607 as additional support for our
conclusion that Article 2.4.2 does not prohibit simple zeroing in the calculation of margins of dumping
in periodic reviews and new shipper reviews. Second, we have stated explicitly in paragraph 6.172 of
the interim report608 that Japan considers that it is not necessar y for the Panel to decide whether or not
Article 2.4.2 applies to proceedings other than investigations under Ar ticle 5. Thus, we have clearly
acknowledged Japan's position on this issue. Third, we have already expressed a view on the limited
applicability of Article 2.4.2 in our discussi on in paragraph 6.119 of the interim report 609 without
providing a legal analysis of the basis for taking that view. It is therefore necessary for us to explain the
reasons for taking that position. In light of these c onsiderations we have decided to retain paragraphs
6.190-6.193 of the interim report 610, but we have added a footnote to the first sentence of paragraph
7.211 of the final report to respond to Japan's view that it is not necessary for the Panel to consider the
issue of the applicability of Article 2.4.2.

604 Paragraph 7.189 of the Final Report.
605 Paragraph 7.190 of the Final Report.
606 Paragraphs 7.212-7.215 of the Final Report.
607 See first sentence of paragraph 7.211 of the Final Report.
608 Paragraph 7.193 of the Final Report.
609 Paragraph 7.122 of the Final Report.
610 Paragraphs 7.212-7.215 of the Final Report.

6.92 Japan requests the Panel to amend pa ragraph 6.204 of the interim report
611 to add the phrase
"[i]t is clear as a factual matter that USDOC app lied simple zeroing in these 11 periodic reviews.
However, for ... ." Japan explains that the Panel ha s correctly noted in paragraph 6.46 of the interim
report that it is clear as a factual matter that USDOC always applies zeroing. Japan proposes a similar
change to paragraph 6.235 of the interim report.
612 The United States opposes both these changes.
6.93 It has not been disputed that USDOC has app lied simple zeroing in the periodic reviews at
issue. The changes proposed by Japan therefore are factually correct. On the other hand, it is not clear
why it is necessary for us to state that USDOC has applied simple zeroing in these reviews when we
have found that the AD Agreement does not proscribe simple zeroing in periodic reviews. We therefore
decline to make the changes proposed by Japan to paragraphs 6.204 and 6.235 of the interim report.
6.94 Japan requests that the Panel amend paragraph 6.224 of the interim report 613 to reflect that
Japan has claimed that the margin of dumping must be calculated in conformity not only with Article
2.4 but also with Articles 2.1 and 2.4.2. Japan proposes to substitute "Article 2" for "Article 2.4" after
"in conformity with" in the fourth line of this paragraph. The United States opposes this suggestion.
6.95 We decline to make this change. As written, paragraph 6.224 of th e interim report already
refers to Articles 2.1, 2.4 and 2.4.2. Moreover, the paragraph is an accurate summarization of
paragraphs 190-191 of the First Submission of Japan.
6.96 Finally, Japan proposes changes to correct the Federal Register reference for one of the periodic
reviews mentioned in paragraph 2.3 and to correct the short citation forms of several measures referred
to in paragraphs 2.3, 3.2 and 4.249 of the interim report. Japan also proposes that the word "average" be
inserted between "weighted" and "normal value" in th e third sentence of paragraph 4.251. Japan also
suggests a number of corrections to typo graphical errors in paragraphs 6.229 and 6.231 of the interim
report. We have accepted all these suggested corrections.
2. Comments of the United States
6.97 The United States requests that the Panel either delete or amend the last sentence of
paragraph 6.12 of the interim report614 in order to avoid the negative implication that what is provided
for in the second sentence of Article 17.6(ii) of the AD Agreement is not permitted under the DSU.
Japan has not commented on this proposed change.
6.98 In order to address the issue raised by the Unite d States we have redrafted the last sentence of
paragraph 6.12 of the interim report.
6.99 The United States raises two issues with respect to paragraphs 6.43-6.45 of the interim
report.615 First, the United States submits that, contrary to what is set forth in the report, the Appellate
Body has not equated norms and measures but has found that acts or instruments setting forth rules or
norms of prospective application may be measures. The United States refers in this regard to its Other
Appellant Submission in US – Zeroing (EC). In this dispute Japan has failed to identify such an act or
instrument independent of the specific results wh ich purportedly represent the application of the
measure. Second, the United States considers that paragraph 6.44 of the interim report616 is superfluous
since neither party has argued that a rule or norm must be in written form. The United States proposes

611 Paragraph 7.226 of the Final Report.
612 Paragraph 7.256 of the Final Report.
613 Paragraph 7.246 of the Final Report.
614 Paragraph 7.12 of the Final Report.
615 Paragraphs 7.48-7.50 of the Final Report.
616 Paragraph 7.49 of the Final Report.

that the Panel delete paragraph 6.44 of the in terim report and add a sentence to paragraph 6.45 617
indicating that Japan and the United States agree th at where a measure is not written, circumstantial
evidence may be proffered to demonstrate the existence of the measure. Should the Panel decide not to
delete paragraph 6.44 of the interim report, the United States requests that a footnote be inserted
clarifying that the United States did not argue that a measure had to be in written form.
6.100 Japan requests that the Panel reject the argument of the United States that a rule or norm cannot
in and of itself be a measure that can be challenged as such in WTO dispute settlement. Regarding the
new sentence proposed by the United States as new fi rst sentence of paragraph 6.45 of the interim
report, Japan disagrees that the evidence in this dispute is properly characterized as "circumstantial".
6.101 In our view, the first argument raised by the United States in respect of paragraphs 6.43-6.45 of
the interim report618 in essence repeats the argument advanced by the United States during earlier stages
of this proceeding that there is no act or inst rument causing USDOC to apply zeroing. While the
United States disagrees with our approach to that question, we consider that the purpose of the interim
review process is not to provide another opportunity for a party to re-argue issues that have already been
discussed in detail in written submissions, oral statement and responses to panel questions. Article 15.2
of the DSU provides that a party may request a panel "to review precise aspects of the interim report.."
By contrast, Article 17 of the DSU provides for an appellate review process with respect to "issues of
law" and "legal interpretations deve loped by the panel". We find it significant in this respect that the
United States has raised the same question in anothe r dispute currently before the Appellate Body and
that it refers us to the arguments contained in a s ubmission which it has made in that proceeding. In
light of these considerations, we conclude that th e first issue raised by the United States regarding
paragraphs 6.43-6.45 of the interim report does not warrant a change to the text of the interim report.
6.102 With regard to the comments made by the United States on paragraph 6.44 of the interim
report619, we have added a footnote to the first sentence of this paragraph to make it clear that the
United States has not taken the position in this disput e that a measure must necessarily exist in written
form.
6.103 The United States expresses its disagreement with the Panel's discussion in
paragraphs 6.46-6.49 of the interim report620 of the relevance of the use of zeroing over time and refers
the Panel in this respect to the argument in its Other Appellant Submission in US – Zeroing (EC). The
United States submits that the mere fact that a Memb er has acted consistently in the past says nothing
about whether there is an act or instrument causing th at behaviour and that consistent behaviour in the
light of identical facts can be expected of a Member which does not act in an arbitrary manner. In this
connection, the United States argues that the last sentence of paragraph 6.46 of the interim report would
be more correct if it were phrased: "Thus, it is clear as a factual matter that USDOC has always applied
zeroing." The United States points out that the fact that discretion may have been exercised in a
particular manner in the past does not establish as a factual matter the manner in which it will be
exercised in the future, as illustrated by the r ecent announcement of USDOC that it will no longer use
zeroing in investigations involving average-to-ave rage comparisons. Japan considers that the
United States repeats an argument which it has advanced at an earlier stage of the proceeding and which
the Panel properly rejected in its interim report. Japan also submits that the last sentence of paragraph
6.46 of the interim report is consistent with the statements quoted in paragraph 6.47 of the interim report
and that the recent formal announcement by the USDOC that it will abandon the use of zeroing shows

617 Paragraph 7.50 of the Final Report.
618 Paragraphs 7.48-7.50 of the Final Report.
619 Paragraph 7.49 of the Final Report.
620 Paragraphs 7.51-7.54 of the Final Report.

that the zeroing procedures constitute a general rule or norm that even the USDOC recognizes must be
formally abandoned and replaced with a new procedure.
6.104 In our view, the argument of the United States th at consistent behaviour in the past is not
sufficient to conclude that a measure exists that can be challenged as such is not different from the
argument addressed in paragraph 6.49 of the interim report.
621 As explained in that paragraph, our
conclusion that a measure exists that can be challeng ed as such is not based simply on the fact that
USDOC has consistently applied zeroing. In fact, we explicitly point out that to base an "as such" claim
solely on consistent practice would raise serious c onceptual questions but that these questions do not
arise in this case because the evidence before us indicates not only that USDOC invariably applies
zeroing but also that it has repeatedly described zeroing in terms of a long-standing policy. Finally, we
recall our observation above regarding the limited func tion of the interim review process as compared
to the function of appellate review.
6.105 The United States disagrees with the Panel's di scussion in paragraph 6.52 of the interim
report622 of the relevance of the discretion available to the USDOC Assistant Secretary to provide
offsets or not. Referring to its Other Appellant Submission in US – Zeroing (EC) , the United States
submits that the question of whether a Member has discretion to act in a WTO-inconsistent manner is
separate from the question of whether there is a measure. Moreover, there is no basis to conclude from
past behaviour that future behaviour is predictable or that predictability is the test for identifying a
measure. The United States considers that these and other assumptions in the interim report regarding
how to identify a measure have alarming implications. Japan has not commented on the issues raised by
the United States regarding this paragraph.
6.106 The key point in paragraph 6.52 of the interim report is that the fact that USDOC enjoys
discretion with regard to how it treats export prices that are higher than the normal value is not a basis to
conclude that the zeroing methodology is not a rule or norm of general and prospective application
given that this discretion has been exercised by ad opting a policy of systematically applying zeroing.
As in the case of the comments of the United States on paragraphs 6.43-6.45 and paragraphs 6.46-6.49
of the interim report, the comments of the United States on this paragraph reflect a fundamental
disagreement with the approach that we have taken in identifying the existence of a measure that can be
challenged as such. As explained a bove, we consider that it is not appropriate to reconsider in the
interim review process fundamental legal questions th at have already been extensively debated by the
parties.
6.107 The United States requests that the Panel delete the last two sentences of paragraph 6.122623 as
well as paragraphs 6.123 and 6.135 of the interim report. 624 The United States asserts that whether
dumping may be masked by the application of the transaction-to-transaction comparison methodology
was not raised by any party in this dispute nor was it the subject of any questions from the panel. The
United States considers that there may be circ umstances in which the transaction-to-transaction
comparison may mask the existence of dumping and th at while the Panel appears to have concluded
otherwise, such a conclusion is unnecessary to support the Panel's analysis and is without support in the
record before the Panel. Japan opposes the changes proposed by the United States.
6.108 We decline to make the changes re quested by the United States. Fi rst, we consider that it is
well established that a panel is not obliged to limit its legal reasoning to arguments presented by the

621 Paragraph 7.54 of the Final Report.
622 Paragraph 7.57 of the Final Report.
623 Paragraph 7.125 of the Final Report.
624 Paragraphs 7.126 and 7.138 of the Final Report.

parties to a dispute. 625 Second, the report fully explains why we considered it necessary to raise the
issue of whether dumping may be masked by a the transaction-to-transaction method. As stated in
paragraphs 6.112-6.113 of the interim report 626, an important consideration guiding our analysis of
whether simple zeroing is proscribed in investigations is the need to interpret Article 2.4.2 in a manner
that reflects the particular interrelationship between the three comparison methods identified in Article
2.4.2 in a logically coherent manner, consistent with the requirement to interpret the terms of a treaty in
their context and in light of the principle of effectiveness. One aspect of this issue, which we analyze in
paragraph 6.122 627, is the question whether an interpretation of Article 2.4.2 as prohibiting zeroing only
in the context of the average-to-average me thod is consistent with the nature of the
average-to-transaction method in the second sentence of Article 2.4.2 as an exception not only to the
average-to-average method but also to the transaction- to-transaction method. It is in this particular
context that the question of whether dumping may be masked by the transaction-to-transaction method
necessarily arose. While we have concluded, in light of other textual and contextual elements, that this
issue is not of decisive importance, we nevert heless consider that our report must provide a
comprehensive explanation of our reasoning.
6.109 The United States proposes that the Panel ame nd paragraph 6.221 of the interim report 628 to
make a cross-reference to the Panel's conclusion in paragraph 6.235 of the interim report629 that reliance
on margins calculated in periodic reviews under Artic le 9.3 on the basis of simple zeroing is not
WTO-inconsistent. The United States provides no explanation of why this change is necessary. Thus,
although the change may not affect the substance of the Panel's reasoning and findings and Japan has
not opposed it, it is not clear that this change is appropriate.
6.110 The United States proposes deletion of paragraph 6.234 of the interim report because it
considers that this paragraph does not reflect the arguments of the United States on this issue.
6.111 A review of submissions of the United States shows that although it is possible to interpret
certain statements in the manner suggested in paragraph 6.234, there is no statement that expressly and
unambiguously makes a distinction between the existence of margins of dumping and the magnitude of
margins of dumping. Therefore we have accepted the proposed deletion of paragraph 6.234 of the
interim report.
6.112 Finally, the United States has identifies typogra phical errors in paragraphs 4.61, 4.62, 4.133,
4.141, 4.141-footnotes 210 and 211, 6.28, 6.52 and 6. 108 of the interim report. We have accepted all
these corrections suggested by the United States.
VII. FINDINGS
A. INTRODUCTION
1. The Terms "Model Zeroing" and "Simple Zeroing" as used by Japan in this Dispute
7.1 The claims of Japan in this dispute pertain to "zeroing", a term used by Japan to refer to the
calculation by the United States Department of Co mmerce ("USDOC") of a weighted average margin

625 Appellate Body Report, EC – Hormones , para. 156; Appellate Body Report; US – Certain EC
Products, para. 123; Appellate Body Report, Chile - Price Band Systems, paras. 167-168.
626 Paragraphs 7.115-7.116 of the Final Report.
627 Paragraph 7.125 of the Final Report.
628 Paragraph 7.243 of the Final Report.
629 Paragraph 7.256 of the Final Report.

of dumping
630 for an exporter or producer in a manner that does not fully reflect export prices that are
above the normal value. Japan distinguishes between "model zeroing" and "simple zeroing". We note
that "model zeroing" and "simple zeroing" are not terms of United States' law but labels used by Japan
for purposes of this dispute.631
7.2 By "model zeroing" Japan means the method whereby USDOC makes average-to-average
comparisons of export price and normal value within individual "averaging groups" established on the
basis of physical characteristics ("models" 632) and disregards any amounts by which average export
prices for particular models exceed normal valu e in aggregating the results of these multiple
comparisons to calculate a weighted average margin of dumping. Specifically, "model zeroing" means
that when USDOC aggregates the results of model-specific, average-to-average comparisons of normal
value and export price into a weighted average margin of dumping, the numerator of that margin of
dumping only includes the results of models for which the average export price is less than the normal
value.
7.3 By "simple zeroing" Japan means the method whereby USDOC determines a weighted average
margin of dumping based on average-to-transaction or transaction-to-transaction comparisons between
export price and normal value and disregards any amounts by which export prices of individual
transactions exceed normal value in aggregatin g the results of these multiple comparisons.
Specifically, "simple zeroing" means that when US DOC aggregates the results of comparisons of
normal value and export price made on an average-to-transaction basis or on a
transaction-to-transaction basis, the numerator of the weighted average ma rgin of dumping only
includes the results of those comparisons in whic h individual export prices are less than the normal
value.
 633
7.4 Japan asserts that USDOC routinely uses model ze roing in original investigations, although
USDOC recently has also applied simple zeroing when it calculated a dumping margin in an original
investigation using the transaction-to-transaction method, and that in periodic reviews and new shipper
reviews USDOC routinely uses average-to-transaction comparisons, including simple zeroing. Japan
submits that in changed circumstances reviews and sunset reviews USDOC generally does not calculate
a new margin of dumping but relies on margins of dumping calculated in original investigations on the
basis of model zeroing or on margins of dumping calculated in periodic reviews on the basis of simple
zeroing.
7.5 In addition to the application of zeroing in specific instances, Japan challenges what it describes
as "(model and simple) zeroing procedures", which Japan considers to be a measure that can be
challenged as such, i.e. independently of the application of zeroing in specific instances.

630 We note that with regard to periodic reviews and new shipper reviews, Japan challenges zeroing not
only with respect to the calculation of margins of dumping but also with respect to the calculation of assessment
rates.
631 Japan First Written Submission, para. 6, footnote 6.
632 USDOC Regulations provide for average-to-average comparisons within "averaging groups"
established on the basis of various criteria, particularly physical characteristics and level of trade. In this
proceeding, Japan uses the term "model" to refer to averaging groups established on the basis of physical
characteristics. Japan First Written Submission, para. 18.
633 Under both the model zeroing method and the simple zeroing method, the denominator of the
weighted average overall margin of dumping calculated by USDOC always includes the total value of all export
sales, including export sales at prices above the normal value.

2. Findings requested by the Parties
7.6 Japan requests the Panel to make the following findings:634 635
(a) Model and simple zeroing procedures are as such inconsistent with Articles 2.1 and
2.4.2 of the Agreement on Implementation of Article VI of the General Agreement on
Tariffs and Trade 1994 ("AD Agreement" or "Agreement") and Articles VI:1 and VI:2
of the General Agreement on Tariffs and Trade 1994 ("GATT 1994") because in any
type of anti-dumping proceeding the determination of dumping, and the calculation of
the dumping margin, is not for the product as a whole.
(b) Model and simple zeroing procedures are as su ch inconsistent with Article 2.4 of the
AD Agreement because in any type of anti-dumping proceeding these procedures are
inherently biased, distort the comparison of normal value and export price, and thus
deprive exporters of a "fair comparison".
(c) Model and simple zeroing procedures are as such inconsistent with Articles 3.1-3.5 of
the AD Agreement because the injury determination in original investigations is not
based on an objective examination of positiv e evidence regarding the existence and
amount of dumping and dumped imports.
(d) Model and simple zeroing procedures are as su ch inconsistent with Article 5.8 of the
AD Agreement because USDOC does not have suff icient evidence of dumping to
assess whether it must terminate original investigations.
(e) Model and simple zeroing procedures are as such inconsistent with Articles 9.1-9.3 and
9.5 of the AD Agreement because margins of dumping established in periodic reviews
and new shipper reviews are not established consistently with Articles 2.1, 2.4 and
2.4.2 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994 and the
United States fails to ensure that duties collected do not exceed the proper margin of
dumping established on the basis of a "fair comparison" for the product as a whole.
(f) Model and simple zeroing procedures are as su ch inconsistent with Articles 11.1-11.3
of the AD Agreement because changed circumstances reviews and sunset reviews are
not conducted on the basis of dumping marg ins calculated through a fair comparison
for the product as a whole, as required by Articles 2.1, 2.4 and 2.4.2 of the AD
Agreement and Articles VI:1 and VI:2 of the GATT 1994.
(g) As a consequence of the above-mentioned inc onsistencies with various provisions of
the AD Agreement, model and simple zeroing procedures are as such inconsistent with
Article 1 of the AD Agreement.

634 Japan First Written Submission, paras. 9-10 and 194-195. As noted below, in its Second Written
Submission Japan has also requested that the Panel find that what Japan terms the "standard zeroing line" is
inconsistent with the provisions cited by Japan.
635 In its written comments submitted on 10 May 2006 on the Appellate Body Report in
US – Zeroing (EC), Japan withdrew its claim with respect to simple zeroing procedures maintained for use in
average-to-transaction comparisons in original investigations. Japan Written Comments on the Relevant Issues of
Law Addressed in the Appellate Body Report in US – Zeroing (EC) (WT/DS294/AB/R), paras. 31-32.

(h) By maintaining model and simple zeroing procedures, the United States acts
inconsistently with Article 18.4 of the AD Agreement and Article XVI:4 of the WTO
Agreement.
(i) Through the application of the zeroing procedures, the anti-dumping measures in the
original investigation in certain cut-to-length carbon quality steel plate products from
Japan are inconsistent with Articles 1, 2.1, 2.4.2, 2.4 and 3.1-3.5 of the AD Agreement
and Articles VI:1 and VI:2 of the GATT 1994.
(j) Through the application of the zeroing procedures, the anti-dumping measures in 11
periodic reviews are inconsistent with Articles 1, 2.1, 2.4, 2.4.2 and 9.1-9.3 of the AD
Agreement and Articles VI:1 and VI:2 of the GATT 1994.
(k) Through the application of the zeroing procedures, the anti-dumping measures in the
expedited sunset review of anti-friction bear ings (other than tapered roller bearings),
and parts thereof, from Japan and in the full sunset review of corrosion-resistant carbon
steel flat products from Japan are inconsistent with Articles 1, 2.1, 2.4, 2.4.2, 11.1 and
11.3 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994.
7.7 The United States requests the Panel to reject the claims of Japan in their entirety.
3. Relevant Principles regarding Standard of Review, Treaty Interpretation and Burden of
Proof
(a) Standard of Review
7.8 Article 11 of the Understanding on Rules a nd Procedures Governing the Settlement of
Disputes("DSU") provides the standard of review for WTO panels in general. Article 11 imposes upon
panels a comprehensive obligation 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.
636
7.9 Article 17.6 of the AD Agreement sets forth the special standard of review applicable to
disputes under the AD Agreement:
 (i) in its assessment of the facts of the ma tter, 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 est ablishment of the facts was proper and the
evaluation was unbiased and objective, even though the panel might have reached a
different conclusion, the evaluation shall not be overturned;

 (ii) 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 Agreemen t 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 those permissible interpretations.

636 Article 11 of the DSU provides in part: "The function of panels is to assist the DSB in discharging its
responsibilities under this Understanding and the covere d agreements. Accordingly, a panel should make an
objective assessment of the matter before it, including an objective assessment of the facts of the case and the
applicability of and conformity with the relevant covered agreements, and make such other findings as will assist
the DSB in making the recommendations or in giving the rulings provided for in the covered agreements."

Thus, taken together Article 11 of the DSU and Article 17.6 of the AD Agreement establish the standard
of review this Panel must apply with respect to both the factual and the legal aspects of the present
dispute.

(b) Rules of Treaty Interpretation
7.10 Article 3.2 of the DSU provides that the dispute settlement system serves to clarify the
provisions of the covered agreements "in accordance with customary rules of interpretation of public
international law". It is generally accepted that these customary rules are reflected in Articles 31-32 of
the Vienna Convention on the Law of Treaties ("Vienna Convention" ). Article 31(1) of the
Vienna Convention provides:
"A treaty shall be interpreted in good faith in accordance 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."
7.11 In the context of disputes under the AD Agreement, the Appellate Body has stated that:
"The first sentence of Article 17.6(ii), echoing closely Article 3.2 of the DSU, states
that panels 'shall' interpret the provisions of the AD Agreement 'in accordance with
customary rules of interpretation of public international law.' Such customary rules are
embodied in Articles 31 and 32 of the Vienna Convention on the Law of
Treaties (' Vienna Convention' ). Clearly, this aspect of Article 17.6(ii) involves no
'conflict' with the DSU but, rather, confirms that the usual rules of treaty interpretation
under the DSU also apply to the AD Agreement. …
The second sentence of Article 17.6(ii) … presupposes that application of the rules of
treaty interpretation in Articles 31 and 32 of the Vienna Convention could give rise to,
at least, two interpretations of some provisions of the AD Agreement, which, under
that Convention, would both be 'permissible interpretations.' In that event, a measure
is deemed to be in conformity with the AD Agreement 'if it rests upon one of those
permissible interpretations."637
7.12 Thus, under the AD Agreement, we are to follow the same rules of treaty interpretation as in any
other dispute. The difference is that Article 17.6(ii) provides explicitly that if we find more than one
permissible interpretation of a provision of the AD Agreement, we may uphold a measure that rests on
one of those interpretations.
(c) Burden of Proof
7.13 The general principles applicable to burden of proof in WTO dispute settlement require that a
party claiming a violation of a provision of the WT O Agreement by another Member assert and prove
its claim.638 Japan as the complaining party must therefore make a prima facie case of violation of the
relevant provisions of the relevant WTO agreements, which the 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.639 In this respect, therefore, it is also for the United States to provide evidence for
the facts which it asserts. We also recall that a prima facie case is one which, in the absence of effective

637 Appellate Body Report, US – Hot-Rolled Steel, paras. 57 and 59 (emphasis in original).
638 Appellate Body Report, US – Wool Shirts and Blouses, para. 337.
639 Appellate Body Report, US – Wool Shirts and Blouses, para. 337.

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.
4. Order of Analysis
7.14 Japan first presents claims regarding the zeroi ng procedures as such in relation to "original
investigations"
640, periodic reviews and new shipper reviews, changed circumstances reviews and
sunset reviews, and then submits claims regard ing the application of zeroing procedures in one
investigation and in a number of periodic reviews and sunset reviews. We do not consider that we are
bound by this sequence. 641 We decide to examine first the "as such" and "as applied" claims of Japan
relating to original investigations, followed by an examination of the "as such" and "as applied" claims
of Japan relating to periodic reviews and new ship per reviews and of the "as such" and "as applied"
claims of Japan relating to changed circumstances reviews and sunset reviews.
B. CLAIMS REGARDING ZEROING IN THE CONTEXT OF ORIGINAL INVESTIGATIONS
7.15 Japan claims that model and simple zeroing procedures, in the context of original
investigations, are as such inconsistent with (1) Articles 2.1 and 2.4.2 of the AD Agreement and
Articles VI:1 and VI:2 of the GATT 1994; (2) Article 2.4 of the AD Agreement; (3) Articles 3.1-3.5 of
the AD Agreement ; (4) Article 5.8 of the AD Agreement and (5) Articles 1 and 18.4 of the
AD Agreement and Article XVI:4 of the WTO Agreement.642
7.16 Japan also claims that the use of model zeroing in an original investigation concerning imports
of certain cut-to-length carbon quality steel products from Japan is inconsistent with (1) Articles 2.1 and
2.4.2 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994; (2) Article 2.4 of the
AD Agreement; (3) Articles 3.1-3.5 of the AD Agreement; and (4) Article 1 of the AD Agreement.
7.17 The Panel examines first the claims of Japan relating to zeroing procedures as such in the
context of original investigations.
1. Claims regarding zeroing procedures as such in the context of original investigations
7.18 The claims of Japan regarding zeroing procedures in the context of original investigations raise
two questions. First, whether what Japan describes as "zeroi ng procedures" are as such capable of
being challenged as a measure, independently of th e application of zeroing in specific instances.
Second, whether the AD Agreement and/or the GATT 1994 proscribe zeroing in the context of original
investigations.
7.19 We examine first whether, independently of the application of zeroing in specific cases, zeroing
procedures as such can be the subject of dispute settlement under the DSU and the AD Agreement.

640 Japan uses the term "original investigations" to refer to investigations within the meaning of Article 5
of the AD Agreement. Hereinafter, the terms "original investiga tions", "investigations" and "the investigation
phase" are used in the same sense, i.e. investigations within the meaning of Article 5 of the AD Agreement.
641 As stated by the panel in US – Zeroing (EC), "a panel is entitled to structure its analysis in a manner
most appropriate to facilitate the analysis of the issues presented to it". Panel Report, US – Zeroing (EC) ,
para. 7.13.
642 As noted above, Japan has withdrawn its claim regarding simple zeroing procedures in relation to the
average-to-transaction method provided for in the second sentence of Article 2.4.2. Supra, footnote 635.

(a) Whether zeroing procedures, as such, can be th e subject of dispute settlement proceedings
under the DSU and the AD Agreement
(i) Arguments of the Parties
7.20 Japan asserts that the model and simple zeroing procedures are contained in a line of computer
programming code in the Anti-dumping Margin Calculation Program643, one of the standard computer
programmes maintained by USDOC. 644 Japan terms this line of computer programming code the
"standard zeroing line". 645 Japan asserts that model and simple zeroing procedures are specific
"measures" within the meaning of Article 6.2 of the DSU and "administrative procedures" within the
meaning of Article 18.4 of the AD Agreement. Japan submits that the term "measure" comprises any act
or omission by a Member, that the characterizati on or status of an act in domestic law is not
determinative of its character as a measure in WTO law, and that whether or not an act is binding under
municipal law is irrelevant to whether it is a meas ure in WTO law. In addition, Article 17 of the
AD Agreement contains no limitation regarding the types of measure that may as such be the subject of
dispute settlement, and the phrase "laws, regulations and administrative procedures" in Article 18.4 of
the AD Agreement demonstrates that measures that can be challenged as such under the AD Agreement
encompass the entire body of generally applicable ru les, norms and standards adopted by Members in
connection with the conduct of anti-dumping proceedings.
7.21 Japan submits that an "administrative procedur e" within the meaning of Article 18.4 of the
AD Agreement is a system or method, including a set of computer instructions, used by investigating
authorities to conduct or manage anti-dumping proceedings. Model and simple zeroing procedures are
administrative procedures because they are a pre-de termined, standardized system or method for
mechanistically conducting and managing, on a unif orm and predictable basis, an aspect of the
USDOCs margin calculation in all anti-dumping proceedings, irrespective of the method of comparison
used. The standard zeroing line is applied on a generalized, normative and prospective basis because
the standard computer programmes are written in su ch a way that the zeroing procedure is executed
automatically in the margin calculation process and th e standard zeroing line is found in every margin
calculation program applied by the USDOC.
7.22 Japan asserts that the fact that the zeroing procedures are a rule, norm or standard of general and
prospective application is evidenced by the consis tent use of these procedures by USDOC in every
dumping margin calculation undertaken in at least the past decade, the inclusion of the standard zeroing
line in the standard computer programme and in the 26-case specific computer programmes submitted
by Japan in this dispute, the reference made to the zeroing procedures in the USDOC Import
Administration Anti-Dumping Manual, the fact that even in the handful cases in which USDOC did not
apply the standard zeroing line USDOC used the zeroing procedures by excluding negative comparison
results using other software or even manually, a nd statements of USDOC, the Department of Justice

643 Exhibits JPN-6 and JPN-7 contain copies of this AD Margin Calculation Program, as at 4 April 2002,
for both original investigations and periodic reviews.
644 In the case of the calculation of an overall weighted average dumping margin in original
investigations, periodic reviews and new shipper reviews, the relevant line of computer code that executes (model
or simple) zeroing is "WHERE EMARGIN GT 0". In the case of the calculation of importer-specific assessment
rates in periodic reviews, the line of programming code that executes simple zeroing is "WHERE UMARGIN GT
0". Japan First Written Submission, paras. 39 and 43.
645 We note that while the First Written Submission of Japan focuses on zeroing procedures as the
measure challenged as such, in its Second Submission Japan identifies the measures that it challenges as such as
the zeroing procedures and the standard zeroing line. At the second meeting of the Panel with the parties, Japan
used the notion of "zeroing measures", encompassing both the zeroing procedures and the standard zeroing line.

and United States' domestic courts confirming the existence and content of the zeroing procedures as a
general and prospective rule.
646
7.23 Japan emphasizes, in this regard, that it has presented different categories of evidence that,
taken together, demonstrate that the zeroing pro cedures constitute a general rule, norm or standard
maintained by the United States for calculating du mping margins. Whethe r a Member maintains a
general rule, norm or standard that can be challenged as such is a question of fact that a panel must
examine in light of all the evidence before it. While such evidence will typically include the text of a
measure, if a Member has failed to publish a genera l rule, a consistent pattern of regulatory behaviour
may provide valuable evidence of the existence of an "as such" measure. In the present dispute, the
evidence of a perfectly consistent pattern of regulat ory behaviour, together with the other evidence of
record submitted by Japan, supports the conclusi on that USDOC has adopted a general rule, norm or
standard.
7.24 Japan asserts that the standard zeroing line647 is an instrument setting forth rules or norms that
are intended to have general and pr ospective application. Since com puter instructions are covered by
the ordinary meaning of "administrative procedures ", the standard zeroing line forms part of the
USDOCs administrative procedures for calculating margins of dumping. That the standard zeroing line
has not been used in all cases does not deprive it of its quality as a rule, norm or standard of general
application because a rule may be general in character although not necessarily applied in all cases.
7.25 Japan rejects what it characterizes as an ar gument of the United States that the zeroing
procedures and the standard zeroing line cannot be measures if they are not manifested in domestic laws
and regulations of the United States. Whether a measure can be challenged in the WTO does not
depend upon the label given to a measure under domestic law and whether it is binding. The assertion
of the United States that there are no laws, regula tions or administrative procedures which govern the
calculation of dumping with respect to the issue of whether an offset is required for non-dumped
transactions is in contradiction w ith the totality of the evidence wh ich Japan has provided in this
proceeding, which demonstrates that what Japan ha s termed zeroing procedures constitute a norm or
rule of general and prospective application and which are therefore administrative procedures.
7.26 Japan argues that the standard zeroing pro cedures and the standard zeroing line mandate
violations of WTO obligations. Although a measure do es not have to be mandatory in order to be as
such WTO-inconsistent, the zeroing procedures and standard zeroing line are mandatory in the sense
that they preclude USDOC from complying with th e WTO obligations of the United States. If a
measure mandates WTO-inconsistent conduct as a rule, the existence of discretion not to apply that
measure in an individual case does not render the me asure WTO-consistent. The issue is not whether
the USDOC Assistant Secretary can change, or de cide not to apply the zeroing procedures in a
particular investigation, but whether the zeroing pr ocedures themselves –in terms of their substantive
content – mandate a violation of WTO obligations as a rule.
7.27 Japan argues that the Appellate Body Report in US – Zeroing (EC) confirms that the model and
simple zeroing procedures are measures that ca n be challenged as such. Although the European
Communities and Japan have used different labels, the zeroing procedures are substantively the same
measures that were challenged as such in US – Zeroing (EC) and the evidence before this Panel
regarding the existence of the zeroing procedures as a measure that can be challenged as such is more
extensive than the evidence that was before the panel in US – Zeroing (EC).

646 In support of its position that the zeroing procedures are rules, norms or standards of general and
prospective application, Japan has also submitted a statement of Ms. Valerie Owenby, an expert in USDOCs
computer programming procedures and a former employee of USDOC. Exhibit JPN-1(Owenby Statement).
647 Supra, footnote 644.

7.28 The United States argues that there is no "standard computer programme" that is a "measure"
within the meaning of Article 6.2 of the DSU because USDOC tailors its computer programmes to each
particular investigation. In any event, comput er programmes and lines in computer programming are
tools to calculate margins of dumping accurately an d efficiently rather than instruments setting forth
rules or norms that have general and prospective a pplication. Even if the computer programmes were
measures, they could not be found to be WTO-inconsistent because they do not mandate any action and
do not preclude USDOC from offsetting negative dum ping margins or require USDOC to ignore
negative dumping margins.
7.29 The United States argues that Japan has not demonstrated how what it refers to as the "zeroing
procedures" and the "'standard zeroing line" are measures, let alone whether these "measures" mandate
a breach. Japan has not identified any actual meas ure of the United States that corresponds to the
"zeroing procedures". Japan has failed to demonstrate that the "zeroing procedures" are an "act" of the
United States and how that "act" sets forth rules or norms intended to have generalized and prospective
application. Japan's reference to "consistent a pplication" as evidence of the binding and mandatory
nature of the zeroing procedures ignores that, as stated by the Appellate Body, the starting point of the
analysis of a measure challenged as such is the te xt of that measure. Analysis of "consistent
application" can supplement, but not supplant, analysis of the measure itself on its face or obviate the
need even to identify the measure which is supposedly being applied. Japan has confused the evidence
that might demonstrate the scope and meaning of a measure with the very existence of the measure
itself. Concluding that a measure exists because of its consistent application is an exercise in circular
reasoning. The evidence establishing the existence of a measure must be independent of its repeated
application. What Japan refers to as "consistent appl ication" in fact is nothing more than "consistent
results" with an assumption that there is a measure that causes those results. The United States argues
that the only evidence presented by Japan in its a ttempt to demonstrate the existence of zeroing
procedures is evidence of the consistent application of zeroing.
7.30 The United States asserts that the fact that it has indicated that USDOC has never granted an
offset for negative dumping margins does not amount to an acknowledgement of the existence of
"zeroing procedures". The United States submits, in this respect, that Japan has not provided any
evidence that the zeroing procedures or the zeroing li ne are mandatory. The United States points out
that its position is not that a measure must be written but that Japan has pointed to nothing that
substantiates its assertion that there is a measure called zeroing procedures that USDOC acts in
accordance with. The United States does not argue th at the zeroing procedures cannot be measures if
they are not manifested in United States' domestic laws and regulations. The question is whether a
measure exists, not whether that measure is embodied in a particular form, such as a law or regulation.
7.31 The United States contends that there are no laws , regulations or administrative procedures
which govern the calculation of margin(s) of dumping with respect to the issue of whether an offset is
required for non-dumped transactions and that US cour ts have determined that Section 771(35) of the
Tariff Act of 1930 does not govern this issue. Th e USDOC Assistant Secretary enjoys discretion to
provide or not to provide an offset for non-dumped sales, and that discretion is exercised in each
investigation.
7.32 The United States submits that in US – Zeroing (EC) the Appellate Body articulated the correct
legal standard for determining when an unwritten measu re exists that can be challenged as such. This
standard requires that an act or instrument be found to exist that creates a rule or norm of general and
prospective application, i.e. a rule or norm in a prescriptive sense, as distinguished from a rule or norm
in a merely descriptive sense. However, the Appella te Body failed to adequately apply this standard
when it made its own findings based on evidence that either was not relied upon by the panel or that was
disputed by the parties. The United States also submits that the Appellate Body failed to consider legal
arguments of the United States regarding the mandatory/discretionary distinction.

(ii) Arguments of Third Parties
7.33 Argentina, China, the European Communities , Korea, Mexico, Norway and Thailand
agree with Japan that the zeroing procedures can be challenged as such. As support for this view they
rely, in particular, on the reasoning of the Appellate Body in US – Corrosion-Resistant Steel Review
regarding measures that can be challenged as such . These third parties consider that the zeroing
procedures can be considered to be a rule or norm of general and prospective application. A number of
third parties also argue that the zeroing procedur es constitute "administrative procedures" within the
meaning of Article 18.4 of the AD Agreement.
(iii) Evaluation by the Panel
7.34 Neither party contests that, as is well-established in GATT and WTO dispute settlement, it is
possible for a Member to have recourse to dispute settlement under the DSU and the AD Agreement
with respect to certain measures "as such", as distinguished from the application of measures in specific
situations. What is disputed is whether Japan has established that its claims with respect to what it terms
"zeroing procedures" pertain to a measure of the United States capable of being challenged as such.
7.35 As we understand the position of the United Stat es, the United States does not dispute that
USDOC consistently calculates margins of dumping by using a method termed "zeroing" by Japan.
648
Rather, the United States argues that Japan has not demonstrated that the fact that USDOC consistently
calculates margins of dumping in this manner is caused by a measure which can be challenged as such,
i.e independently of the application of zeroing in specific cases.
7.36 The DSU and the AD Agreement do not define criteria for determining when measures can be
challenged "as such". Thus, we believe that, as a starting point of our analysis of whether zeroing
procedures can be challenged as such, it is inst ructive to consider how the notion of measures
challenged "as such" has been interpreted and applied in recent WTO dispute settlement cases.
7.37 The Appellate Body affirmed in US – Corrosion-Resistant Steel Sunset Review that, in
principle, any act or omission attributable to a WTO Member can be a "measure" of that Member for
purposes of WTO dispute settlement proceedings, and th at, in addition to "particular acts applied only
to a specific situation", the concept of a measure within the meaning of the DSU encompasses certain
acts or instruments irrespective of their applica tion in specific instances. The Appellate Body
characterized such acts or instruments as "acts settin g forth rules or norms that are intended to have
general and prospective application" and "instruments of a Member containing rules or norms". Not
allowing claims against instruments setting out rules or norms inconsistent with a Member's obligations
would frustrate the objective of protecting the security and predictability to c onduct future trade and
lead to a multiplicity of litigation.
649 Following these general consid erations, the Appellate Body
considered whether there are any limitations upon the types of measures that may as such be the subject
of dispute settlement under the DSU or the AD Agreement.
7.38 The Appellate Body considered, in this respect, that its reasoning for concluding in its report in
US - 1916 Act that the AD Agreement does not preclude a panel from examining legislation as such,
which was "based on the GATT acquis and the language of the AD Agreement , in particular
Articles 17.3 and 18.4", would also apply to the case under review "where th e relevant measures are
specific provisions of an administrative instrument issued by an executive agency pursuant to statutory
and regulatory provisions".650 Although in the practice under the GATT most of the measures subject,

648 We note, however, that the US does not use the te rm "zeroing" and instead uses the concept of "not
providing offsets for export transactions that exceed normal value".
649 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 82.
650 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 84.

as such, to dispute settlement, were legislation, a broad range of measures could be submitted, as such,
to dispute settlement.651 The Appellate Body also pointed out that Article 17.3 of the AD Agreement
contains no threshold requirement that a measure submitted to dispute settlement be of a certain type652
and that the phrase "laws, regulations and admi nistrative procedures" in Article 18.4 of the
AD Agreement implies that "the entire body of generally applicable rules, norms and standards adopted
by Members in connection with the conduct of anti-dumping proceedings" can be challenged as such.653
7.39 The Appellate Body concluded from this analysis that there is no basis for holding that only
certain types of measure can be challenged as su ch in dispute settlement proceedings under the
AD Agreement and that there is therefore no reason for concluding that, in principle, non-mandatory
measures cannot be challenged as such.654
7.40 We also note that, in the same case, the Appe llate Body treated the USDOC Sunset Policy
Bulletin ("SPB") as an instrument that can be challenged as such.655 Subsequently, in US - Oil Country
Tubular Goods Sunset Reviews, the Appellate Body stated that the fact that the SPB is not binding under
United States' law and that USDOC is free to depart from the SPB at any time is not relevant to the
question of whether the SPB is a measure that may be challenged in WTO dispute settlement
proceedings. In this connection, the Appellate Body recalled its statement in US – Corrosion-Resistant
Steel Sunset Review that "acts setting forth rules or norms that are intended to have general and
prospective application" are measures subject to WTO dispute settlement. The Appellate Body went on
to observe:
"In our view, the SPB has normative value, as it provides administrative guidance and
creates expectations among the public and among private actors. It is intended to have
general application, as it is to apply to all the sunset reviews conducted in the
United States. It is also intended to have prospective application, as it is intended to
apply to sunset reviews taking place after its issuance. Thus, we confirm—once
again—that the SPB, as such, is subject to WTO dispute settlement."
 656
7.41 While we realize that the Appellate Body in US – Corrosion-Resistant Steel Sunset Review did
not necessarily purport to provide a comprehensive de finition of measures that can be challenged as
such, we consider that the notion of rules or norm s of general and prospective application connotes an
essential condition in order for an act to be challengeab le as such. The fact that an act or instrument
contains rules or norms of general and prospective application makes it possible to analyze the future
conduct envisioned by that act or instrument. We note, in this regard, that in US – Oil Country Tubular
Goods Sunset Reviews the Appellate Body stated that:

651 The Appellate Body referred, in th is respect, to its statement in Guatemala - Cement I that in the
practice established under the GATT a "measure" may be any act of a Member, whether or not legally binding and
could even include non-binding administrative guidance". Appellate Body Report, US – Corrosion-Resistant
Steel Sunset Review, para. 85.
652 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 86.
653 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 87.
654 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 88.
655 Thus, the Appellate Body found that Section II.A.2 of the SPB, as such, is not inconsistent with
Articles 6.10 or Article 11.3 of the AD Agreement and that, in view of the lack of relevant actual findings by the
panel or uncontested facts on the record, it could not rule on Japan's claim that Sections II.A.3 and 4 of the SPB
are, as such, inconsistent with Article 11.3 of the AD Agreement. Appellate Body Report,
US – Corrosion-Resistant Steel Sunset Review, paras. 157 and 190.
656 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para.187.

"[b]y definition, an 'as such' claim challenges laws, regulations, or other instruments of
a Member that have general and prospective application, asserting that a Member's
conduct-not only in a particular instance that has occurred but in future situations as
well-will necessarily be inconsistent with that Member's WTO obligations. In essence,
complaining parties bringing 'as such' challenges seek to prevent Members ex ante
from engaging in certain conduct."
657
7.42 In US – Zeroing (EC), the Appellate Body upheld the conclu sions of the panel in that dispute
that the zeroing methodology of the United States, as it relates to original investigations in which the
average-to-average comparison method is used to cal culate margins of dumping, can be challenged as
such in WTO dispute settlement and is inconsistent with Article 2.4.2 of the AD Agreement.658
7.43 The Appellate Body began its analysis by examining the concept of "measure" in Article 3.2 of
the DSU in which connection it recalled its findings in US – Corrosion-Resistant Steel Sunset Review
and US – Oil Country Tubular Goods regarding the types of measures that can be subject to an "as such"
challenge.659 In examining whether the zeroing methodology constituted such a measure, the Appellate
Body considered in light of the text of Articles 17.3 and 18.4 of the AD Agreement that there is "no basis
to conclude that 'rules or norms' can be challenged as such only if they have been expressed in the form
of a written instrument". 660 However, the Appellate Body also op ined that a "panel must not lightly
assume the existence of a 'rule or norm' constituting a measure of general and prospective application,
especially when it is not expressed in the form of a written document".661 The Appellate Body observed
in this regard:
"In our view, when bringing a challenge against such a 'rule or norm' that constitutes a measure
of general and prospective application, a comp laining party must clearly establish, through
arguments and supporting evidence, at least that the alleged 'rule or norm' is attributable to the
responding Member; its precise content; and indeed, that it does have general and prospective
application. It is only if the complaining party meets this high threshold, and puts forward
sufficient evidence with respect to each of these elements, that a panel would be in a position to
find that the 'rule or norm' may be challenged, as such. This evidence may include proof of the
systematic application of the challenged 'rule or norm'. Particular rigour is required on the part
of a panel to support a conclusion as to the existence of a 'rule or norm' that is not expressed in
the form of a written document. A panel must carefully examine the concrete instrumentalities
that evidence the existence of the purported 'rule or norm' in order to conclude that such 'rule or
norm' can be challenged, as such."
662
7.44 The Appellate Body then reviewed the ev idence before the panel and concluded,
notwithstanding that there were shortcomings in the panel's reasoning, that "in the specific
circumstances of this case, the evidence before the panel was sufficient to identify the precise content of
the zeroing methodology; that the zeroing methodology is attributable to the United States, and that it
does have general and prospective application".
663 It therefore concluded that the zeroing methodology,
as it relates to original investigations in which th e average-to-average comparison method is used, can
be challenged as such in WTO dispute settlement. 664 The Appellate Body rejected an argument of the

657 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 172 ( emphasis
added).
658 Appellate Body Report, US – Zeroing (EC), paras. 205 and 222.
659 Appellate Body Report, US – Zeroing (EC), paras. 187-189.
660 Ibid, para. 193.
661 Ibid, para. 196.
662 Ibid, para. 198 (emphasis in original, footnote omitted).
663 Ibid, para. 204.
664 Ibid, para. 205.

European Communities that the panel had erred by exercising judicial economy with regard to the issue
of whether the Anti-Dumping Manual is a measure that is, as such, inconsistent with certain provisions
of the AD Agreement.665 The Appellate Body also agreed with the panel's conclusion that what was
referred to as "Standard Zeroing Procedures" did not constitute a measure that could be challenged as
such.666 The Appellate Body declined to rule on the conditional appeal of the European Communities
regarding the "practice" of zeroing as such.667
7.45 In its submissions to the Panel, Japan describ es the measures that it challenges as such as
zeroing procedures and standard zeroing line.668 The question we must address is whether it is possible
to identify the precise content of the zeroing proced ures and the standard zeroing line and whether the
zeroing procedures and the standard zeroing line are attributable to the United States and can be
considered to be rules or norms intended to have general and prospective application.
7.46 We are not persuaded, in this respect, by Japan's argument that the standard zeroing line
constitutes an act setting forth a rule, norm or standard of general application. The standard zeroing line
is a particular line of computer code whereby USDOC applies zeroing. 669 By itself, the standard
zeroing line only constitutes an instruction in a com puter programme on how to perform a particular
aspect of the dumping margin calculation.670 There is nothing in this instruction that indicates that it is
of general and prospective application. In order for this line to be applicable to a particular
investigation or review, a decision must be made to include the line in the computer programme used in

665 Ibid, para. 225.
666 Ibid, para. 231.
667 Ibid, para. 234.
 668 We consider that these zeroing procedures and standard zeroing line fall within the scope of the
measures covered by Japan's request for the establishment of a panel contained in document WT/DS322/8. We
note, in particular, that sub-paragraph 1(a) of this request states; inter alia:

"In original investigations, periodic reviews, new shipper reviews, sunset reviews and changed
circumstances reviews where the re-determination of margins of dumping occurs, the US Department of
Commerce ('USDOC') disregards intermediate ne gative dumping margins calculated by comparing
normal value and export price, including on a weighted-average-to-weighted average basis,
weighted-average-to-transaction basis, and transaction-to-transaction basis, through the USDOCs
AD Margin Calculation computer program and other related procedures, in the process of establishing
the overall dumping margin for the product as a whole (hereinafter collec tively referred to as
'Zeroing')…"

Moreover, sub-paragraphs 1(a) (iii)-(vi) and 1(b) (c) and (d) repeatedly refer to the "Zeroing procedure".
It is clear, therefore, that in its re quest Japan uses the term "zeroing" to denote the fact that USDOC "disregards
intermediate negative dumping margins … through the USDOCs AD Margin Calculation Computer Programme
and other related procedures, in the process of establishing the overall dumping margin for the product as a
whole". It is also beyond dispute that the request employs the term "Zeroing procedure".
669 Supra, footnote 644.
670 As explained in one of the exhibits submitted by Japan: "In SAS, the WHERE statement is equivalent
to an 'if'. It is a conditional statement that instructs SAS to execute the procedure only if/where a certain condition
is met. The line 'WHERE EMARGIN GT 0' in this pr ogramming is the equivalent of saying 'if the EMARGIN
value for a given observation in the MARGIN dataset is great er than zero then include that observation in this
calculation". Statement of Valerie Owenby, p. 9, footnote 8. Exhibit JPN-1. In the context of the calculation of
importer-specific assessment rates, the line "WHERE UMARGIN GT 0" is a "statement that instructs SAS to sort
and include in the new dataset POSMARG only those US sales that had positive dumping amounts". Statement of
Valerie Owenby, para. 47. Exhibit JPN-1. As noted in the same document: "SAS...is both a software application
and a computer programming language. The SAS programming language works only in the SAS software
application, and it is the tool by which the programm er communicates the calculations and procedures, he/she
wants the SAS application to execute". Statement of Valerie Owenby, para.27. Exhibit JPN
-1.

that investigation or review. The line by itself cannot be a measure; rather there must be something else
that causes the zeroing line to be applied.
671 We find it significant in this regard that Japan itself has
characterized the standard zeroing line as "a specifi c expression of, and instrument to carry out" the
zeroing procedures. Therefore, we conclude that the standard zeroing line is not a measure that can be
challenged as such.
7.47 We now turn to the issue of whether what Japan terms "zeroing procedures" can be considered
to be a measure that can be challenged as such in light of the criteria enunciated by the Appellate Body,
particularly in US – Zeroing (EC). It is our understanding that by "zeroing procedures", Japan means
the zeroing methodology per se, as distinguished from the standard zeroing line. 672 The concept of
zeroing procedures, as used by Japan in this pr oceeding, does not correspond to a provision of
legislation or regulation of the United States or to any other type of written instrument adopted by the
United States that explicitly provides for zeroing as a rule or norm of general and prospective
application. This raises the question of whether a procedure not to be found in legislation or regulation
or in some other form of written instrument may nevertheless constitute a measure challengeable as
such in WTO dispute settlement. A closely relate d question that arises is whether it is of any
consequence that the term "zeroing procedures" is not employed in the anti-dumping legislation and
practice of the United States but has been created by Japan for the purpose of this dispute settlement
proceeding.
7.48 We consider, consistent with the reasoning of the Appellate Body in US – Corrosion-Resistant
Steel Sunset Review, that the fact that a norm to act in a given way in a given situation is not contained in
legislation or regulation does not entail that such a norm cannot be challenged as such in WTO dispute
settlement.673 In order for a measure to have the "normative value" necessary to render it susceptible of
being challenged as such, the measure must meet certain requirements. Its content must be clear and it
must be understood by those to whom it will apply th at it will be applied generally and prospectively.
We also concur with the observation of the panel in US – Zeroing (EC) that a finding regarding the
WTO-inconsistency of a norm as such must be b ased on solid evidence enabling a panel to determine
the precise content of the norm and the future conduct to which it will necessarily give rise.674 It stands
to reason that a measure can only have these properti es if it has a legal basis and that a measure is
unlikely to be capable of being challenged as such in WTO dispute settlement if it is not grounded in the

 671 Our reasoning is similar to that of the panel in US – Zeroing (EC):

 "[W]e consider that to characterize the 'Standard Zero ing Procedures' as an act or instrument that sets
forth rules or norms intended to have general and prospective application is somewhat difficult to
reconcile with the fact that the "Standard Zeroing Procedures" are only app licable in a particular
anti-dumping proceeding as a result of their inclusion in the computer programme used in that particular
proceeding. The need to incorporate these lines of computer code into each individual programme
indicates that it is not the "Standard Zeroing Procedures" per se that set forth rules or norms of general
and prospective application. Fo r this reason, we also question whether these "Standard Zeroing
Procedures" are "administrative pro cedures" within the ordinary meaning of that term as used in
Article 18.4 of the AD Agreement. The "Standard Zeroing Procedures" by themselves do not create
anything and are simply a reflection of something else."

 Panel Report, US - Zeroing (EC), para. 7.97. The term "Standard Zeroing Procedures" as used in US –
Zeroing (EC) refers to what Japan has termed "standard zeroing line" in this proceeding. Panel Report, US –
Zeroing (EC), para. 7.70. As noted above, the conclusion of the panel in US – Zeroing (EC) that the Standard
Zeroing Procedures could not be challenged as such was upheld by the Appellate Body.
672 We note, however, that our understanding of the distinction Japan makes between the zeroing
procedures and the standard zeroing line is based in particular on the arguments of Japan submitted following the
first meeting of the Panel with the parties and that, as noted above, this distinction is less clear in the First
Submission of Japan.
673 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 85.
674 Panel Report, US – Zeroing (EC), paras. 7.102 and 7.104.

relevant domestic legal framework. However, this does not mean that the measure must necessarily be
in the nature of legislation or regulation.
7.49 We also do not consider that the fact that there exists no written instrument that explicitly lays
down a rule or norm of zeroing is of decisive importance.675 We can see no logical basis in the GATT
and WTO dispute settlement practice for the proposition that an "as such" claim is only possible where
a rule or norm of general and prospective applicati on is recorded in a written instrument. As noted
above, the Appellate Body has explicitly stated in US – Zeroing (EC) that a rule or norm need not be
embodied in a written instrument in order for such a rule or norm to be challenged as such in WTO
dispute settlement.
7.50 We recognize that an analysis of an "as su ch" claim regarding a measure not embodied in
legislation or regulation or other type of written inst rument raises particular problems with respect to
the evidence required to establish that the measure constitutes a rule or norm of general and prospective
application, especially because, in our view, consistent practice is to be distinguished from the notion of
a rule or norm of general and prospective application. 676 677 However, in this case the evidence before
us is sufficient to conclude that a rule or norm exists providing for the application of zeroing whenever
USDOC calculates margins of dumping or duty assessment rates.
7.51 First, the evidence before the Panel shows that zeroing (i.e. the exclusion from the numerator of
weighted average dumping margins of results of co mparisons in which export prices are above the
normal value) has been a constant feature of USDOC s practice for a considerable period of time. The
line of computer programming code described as the standard zeroing line by Japan 678 has been
included in the vast majority of computer prog rammes used by USDOC to calculate margins of
dumping and assessment rates in specific cases, and where the line has not been included, USDOC has
used other methods to exclude export prices higher than the normal value from the numerator of the
weighted average margin of dumping.
679 The United States has emphasized that the USDOC Assistant
Secretary enjoys discretion to decide whether to provide for offsets for non-dumped transactions but has
not identified a single case in which a decision was taken to provide such an offset. Thus, it is clear as a
factual matter that USDOC always applies zeroing.
7.52 Second, the evidence before the Panel also shows th at what is at issue goes beyond the simple
repetition of the application of a certain methodology to specific cases. The manner in which USDOCs
use of zeroing has been characterized in statem ents by USDOC, other United States' agencies and
courts in our view confirms that USDOCs consistent application of zeroing reflects a deliberate policy.
Thus, for example, USDOC has rep eatedly stated that "we do not allow" export sales at prices above

675 We note that the US has not argued that a measure has to be in written form.
676 In US – Countervailing Measures on Certain EC Products, the Appellate Body made a finding with
respect to an "administrative practice" and "method". Appellate Body Report, US – Countervailing Measures on
Certain EC Products, para. 162. However, the Appellate Body subsequently indicated in several cases that it has
not yet pronounced on the issue of whether "practice" can constitute a "measure" fo r purposes of WTO dispute
settlement. Appellate Body Report, US – Gambling , para. 132; Appellate Body Report, Oil Country Tubular
Goods Sunset Reviews, para. 220. Japan has stated that it is not challenging "mere practice" in this dispute.
677 In this regard, we have also taken into account the criteria enunciated in paragraph 198 of the
Appellate Body Report in US – Zeroing (EC). Supra, para. 7.43.
678 Supra, footnote 644.
679 The US has explained that the lines of computer instruction referred to by Japan in this proceeding
have been developed for use in conjunction with SAS © software and that there have been several instances in the
past ten years in which USDOC used spreadsheet softwa re instead of the SAS © software to perform margin
calculations. In those cases, "the programming which provides that no offset is given for non-dumped sales
varied, depending on the programming approach adopted by the Commerce personnel who designed the
spreadsheet". US Response to Panel Question 9.

normal value to offset dumping margins on other export sales
680, has referred to its "practice" or
"methodology" of not providing for offsets for non-dumped sales 681 , has pointed out that the
United States Court of Appeals for the Federal Circuit has ruled that the "zeroing practice" i.e not
allowing US sales not priced below normal value to offset margins found on other US sales, is a
reasonable interpretation of the law
682, that the US Congress was aware of USDOCs methodology when
it adopted the Uruguay Round Agreements Act683, and that not granting an offset for non-dumped sales
"has consistently been an integral part of the Department's weighted-ave rage-to-weighted-average
analysis".684 We also note that the United States Departme nt of Justice has stated that USDOC "has
consistently applied its practice of treating non-dumped sales as sales with a margin of zero since the
implementation of the URAA" and has referred to USDOCs "long-standing methodology" and to "the
zeroing practice, which has been followed for at least 20 years" and which "predated the passage of the
latest major amendment of the Anti-dumping law".685 Finally, the United States Court of International
Trade has stated that "Commerce's zeroing methodology in its calculation of dumping margins is
grounded in long-standing practice".
686
7.53 In our view, these statements are significant as evidence showing that the consistent use of
zeroing in specific cases reflects a rule or norm of general and prospective application, which provides
that non-dumped export sales are not allowed to offset margins found on dumped export sales 687 and
which is applied regardless of the basis upon which export price and normal value are compared688 and
regardless of the type of proceeding in which margins are calculated. In this connection, we also recall
our observation above that while a rule or norm of general and prospective application need not be
embodied in legislation or regulation, a measure is unlikely to have the properties necessary to render it
susceptible of being challenged as such if it has no b asis in the relevant domestic legal framework. In
the case of the zeroing practice or methodology app lied by USDOC, such a basis in domestic law
clearly exists. In this regard, we note that the United States Court of Appeals for the Federal Circuit has
ruled that zeroing is permissible under Section 771(35) of the Tariff Act of 1930.689
7.54 We consider that the argument of the United States that the evidence of the existence of a
measure challenged as such must be independent of its repeated application is not relevant in the
circumstances of this case. In our view, this is not a case in which there is no evidence of the existence
of a measure challenged as such other than the re peated application of a particular methodology in
specific instances. The evidence be fore us indicates not only that USDOC invariably applies zeroing
but also that USDOC has repeatedly described its zeroing methodology in terms of a long-standing
policy that it considers to be consistent with its st atutory obligations. Therefore, while we believe an
"as such" claim based solely on consistent practice raises serious conceptual questions, we consider that
it is not necessary for us in the present case to opine on those questions.

680 Exhibits JPN-21.D and 26.
681 Exhibits JPN-16.D and 21-D.
682 Exhibit JPN-21.D.
683 Exhibit JPN-21D.
684 Exhibit JPN-27.
685 Exhibits JPN-28-31.
686 Exhibit JPN-32.
687 The fact that we describe this norm as a norm which provides that "non-dumped export sales are not
allowed to offset margins found on dumped export sales" is solely intended to reflect the terminology used in the
statements of US agencies cited in the preceding paragraph. By using this terminology here we do not intend to
convey a particular view on the question of whether the concept of dumping can apply to individual export
transactions. Our views on that question are set forth below, particularly in paragraphs 7.103-7.106.
688 Therefore, we consider that the terms "model ze roing" and "simple zeroing" used by Japan do not
correspond to two different rules or norms but simply refer to different manifestations of a single rule or norm –
not allowing non-dumped export sales to offset margins on export prices below the normal value.
689 US Response to Panel Question 37.

7.55 We therefore consider that the evidence before us is sufficient to identify the precise content of
what Japan terms "zeroing procedures", that these pr ocedures are attributable to the United States and
that they are a rule or norm of general and prosp ective application. While we acknowledge that to
establish a norm in part on the basis of inferential reasoning is highly unusual, we consider that it is
justified in the circumstances of this case. In th e Panel's view, this norm can be characterized as an
"administrative procedure" within th e meaning of Article 18.4 of the AD Agreement . Our
characterization of the zeroing procedures is consiste nt with the conclusion reached by the Appellate
Body in US – Zeroing (EC) that the zeroing methodology, as it rela tes to original investigations in
which the average-to-average comparison method is used, can be challenged as such.
7.56 Since we have been able to discern with precisi on the specific content of a rule or norm with
respect to how USDOC treats export prices higher th an the normal value in calculating margins of
dumping, we do not consider that it is of any relevance that the term "zeroing procedures" is not used in
the anti-dumping legislation or practice of the United States.
7.57 We consider that the character of the zeroin g methodology as a rule or norm of general and
prospective application is not diminished by the f act that the USDOC Assistant Secretary may change
this methodology or decide not to apply it in a par ticular case. While USDOC enjoys discretion with
regard to how it treats export prices above normal value when calculating weighted average dumping
margins or assessment rates, this discretion has been exercised by adopting a policy of systematically
zeroing. We agree with the observation of the panel in US – Zeroing (EC) that the argument that, if an
agency has discretion to change its methodology there can be no WTO-inconsistency as such, is
somewhat artificial, at least where a rule or norm has been applied invariably for a considerable period
of time because in such a case WTO-inconsistent conduct is as predictable as when WTO inconsistent
conduct is envisaged in legislation or regulation.
690 Moreover, the general characteristics that give a
measure normative value may take the form of a discr etion because, for example, a guideline to the
exercise of a discretion may be of general application and exist independently of the particular exercise
in each case of the discretion.
7.58 To conclude, we consider that what Japan te rms "zeroing procedures" is a measure which can
be challenged as such.
7.59 In light of our conclusion that what Japan describes as "zeroing procedures" are as such capable
of being challenged as a measure, independently of the application of zeroing in specific instances, we
now proceed to examine whether the AD Agreement and/or the GATT 1994 proscribe zeroing in the
context of original investigations.

690 "In our view, the objective of protecting the security and predictability needed to conduct future trade
can just as readily be frustrated if well-established norms that systematically and predictably lead to
WTO-inconsistent actions cannot be challenged or if they can be challenged only if they are
embodied in a particular type of instrument. Similarly, not allowing 'as such' claims against such
norms that are 'the root of WTO-inconsistent behaviour' might well entail a multiplicity of litigation.
While an agency probably can in most cases more easily depart from its own established norm than
from a law or regulation, the argument that there cannot be WTO-inconsistency as such if an agency
has discretion to make a change strikes us as artificial, at the very least in the case of a norm that has
been applied invariably for a considerable period of time. In such a case, WTO-inconsistent conduct
may be as predictable as when WT O-inconsistent conduct is envisaged in a law or regulation. We
also consider that to accord decisive weight to the nature of a particular instrument in which a norm
manifests itself creates a risk of addressing sy mptoms rather than causes." Panel Report, US –
Zeroing (EC), para. 7.100.

(b) whether the AD Agreement and/or the GATT 1994 proscribe zeroing in the context of original
investigations
(i) Articles 2.1 and 2.4.2 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994
Arguments of the Parties
7.60 Japan submits that it follows from the definition of "dumping" and "margin of dumping" in
Article 2.1 of the AD Agreement and Article VI of the GATT 1994 in relation to "a product" and
"products" that dumping and margins of dumping can be determined only for a product as a whole and
not in relation to a product type, model or category. Jap an refers in this respect to the analysis of the
Appellate Body in US – Softwood Lumber V. Because Article 2.1 applies to the entire AD Agreement,
"margins of dumping" in Article 2.4.2 must also be established for a product as a whole. While a
Member is entitled to make multiple comparis ons between export price and normal value for
sub-divisions of a product, disregarding the results of any such comparisons is inconsistent with the
requirement to determine dumping and calculate margins of dumping for a product as a whole. Model
zeroing applied by USDOC when making average-to-ave rage comparisons in original investigations
automatically disregards negative results of comp arisons where the normal value is higher than the
export price, which means that the results of all comparisons are not taken into account and that, as a
consequence, the determination of dumping and the calculation of the margin of dumping are not for the
product as a whole.

7.61 Japan argues that the same reasoning dictates that simple zeroing in the context of original
investigations is inconsistent w ith Articles 2.1 and 2.4.2 of the AD Agreement and Articles VI:1 and
VI:2 of the GATT 1994.691 692 Japan also refers to the Appellate Body Report in US – Zeroing (EC) in
this regard.
7.62 Japan argues that its view that margins of du mping can only be found to exist for a product
under investigation as a whole is supported by the te rm "product under investigation" in Article 6.10,
the fact that Article 9.2 provides for the imposition of anti-dumping duties in respect of a "product", and
the need for consistent treatment of a product in an anti-dumping investigation and throughout the life
of an anti-dumping action.
7.63 Japan emphasizes that the obligation to dete rmine dumping and margins of dumping for a
product as a whole stems from Article 2.1 of the AD Agreement and Article VI of the GATT 1994 and
does not derive from language specific to Article 2.4.2. The fundamental rule that dumping can only be
established for a product as a whole governs the inte rpretation of "margin(s) of dumping" throughout
the AD Agreement, with the sole exception being the calculation of a margin of dumping under the
average-to-transaction method in the second sentence of Article 2.4.2.
7.64 Japan asserts that the word "p rice" in Article VI of the GATT 1994 and the text of the first
paragraph of Ad Article VI:1 of the GATT 1994 do not suppo rt an interpretation of "margin of
dumping" as transaction-specific because they do not alter the requirement that dumping and margins of
dumping be found to exist with respect to a product.

691 Japan mentions a determination regarding imports of softwood lumber from Canada as an example of
the application of simple zeroing in original investigations. Notice of Determination Under Section 129 of the
Uruguay Round Agreements Act: Antidumping Measures on Certain Softwood Lumber Products From Canada .
70 Fed. Reg. 22636 (2 May 2005), Exhibit JPN-27.
692 As noted above, Japan has withdrawn its claim regarding simple zeroing procedures in relation to the
average-to-transaction method provided for in the second sentence of Article 2.4.2. Supra, footnote 635.

7.65 Japan submits that the United States is incorrect in arguing that the fact that anti-dumping
duties are assessed on individual entries of a pr oduct demonstrates that investigating authorities
determine margins of dumping for individual transactions. In particular, Japan rejects the argument that
a prospective normal value system involves the establishment of margins of dumping on individual
transactions. When imposing and collecting duties on individual entries of a product, including in the
context of a prospective normal value system, aut horities are not calculating margins of dumping on
individual transactions. In addition, even in a prospective normal value system final liability for
payment of anti-dumping duties must be determined in a review under Article 9.3.2 that involves a
determination of the margin of dumping for the product, for the review period. In any event, the United
States' system of retrospective duty assessment is not similar to a prospective normal value system.
7.66 Japan submits that a general prohibition of zer oing does not render the average-to-transaction
methodology in the second sentence of Article 2.4.2 of the AD Agreement redundant. Japan contests
that without zeroing the average-to-transaction comparison necessarily produces results identical to the
results of the average-to-average comparison. Thus, an average-to-transaction comparison will produce
a result different from that of an average-to-ave rage comparison if the average normal value is
calculated on a different basis. Moreover, th e second sentence of Article 2.4.2 provides for a
comparison of an average normal value to only those export transactions that constitute the pattern of
targeted dumping. Japan claims th at this interpretation of Article 2.4.2 is consistent with the USDOC
Regulations, which provide that the application of the average-to-transaction comparison shall be
limited to the prices that make up the pattern of targeted dumping.
7.67 The United States submits that there is no obligation in the AD Agreement to calculate a
margin of dumping for the product as a whole. The text of Article 2.4.2 of the AD Agreement does not
require Members to calculate a margin for the pr oduct as a whole. While the methodologies provided
for in Article 2.4.2 will generally result in multiple comparisons, Article 2.4.2 does not address the issue
of whether, and, if so, how the results of such mu ltiple comparisons are to be aggregated into a single
overall margin. The phrase "product as a whole" is not used in Article VI of the GATT 1994 or in
Articles 2.1, 2.4 or 2.4.2 of the AD Agreement.
7.68 The United States submits that the definition of "margin of dumping" in terms of a price
difference and the manner in which the first paragraph of Ad Article VI:1 of the GATT 1994 uses the
term "margin of dumping" imply that dumping may be found to exist with respect to individual
transactions in which export prices are less than the normal value. The AD Agreement did not alter the
definition of "margin of dumping" provided in GATT Article VI:2 but, as illustrated by Article 2.4.2,
the context in which this definition is used in the AD Agreement may allow it to be applied in more than
one way. In the case of the transaction-to-tra nsaction and average-to-transaction comparison
methodologies, the plural "margins of dumping" is u sed in a manner consistent with the definition of
"margin of dumping" in GATT Article VI:2 and refe rs to the results of multiple, transaction-specific
comparisons. Articles 5.8, 3.3 and 9.3 of the AD Agreement are other examples of how the meaning of
"margin(s) of dumping" depends upon the context within which these terms are used. Whereas Articles
5.8 and 3.3 refer to a single overall margin of dumping for an exporter or producer, the phrase "margin
of dumping" in Article 9.3 indicates that the anti-dumping duty for a specific import cannot exceed the
extent to which the export price for that transacti on falls below normal value. The United States also
argues that in a prospective normal value system the amount by which the prospective normal value
exceeds the export price of a particular transaction is the margin of dumping for that transaction.
7.69 The United States asserts that there is no textual support for the view that Article 2.4.2 of the
AD Agreement obligates Members to offset positive and negative dumping margins. Consequently,
panels and the Appellate Body have never found in the text of the AD Agreement an independent
obligation to offset margins. The finding of the Appellate Body in US – Softwood Lumber V that
zeroing is prohibited when establishing margins of dumping under the average-to-average methodology
in investigations is based on the phrase "all comp arable export transactions", which is unique to the

average-to-average comparison, and not on the phrase "margins of dumping". If the Appellate Body's
conclusion that zeroing is prohibited were based not on the "all comparable export transactions"
language but on "margins of dumping", this would have rendered the "targeted dumping" methodology
in the second sentence of Article 2.4.2 a nullity becau se, mathematically, if zeroing is prohibited, the
overall dumping margin calculated for an exporter must be the same under an average-to-average
comparison as under an average-to-transaction comparison.
7.70 In the latter regard, the United States asserts that there is no textual support for Japan's
arguments that the second sentence of Article 2.4.2 provides for a selection of only those export
transactions that make up the pricing pattern envision ed by that provision and that Article 2.4.2 was
crafted on the assumption that the average normal value in the third methodology in Article 2.4.2 is
established on a basis different from the averag e normal value in the first methodology. The
United States also submits that Japan is incorrect in arguing that the USDOC Regulations provide for
the application of the third comparison methodology to a subset of export transactions.
7.71 Moreover, the United States argues that the c onclusion of the Appellate Body Report in
US – Softwood Lumber V that Article 2.4.2 of the AD Agreement requires negative margins to be offset
when the average-to-average comparison is used is in contradiction with the text and the negotiating
history of that provision and should not be followed by this Panel. The United States also argues that
the reasoning in the Appellate Body Report in US – Zeroing (EC) is flawed and should not be followed
by this Panel.
7.72 The United States argues that the fact that Article VI of the GATT 1994 and the AD Agreement
do not recognize the existence of negative margins of dumping is also evident from the fact that
Members operating a prospective normal value system are not required to provide a refund or credit for
any amount by which an export transaction exceeds normal value. The United States asserts that Japan
is incorrect in arguing that the retrospective duty assessment system of the United States does not
determine final liability for payment of anti-dumping duties on an entry-by-entry basis.
Arguments of Third Parties
7.73 Argentina, China, the European Communities , Korea, Mexico, Norway and Thailand
broadly agree with Japan that model and simple ze roing is inconsistent with Article 2.4.2 of the
AD Agreement because it violates the requirement to make a determination of dumping for the product
as a whole and is also inconsistent with the "fair comparison" requirement contained in Article 2.4 of
the AD Agreement because it inflates the margin of dumping and may even lead to a finding of the
existence of dumping where no such finding would have been made in the absence of zeroing.
693 A
number of third parties refer, in this respect , to the analysis of the Appellate Body in EC – Bed Linen,
US – Corrosion-Resistant Steel Sunset Review and US – Softwood Lumber V . Some third parties
emphasize, in this regard, that the reasoning of the Appellate Body in US – Softwood Lumber V implies
that zeroing is prohibited in any context.
7.74 New Zealand submits that it is important to bear in mind the negotiating history of the
AD Agreement in considering the validity of Japan's ar guments. While curbs were placed on the
situations in which the average-to-transactions method might be used, no such curbs were placed on the
other two methods set out in Article 2.4.2. In this respect, New Zealand emphasizes its systemic interest
in ensuring that the right to use the transacti on-to-transaction methodology is preserved and disagrees
with the view that the reasoning of the Appellate Body in US – Softwood Lumber V applies to the
transaction-to-transaction method. New Zealand also points to the need for a holistic perspective in

693 The EC also argues that zeroing amounts to an impermissible adjustment for a difference that does not
affect price comparability.

which account is taken of the relationship between the method of calculating dumping margins and the
determination of the existence of material injury to a domestic industry caused by dumped imports.
Evaluation by the Panel
7.75 Japan requests us to find that maintaining mode l and simple zeroing procedures in the context
of original investigations is inconsistent with Articles 2.1 and 2.4.2 of the AD Agreement and
Articles VI:1 and VI:2 of the GATT 1994 because th ese procedures conflict with the requirement to
determine dumping, and to calculate a margin of dumping, for the product as a whole.
7.76 Article 2.1 of the AD Agreement provides:
 For the purpose of this Agreement, a product is to be considered as being dumped, i.e.
introduced into the commerce of another country at less than its normal value, if the export
price of the product exported from one country to another is less than the comparable price, in
the ordinary course of trade, for the like pr oduct when destined for consumption in the
exporting country.

7.77 Article 2.4.2 of the AD Agreement provides:
 Subject to the provisions governing fair comparis on in paragraph 4, the existence of margins of
dumping during the investigation phase shall normally be established on the basis of a
comparison of a weighted average normal value with a weighted average of prices of all
comparable export transactions or by a comparison of normal value and export prices on a
transaction-to-transaction basis. A normal value established on a weighted average basis may
be compared to prices of individual export transactions if the authorities find a pattern of export
prices which differ significantly among different purchasers, regions or time periods, and if an
explanation is provided as to why such differe nces cannot be taken into account appropriately
by the use of a weighted average-to-wei ghted average or transaction-to-transaction
comparison.

7.78 Articles VI:1 and VI:2 of the GATT 1994 provide:
1. The contracting parties recognize that dump ing, by which products of one country are
introduced into the commerce of another count ry at less than the normal value of the
products, is to be condemned if it causes or th reatens material injury to an established
industry in the territory of a contracting party or materially retards the establishment of
a domestic industry. For the purposes of this Article, a product is to be considered as
being introduced into the 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 when destined for consumption in the exporting country, or,

 ( b) in the absence of such domestic price, is less than either

 (i) the highest comparable price for the like product for export to
any third country in the ordinary course of trade, or

 (ii) the cost of production of the product in the country of origin
plus a reasonable addition for selling cost and profit.

Due allowance shall be made in each case for differences in conditions and terms of
sale, for differences in taxation, and for other differences affecting price comparability.

 2. In order to offset or prevent dumping, a contracting party may levy on any dumped
product an anti-dumping duty not greater in amount than the margin of dumping in
respect of such product. For the purposes of this Article, the margin of dumping is the
price difference determined in accordance with the provisions of paragraph 1.

7.79 We will examine first Japan's claims that maintaining model zeroing procedures in the context
of original investigations is inconsistent with these provisions.
 Model zeroing
694

7.80 Model zeroing, as that term is used by Japan, involves average-to-average comparisons of
export price and normal value within individual aver aging groups established on the basis of physical
characteristics. 695 We note that the panels in EC – Bed Linen , EC – Tube or Pipe Fittings,
US – Softwood Lumber V and the Appellate Body in EC – Bed Linen and US – Softwood Lumber V have
found that in circumstances where an authority establishes the existence of margins of dumping during
the investigation phase by making multiple, model-by-model comparisons between average export
prices and average normal values and by aggregating th e results of those comparisons into an overall
margin of dumping, Article 2.4.2 of the AD Agreement requires that the results of all those comparisons
be fully taken into account in the numerator of the overall margin of dumping.
696 In other words, model
zeroing, a method under which the numerator of the overall margin of dumping does not include results
of comparisons in which average export prices of specific models of a product are above average
normal values for those models, has repeatedly been found to be prohibited by Article 2.4.2 of the
AD Agreement in recent WTO dispute settlement cases when used to establish the existence of margins
of dumping during the investigation phase.
7.81 We note, in this regard, the argument of the United States that the reasoning underlying the
conclusion of the Appellate Body in US - Softwood Lumber V regarding the inconsistency with
Article 2.4.2 of zeroing applied in connection with an average-to-average comparison in the
establishment of margins of dumping during the inv estigation phase is flawed and should not be
followed by this Panel. As support for its position, the United States refers in particular to the historical
background to the AD Agreement.
697
7.82 We have carefully considered these arguments of the United States, in accordance with the
obligation contained in Article 11 of the DSU to "make an objective assessment of the matter".698 We
consider, however, that the language used in the first sentence of Article 2.4.2 of the AD Agreement
warrants the conclusion that model zeroing is pro scribed. This follows in particular from the
requirement in the first sentence of Article 2.4.2 th at the weighted average normal value be compared
with a weighted average export price that reflects the prices of all comparable export transactions and
from the fact that this sentence does not contain language that indicates that margins of dumping can be
determined in respect of individual models of a product. We note, in this regard, the reasoning that has
led several panels and the Appellate Body to conclude that the text of the first sentence of Article 2.4.2

694 We recall that we have concluded that what Japan terms "model zeroing" and "simple zeroing" are
different manifestations of a single rule or norm. Supra, footnote 688.
695 Supra, para. 7.2.
696 Panel Report, EC – Bed Linen , paras. 6.110-6.119; Appellate Body Report, EC – Bed Linen , paras.
46-66; Panel Report, EC – Tube or Pipe Fittings , paras. 7.213-7.219; Panel Report, US – Softwood Lumber V ,
paras. 7.196-7.226; Appellate Body Report, US – Softwood Lumber V, paras. 76-117.
697 US First Written Submission, paras. 89-94.
698 Supra, footnote 636.

prohibits the use of model zeroing.699 We also note that the arguments presented by the United States700
are similar to arguments of the United States that were rejected by the Appellate Body in US – Softwood
Lumber V.701
7.83 Thus, we consider that model zeroing in the context of an average-to-average comparison when
the existence of margins of dumping is established du ring the investigation phase is inconsistent with
Article 2.4.2 of the AD Agreement.
7.84 We recall our conclusion that a measure exists that requires the use of zeroing and that model
zeroing is one aspect of this measure. 702 In light of our interpretation that model zeroing in the
establishment of the existence of margins of dumping during the investigation phase is inconsistent with
Article 2.4.2 of the AD Agreement, we find that this measure produces WTO-inconsistent conduct.703
7.85 In light of the foregoing, we conclude that model zeroing procedures in the context of original
investigations are, as such, inconsistent with Article 2.4.2 of the AD Agreement.
7.86 The Panel therefore finds that by maintaining model zeroing procedures in the context of
original investigations USDOC acts inconsistently with Article 2.4.2 of the AD Agreement.
7.87 We exercise judicial economy with respect to Japan's claims that the model zeroing procedures
in the context of original investigations are inconsistent as such with Article 2.1 of the AD Agreement
and Articles VI:1 and VI:2 of the GATT 1994. In this respect, we have taken into account the
considerations articulated by the Appellate Body w ith respect to the exercise of judicial economy.
Thus, we note the statement of the Appellate Body Report in Canada - Wheat Exports and Grain
Imports that:
"The practice of judicial economy, which was first employed by a number of GATT
panels, allows a panel to refrain from making multiple findings that the same measure
is inconsistent with various provisions when a single, or a certain number of findings
of inconsistency, would suffice to resolve the dispute. Although the doctrine of
judicial economy allows a panel to refrain from addressing claims beyond those
necessary to resolve the dispute, it does not compel a panel to exercise such restraint.
At the same time, if a panel fails to make findings on claims where such findings are
necessary to resolve the dispute, then this would constitute a false exercise of judicial
economy and an error of law."
704 (emphasis in original; footnotes omitted)
7.88 The Appellate Body has also stated in Australia – Salmon that a panel is under a duty "to
address those claims on which a finding is necessary in order to enable the DSB to make sufficiently
precise recommendations and rulings so as to allow for prompt compliance by a Member with those
recommendations and rulings." 705 In US – Zeroing (EC) , the Appellate Body upheld the exercise of
judicial economy by the panel in that dispute with regard to claims of the European Communities under
Articles 2.4 and 9.3 of the AD Agreement on the grounds that findings on those claims were not

699 As discussed below, this reasoning led to the development of the concept of "product as a whole";
infra, paras. 7.92-7.99.
700 US First Written Submission, paras. 89-94.
701 Appellate Body Report, US – Softwood Lumber V, paras. 16 and 107-108.
702 Supra, para. 7.58 and footnote 688.
703 We note that in US – Zeroing (EC), the Appellate Body rejected an argument of the US that the panel
in that case had acted inconsistently with Article 11 of the DSU by not applying the mandatory/discretionary
distinction in finding that the zeroing methodology was inconsistent with Article 2.4.2.
 704 Appellate Body Report, Canada – Wheat Exports and Grain Imports, para. 133.
705 Appellate Body Report, Australia – Salmon, para. 223.

necessary to secure a "positive solution" to the dispute or a "satisfactory settlement of the matter" within
the meaning of, respectively, Articles 3.7 and 3.4 of the DSU.
706
7.89 The issue in respect of which Japan requests us to make findings under Article 2.1 of the
AD Agreement and Articles VI:1 and VI:2 of the GATT 1994 is exactly the same issue on which we
have already made a finding of incons istency with Article 2.4.2 of the AD Agreement. We therefore
consider that our finding that maintaining model zeroing procedures is inconsistent with Article 2.4.2 of
the AD Agreement will enable the DSB to make "sufficiently precise recommendations and rulings" and
that in order to secure a "positive solution" to the dispute or a "satisfactory settlement of the matter" it is
not necessary to make additional findings on the same issue under Article 2.1 of the AD Agreement and
Article VI:1 and VI:2 of the GATT 1994.707
Simple zeroing708
7.90 We now turn to an examination of Japan's claims that maintaining simple zeroing procedures in
the context of original investigations is in consistent with Articles 2.1 and 2.4.2 of the AD Agreement
and Articles VI:1 and VI:2 of the GATT 1994.709
7.91 With respect to Article 2.1 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994,
Japan argues that the reasoning of the Appellate Body in US – Softwood Lumber V regarding model
zeroing necessarily implies that simple zeroing 710 in original investigations is also inconsistent with
these provisions because, like model zeroing, simple zeroing amounts to a failure to determine
dumping, and to calculate a margin of dumping, for the product as a whole. Japan also argues that,
although the Appellate Body Report in US – Zeroing (EC) did not address the issue of whether zeroing
is prohibited if a transaction-to-transaction comparis on is used in an original investigation, the
reasoning of the Appellate Body in that report dict ates that conclusion in that it confirms that the
requirement to determine dumping and margins of dumping for the product under investigation as a
whole applies throughout the AD Agreement.
7.92 In considering whether, as argued by Japan, th e "product as a whole" concept as used by the
Appellate Body in US – Softwood Lumber V necessarily supports Japan's claim regarding simple
zeroing, it is important to recall that the issue befo re the Appellate Body in that dispute was whether
Article 2.4.2 of the AD Agreement proscribes zeroing in the context of "multiple averaging".
711 The
term "multiple averaging" refers to a met hod whereby an authority divides a product under

706 Appellate Body Report, US – Zeroing (EC), para. 250.
707 Japan has reiterated its request for findings under Article 2.1 of the AD Agreement and Article VI of
the GATT 1994 regarding model zeroing procedures in original investigations in its written comments of 10 May
2006 on the Appellate Body Report in US – Zeroing (EC). Japan submits that because the Appellate Body has
emphasized in that report that the prohibition of zeroing stems from Article 2.1 as well as Article 2.4.2 of the
AD Agreement the Panel should find that model zeroing procedures in original investigations, as such and as
applied, are inconsistent with both Articles 2.1 and 2.4.2. The Panel should also find that because the definition of
dumping derives from Article VI of the GATT 1994, the US acts inconsistently with that provision. Japan
Written Comments on the Relevant Issues of Law Addressed in the Appellate Body Report in US – Zeroing (EC)
(WT/DS294/AB/R), para. 20. We consider that these argum ents of Japan are insufficie nt reason to change our
conclusion that additional findings on the claims of Japan under Article 2.1 of the AD Agreement and Article VI of
the GATT 1994 are not necessary.
708 We recall that we have concluded that what Japan terms "model zeroing" and "simple zeroing" are
different manifestations of a single rule or norm. Supra, footnote 688.
709 As noted above, Japan has withdrawn its claim regarding simple zeroing procedures in relation to the
average-to- transaction method provided for in the second sentence of Article 2.4.2. Supra, footnote 635.
710 The meaning of the term "simple zeroing" as used by Japan in this dispute is explained in para. 7.3.
711 We note that in a written communication circulated in document WT/DS294/18 the US has essentially
incorporated the text of this paragraph in the version in which it appeared in the Panel's Interim Report.

investigation into product types or models, calculates a weighted average normal value and a weighted
average export price for each product type or model and then aggregates the results of these
comparisons to derive an overall margin of dumping. 712 The Appellate Body agreed with the
participants that Article 2.4.2 of the AD Agreement permits such multiple averaging and noted that the
participants disagreed on the proper interpretation of the terms "all comparable export transactions" and
"margins of dumping" in Article 2.4.2. The Appella te Body noted that the participants disagreed on
whether the requirement to take into account "all co mparable export transactions" can be satisfied at a
sub-group level or whether this require ment extends to the aggregation stage. 713 With respect to the
interpretation of the term "margins of dumping", the Appellate Body stated that the "disagreement turns
on the question of whether that term applies to the product under investigation as a whole, or, at the
sub-group level, when multiple averaging is undertaken ".714 715 In its analysis of this question, the
Appellate Body consistently characterized the issue before it in terms of whether the terms "dumping"
and "margins of dumping" apply at the product or "sub-group" or "sub-product" level716 and concluded,
in light of, inter alia, Article 2.1 of the AD Agreement and Article VI:2 of the GATT 1994, that dumping
and margins of dumping can be found to exist only for a product as a whole and not for "a type, model or
category of that product".717 In other words, the Appellate Body used the notion of "the product [under
investigation] as a whole" to make a distinction between the product as a whole, on the one hand, and

712 Appellate Body Report, US – Softwood Lumber V , para. 80. The Appellate Body observed that, as
noted by the panel, multiple averaging is not necessarily based on product types or models and can be based on
other factors, such as level of trade.
713 Appellate Body Report, US – Softwood Lumber V, paras. 82-83.
714 Appellate Body Report, US – Softwood Lumber V, para. 84 (emphasis added).
715 The Appellate Body stated that the terms "all co mparable export transactions" and "margins of
dumping" in Article 2.4.2 "should be interpreted in an integrated manner". Appellate Body Report, US – Softwood
Lumber V, para. 85. After describing the differing views of the participants on the meaning of the term "all
comparable export transactions", the Appellate Body observed that their disagreement "centres on how the results
of multiple comparisons are interpreted and aggregated when all comparable export transactions have admittedly
been taken into account at the sub-group level" and that "this disagreement flows, in essence, from the
participants'' respective interpretations of the terms ' dumping' and 'margins of dumping' in the Anti-Dumping
Agreement – whether these terms apply at the product or sub-product level. We therefore turn now to an analysis
of these terms as used in Article 2.4.2 of the AD Agreement". Appellate Body Report, US – Softwood Lumber V,
para. 90. Our view on the relationship between "margins of dumping" and "all comparable export transactions" in
the Appellate Body's reasoning in US – Softwood Lumber V is consistent with the analysis of the
 Panel in
US – Softwood Lumber V (Article 21.5). We concur with that Panel's view that "it [is] not appropriate to focus on
the Appellate Body's interpretation of the term 'margins of dumping', in isolation from the phrase 'all comparable
export transactions'". Panel Report, US – Softwood Lumber V (Article 21.5) (appeal pending), para. 5.21.
716 Appellate Body Report, US – Softwood Lumber V, paras. 90-91, 97, 99, 101 to 103, and 115.
717 Appellate Body Report, US – Softwood Lumber V, paras. 93 and 96.

"sub-group", "sub-product", "type", "m odel" or "category" on the other.
 718 The terminology used by
the Appellate Body in this respect is intimately linked to the multiple averaging method.719
7.93 Thus, in US – Softwood Lumber V the Appellate Body used the phrase "product as a whole" in
its analysis of whether the term "margins of dumping", as used in Article 2.4.2 of the AD Agreement,
"applies to the product under investigation as a whol e, or, at the sub-group level, when multiple
averaging is undertaken". The Appellate Body considered that since margins of dumping can be found
only for the product under investigation as a whole, it follows that, while "an investigating authority
may undertake multiple averaging to establish marg ins of dumping for a product under investigation
...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
investigating authority in the context of establishing margins of dumping for the product under
investigation". 720 We see nothing in the relevant paragr aphs in the Appellate Body Report in
US – Softwood Lumber V to indicate that the Appellate Body considered that its reasoning regarding the
requirement to determine dumping and margins of dumping for the product as a whole has implications
going beyond the question of whether, in the contex t of a multiple averaging methodology, the terms
"dumping" and "margins of dumping" must be und erstood to apply at a product or sub-product or
sub-group level.
7.94 In this respect, we note that the Appellate Body Report in US – Softwood Lumber V nowhere
discusses the issue of whether or not the terms " dumping" and "margins of dumping" can apply to
transactions. Moreover, the Appellate Body stated several times that it was not addressing the issue of
whether zeroing can be used under other methodologies provided for in Article 2.4.2.721 In rejecting an
argument of the United States that these other methodologies were important as context for the
consideration of whether zeroi ng is permitted under the average-to-average methodology, the
Appellate Body stated that it "fail[ed]to see how [it] could find that the transaction-to-transaction and
average-to-individual methodologies could provide contextual support for the United States'
interpretation of Article 2.4.2 without examining first whether zeroing is permitted under those
methodologies".
722 We concur, in this regard, with the view of the panel in US – Softwood Lumber V
(Article 21.5) that "[t]he 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

718 The Appellate Body Report in US – Softwood Lumber V refers to the statement in paragraph 53 of the
Appellate Body Report in EC – Bed Linen that "whatever the method used to calculate the margins of dumping, in
our view, these margins must be, and can only be, established for the product under investigation as a whole" .
(original emphasis) The context of this statement clearly indicat es that the Appellate Body was drawing a
distinction between "the product as a whole", on the one hand, and "types or models of the product under
investigation", on the other. Appellate Body Report, EC – Bed Linen , paras. 49, 53, 55 and 57. The Panel in
US – Softwood Lumber V (Article 21.5) stated, with respect to the "product as a whole" concept as used by the
Appellate Body in US – Softwood Lumber V , that "[i]n light of the Appellate Body's own description of "the
product as a whole", we believe that the Appellate Body simply used 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". Panel Report, US – Softwood Lumber V (Article 21.5) (appeal pending), footnote 33. We
agree with the Panel's observation.
719 It is significant, in this regard, that the term "sub-group" is used in US – Softwood Lumber V in the
sense of "sub-groups in which the weighted average normal value is less than the weighted average export price".
Appellate Body Report, US – Softwood Lumber V, paras. 99 and 101. Similarly, the "comparisons" the results of
which may not be excluded in calculating a margin of dumping for the product under investigation as a whole are
"comparisons for which the weighted average normal value is less than the weighted average export price".
Appellate Body Report, US – Softwood Lumber V, paras. 102-103.
720 Appellate Body Report, US – Softwood Lumber V, para. 97.
721 Appellate Body Report, US – Softwood Lumber V, paras. 63, 77 and 104-105.
722 Appellate Body Report, US – Softwood Lumber V, para. 105 (emphasis added).

interpretation was indeed limited to the situation where the term 'margins of dumping' is used in
conjunction with the phrase 'all comparable export transactions'."723
7.95 We note, however, that in US – Zeroing (EC) the Appellate Body used the concept of "the
product as a whole" in a manner that suggests that th e relevance of that concept is not limited to the
establishment of the existence of margins of dum ping under the average-to-average method provided
for in the first sentence of Article 2.4.2 of the AD Agreement. In that dispute, the Appellate Body found
that the United States had acted inconsistently with Articles 9.3 of the AD Agreement and Article VI:2
of the GATT 1994 by applying zeroing in the administrative reviews at issue.724 This ruling appears to
be based on the following reasoning.
7.96 First, the Appellate Body interpreted the term "margin of dumping" in Article 9.3 of the
AD Agreement and Article VI:2 of the GATT 1994 in light of a requirement, derived from Article 2.1 of
the AD Agreement and Article VI of the GATT 1994, to establish dumping and margins of dumping for
the product under investigation as a whole, as di scussed in the Appellate Body Reports in EC – Bed
Linen and US - Softwood Lumber V .725 The Appellate Body considered that since Article 9.3 of the
AD Agreement refers to Article 2, "under Article 9.3 of the Anti-Dumping Agreement and Article VI:2
of the GATT 1994, the amount of the assessed anti -dumping duties shall not exceed the margin of
dumping 'as established' for the product as a whole' ".726 As a consequence,
"...if the investigating authority establishes the margin of dumping on the basis of multiple
comparisons made at an intermediate stage , it is required to aggregate the results of all of the
multiple comparisons, including those where the export price exceeds the normal value. If the
investigating authority chooses to undertake multiple comparisons at an intermediate stage, it is
not allowed to take into account the results of only some multiple comparisons, while
disregarding others."727
7.97 Second, the Appellate Body rejected the view of the United States that in duty assessment
proceedings the term "margins of dumping" can be interpreted as applying on a transaction-specific
basis. The Appellate Body considered that it follows from the meaning of the term "margin of
dumping" in Article 9.3 of the AD Agreement and Article VI:2 of the GATT 1994, interpreted in light of
Article 6.10 of the AD Agreement, that "margins of dumping for a product must be established for
exporters or foreign producers". 728 729 Therefore, under Article 9.3 of the AD Agreement and Article
VI:2 of the GATT 1994 "investigating authorities are required to ensure that the total amount of
anti-dumping duties collected on the entries of a product from given export er shall not exceed the
margin of dumping established for that exporter".730
7.98 Based on these two considerations i.e. the requi rement to determine dumping and margins of
dumping for the product as a whole and the notion that in the AD Agreement the term "margin of

723 Panel Report, US – Softwood Lumber V (Article 21.5) (appeal pending), para. 5.20.
724 Appellate Body Report, US – Zeroing (EC), para. 135.
725 Appellate Body Report, US – Zeroing (EC), paras. 124-126.
726 Appellate Body Report, US – Zeroing (EC), para. 127.
727 Appellate Body Report, US – Zeroing (EC), para. 127 (emphasis added).
728 Appellate Body Report, US – Zeroing (EC), para. 128.
729 In support of the view that "the term 'margin of dumping' in the Anti-Dumping Agreement in general
refers to the margins of dumping for exporters or fore ign producers" the Appellate Body also referred to the
Appellate Body Reports in Mexico – Anti- Dumping Measures on Rice , US – Hot-Rolled Steel and US –
Corrosion-Resistant Steel Sunset Review. The Appellate Body also found support for this view in "the notion of
dumping, which is designed to counteract the foreign producer's or exporter's pricing behaviour". Appellate Body
730 Appellate Body Report, US – Zeroing (EC), para. 130.

dumping" in general refers to margins of dumping of exporters or foreign producers, the Appellate
Body reasoned that, in order to determine whethe r the use of zeroing in administrative reviews is
inconsistent with Article 9.3 of the AD Agreement and Article VI:2 of the GATT 1994, "the
anti-dumping duties collected on all entries of the subject product from a given exporter or foreign
producer" must be compared with "that exporter's or foreign producer's margin of dumping for the
product as a whole" and that, "if a margin of a dumping is calculated on the basis of multiple
comparisons made at an intermediate stage", the anti-dumping duties assessed must be compared with
margins of dumping of exporters or foreign producer s "that reflect the results of all of the multiple
comparisons carried out at an intermediate stage of the calculation".
731 The Appellate Body then found
that because in the administ rative reviews at issue USDOC employed a methodology that
systematically disregarded the results of individu al comparisons in which export price exceed normal
value, the amounts of anti-dumping duties assessed exceeded the foreign producers' or exporters'
margins of dumping with which the anti-dumping duti es had to be compared under Article 9.3 of the
AD Agreement and Article VI:2 of the GATT 1994.732
7.99 We have carefully considered the arguments of Japan in favour of a broader application of the
"product as a whole" concept in a manner consistent with the reasoning of the Appellate Body in
US – Zeroing (EC). However, while we recognize the important systemic considerations in favour of
following adopted panel and Appellate Body reports, we have decided not to adopt that approach for the
reasons outlined below. 733
7.100 First, we consider that there are difficulties in discerning the precise meaning and scope of
application of the phrase "multiple comparisons...a t an intermediate stage" as used in the
Appellate Body Report in US – Zeroing (EC) .734 The Appellate Body did not elaborate upon the
meaning of that phrase and did not explain in any detail what particular aspect of the methodology
employed by USDOC in the administrative reviews at issue in US – Zeroing (EC) involved "multiple
comparisons...at an intermediate stage". It is possible that, as used by the Appellate Body in
US – Zeroing (EC), the phrase "multiple comparisons at an intermediate stage" should be interpreted to
mean that whenever there are "multiple comparisons" there is by definition an "intermediate stage". It
is also possible, however, to interpret this phrase to refer only to those multiple comparisons that
involve a particular "intermediate stage". In the c ontext of the dispute before the Appellate Body, the
concept of an "intermediate stage" could perhaps be related to the manner in which USDOC divides the
universe of transactions under consideration for the purpose of determining margins of dumping in duty
assessment proceedings. Thus, we cannot exclude th e possibility of a reading of the Appellate Body

731 Appellate Body Report, US – Zeroing (EC), para. 132.
732 Appellate Body Report, US – Zeroing (EC), para. 133.
733 It is well established that panel and Appellate Body reports are not binding, except with respect to
resolving the particular dispute between the parties to the dispute, but that such reports create "legitimate
expectations" among WTO Members and should therefore be taken into account where they are relevant to any
dispute. Appellate Body Report, US – Softwood Lumber V , paras. 109-112; Appellate Body Report , Japan
Alcoholic Beverages II, pp. 12-15; Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia), para.109. The
Appellate Body has stated that "...following the Appellate Body's conclusions in earlier disputes is not only
appropriate, but is what would be ex pected from panels, especially where the issues are the same". Appellate
Body Report, US – Oil Country Tubular Goods Sunset Reviews , para. 188. This notion of an "expectation" that
panels will follow Appellate Body re ports (as well as panel reports) is supported by important systemic
considerations, including the objective, referred to in Article 3.2 of the DSU, of providing security and
predictability to the multilateral trading system. At the same time, a panel is under an obligation under Article 11
of the DSU to "make an objective assessment of the matter before it, including an objective assessment of the facts
of the case and the applicability of and conformity with the relevant covered agreements..." Moreover, Article 3.2
of the DSU requires a panel "to clarify the existing provisions of those agreements in accordance with customary
rules of interpretation of public international law" and provides that "[r]ecommendations and rulings of the DSB
cannot add to or diminish the rights and obligations provided in covered agreements".
734 Appellate Body Report, US – Zeroing (EC), paras. 126-127 and 132.

reasoning as applicable only to certain kinds of multipl e comparisons. It is perhaps significant, in this
regard, that the Appellate Body recalle d, in paragraph 127 of its report in US – Zeroing (EC), that in
US – Softwood Lumber V it had not addressed "the issue of zeroing in the context of the other
methodologies set out in Article 2.4.2" and that it st ated in paragraph 203 that it was "not making any
finding here with respect to the consistency of the zeroing methodology, as such, with the second or
third methodology set forth in Article 2.4.2 for establishing the existence of margins of dumping". We
also note that, although the Appellate Body Report in US – Zeroing (EC) states that a Member "may
choose" to undertake "multiple comparisons...at an intermediate stage"
735, it is unclear from the Report
what is the basis for and the extent of the discretion enjoyed in this regard by Members. For example, it
is difficult to see how a Member can choose not to make multiple comparisons between export price and
normal value if it uses the transaction-to-transaction method or the average-to-transaction method
provided for in Article 2.4.2 of the AD Agreement since these two methods by definition almost always
involve multiple comparisons of some kind. Similarly, if a Member compares normal value and export
price on an average-to-average basis, as provided for in the first sentence of Article 2.4.2, it may well be
obligated, depending upon the facts of particular case, to use multiple averaging and thus to make
multiple comparisons in order to take into account differences affecting price comparability, as required
by the introductory clause to Article 2.4.2.
7.101 Second, as discussed above
736, the Appellate Body Report in US – Softwood Lumber V uses the
phrase "product as a whole" as part of an analysis under the first sentence of Article 2.4.2 of the
AD Agreement of whether zeroing is permitted in the context of "multiple averaging" and does not
address the issue of whether zeroing is permitted in the context of "multiple comparisons"
generally.737 In this respect, the Appellate Body relied on the terms "product" and "products" in GATT
Article VI and in Article 2.1 of the AD Agreement to interpret the term "margins of dumping" in the first
sentence of Article 2.4.2, which, it observed, shoul d be interpreted in an integrated manner with the
phrase "all comparable export transactions". In US – Zeroing (EC), by contrast, the Appellate Body
appeared to embrace the interpretation that the refere nce to "product" and "products" in Article VI of
the GATT 1994 and in Article 2.1 and other provisions of the AD Agreement by itself suffices to
conclude that zeroing is prohibited whenever "multiple comparisons at an intermediate stage are made".
The Appellate Body Report in US – Zeroing (EC) provides no explanation of this shift from the use of
the "product as a whole" concept as context to interp ret the term "margins of dumping" in the first
sentence of Article 2.4.2 of the AD Agreement in connection with multiple averaging, on the one hand,
to the use of this concept as an autonomous legal basis for a general prohibition of zeroing, on the other.
In this regard, we note, in particular, that the A ppellate Body does not discuss why the fact that in the
context of multiple averaging the terms "dumping" and "margins of dumping" cannot apply to a
sub-group of a product logically leads to the broader conclusion that Members may not distinguish
between transactions in which export prices are less than normal value and transactions in which
export prices exceed normal value.
7.102 Third, as explained below, we consider that it is permissible to interpret Articles 2.1 and 2.4.2
of the AD Agreement and Article VI of the GATT 1994 to mean that there is no general requirement to

735 Appellate Body Report, US – Zeroing (EC), para. 126.
736 Supra, paras. 7.92-7.94.
737 Thus, with respect to the statement in para graph 126 of the Appellate Body Report in US – Zeroing
(EC) that "an investigating authority may choose to undertake multiple comparisons or multiple averaging at an
intermediate stage to establish margins of dumping" ( emphasis added), we note that the first two sentences in
paragraph 97 of the Appellate Body Report in US – Softwood Lumber V refer to "multiple averaging" and
"multiple comparisons at the sub-group level" but no to "multiple comparisons at an intermediate stage".
Similarly, with respect to the penultimate sentence of paragraph 126 of the Appellate Body Report in US –
Zeroing (EC), we note that paragraph 102 of the Appellate Body Report in US – Softwood Lumber V states that
"the terms 'dumping' and 'margins of dumping' in Article VI of the GATT 1994 and the Anti-Dumping Agreement
apply to the product under investigation as a whole and do not apply to sub-group levels". (emphasis added)

determine dumping and margins of dumping for the product as a whole, which, by itself or in
conjunction with a requirement to establish margin s of dumping for exporters or foreign producers
738,
entails a prohibition of zeroing other than in the context of the average-to-average comparison method
in the first sentence of Article 2.4.2 of the AD Agreement. This view is based on an analysis of the
words "product" and products" as used in Article 2.1 of the AD Agreement and Article VI of the
GATT 1994 and of the text of Article 2.4.2 of the AD Agreement. In addition, as discussed below in
connection with Japan's claims regarding periodic re views, we also consider that such a general
prohibition is not supported by the provisions of Article 9 of the AD Agreement.
The words" product" and "products" as used in Artic le 2.1 of the AD Agreement and Article VI of the
GATT 1994
7.103 The textual basis of the argument of Japan that Article 2.1 of the AD Agreement and Article VI
of the GATT 1994 must be interpreted as proscribing zeroing in general is the fact that these provisions
define the terms "dumping" and "margins of dumping" in relation to "product(s)". 739 According to
Japan, "product" in these provisions must be understood as "product as a whole" and thereby excludes
the possibility of applying the terms "dumping" and "margins of dumping" to models, types, categories,
sub-groups and transactions. In the context of Japan's claim regarding simple zeroing, it is in particular
the claim that these terms cannot apply to transactions that must be examined.
7.104 We note that the expression "product as a whole" does not appear in Article 2.1 of the
AD Agreement and Articles VI:1 and VI:2 of the GATT 1994. Japan's argument that, by virtue of a
requirement to determine dumping, and to calculate a margin of dumping, for the product as a whole,
Article 2.1 of the AD Agreement and Article VI of the GATT 1994 prohibit zeroing under any
comparison method, is based upon the proposition that th e mere use of the word "product" means that
the concept of dumping, by definition, cannot apply to individual transactions and inherently entails the
need to examine export transactions at an aggregate level and to accord the same weight to export prices
that are above normal value as to export prices that are below normal value. 740 We disagree with that
interpretation. In our view, Article 2.1 of the AD Agreement and Article VI of the GATT 1994,
interpreted in accordance with the rules of the Vienna Convention, do not compel the conclusion that the
words "product" and "products" mean that these provisions necessarily require such an examination of
export transactions at an aggregate level.
7.105 Thus, Japan has not explained how such a requi rement to examine export transactions at an
aggregate level flows naturally from the ordinary meaning of the words "product" and "products" in

738 As discussed above, in US – Zeroing (EC) the Appellate Body based its finding that the use of zeroing
in certain administrative reviews was in consistent with Article 9.3 of the AD Agreement both on the notion that
dumping and margins of dumping must be determined for the product as a whole and on the notion that the term
"margin of dumping" in the AD Agreement in general refers to the margin of dumping for exporters or foreign
producers, which it derived from Article 6.10 of the AD Agreement. We discuss the question whether Article 6.10
is of relevance to the issue of zeroing below in paras. 7.109-7.111.
739 Japan has also referred to provisions such as Article 6.10 and 9.2 of the AD Agreement as support for
its position.
740 Thus, Japan asserts with respect to Article VI of the GATT 1994 that "[j]ust as the term 'dumping' is
defined in relation to the product as a whole, this Article explicitly states that the relevant price is for the 'product',
not a subpart of the product or a single transaction." Japan Second Written Submission, para. 46. Japan observes
that in terms of the definition in Article 2.1 of the AD Agreement " 'dumping' is for a product and not for individual
transactions". Japan Opening Statement at the Second Substantive Meeting of the Panel with the Parties, para. 22.
Japan argues that Articles VI:1 and VI:2 of the GATT 1994 "demonstrate that the 'price difference' in question is
the price difference for the 'product', not for individual transactions". Japan Response to Panel Question 44,
para. 36. Similarly, Japan states that "Article 2.1 of the AD Agreement and Article VI of the GATT 1994 define
'dumping' and 'margins of dumping' in relation to a product. As a result, dumping margins must be determined for
the product, not for particular transactions". Japan Response to Panel Question 53, para. 53.

Article 2.1 of the AD Agreement and Article VI:1 and VI:2 of the GATT 1994. In this regard, we agree
with the view of the Panel in US – Softwood Lumber V (Article 21.5) 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".741
7.106 The Panel has also not been presented w ith compelling arguments as to why the context in
which the words "product" and "products" are used in Article 2.1 of the AD Agreement and Article VI of
the GATT 1994 supports the interpretation proffered by Japan. The fact that dumping is defined in the
GATT 1994 and in the AD Agreement as occurring when a product is introduced into the commerce of
another country at less than its normal value, i.e. when the price of a product is less than its normal value
in our view undermines the argument that it is not permissible to interpret the concept of dumping as
being applicable to individual sales transactions. We fail to see why the notion that "a product is
introduced into the commerce of another country" ca nnot apply to a particular export sale and would
necessarily require an examination of different export sales at an aggregate level. Similarly, the notion
of a margin of dumping as the price difference that exists when one price is less than another price (or
constructed value) can easily be applied to individual transactions and does not require an examination
of export transactions at an aggregate level.742 The terms "export price of a product exported from one
country to another" in Article 2.1 of the AD Agreement and "the price of the product exported from one
country to another" in Article VI:1 of the GATT 1994 can reasonably be interpreted to mean the price of
the product in a particular export transaction.
7.107 Therefore, the ordinary meaning of the words "p roduct" and "products", read in the context of
the definition of "dumping" and "margin of dumping" in which they are used in Article 2.1 of the
AD Agreement and Article VI of the GATT, provides no support for the view that these words give rise
to a general prohibition of zeroing by requiring an examination of export transactions at an aggregate
level. We note, in this respect, that the record of past discussions in the framework of the GATT shows
that historically the concept of dumping has been understood to be applicable at the level of individual
export transactions.743
7.108 Apart from the particular context in which the wo rds "product" and "products" are used in the
definition of the terms "dumping" and "margi ns of dumping" in Article 2.1 of the AD Agreement and
Article VI of the GATT 1994, it is also necessary to consider the use of these words elsewhere in the

741 Panel Report, US – Softwood Lumber V (Article 21.5) (appeal pending), footnote 32.
742 Japan argues that the fact that prices can be es tablished in the marketplace on a transaction-specific
basis does not mean that the words "product", "dumping" and "margin of dumping" in the GATT 1994 and in the
AD Agreement have a transaction-specific meaning. Japan asserts that "investigating authorities routinely
aggregate prices for transactions into prices for a product" and concludes from this that the fact that prices can be
transaction-specific does not nece ssarily mean that margins of dumping are determined for individual
transactions. Second Written Submission of Japan, para. 45. The question before the Panel, however, is whether
the term "price difference" indicates that dumping and margins of dumping may be found to exist with respect to
particular transactions. While it may be true that it is possible to "aggregate" prices for some particular purposes,
the words "price" and "price difference" clearly do not require an examination of export transactions at an
aggregate level.
743 The Second Report of the Group of Experts on Anti-Dumping and Countervailing Duties, adopted on
27 May 1960, notes that "the ideal method of fulfilling [the principles th at the imposition of an anti-dumping is
only justified if a product is found to be dumped and to cause or threaten material injury] was to make a
determination in respect of both dumping and material injury in respect of each single importation of the product
concerned". BISD 9S/194, para. 7. See also Panel Report, US – Softwood Lumber V (Article 21.5) (appeal
pending), para. 5.63.

GATT 1994 and the AD Agreement as relevant context. Japan has failed to explain how its
interpretation of the words "product" and "products " as precluding the application of a provision to
individual transactions is consistent with the meaning of these words when used elsewhere in Article VI
of the GATT 1994, other provisions of the GATT 1994 and the AD Agreement. We see no basis for the
view that when other provisions of Article VI, of the GATT 1994 or of the AD Agreement use the words
"product" or "products", this necessarily precludes th e application of such provisions to individual
transactions. Thus, for example, the phrase "importation of any product" used in Article VI:6 and other
provisions of the GATT 1994 does not mean that th ese provisions inherently cannot apply to an
individual import transaction.
744 Similarly, when Article VII:3 of the GATT 1994 refers to "the value
for customs purposes of any imported product", the mere use of the word "product" cannot reasonably
be interpreted to preclude the possibility to apply th is term to the value of a product in a particular
import transaction. If the word "product" in Article VII:3 does not necessarily require an examination
of transactions at an aggregate level, we cannot see why such an examination is nevertheless required
by the use of that word in Articles VI:1 and VI:2.745
7.109 Japan relies on Article 6.10 of the AD Agreement as contextual support for the proposition that
dumping and margins of dumping must be determined for the product as a whole.746
7.110 The issue before us is whether the AD Agreement must be interpreted to mean that in
determining dumping and margins of dumping authorities must necessarily carry out an aggregate
analysis of export transactions in which export prices above normal value are accorded the same
significance as export prices below normal value. In our view, Article 6.10 of the AD Agreement does
not support such an interpretation.
7.111 Article 6 of the AD Agreement contains provisions designed to ensure transparency and due
process in the conduct of anti-dumping investigations. In that context, Article 6.10 provides that, as a
rule, authorities must determine an individual margin of dumping for each known exporter or producer
of the product under investigation but also lays down certain rules that must be observed when it is not
possible to determine such an individual marg in of dumping. Neither the phrase "product under
investigation" nor the reference to an individual marg in of dumping for an exporter or producer in our
view provides any guidance with respect to the pr ecise methodology to be used for the purpose of
calculating that margin of dumping. As in Article 2.1 of the AD Agreement and Articles VI:1 and VI:2
of the GATT 1994, the use of the word "product" in Article 6.10 does not exclude the possibility of
applying the concept of dumping to individual transactions. Even assuming arguendo that the notion of
an "individual margin of dumping for each known exporter or producer"
747 implies an obligation to
determine a single margin of dumping for each known exporter or producer based on an analysis of the

744 Panel Report, US – Softwood Lumber V (Article 21.5) (appeal pending) para. 5.23. As stated there,
"[a] review of the use of these terms [in Article VI of the GATT 1994] does not support the proposition that
'product' must always mean the entire universe of exported product subject to an anti-dumping investigation".
745 Our view that it is not possible to infer from the words "product" and "products" that the concept of
dumping cannot apply to individual export transactions does not imply that we consider that a Member may on the
basis of a finding that some export sales under consideration are dumped (and are causing injury) impose a duty on
all subsequent imports of that product without in any wa y taking into account the relative significance of those
dumped sales compared to other, non-dumped sales under consideration.
746 Japan points out that in US – Softwood Lumber V the Appellate Body used the phrase "product under
investigation" in Article 6.10 to confirm its view that dumping and margins of dumping can only be found for the
product as a whole. Japan also argues that in US – Zeroing (EC), the Appellate Body has held that Article 6.10
confirms that Article 2.1 of the AD Agreement requires that margins of dumping be determined for foreign
producers and exporters, for the product as a whole.
747 In our view, an "individual" margin of dumping of an exporter or foreign producer within the
meaning of Article 6.10 is a margin of dumping based on an examination of data pertaining to that particular
exporter or foreign producer. In this sense, the indi vidual character of the margin carries no particular
implications regarding the methodology for determining the margin.

totality of the export transactions under considera tion, it does not necessarily follow that in deriving
such a single margin an authority must accord the same weight to transactions in which the export price
is above the normal value as to transactions in wh ich the export price is below the normal value.
Nothing in the text of Article 6.10 indicates that such a margin may not be calculated as an overall
weighted average margin of dumping in which the numerator consists of the sum of the amounts by
which export prices are less than normal value and the denominator reflects the total value of all export
transactions.748 Nor do we see on what basis it could be argued that such an approach to the calculation
of margins of dumping is inconsistent with the fact that Article 9.2 of the AD Agreement provides for
the imposition of an anti-dumping duty on a "product" or with "the need for consistent treatment of a
product during an anti-dumping investigation and throughout the life on an anti-dumping action".749
7.112 We conclude from our analysis that the fact that the terms "dumping" and "margin of dumping"
in Article 2.1 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994 are defined in relation
to "product" and "products" does not warrant the conclusion that these terms, by definition, cannot
apply to individual transactions and inherently requ ire an examination of export transactions at an
aggregate level in which the same weight is accorded to export prices that are above normal value as to
export prices that are below normal value.
Article 2.4.2 of the AD Agreement
7.113 In addition to these considerations relating to the use of the words "product" and "products" in
Article 2.1 of the AD Agreement and Article VI of the GATT 1994, we consider that Japan's argument
that the concept of a "product as a whole", as discussed in US – Softwood Lumber V , provides a
sufficient basis for a general prohibition of zeroing cannot be reconciled with a coherent interpretation
of Article 2.4.2 of the AD Agreement.
7.114 Our analysis of Article 2.4.2 is structured as follows. First, we articulate a key consideration
guiding our analysis, namely the need for an internally coherent interpretation. Second, we explain the
lack of a textual foundation of a general prohibiti on of zeroing in the text of this provision. Third, we
identify some considerations that could be advanced in favour of an interpretation of this provision as
prohibiting zeroing more broadly than only in the context of the average-to-average method. Fourth,
we analyze the logical impossibility of reconciling a general prohibition of zeroing with the express
provision for the use of an average-to-transaction method in the second sentence of Article 2.4.2.
Need for an internally coherent interpretation of Article 2.4.2
7.115 A fundamental consideration in our anal ysis of whether Article 2.4.2 of the AD Agreement
supports the existence of a general prohibition of zer oing is that this provision defines three specific
methodologies regarding the establishment of th e existence of margins of dumping during the
investigation phase. The specification of these methodologies is of considerable interpretive
significance. In our view, an understanding as to whet her or not there exists a general prohibition of
zeroing must engage with these specific methodologies explicitly provided for in Article 2.4.2 as part of
a single provision. The first sentence of Article 2. 4.2 defines the average-to-average method and the
transaction-to-transaction method as the two methods that Members shall normally use for this purpose.
The second sentence of Article 2.4.2 provides that an average-to-transaction comparison may be used if
a particular pattern of export prices exists and if an explanation is provided of why that pattern cannot
be taken into account appropriately by using one of the two normal methods. In other words, the second
sentence lays down the conditions under which an av erage-to-transaction method may be used as an

748 We concur with the reasoning in paragraph 5.25 of the Panel Report in US – Softwood Lumber V
(Article 21.5) (appeal pending).
749 Supra, para. 7.62.

exception to the use of one of the two normal methods set out in the first sentence. Our assessment of
whether or not the use of zeroing under a particular comparison method is inconsistent with Article
2.4.2 cannot be based on an analysis of that method in isolation but must be the result of an
interpretation that reflects the particular interrela tionship between these three methods in a logically
coherent manner.
7.116 We recall in this respect that Article 31 of the Vienna Convention provides that the context in
which terms are used in a treaty must be taken into account as one element in their interpretation. We
also recall that the Appellate Body has consistently referred to the principle of effectiveness, which it
has characterized as "[o]ne of the corollaries of 'the general rule of interpretation' in the Vienna
Convention"
750 and "[a] fundamental tenet of treaty inte rpretation flowing from the general rule of
interpretation set out in Article 31".751 According to this principle of effectiveness, or effet utile, "[a]n
interpreter is not free to adopt a reading that would result in reducing whole clauses or paragraphs of a
treaty to redundancy or inutility" 752 and "a treaty interpreter must read all applicable provisions of a
treaty in a way that gives meaning to all of them, harmoniously".753
7.117 As discussed above, zeroing has already been found to be inconsistent with Article 2.4.2 if
applied in the context of the average-to-average transaction method when establishing the existence of
margins of dumping during the investigation phase. In determining whether zeroing is also inconsistent
with Article 2.4.2 if used in connection with other comparison methods, we must adopt an interpretation
that gives full effect, on the one hand, to the natu re of the transaction-to-transaction method as one of
the two normal comparison methods which is used for the same purpose and which is subject to the
same conditions as the average-to-average method. On the other hand, we must give full effect to the
average-to-transaction method as an exception to the normal methods provided for in the first sentence.
Lack of support in the text of Article 2.4.2 for a general prohibition of zeroing
7.118 We note that the text of Article 2.4.2 of the AD Agreement does not expressly address the
question whether a Member may apply the zeroing method when establishing the existence of margins
of dumping during the investigation phase on the basi s of the transaction-to-transaction method or the
average-to-transaction method of comparing export price and normal value.
7.119 The first sentence of Article 2.4.2 indicates that one of the two normal methods of establishing
the existence of margins of dumping during the investigation phase is "by a comparison of normal value
and export prices on a transaction-to-transaction basis" . The natural meaning of "a comparison ..on a
transaction-to-transaction basis" is a comparison between a normal value in a particular transaction and
an export price in a particular transaction.754 When compared to the other two methods provided for in
Article 2.4.2 - the average-to-average method, on the one hand, and the average-to-transaction method,
on the other - the distinguishing feature of the transaction-to-transaction method is its focus on
individual transactions, with respect to both normal value and export price. While Article 2.4.2 thus
provides that the existence of margins of dump ing may be established by making comparisons of
normal value and export prices in individual transactions, it does not expressly address the question of
the nature of the precise methodology that an investig ating authority must use to convert the results of

750 Appellate Body Report, US – Gasoline, p.23.
751 Appellate Body Report, Japan – Alcoholic Beverages, p. 12.
752 Appellate Body Report, US – Gasoline, p.23.
753 Appellate Body Report, Argentina – Footwear, para. 81.
 754 Thus, the existence of the transaction-to-transaction method contradicts Japan’s argument that by
definition normal value cannot be based on the price of a single transaction but must necessarily be based on
“multiple transactions for the like product as a whole”. Japan Comments on the US Answers to the Panel’s
Questions Following the Third Substantive Meeting with the Parties, paras. 6-7.

transaction-specific comparisons into "margins of dumping".755 Even assuming that the term "margins
of dumping" in Article 2.4.2 cannot apply to the results of individual transaction-to-transaction
comparisons and must necessarily be understood to require aggregation of the results of multiple
comparisons756, the fact remains that Article 2.4.2 provides no guidance on the specific methodology to
be used in such an aggregation of results of multiple comparisons. Because "dumping" occurs when the
export price of a product is less than its normal valu e, the fact that Article 2.4.2 expressly permits the
use of a transaction-to-transaction comparison in our view logically means that a Member may treat
transactions in which export prices are less than normal value as being more relevant than transactions
in which export prices exceed normal value.
757 Thus, in the context of the transaction-to-transaction
methodology in the first sentence of Article 2.4.2 the term "margins of dumping" can be understood to
mean the total amount by which transaction-specific export prices are less than transaction-specific
normal values.758 Therefore, we can see no language in Article 2.4.2 from which it is possible to derive
a requirement that, if an authority uses a method wh ereby a weighted average margin of dumping is
expressed as a fraction, the denominator of which consists of the total value of export sales 759, the
numerator of that fraction must include both amounts by which export prices of individual transactions
are below the normal value and amounts by which e xport prices of other transactions exceed normal
value.

755 See also the observations of the Panel in US – Softwood Lumber V (Article 21.5) (appeal pending)
paras. 5.17 and 5.18.
756 We realize of course that, in the context of its analysis of zeroing in connection with multiple
averaging, the Appellate Body has stated in US – Softwood Lumber V that results of multiple comparisons at the
sub-group level are "intermediate values" and are not "margins of dumping" within the meaning of Article 2.4.2.
Appellate Body Report, US – Softwood Lumber V, para. 97.
757 Japan asserts that the transaction-to-transaction method involves a “comparison of normal value and
export prices on a transaction-to-transaction basis” and that th e use of the plural word “prices” shows that the
margin of dumping cannot be based on the price of a single export transaction. More generally, Japan asserts, in
this regard, that each of the comparison methods provided for in Article 2.4.2 requires that a comparison be made
with the “prices” of multiple “export transactions”, not the price of single transaction. Japan Comments on the US
Answers to the Panel’s Questions Following the Third Su bstantive Meeting with the Parties, paras. 8-13.
Assuming, however, that the use of the plural “prices” and “export transactions” must necessarily be interpreted to
mean that margins of dumping can only be established under Article 2.4.2 on the basis of a consideration of
“multiple export transactions”, it does not logically follow that a Member may not treat a transaction in which the
export price is below the normal value differently from another transaction in which the export price is above the
normal value.
758 In this regard, we concur with the view of the Panel in US – Softwood Lumber V (Article 21.5): "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 methodology to ensure that 'all comparab le export transactions' are represented in a weighted
average 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. In our view, this would be a permissible interpretation of the relevant part of the first
sentence of Article 2.4.2, even though it does not reflect 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 investigating authority need not include in its calculations the results of comparisons where
export price exceeds normal value." (emphasis in original) Panel Report, US – Softwood Lumber V (Article 21.5)
(appeal pending), para. 5.28 (emphasis in origina;, footnote omitted).
759 Under the zeroing methodology at issue in this dispute USDOC includes the value of all export prices
in the denominator of a weighted average margin of dumping. Therefore, the issue before us is not whether
Article 2.4.2 is to be interpreted as allowing an authority to disregard completely the results of comparisons in
which export price is above the normal value. Rather, the issue is whether Ar ticle 2.4.2 requires that Members
accord the same importance to export prices above norm al value as to export prices below normal value by
including both negative and positive differences between export price and normal value in the numerator of a
weighted average margin of dumping.

7.120 These arguments regarding the apparent lack of a clear textual foundation to interpret
Article 2.4.2 as prohibiting zeroing in relation to the transaction-to-transaction method in our view also
apply to the average-to-transaction method. Read together with the first sentence, the second sentence
of Article 2.4.2 provides that the existence of margins of dumping during the investigation phase may
be established on the basis of a comparison of an average normal value to prices of individual export
transactions. As in the case of the transaction–t o-transaction method, Article 2.4.2 provides no
guidance regarding the manner in which results of multiple, average-to-transaction comparisons must
be converted into margins of dumping and contains no language from which it is possible to conclude
that, in the process of aggregating results of su ch multiple comparisons into margins of dumping,
comparisons in which the export price is above normal value must necessarily be taken into account in
exactly the same manner as comparisons in which the export price is below normal value.
Possible considerations in favour of an interpretation of Article 2.4.2 in light of a general prohibition of
zeroing
7.121 A conclusion that the text of a particular provision does not explicitly address an issue does not
end the process of interpretation. The rules of treaty interpretation in the Vienna Convention direct us to
consider the potential relevance of other elements.
7.122 Article 2.4.2 of the AD Agreement sets forth rules on comparisons of export price and normal
value for the purpose of establishing "the existenc e of margins of dumping during the investigation
phase". We concur with the analysis by the panel in US – Zeroing (EC) that the applicability of
Article 2.4.2 is limited to investigations within the meaning of Article 5 of the AD Agreement.760 In that
specific context, a determination of the existen ce of dumping is one of the necessary conditions to
justify the application of an anti-dumping measure, which frequently takes the form of a duty applied to
all future entries of the product subject to investigation. The establishment of the existence of margins
of dumping in Article 2.4.2 thus serves a purpose fundamentally different from the purpose of other
types of proceedings, such as duty assessment proceed ings within the meaning of Article 9.3 of the
AD Agreement. It could be argued that since Article 2.4.2 does not focus on individual export
transactions but contemplates an examination of a universe of export transactions to determine whether
dumping "exists" such as to warrant the introductio n of an anti-dumping measure applicable to all
subsequent imports of the product (if it is also fo und that dumped imports cause material injury to a
domestic industry), an investigating authority must ha ve regard to the overall results of the totality of
the comparisons.
7.123 With regard to this fundamental purpose of Article 2.4.2, there is no logical basis to distinguish
between the average-to-average compar ison method, on the one hand, and the
transaction-to-transaction and average-to-transaction comparison methods, on the other. Each of these
methods is used as a basis to est ablish the existence of margins of dumping during the investigation
phase. Since Article 2.4.2 prohibits zeroing when the existence of margins of dumping during the
investigation phase is established on the basis of the average-to-average comparison methodology, it
could be argued that it is illogical to interp ret Article 2.4.2 as permitting zeroing when the
transaction-to-transaction method and the average- to-transaction method are used for precisely the
same purpose.
7.124 In addition, the average-to-average method and the transaction-to-transaction method have the
same normative status in that in normal circumstances Members are required to use either of these
methods. The choice of the transaction-to-tra nsaction method is not subject to any special
considerations compared to the average-to-average method. In light of this normative equivalence
between the transaction-to-transaction method and th e average-to-average method, it could be argued

760 Infra, paras.7.211-7.215.

that it would be illogical if zeroing were prohibited under the average-to-average method but not under
the transaction-to-transaction method.
7.125 Moreover, to interpret Article 2.4.2 as prohi biting zeroing only in the context of the
average-to-average method also raises a question regarding the useful effect of the
average-to-transaction method. The second sentence of Article 2.4.2 envisions use of an
average-to-transaction method as an exception to the methods in the first sentence in situations in which
a particular configuration of export prices exists , i.e. "a pattern of export prices which differ
significantly among different purchasers, regions or ti me periods". The logical premise of the second
sentence is that in certain circumstances it is im possible to take this pattern of export prices
appropriately into account by using one of the two methods described in the first sentence. In this
regard, we note the observation made by the panel in US – Zeroing (EC) that the second sentence of
Article 2.4.2 addresses the issue of "targeted dumping" and that this sentence acknowledges that use of
the symmetrical comparison methodologies in the first sentence "may mask the existence of targeted
dumping with respect to specific purchasers, regions or time periods." 761 However, if zeroing is
permitted under the transaction-to-transaction method, we find it somewhat difficult to see how the
existence of such targeted dumping would be masked when export price and normal value are compared
on a transaction-to-transaction basis. Therefore, to interpret Article 2.4.2 as permitting the use of
zeroing under the transaction-to-transaction method raises the question under what circumstances it
would not be possible to take account of a pattern of export prices described in the second sentence of
Article 2.4.2 by using the transaction-to-transaction method.
7.126 However, while we realize that certain anomali es arise if Article 2.4.2 is interpreted as only
prohibiting the use of zeroing in connection with the average-to-average comparison method, we
consider that an interpretation of Article 2.4.2 as prohibiting zeroing under all comparison methods is
even more problematic from the perspective of a coherent approach to the interpretation of
Article 2.4.2.762
The implications of a general prohibition of zeroing for the average-to-transaction method provided for
in the second sentence of Article 2.4.2 of the AD Agreement
7.127 We consider, in particular, that, as argued by th e United States, such a general prohibition of
zeroing cannot be reconciled with the average-to-t ransaction comparison method provided for in the
second sentence of Article 2.4.2. If zeroing is pr ohibited in the case of th e average-to-transaction
comparison, the use of this method will necessarily always yield a result identical to that of an
average-to-average comparison.763 Given that the average-to-transaction methodology by its express
terms is available to Members as a means to address a particular pattern of export prices that cannot be
taken into account appropriately by the two normal methods set forth in the first sentence of
Article 2.4.2, an interpretation which means that the average-to-transaction method will always produce
the same results as the average-to-average method is fundamentally inconsistent with the very rationale
of the average-to-transaction method.
764 The principle of effective treaty interpretation means that we
may not interpret the second sentence of Article 2.4.2 as providing for a comparison method that always

761 Panel Report, US – Zeroing (EC), para. 7.266.
762 Supra, paras. 7.115-7.117.
763 Mathematically, if zeroing is prohibited under the average-to-transaction method, the sum total of
amounts by which export prices are above normal value will offset the sum total of the amounts by which export
prices are less than normal value.
764 Panel Report, US – Zeroing (EC), para. 7.266; Panel Report, US – Softwood Lumber V (Article 21.5)
(appeal pending), para. 5.52.

yields the same outcome as one of the two methods in the first sentence to which it provides an
exception.
765
7.128 Japan does not contest that the average-to -transaction method in the second sentence of
Article 2.4.2 would be redundant if it always yielded a result identical to that of the average-to-average
comparison method in the first sentence of Article 2.4.2. Japan asserts, however, that to interpret
Article 2.4.2 as prohibiting zeroing under all comparison methods does not render the
average-to-transaction method redundant because an average-to-transaction comparison will produce a
result different from that of an average-to-average comparison, even if zeroing is prohibited. Japan
argues that a different outcome will result if the average normal value under the average-to-transaction
comparison is calculated on a different basi s from the average normal value under the
average-to-average method766, or if, as explicitly provided for in the second sentence of Article 2.4.2,
the average-to-transaction method is applied by comp aring an average normal value to a subset of the
universe of export transactions, namely those export transactions that constitute the pattern of targeted
dumping, and which is thus a smaller universe of export transactions than used under the
average-to-average method.
7.129 Regarding Japan's argument that, if zeroing is prohibited, an average-to-transaction comparison
will produce a result different from that of an aver age-to-average comparison if the average normal
value is established on a different basis, we see nothi ng in the text of Article 2.4.2 that suggests any
distinction between the bases upon which the normal value is established under the average-to-average
method, on the one hand, and under the average-to-tra nsaction method, on the other. There exists no
substantive difference between "a weighted average normal value" in the first sentence of Article 2.4.2
and "a normal value established on a weighted average basis" in the second sentence of that provision.
Moreover, the average-to-transaction method provi ded for in the second sentence is manifestly
designed to address a problem arising from a particular pattern of export prices, not domestic prices.
Thus, Japan's interpretation of the second sentence as contemplating an average normal value
established on a basis different from the average nor mal value referred to in the first sentence of
Article 2.4.2 is without support in the text of Article 2.4.2 and has no logical relationship to the purpose
of the average-to-transaction method. In this r espect, we see no merit in Japan's argument that
Article 2.4.2 does not prohibit a Member from using different bases for calculating the average normal
values in the average-to-average comparison and the average-to-transaction comparison and that
Article 2.4.2 was thus crafted on the assumption th at Members could choose to use different bases for
calculating the average normal value under these two methods. 767

765 As noted above, in Japan's written comments of 10 May 2006 on the Appellate Body Report in
US – Zeroing (EC) Japan withdrew its claim with respect to simple zeroing under the average-to-transaction
method provided for in the second sentence of Article 2.4.2. In our view, the fact that there is no longer a claim
before us regarding simple zeroing under the average-to-transaction method under the second sentence of Article
2.4.2 does not in any way detract from the significance of this sentence as an importa nt contextual element that
must necessarily be taken into account in any analysis of the issue of zeroing. The "product as a whole" analysis,
as articulated by Japan in this proceeding , posits a general principle applicable throughout the AD Agreement:
differences between export price and normal value, positive or negative, must be equally taken into account. The
result of the application of this general principle to the average-to-transaction method in the second sentence of
Article 2.4.2 is that that method always yields the same outcome as the average-to-average method in the first
sentence, thereby depriving the average-to-transaction me thod of its effectiveness as an exception to the two
methods in the first sentence. That a prohibition of zeroing based on the "product as whole" reasoning negates the
effectiveness of an entire clause in Article 2.4.2, a pr ovision that explicitly deals with a key aspect of the
methodology for establishing margins of dumping, shows that the "product as a whole" argument is seriously
flawed from a perspective of a coherent approach to treaty interpretation.
766 As an example, Japan points out that USDOC calculates average normal values on an annual basis in
original investigations but on a monthly basis in periodic reviews.
767 Japan Opening Statement at Second Substantive Meeting of the Panel with the Parties, para. 62.

7.130 Japan's argument that the second sentence of Article 2.4.2 authorizes Members to restrict their
inquiry to a subset of export transactions, namely those export transactions that constitute the "pattern
of export prices", in our view is also unsupported by the text of that sentence. The first part of the
second sentence of Article 2.4.2 makes it unambiguously clear that what is authorized by that sentence
is a comparison of a normal value established on a weighted average basis to prices of individual export
transactions, as a departure from the requirement to use one of the two symmetrical methods defined in
the first sentence of Article 2.4.2. The average-to-transaction method is different from the two methods
defined in the first sentence only in that it is "asy mmetrical". In particular, the second sentence of
Article 2.4.2 contains no words that express the idea that an authority may restrict the universe of export
transactions which are compared to the average normal value. The sentence simply refers to "prices of
individual export transactions" without any indication that "transactions" in this connection refers to a
smaller universe of transactions than in the case of the average-to-average and
transaction-to-transaction comparison methods.
7.131 In response to a question from the Panel, Japan states that the word "individual" in" individual
export transactions" in the second sentence of Article 2. 4.2, when contrasted with "all" in the first
sentence, provides support for its interpretation that the average-to-transaction method provides for a
comparison of an average normal value to export prices of the transactions that make up a pattern of
export prices. In our view, Japan's response is not consistent with the contex t within which the word
"individual" is used in the second sentence of Article 2.4.2. The difference between the
average-to-average and average-to-transaction met hods is a difference between a comparison of "a
weighted average normal value with a weighted average of prices of all comparable export
transactions", on the one hand, and a comparison of a "normal value established on a weighted average
basis" with "prices of individual export transactions" on the other. When viewed in the context of the
average-to-transaction method as an excep tion to the average-to-average and the
transaction-to-transaction methods, the expression "p rices of individual export transactions" in the
second sentence simply refers to prices establishe d on the basis of individual transactions, as
distinguished from an average of all prices. Therefore, the expression "individual export transactions"
describes the basis upon which export prices are comp ared to an average normal value and does not
confine the range of export transactions covered by the comparison. Moreover, under Japan's approach
the term "individual export transactions" is depr ived of its effectiveness because the prohibition of
zeroing means that the numerator of the average margin of dumping must reflect any differences,
positive and negative, between export prices of the tran sactions that constitute the pattern of targeted
dumping. This means, in effect, that under Japan's interpretation of the average-to-transaction method
an average normal value must be compared to the average export price of the transactions that constitute
the pattern of targeted dumping. Under Japan's interpretation, the notion of the methodology provided
for in the second sentence of Ar ticle 2.4.2 as an average-to- transaction method completely looses its
meaning.
7.132 With respect to Japan's argument that its pos ition that an authority may make a targeted
selection of export transactions finds support in the "tak en into account appropriately" language in the
second sentence of Article 2.4.2, we consider that Japan misinterprets the role of this language. This
language has no role other than in the context of th e requirement to explain why the pattern of export
prices cannot be addressed through the use of the average-to-average method or the
transaction-to-transaction method. The second sen tence of Article 2.4.2 does not contain an
independent requirement or authorization to design a comparison methodology in such a way as to take
appropriate account of a particular pattern of export prices. We also consider that Japan is incorrect in
arguing that a pattern of targeted dumping can only be taken into account appropriately through the
selection of a subset of the export transactions. If an asymmetrical comparison is made, a pattern of
targeted dumping will automatically manifest itself in the results of that comparison, if zeroing is
permitted.

7.133 Japan's interpretation of the second sentence of Article 2.4.2 as permitting an investigating
authority to confine a comparison to those export transactions that constitute targeted dumping also
suffers from logical inconsistencies. In particular, Japan argues that in a situation envisioned by the
second sentence of Article 2.4.2, the "fair comparis on" requirement prohibits zeroing with regard to
those export transactions that constitute targeted dumping but that export prices of export transactions
that fall outside the "pattern of export prices" may be excluded not only from the numerator but also
from the denominator of a weighted average margin of dumping.
768 Thus, Japan interprets this method
in a manner that, by enabling an investigating authority to confine its analysis to a subset of the export
transactions and to completely disregard export prices that are outside the "pattern of export prices"
may well yield an overall margin of dumping significantly higher than a comparison in which all export
transactions are included in the denominator and in which zeroing is applied to compute the numerator
of the average margin of dumping.
7.134 In the latter regard, we note that Japan takes the view that if an authority has limited its inquiry
to particular regions, purchasers or time-periods , it may nevertheless impose under Article 9 of the
AD Agreement anti-dumping duties on all entries of the pr oduct into the territory of the importing
Member.769 We consider that this position is fundamenta lly inconsistent with the general approach of
the AD Agreement regarding the scope of application of anti-dumping duties. Article 4 of the
AD Agreement very carefully defines the circumstan ces in which it is permissible to impose
anti-dumping duties on all imports into a Member's customs territory on the basis of the effect of
dumped imports in a part of that territory. There is no basis in the AD Agreement for the view that,
absent the circumstances described in Article 4, a determination of dumping based on the effect of
dumped imports in a part of a Member's territory can justify the imposition of anti-dumping duties on all
imports of the product into that entire territory. Specifically, nothing in Article 2.4.2 indicates that the
second sentence provides authority for such an application of anti-dumping duties. Nor can we a see
legal basis in Article 2.4.2 or in other provisions of the AD Agreement for the view that a Member may
impose an anti-dumping duty on all imports of a pro duct on the basis of a determination of dumping
which is limited to particular customers or time-p eriods and completely disregards any other export
sales.
7.135 We also see a contradiction between Japan's argument that an authority may restrict its analysis
to a sub-set of the export transactions and Japan's general position that dumping must be determined for
a product as a whole. By its express terms, the second sentence of Article 2.4.2 is only a departure from
the first sentence of Article 2.4.2. Thus, if there is an obligation flowing from the definition of dumping
to determine dumping for the product as a whole, there is no textual basis to conclude that such an
obligation does not apply to the second sentence of Article 2.4.2.
 While Japan asserts that the second
sentence of Article 2.4.2 is an ex ception to the requirement to determine a margin of dumping for a
product as a whole, it has failed to indicate the precise textual basis for that view.
7.136 Finally, Japan has not submitted any material relating to the negotiating history of Article 2.4.2
to support its view that the second sentence of Artic le 2.4.2 provides for a comparison of an average
normal value with a more limited universe of expor t transactions than under the average-to-average
method.
7.137 To conclude, we consider that the arguments of Japan to support its position that, even without
zeroing, an average-to-transaction comparison will produce a result that is different from the result of an
average-to-average comparison are not compelling. Thus, Japan has not effectively rebutted the
argument of the United States that, without zeroing, the average-to-transaction method always yields
results that are identical to those of the average-to-average method and that, as a consequence, if zeroing
is always prohibited, the second sentence of Article 2.4.2 is deprived of its effectiveness. Therefore, we

768 Japan Response to Panel Question 49.
769 Japan Response to Panel Question 50.

conclude that Article 2.4.2 cannot be interprete d to mean that zeroing is prohibited under the
average-to-transaction method and that the second sen tence of Article 2.4.2 thus contradicts the
existence of a general prohibition of zeroing.770
Summary of the Panel's analysis of Article 2.4.2 of the AD Agreement
7.138 Our analysis shows, first, that the text of Article 2.4.2 of the AD Agreement does not expressly
address the issue of whether a Member may apply zeroing when it establishes the existence of margins
of dumping during the investigation phase on the basi s of the transaction-to-transaction method or the
average-to-transaction method. Second, whether Article 2.4.2 is interpreted as prohibiting zeroing only
under the average-to-average method or under all three comparison methods, both interpretations pose
problems in terms of a logically coherent approach to the interpretation of this provision that takes into
account the interrelationship between the three methods in a manner that is consistent with the principle
of effective treaty interpretation. On the one hand, if Article 2.4.2 is interpreted to mean that zeroing is
prohibited only in connection with the average-to-average comparison method, certain anomalies arise.
Thus, for instance, absent a prohibition of zeroing, there is a question as to why it would not be possible
for a Member confronted with a "pattern of export prices" within the meaning of the second sentence of
Article 2.4.2 to address such a pattern by using th e transaction-to-transaction method. On the other
hand, to interpret Article 2.4.2 as prohibiting zeroing under all three methods, including the
transaction-to-transaction method and the average-to -transaction method, also gives rise to serious
anomalies. In particular, such an interpretation would completely deprive the average-to-transaction
method of its effectiveness as an exception to the use of the two normal comparison methods set out in
the first sentence of Article 2.4.2. In effect, an interpretation that zeroing is prohibited under all
comparison methods effectively means that the average-to-transaction method becomes
indistinguishable in its results from the average-to-average comparison method.
7.139 We realize that it could be argued that Article 2.4.2 must be interpreted to mean that zeroing is
prohibited under the average-to-average and tr ansaction-to-transaction methods but not in the
average-to-transaction method. However, we see no textual support for such an interpretation. In
particular, we see no textual difference betw een the average-to-transaction method and the
transaction-to-transaction method that can sustain the view that zeroing, while not prohibited under the
average-to-transaction method is prohibited under th e transaction-to-transaction method. While these
methods obviously differ with respect to the basis upon which the normal value is established, they do
not differ with respect to the establishment of export prices. A transaction-to-transaction comparison is
a comparison between prices of individual transactio ns in the domestic market, on the one hand, and
prices of individual transactions in the export market , on the other. Thus, the export prices in the
transaction-to-transaction method are "prices of individual export transactions" as is the case under the
average-to-transaction method. Therefore, the expression "prices of individual export transactions" in
the second sentence of Article 2.4.2 does not distin guish the average-to-transaction method from the
transaction-to-transaction method. We see no textual basis in Article 2.4.2 for the view that such
"prices of individual export transactions" must be taken into account under the
transaction-to-transaction method in a different manner than under the average-to-transaction method.
7.140 We are compelled to conclude that the result of our analysis is somewhat imperfect in terms of
a logically coherent interpreta tion of Article 2.4.2 of the AD Agreement . While ideally a coherent
interpretation would yield a single answer to the question of whether Article 2.4.2 allows for the use of
zeroing under any of the three comparison methods, we have found that such a single answer may not be
possible. We have identified some possible considera tions in favour of the view that a prohibition of

770 Our view that the second sentence of Article 2.4.2 would be deprived of effectiveness if interpreted in
light of a general prohibition of zeroing is consistent with the analysis of the Panel in US – Softwood Lumber V
(Article 21.5). Panel Report, US – Softwood Lumber V (Article 21.5) (appeal pending), para. 5.52.

zeroing under the average-to-average method must also apply to the other two comparison methods,
notably the transaction-to-transaction method. Howeve r, our analysis has also ineluctably led to the
very serious difficulties posed by an approach that interprets Article 2.4.2 to mean that zeroing is
prohibited under all comparison methods set out in that provision. In the latter regard, it is our view
that, on balance, the interpretation that zeroing is prohibited under all circumstances is more anomalous
and in conflict with the requirement of effective treaty interpretation than the interpretation that zeroing
is prohibited only under the first comparison method. To interpret Article 2.4.2 as prohibiting zeroing
under all methods means that the average-to-transact ion method collapses into the average-to-average
comparison method set forth in the first sentence. This would completely defeat the objective of
providing an exceptional method that enables Members to address certain patterns of export prices that
cannot be effectively dealt with through the av erage-to-average or transaction-to-transaction
comparison. Such an interpretation can be consid ered to be manifestly absurd and unreasonable
because it means that the average-to -transaction method will in effect be the same as one of the two
methods to which it is an exception.
7.141 We have found that (1) the fact that the terms "dumping" and "margin of dumping" in
Article 2.1 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994 are defined in relation to
"product" and "products" does not warrant the conclu sion that these terms, by definition, cannot apply
to individual transactions and inherently require an examination of export transactions at an aggregate
level in which the same weight is accorded to e xport prices that are above normal value as to export
prices that are below normal value;
771 and (2) the text of Article 2.4.2 of the AD Agreement does not
support the view that the AD Agreement and GATT Article VI must be interpreted to mean that there
exists a general prohibition of zeroing.772 773
7.142 Thus, we conclude that it is permissible w ithin the meaning of Article 17.6(ii) of the
AD Agreement to interpret Article VI of the GATT 1994 and relevant provisions of the AD Agreement
to mean that there is no general requirement to determine dumping and margins of dumping for the
product as a whole, which, by itself or in conjunction with a requirement to establish margins of
dumping for exporters or foreign producers, entails a general prohibition of zeroing.
7.143 In light of all the foregoing considerations, the Panel finds that by maintaining simple zeroing
procedures in the context of original investig ations USDOC does not act inconsistently with
Articles 2.1 and 2.4.2 of the AD Agreement and Article VI:1 and VI:2 of the GATT 1994.
(ii) Article 2.4 of the AD Agreement
Arguments of the Parties
7.144 Japan claims that model and simple zeroing are as such inconsistent with Article 2.4 of the
AD Agreement mainly because they violate the obligation to make a fair comparison expressed in the
first sentence of that provision. Japan asserts that the word "comparison" as used in the first sentence of
Article 2.4 means the action by which an investig ating authority determines the price difference
between normal value and export price for the product as a whole, i.e. the margin of dumping. This
"comparison" does not end when authorities have made due allowance for factors affecting price
comparability. The "fair comparison" requirement, wh ich is a general obligation that informs all of
Article 2 and which also applies to the calculation of the margin of dumping, means that the process by
which authorities identify "the price difference" between normal value and export price for the product

771 Supra, paras. 7.103-7.112.
772 Supra, paras. 7.113-7.140.
773 In addition, as discussed in connection with Japan's claims regarding periodic reviews, we also
consider that such a general prohibition is not supported by the provisions on duty assessment in Article 9 of the
AD Agreement.

as a whole must not be biased, lack even-handedn ess, favour particular interests or outcomes or
otherwise distort the facts, in particular to the detriment of exporters or foreign producers.
7.145 Japan submits that model and simple zeroing prevent USDOC from making a fair comparison
as required by Article 2.4. The Appellate Body has already held that zeroing is unfair within the
meaning of Article 2.4 of the AD Agreement because it may lead to a finding of dumping where no
dumping would be found in the absence of zeroing and because it inflates the margin of dumping by
excluding results of negative comparisons that w ould reduce the overall amount of dumping if they
were included. The model and simple zeroing procedures at issue in this case deprive the comparison of
normal value and export prices of even-handedness because they overstate the amount of dumping and
render a dumping determination more likely and th ereby systematically favour the interests of
petitioners and prejudice the interests of exporters. They also distort the comparison by effectively
treating export prices as less than what they actually are and fail to determine a margin of dumping for
the product as a whole.
7.146 Japan submits that a general prohibition of zer oing does not render the average-to-transaction
methodology in the second sentence of Article 2.4.2 redundant. Japan contests that without zeroing the
average-to-transaction comparison necessarily pro duces results identical to the results of the
average-to-average comparison. Thus, an aver age-to-transaction comparison will produce a result
different from that of an average-to-average comparison if the average normal value is calculated on a
different basis. Moreover, the second sentence of Article 2.4.2 provides for a comparison of an average
normal value to only those export transactions that c onstitute the pattern of targeted dumping. Japan
claims that this interpretation of Article 2.4.2 is consistent with the USDOC Regulations, which provide
that the application of the average-to-transaction comparison shall be limited to the prices that make up
the pattern of targeted dumping.
7.147 The United States argues that Article 2.4 of the AD Agreement does not contain obligations
with respect to zeroing. First, the "fair comparison" obligation in Article 2.4 refers to the adjustments
necessary to account for differences between expor t price and normal value that affect price
comparability. The focus of Article 2.4 is on ho w the authorities are to select transactions for
comparison and make the appropriate adjustments for differences affecting price comparability. Thus,
Article 2.4 applies to the required price adjustments and not to how the results of those comparisons are
treated. Japan's attempt to read a "good faith" obligation into Article 2.4 is inconsistent with customary
rules of treaty interpretation. Second, Japan's interpretation of the "fair comparison" requirement in
Article 2.4 to create a general obligation to off set dumping margins cannot be reconciled with the
remaining text of the AD Agreement in a manner consistent with customary rules of treaty
interpretation. To interpret Article 2.4 to requi re offsets for negative dumping margins renders the
distinction between the average-to-average comp arison and the average-to-transaction comparison
meaningless.
7.148 In the latter regard, the United States asserts that there is no textual support for Japan's
arguments that the second sentence of Article 2.4.2 provides for a selection of only those export
transactions that make up the pricing pattern envision ed by that provision and that Article 2.4.2 was
crafted on the assumption that the average normal value in the third methodology in Article 2.4.2 is
established on a basis different from the averag e normal value in the first methodology. The
United States also submits that Japan is incorrect in arguing that the USDOC Regulations provide for
the application of the third comparison methodology to a subset of export transactions.
7.149 The United States argues that th e Appellate Body Reports in EC – Bed Linen

US – Corrosion-Resistant Steel Sunset Review and US – Softwood Lumber V do not provide a basis to
conclude that the "fair comparison" requirement in Article 2.4 creates an independent obligation to
provide offsets for export transactions that exceed nor mal value. In any event, even if the "fair
comparison" requirement were not limited in scope to allowances to reflect differences in price

comparability, it would not follow that not to provid e offsets for export prices above normal value is
unfair. Fairness should only be evaluated through an objective, discernable standard of what is
appropriate and inappropriate, as found within the four corners of the AD Agreement. Thus, the simple
fact that the non-use of offsets leads to a higher margin of dumping does not suffice to conclude that it is
unfair.
Evaluation by the Panel
7.150 Japan requests us to find that maintaining mode l and simple zeroing procedures in the context
of original investigations is inconsistent with Article 2.4 of the AD Agreement because these procedures
are inherently biased, distort the comparison of no rmal value and export price, and thus deprive
exporters of a fair comparison.
7.151 Article 2.4 of the AD Agreement provides:
 A fair comparison shall be made between the export price and the normal value. This
comparison shall be made at the same level of trade, normally at the ex-factory level, and in
respect of sales made at as nearly as possible th e same time. Due allowance shall be made in
each case, on its merits, for differences which affect price comparability, including differences
in conditions and terms of sale, taxation, levels of trade, quantities, physical characteristics, and
any other differences which are also demonstrated to affect price comparability. In the cases
referred to in paragraph 3, allowances for cost s, including duties and taxes, incurred between
importation and resale, and for profits accruing, s hould also be made. If in these cases price
comparability has been affected, the authorities shall establish the normal value at a level of
trade equivalent to the level of trade of th e constructed export price, or shall make due
allowance as warranted under this paragraph. Th e authorities shall indicate to the parties in
question what information is necessary to ensure a fair comparison and shall not impose an
unreasonable burden of proof on those parties. (footnote omitted)

Model zeroing

7.152 We have found that maintaining model zeroing procedures in the context of original
investigations is inconsistent with Article 2.4.2 of the AD Agreement .
774 We do not consider it
necessary to make a finding on whether maintaining model zeroing procedures in the context of original
investigations is also inconsis tent with Article 2.4 of the AD Agreement . Our finding that model
zeroing is inconsistent with Article 2.4.2 of the AD Agreement pertains to the fact that when USDOC
calculates the weighted average margin of dumping for an exporter or producer, it does not include in
the numerator of that margin of dumping any amounts by which average export prices for particular
models are higher than the average normal values fo r those models. Exactly the same issue – the
non-inclusion in the numerator of the weighted av erage margin of dumping of differences between
average export prices and average normal values if average export prices are higher than average
normal values-is challenged by Japan under Article 2.4 of the AD Agreement. We refer in this respect to
the general considerations guiding our exercise of judicial economy that we have set out above.
775 We
note that the panels in EC – Tube or Pipe Fittings, US – Softwood Lumber V and US – Zeroing (EC) also
declined to make findings on claims that zeroi ng is inconsistent with Article 2.4 of the AD Agreement
after finding that model zeroing is inconsistent with Article 2.4.2.776

774 Supra, para. 7.86
775 Supra, paras.7.87-7.88.
776 Panel Report, EC – Tube or Pipe Fittings, para. 7.219; Panel Report, US – Softwood Lumber V, para.
7.226; Panel Report, US – Zeroing (EC), paras. 7.33 and 7.108. We note that in US – Zeroing (EC) , the
Appellate Body found that the panel in that dispute had not committed an error of law in exercising judicial

Simple zeroing
7.153 Japan's main argument in support of this clai m is that zeroing is inconsistent with the
requirement expressed in the first sentence of Article 2.4 that a fair comparison be made between the
export price and the normal value. The parties have expressed divergent interpretations of the scope of
application and substantive meaning of this "fair comparison" comparison requirement and on whether
an interpretation of this requirement as the basis for a general prohibition of zeroing is compatible with
other provisions of the AD Agreement, particularly the average-to-transaction method provided for in
the second sentence of Article 2.4.2.
7.154 We consider that the requirement of a fair comparison set out in the first sentence of Article 2.4
is an independent legal obligation that is not defined exhaustively by the specific requirements set out in
the remainder of Article 2.4 and is not limited in sc ope to the issue of adjustments to ensure price
comparability. In this regard, we agre e with the analysis of the panel in US – Zeroing (EC) regarding
the scope of the "fair comparison" obligation. First, as stated by that panel, not to give independent
meaning to the "fair comparison" requirement would render this provision inutile. Second, the structure
of Article 2.4 suggests that the chapeau of Article 2.4 and its sub-paragraphs must be interpreted as a
whole. Third, the "comparison" referred to in Articles 2.4.1 and 2.4.2 of the AD Agreement is the
"comparison" in Article 2.4. Fourth, the "fair comparison" requirement explicitly applies also to the
subject matter of Article 2.4.2 by virtue of the phrase "subject to the provisions governing fair
comparison in paragraph 4" in Article 2.4.2.
777 We also note that the Appellate Body has stated that the
"fair comparison" requirement in Article 2.4 of the AD Agreement constitutes a "general obligation"
which "informs all of Article 2" but which "applies in particular to Article 2.4.2".778
7.155 While the "fair comparison" requirement constitutes an independent legal obligation, its precise
meaning must be understood in light of the nature of the activity at issue. The concept of "fairness" is
potentially a rich concept with different meanings in different contexts. One meaning of "fairness" is
that "like" must be compared with "like". This is the requirement that comparisons should not be
arbitrary. Fairness can also be understood to mean that once an authority has determined the universe of
transactions that it will compare it must take account of the results of all the comparisons made in
respect of those transactions and may not limit its an alysis to those results that tend to support an
affirmative finding of dumping.
7.156 Moreover, it could be argued that if, as stated by the Appellate Body, zeroing is unfair when
used in conjunction with the first methodology in Article 2.4.2779, it stands to reason that zeroing is also
unfair if applied in the context of the other comp arison methodologies. We note that the Appellate
Body itself has made statements that could be interpreted to reflect a view that zeroing is unfair because
of its effect on the magnitude of the margin of dumping, a view that would not seem to limit the
unfairness of this method only to zeroing used in co nnection with the average-to-average comparison
method to establish the existence of margins of dumpi ng during the investigation phase. In particular,
we note the statement that:

economy with regard to a claim of the EC that the application of zeroing in an original investigation is inconsistent
with Article 2.4 of the AD Agreement after the panel had found that zeroing was inconsistent with Article 2.4.2.
Appellate Body Report, US – Zeroing (EC), para. 250.
777 Panel Report, US – Zeroing (EC), paras. 7.252-7.258.
778 Appellate Body Report, EC – Bed Linen, para. 59.
779 Appellate Body Report, EC – Bed Linen , para. 55: "... we are also of the view that a comparison
between export price and normal value that does not take fully into account the prices of all comparable export
transactions – such as the practice of zeroing at issue in this dispute – is not a 'fair comparison' between export
price and normal value, as required by Article 2.4 and Article 2.4.2" (emphasis in original).

"In EC – Bed Linen , we upheld the finding of the panel that the European
Communities acted inconsistently with Article 2.4.2 of the AD Agreement by using a
'zeroing' methodology in the anti-dumping investigation at issue in that case. We held
that the European Communities' use of this methodology 'inflated the result from the
calculation of the margin of dumping.' We also emphasized that a comparison such as
that undertaken by the European Communiti es in that case is not a 'fair comparison'
between export price and normal value as required by Articles 2.4 and 2.4.2.
When investigating authorities use a zeroing methodology such as that examined in
EC – Bed Linen to calculate a dumping margin, whether in an original investigation or
otherwise, that methodology will tend to in flate the margins calculated. Apart from
inflating the margins, such a methodology c ould, in some instances, turn a negative
margin of dumping into a positive margin of dumping. As the Panel itself recognized
in the present dispute, 'zeroing ... may lead to an affirmative determination that
dumping exists where no dumping would have been established in the absence of
zeroing.' Thus, the inherent bias in a zeroing methodology of this kind may distort not
only the magnitude of a dumping margin, but also a finding of the very existence of
dumping."
 780
7.157 We also note, however, that to date the Appellate Body has never actually made a legal finding
in a specific case that the use of zeroing is inconsistent with Article 2.4 of the AD Agreement on its own
(i.e. as an independent legal obligation). We do not consider, in this regard , that the Appellate Body
Reports in EC – Bed Linen and US – Corrosion-Resistant Steel Sunset Review provide a sufficiently
detailed legal analysis of the "fair comparison" requirement in general and its applicability to the issue
of zeroing in particular, to warrant the conclusion that this requirement must be interpreted to mean that
zeroing is prohibited in all circumstances. We find it highly significant in this regard that, as discussed
above, in US – Softwood Lumber V the Appellate Body declined to answer the question of whether
zeroing is permitted under the transaction-to-transac tion and the average-to-transaction comparison
methods. 781 In our view, the present dispute has raised fundamental questions regarding the
interpretation of the "fair comparison" requirement in relation to zeroing that were not considered in the
Appellate Body reports in EC – Bed Linen and US – Corrosion-Resistant Steel Sunset Review. In
particular, we do not see in those reports any analysis of the question of whether an interpretation that
the "fair comparison" requirement proscribes zeroing whenever margins of dumping are calculated can
be reconciled with other provisions of the AD Agreement in accordance with the principle of effective
treaty interpretation.
7.158 In our view, the somewhat indeterminate standard of fairness underlying the "fair comparison"
requirement may not be interpreted in a manner that renders more specific provisions of the
AD Agreement completely inoperative. We agree, in the latter regard, with the view expressed by the
panel in US – Zeroing (EC) that the "fair comparison" requirement cannot have been intended to allow
a panel to review a measure in light of a necessarily somewhat subjective judgement of what fairness
means in the abstract and in complete isolation from the substantive context.782 In the present case, the
relevant "substantive context" in our view indicat es that the "fair comparison" requirement cannot be
interpreted to create a general prohibition of zeroing.
7.159 As explained above, such a general prohibition would be inconsistent with the principle of
effective treaty interpretation, especially because it would render th e average-to-transaction method
provided for in Article 2.4.2 of the AD Agreement indistinguishable from the average-to-average
method and thereby deprive the average-to-transaction method of its effectiveness as an exception to

780 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, paras. 134-135.
781 Appellate Body Report, US – Softwood Lumber V, para. 105.
782 Panel Report, US – Zeroing (EC), para. 7.261.

the normal methods set out in the first sentence of Article 2.4.2. 783 Similarly, a general prohibition of
zeroing would undermine the effectiv eness of provisions in Article 9 that in our view clearly permit
Members to assess anti-dumping duties on a transaction-specific basis. 784 There is nothing in the
second sentence of Article 2.4.2 or in Article 9 that indicates that these provisions establish exceptions
to the "fair comparison" requirement of Article 2.4. Therefore, if the "fair comparison" requirement
operates to prohibit zeroing, it necessarily also applies in the context of these provisions. Consequently,
it is impossible, in our view, to reconcile the proposition that the "fair comparison" requirement must be
interpreted to create a general prohibition of zeroi ng with the second sentence of Article 2.4.2 and the
provisions on duty assessment in Article 9 in a manner consistent with the requirement of effective
treaty interpretation. 785
7.160 Finally, while we realize that Article 2.4.2 must be interpreted in light of the "fair comparison"
requirement contained in Article 2.4 of the AD Agreement, we cannot interpret this requirement in a
manner that would undermine the effectiveness of Article 2.4.2.
7.161 In light of these considerations, the Panel finds that by maintaining simple zeroing procedures
in the context of original investigations USDOC doe s not act inconsistently with Article 2.4 of the
AD Agreement.
(iii) Articles 3.1 to 3.5 of the AD Agreement
Arguments of the Parties
7.162 Japan claims that maintaining zeroing procedures in original investigati ons is inconsistent
with Articles 3.1 to 3.5 of the AD Agreement because, as a consequence of the systematic distortion of
the margin of dumping resulting from the zeroing procedures, injury determinations are not objective in
that they are not based on positive evidence as required by Article 3.1 on the volume of dumped and
non-dumped imports, the rate of increase of dumped imports, the prices of dumped and non-dumped
imports and the magnitude of the margin of dumping.
7.163 The United States argues that Japan's "as such" and " as applied" claims are speculative and
unfounded. Japan fails to explain how the USDOCs approach necessarily results in a lack of positive
evidence in any, let alone every injury determination. Japan's explanation of its claims is based on a
speculation about consequences that may occur.
Evaluation by the Panel
7.164 Japan requests us to make a finding that the model zeroing procedures that we have found to be
inconsistent with Article 2.4.2 of the AD Agreement in the context of original investigations are also
inconsistent with Articles 3.1-5 of the AD Agreement. A panel may exercise judicial economy where it

783 Supra, paras. 7.127-7.137.
784 Infra, paras. 7.196-7.209.
785 Our reasoning also applies to the argument of Japa n that even under a narrow interpretation of the
scope of the "fair comparison" requirement zeroing is inconsistent with that requirement because zeroing amounts
to an allowance for a difference that does not affect price comparability. Japan Second Written Submission,
paras. 61-64. The second sentence of Article 2.4.2 is not an exception to the obligation in Article 2.4 to make due
allowance for differences affecting price comparability. Consequently, if zeroing is prohibited by Article 2.4 as
an allowance for a difference that does not affect price comparability, that prohibition also applies in the context of
the average-to-transaction method provided for in the second sentence of Article 2.4.2. We also note that in
US – Zeroing (EC) the Appellate Body upheld the finding of the panel in that dispute "that zeroing is not an
impermissible allowance or adjustment under Article 2.4, third to fifth sentences". Appellate Body Report, US –
Zeroing (EC), para. 159.

is claimed that the same measure is inconsistent w ith more than one provision if it considers that
multiple findings under various provisions are not necessary to resolve the dispute.
786 We realize that
panels that have found that dete rminations of dumping were inc onsistent with Article 2 of the
AD Agreement or that determinations of the existence a nd amount of subsidies were inconsistent with
relevant provisions of the Agreement on Subsidies and Countervailing Measures (" SCM Agreement"),
have not refrained from addressing claims regarding determinations of injury under Article 3 of the
AD Agreement or Article 15 of the SCM Agreement. We also note, however, that in those cases the
claims submitted with respect to injury determina tions had an independent basis in Article 3 of the
AD Agreement or Article 15 of the SCM Agreement and were not premised upon the existence of an
inconsistency of the determ ination of dumping with the AD Agreement or an inconsistency of the
determination of the existence and amount of a subsidy with the SCM Agreement.787
7.165 In the present case, however, Japan's claims under Article 3 of the AD Agreement with respect
to model zeroing procedures as such are entirely dependent upon the inconsistency of this measure with
Article 2 of the AD Agreement. Japan asserts that the inconsistency of the model zeroing procedures
with Article 2 results in an in consistency with Article 3 in that a distorted finding of dumping
necessarily prevents an authority from making an objective examination b ased on positive evidence.
Japan submits no grounds to support this claim that do not depend upon a finding of inconsistency of
model zeroing procedures with Article 2 of the AD Agreement. Absent such independent grounds, we
consider that it is not necessary to make a finding on Japan's claims under Article 3 of the
AD Agreement with respect to model zeroing procedures in the context of original investigations.
7.166 Since we have found that by maintaining simple zeroing procedures in the context of original
investigations, USDOC does not act inconsistently with Articles 2.1 and 2.4.2 of the AD Agreement,
Articles VI:1 and VI:2 of the GATT 1994 and Article 2.4 of the AD Agreement , we also find that
USDOC does not act inconsistently with Articles 3.1-3.5 of the AD Agreement in this respect.
(iv) Article 5.8 of the AD Agreement
Arguments of the Parties
7.167 Japan claims that maintaining zeroing procedures in original investigations is inconsistent
with Article 5.8 of the AD Agreement because the zeroing procedures deprive USDOC of an adequate
and credible basis for determining whether there is sufficient evidence of dumping to justify proceeding
with an investigation.
7.168 The United States argues that, apart from being dependent upon a separate violation of
Articles 2.1, 2.4 or 2.4.2 of the AD Agreement, Japan's argument with respect to Article 5.8 is also
speculative. Japan has not established that, were it to prevail with respect to its claims that the
United States acted in breach of Articles 2.1, 2.4 or 2.4.2, the only margins that could be determined in
a WTO-consistent manner must be less than de minimis.
Evaluation by the Panel
7.169 Japan requests us to make a finding that the model zeroing procedures that we have found to be
inconsistent with Article 2.4.2 of the AD Agreement in the context of original investigations are also
inconsistent with Article 5.8 of the AD Agreement. A panel may exercise judicial economy where it is
claimed that the same measure is inconsistent with more than one provision if it considers that multiple

786 Supra, paras.7.87-7.88.
787 E.g., Panel Report, EC –Bed Linen ; Panel Report, EC – Tube or Pipe Fittings ; Panel Report,
US – Countervailing Duty Investigation on DRAMs ; Panel Report, EC – Countervailing Measures on DRAM
Chips.

findings under various provisions are not necessary to resolve the dispute. 788 Japan's claim under
Article 5.8 of the AD Agreement with respect to model zeroing procedures as such is entirely dependent
upon the inconsistency of this measure with Article 2 of the AD Agreement. Japan asserts that the
inconsistency of the model zeroing procedures with Article 2 results in an inconsistency with Article 5.8
because the model zeroing procedures deprive USDOC of an adequate and credible basis for
determining whether there is sufficient evidence of dumping to justify proceeding with an investigation.
Japan submits no grounds to support this claim that do not depend upon a finding of inconsistency of
zeroing procedures with Article 2 of the AD Agreement . Absent such independent grounds, we
consider that it is not necessary to make a fi nding on Japan's claim under Article 5.8 of the
AD Agreement with respect to model zeroing procedures in the context of original investigations.
7.170 Since we have found that by maintaining simple zeroing procedures in the context of original
investigations USDOC does not act inconsistently with Articles 2.1 and 2.4.2 of the AD Agreement,
Articles VI:1 and VI:2 of the GATT 1994 and Article 2.4 of the AD Agreement , we also find that
USDOC does not act inconsistently with Article 5.8 of the AD Agreement in this respect.
(v) Articles 1 and 18. 4 of the AD Agreement and Article XVI:4 of the WTO Agreement
7.171 We do not make findings on the claims of Japan that by maintaining model zeroing procedures
in the context of original investigations USDOC acts inconsistently with Articles 1 and 18.4 of the
AD Agreement and Article XVI:4 of the WTO Agreement. When presented with claims under Articles
1 and 18 of the AD Agreement and XVI:4 of the WTO Agreement based on alleged violations of other
provisions of the AD Agreement panels have either dismissed, or refrained from making findings on,
such dependent or consequential claims where th e claims upon which these claims were dependant
were unfounded or have considered it unnecessary to decide such de pendent claims where the claims
upon which they were dependant were well founded.
7.172 For instance, the panel in US – Anti-Dumping Measures on Oil Country Tubular Goods
rejected an argument of Mexico that any finding th at the United States acted inconsistently with any
provision of the AD Agreement necessitated a consequential finding that the United States also acted
inconsistently with Articles 1, 18.1 and 18.4 of the AD Agreement, Article VI of the GATT 1994 and
Article XVI:4 of the WTO Agreement:
"Mexico's claims under Articles 1, 18.1 and 18.4 of the AD Agreement, Article XVI:4
of the WTO Agreement, and Article VI of the GATT 1994 are, as Mexico
acknowledges, consequential claims. That is, any finding of violation under these
claims would rest entirely on the basis of a finding of violation of one or another of the
asserted specific provisions of the AD Agreement. There are no independent bases for
these claims. Thus, addressing these consequential claims would provide neither the
parties nor other Members with additiona l guidance in terms of understanding the
obligations established by the AD Agreement. Nor would it aid in implementation of
any DSB recommendation where a violation of one of those obligations has been found
to exist. We therefore do not consider it either necessary or appropriate to address
these claims, and in the exercise of judicial economy make no findings with respect to
them."
789

788 Supra, paras.7.87-7.88.
789 Panel Report, US – Anti-Dumping Measures on Oil Country Tubular Goods, para. 7.189. In the same
dispute, the Appellate Body found that the Panel had not committed an error of law when in light of its finding that
a determination by the USDOC was inconsistent with Artic le 11.3, it decided to exercise judicial economy with
regard to a claim under Article 2. According to the Appellate Body, Mexico had failed to explain why an

7.173 The panel in US – Zeroing (EC) considered that, having found that zeroing in original
investigations was inconsistent with Article 2.4.2 of the AD Agreement, it was not necessary to make
findings on dependent claims, including claims under Articles 1 and 18 of the AD Agreement and
Article XVI:4 of the WTO Agreement.
790 791
7.174 We concur with the reasoning of the panels in the above-mentioned cases regarding the
disposition of consequential claims. Addressing the claims of Japan regarding model zeroing
procedures under Articles 1 and 18.4 of the AD Agreement and Article XVI:4 of the WTO Agreement
would neither provide additional guidance with respect to steps to be taken to implement the Panel's
recommendation regarding the violation on which that recommendation is dependant nor provide
guidance in terms of understanding the obligations of the AD Agreement. 792
7.175 Since we have found that simple zeroing procedures in the context of original investigations are
not inconsistent with Articles 2.1, 2.4.2 and 2.4 of the AD Agreement and Articles VI:1 and VI:2 of the
GATT 1994 we find that by maintaining simple zeroing procedures in the context of original
investigations USDOC does not act inconsistently with Articles 1 and 18.4 of the AD Agreement and
Article XVI:4 of the WTO Agreement.
2. Model zeroing as applied in the original investigation concerning certain cut-to-length
carbon quality steel products from Japan
(a) Articles 2.1 and 2.4.2 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994
(i) Arguments of the Parties
7.176 Japan claims that by using model zeroing in th e anti-dumping investigation of imports of
certain cut-to-length carbon qua lity steel products from Japan 793, USDOC acted inconsistently with
Articles 2.1 and 2.4.2 of the AD Agreement and with Articles VI:1 and VI:2 of the GATT 1994 in that it
failed to determine the existence of dumping, and to calculate a margin of dumping, for the product as a
whole by not taking into account the results of all the comparisons for the product.
7.177 The United States does not submit arguments specifically relating to the use of zeroing in this
investigation. In connection with Japan's "as such" claims, the Unite d States denies that there exists a
requirement to determine dumping for the product as a whole which prohibits zeroing and also argues

additional finding under Article 2 was necessary to resolve the dispute. In that connection, the Appellate Body
also observed that it did not find it necessary to consider Mexico's arguments concerning Articles 1 and 18.3 of the
AD Agreement. Appellate Body Report, US – Anti-Dumping Measures on Oil Country Tubular Goods, para. 178
and footnote 274.
790 "The Panel also perceives no need to pronounce on the dependent claims raised by the EC under
Articles 1; 3.1, 3.2 and 3.5; 5.8; 9.3; and 18.4 of the AD Agreement, Articles VI:1 and VI:2 of the GATT 1994 and
Article XVI: 4 of the WTO Agreement. Deciding such dependent claims would provide no additional guidance as
to the steps to be undertaken by the US in order to implement our recommendation regarding the violation on
which it is dependent." Panel Report, US – Zeroing (EC), para. 7.34 (footnote omitted).
791 Cf. Panel Report, Argentina – Poultry Anti-Dumping Duties, paras. 7.369-7.370 and Panel Report, US
– Softwood Lumber V, paras. 7.377-7.378.
792 We also note that in US – Zeroing (EC) the Appellate Body did not consider it necessary to make
findings under Articles 1 and 18.4 of the AD Agreement and Article XVI.4 of the WTO Agreement after finding
that the zeroing methodology, as applied by USDOC in the administrative reviews at issue, was inconsistent with
Articles 9.3 of the AD Agreement and Article VI:2 of the GATT 1994. Appellate Body Report, US – Zeroing
(EC), para. 172.
793 Notice of Final Determination of Sales at Less than Fair Value: Certain Cut-To-Length
Carbon-Quality Steel Plate from Japan, 64 Fed. Reg. 73215 (29 December 1999), Exhibit JPN-10.

that the reasoning of the Appellate Body in US – Softwood Lumber V is flawed and should not be
followed by this Panel.
(ii) Evaluation by the Panel
7.178 We recall that in our analysis above of mode l zeroing procedures, as such, we have endorsed
the findings of previous panel and Appellate Body reports that zeroing is inconsistent with Article 2.4.2
of the AD Agreement when applied in the context of average-to-average comparisons when establishing
margins of dumping during the investigation phase.794 In that context, we have also explained why we
consider that the arguments of the United States regarding the reasoning of the Appellate Body's
analysis in US – Softwood Lumber V are insufficient to warrant reconsideration of that finding.
7.179 In light of the foregoing, we find that by using model zeroing in the anti-dumping investigation
of imports of certain cut-to-length carbon qua lity steel products from Japan, USDOC acted
inconsistently with Article 2.4.2 of the AD Agreement.
(b) Article 2.4 of the AD Agreement
(i) Arguments of the Parties
7.180 Japan submits that the use of model zeroing in the anti-dumping investigation of imports of
cut-to-length carbon quality steel products from Japa n was inconsistent with the fair comparison
requirement of Article 2.4 of the AD Agreement because it resulted in an unfair, biased comparison
between export price and normal value.
7.181 The United States argues that Article 2.4 of the AD Agreement contains no obligations with
respect to zeroing.
(ii) Evaluation by the Panel
7.182 We exercise judicial economy with respect to this claim of Japan.795
(c) Articles 3.1-3.5 of the AD Agreement
(i) Arguments of the Parties
7.183 Japan submits that the use of model zeroing in the anti-dumping investigation of imports of
cut-to-length carbon quality steel products from Japan was inconsistent with Articles 3.1-3.5 of the
AD Agreement because it distorted the determination of dumping and thus led to an injury
determination not based on an objective examination of positive evidence.
7.184 The United States rejects the argument that the USITCs injury determination was not based on
positive evidence regarding the volume of dumped imports and the magnitude of dumping because,
firstly, the decision not to offset negative margins was WTO-consistent and, secondly, Japan's argument
is speculative because it cannot be presumed that a different methodology would have resulted in
different margins of dumping.

794 Supra, paras. 7.75-7.86.
795 Supra, paras. 7.87-7.88 and 7.152.

(ii) Evaluation by the Panel
7.185 Japan requests us to make a finding that the measure that we have found to be inconsistent with
Article 2.4.2 of the AD Agreement is also inconsistent with Articles 3.1-5 of the AD Agreement. A
panel may exercise judicial economy where it is claime d that the same measure is inconsistent with
more than one provision if it considers that multiple findings under various provisions are not necessary
to resolve the dispute.
796 We recall our reasoning above in connection with Japan's claims under
Article 3 in relation to the model zeroing procedures as such in the context of original investigations.
As in the case of Japan's claims under Articles 3.1-3.5 with respect to the model zeroing procedures as
such, Japan's claims under Article 3.1-3.5 with respect to the application of zeroing in the investigation
of imports of certain cut-to-length carbon quality steel products from Japan are entirely dependent upon
the inconsistency of this measure with Article 2 of the AD Agreement. Absent any independent grounds
to support the claims of Japan under Article 3 of the AD Agreement we do not consider it necessary to
make findings on these claims.
(d) Article 1 of the AD Agreement
7.186 We do not consider it necessary to make a finding on the claim of Japan that the use of model
zeroing in the anti-dumping investigation of imports of cut-to-length carbon quality steel products from
Japan was inconsistent with Article 1 of the AD Agreement as a consequence of the inconsistency with
various provisions of the AD Agreement and Article VI of the GATT1994.
797
C. CLAIMS REGARDING ZEROING IN THE CONTEX T OF PERIODIC REVIEWS AND NEW SHIPPER
REVIEWS
7.187 Japan claims that maintaining simple zeroing procedures in the context of periodic reviews 798
and new shipper reviews 799 is inconsistent with (1) Articles 2.1 and 2.4.2 of the AD Agreement and
Articles VI:1 and VI:2 of the GATT 1994; (2) Article 2.4 of the AD Agreement; (3) Articles 9.1-9.3 and
9.5 of the AD Agreement; and (4) Articles 1 and 18.4 of the AD Agreement and Article XVI:4 of the
WTO Agreement.
7.188 Japan also claims that, as a consequence of simple zeroing, anti-dumping measures resulting
from 11 periodic reviews 800 are inconsistent with Articles 2.1 and 2.4.2 of the AD Agreement and

796 Supra, paras. 7.87-7.88.
797 Supra, paras.7.171-7.174.
798 By "periodic review" Japan means the "periodic review of the amount of Anti-dumping duty"
pursuant to Section 751(a)(1) of the Tariff Act, which requires the administering authority to review and
determine the amount of any anti-dumping duty at least once during each 12-month period beginning on the

anniversary of the date of publication of an anti-dumping duty order if a request for such a review has been
received.
799 The term "new shipper review", as used by Japan, means a review conducted pursuant to Section
751(a)(2)(B) of the Tariff Act, which provides for a review to determine an individual weighted average margin of
dumping for an exporter or producer of merchandise subject to an anti-dumping duty order if the administering
authority receives a request from an exporter or producer establishing that such exporter or producer did not
export the merchandise during the period of investigation a nd that the exporter or producer is not affiliated with
any exporter or producer who exported the subject merchandise during that period.
800 Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan, and Tapered
Roller bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan; Final Results
of Anti-dumping Duty Administrative Reviews, 66 Fed. Reg. 15078 (15 March 2001); Anti-friction Bearings (other
Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Romania, Singapore,
Sweden, and the United Kingdom; Final Results of Anti-dumping Duty Administrative Reviews and Revocation of
Orders in Part , 65 Fed. Reg. 49219 (11 August 2000); Anti-friction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof from France, Germany, Italy, Japan, Sweden, and the United Kingdom; Final
Results of Anti-dumping Duty Administrative Reviews and Revocation of Orders in Part , 66 Fed. Reg. 36551

Articles VI:1 and VI:2 of the GATT 1994; (2) Article 2.4 of the AD Agreement; (3) Articles 9.1-9.3 of
the AD Agreement; and (4) Article 1 of the AD Agreement.
1. Claims regarding zeroing procedures as such in the context of periodic reviews and new
shipper reviews
(a) Articles 2.1 and 2.4.2 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994
(i) Arguments of the Parties 801
7.189 Japan asserts that in conducting periodic reviews pursuant to Article 9.3 of the AD Agreement
and new shipper reviews pursuant to Article 9.5 of the AD Agreement USDOC determines weighted
average dumping margins for exporters and assessment rates for individual importers by using simple
zeroing procedures. Because the first sentence of Ar ticle 9.3 refers to "the margin of dumping as
established under Article 2" the term "margin of dumpi ng" in Article 9 must be interpreted in light of
Article 2 of the AD Agreement. Moreover, as a result of the definitions in Article 2.1 and Article VI, the
terms "dumping", "margins of dumping" and "pro duct" have a uniform meaning throughout the
AD Agreement. It follows that the simple zeroing procedures maintained by USDOC in relation to
periodic reviews and new shipper reviews are inc onsistent with Articles 2.1 and 2.4.2 of the
AD Agreement and with Articles VI:1 and VI:2 of the GATT 1994 because they fail to provide for a
determination of dumping, and calculation of a margin of dumping, for the product as a whole. Japan
submits that the Appellate Body has already found in US – Zeroing (EC) that the zeroing methodology
at issue in this dispute in the context of periodic reviews is WTO-inconsistent.
7.190 In response to Panel Question 12, Japan submits that the phrase "during the investigation
phase" in Article 2.4.2 of the AD Agreement does not limit the application of that provision to original
investigations and that there is nothing in the context or object and purpose of the AD Agreement to
suggest that the permissible bases of comparison between export price and normal value provided for in
Article 2.4.2 do not apply to Articles 9 and 11. Article 9.3 expressly states that the calculation of
margins of dumping under that provision is subject to Article 2 as a whole and does not exclude
Article 2.4.2. However, Japan argues that in a ny event, whether or not Article 2.4.2 applies to
proceedings other than investigati ons under Article 5 is not decisive to the outcome of this dispute
because the obligation to determine dumping, and to calculate a margin of dumping, for the product as a
whole applies to the entire AD Agreement. In the latter regard, Japan indicates that it takes no position
on the issue of whether Article 2.4.2 applies to anti-dumping proceedings other than investigations and
considers that the Panel does not need to decide this issue.
7.191 The United States submits that there is no obligation in the AD Agreement to establish one
margin of dumping for the product as a whole. The Unites States considers that the reasoning of the
Appellate Body in US – Zeroing (EC) is unpersuasive. The United States also submits that since the
text of Article 2.4.2 expressly limits its applicab ility to "the investigati on phase", Article 2.4.2 only
applies to investigations within the meaning of Article 5 of the AD Agreement. The limited application

(12 July 2001); Ball Bearings and Parts Thereof From France, Germany, Italy, Japan, and the United Kingdom;
Final Results of Anti-dumping Duty Administrative Reviews, 67 Fed. Reg. 55780 (30 August 2002); Ball Bearings
and Parts Thereof From France, Germany, Italy, Japan, and Singapore: Final Results of Anti-dumping Duty
Administrative Reviews, Rescission of Administrative Review in Part and Determination Not to Revoke Order in
Part, 68 Fed. Reg. 35623 (16 June 2003); Anti-friction Bearings and Parts Thereof From France, Germany, Italy,
Japan, Singapore, and the United Kingdom: Final Results of Anti-dumping Duty Administrative Reviews,
Rescission of Administrative Reviews in Part, and Determination To Revoke Order in Part , 69 Fed. Reg. 55574
(15 September 2004).
801 See supra, paras. 7.20-7.32 for the arguments of the parties on whether zeroing procedures, as such,
are measures that can be challenged in WTO dispute settlement.

of Article 2.4.2 to the investigation phase is consiste nt with the divergent functions of investigations
and other proceedings under the AD Agreement and with the existence of various types of duty
assessment systems. The United States submits that Article 9 of the AD Agreement does not incorporate
the requirements of Article 2.4.2. The general reference in Article 9.3 to Article 2 necessarily includes
any limitation found in the text of Ar ticle 2.4.2. Since Article 2.4.2 is by its own terms limited to the
investigation phase, Article 9.3 cannot incorporate the requirements of Article 2.4.2.
(ii) Arguments of Third Parties
7.192 China, the European Communities, Korea, Mexico, Norway and Thailand argue that
maintaining simple zeroing procedures in the cont ext of periodic reviews to assess the amount of
anti-dumping duties is inconsistent with Article 2.4.2 of the AD Agreement. Article 2.4.2 applies to
such reviews because Article 9.3 requires that th e amount of the anti-dumping duty not exceed "the
margin of dumping as established under Article 2". The phrase "during the investigation phase" in
Article 2.4.2 does not limit the applicability of Article 2.4.2 to investigations within the meaning of
Article 5 of the AD Agreement . In the latter regard, the Europ ean Communities argues that in the
absence of a definition of "investigatio n" in Article 2.4.2, this word must be interpreted in light of its
ordinary meaning of "a systematic examination or inquiry or a careful study of or research into a
particular subject". In this sense, the word "inv estigation" also applies to Articles 9 and 11. The
European Communities also argues that the context of the word "investigation" in Article 2.4.2
demonstrates that it is not limited to investigations within the meaning of Article 5.1, that it is possible
to give meaning to the phrase "during the investigation phase" without interpreting it as limiting the
scope of application of Article 2.4.2 and that the negotiating history of the AD Agreement and
"subsequent practice" within the meaning of Article 31(3)(b) of the Vienna Convention support the
view that "during the investigation phase" does not limit the applicability of Article 2.4.2 to
investigations under Article 5.1.
(iii) Evaluation by the Panel
7.193 Japan claims that by maintaining simple zeroing procedures to calculate margins of dumping
and importer-specific assessment rates in periodic reviews and new shipper reviews USDOC violates
Articles 2.1 and 2.4.2 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994. In support of
this claim, Japan submits that Article 2.1 of the AD Agreement and Article VI of the GATT 1994 require
that dumping be determined to exist, and that a margin of dumping be calculated, for the product as
whole, a requirement that applies throughout the AD Agreement and which prohibits zeroing in any
proceeding. Thus, Japan's claim that simple zeroing in the context of periodic reviews and new shipper
reviews is inconsistent with Articles 2.1 and 2.4.2 of the AD Agreement and Article VI:1 and VI:2 of the
GATT 1994 is based on exactly the same reasoning as Japan's claims relating to model and simple
zeroing in the context of original investigations.
802
7.194 In this respect, we recall that in our analysis of the claims of Japan in respect of zeroing in
relation to investigations within the meaning of Article 5 of the AD Agreement we have concluded that
it is permissible within the meaning of Article 17.6(ii) of the AD Agreement to interpret Article VI of the
GATT 1994 and relevant provisions of the AD Agreement to mean that there is no general requirement
to determine dumping and margins of dumping for the product as a whole, which, by itself or in
conjunction with a requirement to establish margin s of dumping for exporters or foreign producers,
entails a general prohibition of zeroing.
803 Specifically, in light of the ordinary meaning and context of
the use of the words "product" and "products", we have concluded that the mere fact that "dumping" and

802 While Japan contests that Article 2.4.2 of the AD Agreement only applies to investigations within the
meaning of Article 5, Japan has expressl y stated that it considers that it is not necessary for the Panel to decide
whether or not Article 2.4.2 applies to proceedings other than investigations under Article 5.
803 Supra, para.7.142.

"margins of dumping" are defined in relation to "product" and "products" does not warrant the
conclusion that under Article 2.1 of the AD Agreement and Article VI of the GATT 1994 the existence
of dumping and margins of dumping can only be established on the basis of an aggregate examination
of export transactions in which export prices that are higher than the normal value are accorded the
same significance as export prices that are less than the normal value.
804 We have also concluded that
the text of Article 2.4.2 of the AD Agreement does not support the view that the AD Agreement and
Article VI of the GATT 1994 must be interpreted to mean that there exists a general prohibition of
zeroing.805 In the latter regard, we have explained our view that to interpret Article 2.4.2 of the AD
Agreement in light of a general prohibition of zeroing under any comparison method would deprive the
average-to-transaction method provided for in the sec ond sentence of Article 2.4.2 of its effectiveness
and would thus be inconsistent with the principle of effective treaty interpretation.806
7.195 Moreover, while we note that Japan finds support for its claims with respect to simple zeroing
in periodic reviews and new shipper reviews in the findings and reasoning of the Appellate Body in US
– Zeroing (EC), we recall in that regard that we have pointed to the difficulties of interpretation of the
meaning and scope of application of the phrase "multiple comparisons ...at an intermediate stage" as
used in the Appellate Body Report in US – Zeroing (EC) 807 and to the limited explanation in that
Appellate Body Report as to why the "product as a whol e" concept is applicable more broadly than in
the specific context of "multiple averaging" in wh ich it is used in the Appellate Body Report in US -
Softwood Lumber V.808
7.196 We find that there are important considerations specific to Article 9 of the AD Agreement that
lend further support to the view that it is permissi ble within the meaning of Article 17.6(ii) of the
AD Agreement to interpret Article VI of the GATT 1994 and relevant provisions of the AD Agreement
to mean that there is no general requirement to determine dumping and margins of dumping for the
product as a whole, which, by itself or in conjunction with a requirement to establish margins of
dumping for exporters or foreign producers, entails a general prohibition of zeroing.
7.197 Article 9.3 of the AD Agreement provides:
The amount of the anti-dumping duty shall not exceed the margin of dumping as established
under Article 2.

 9.3.1 When the amount of the anti-dumping duty is assessed on a retrospective basis,
the determination of the final liability fo r payment of anti-dumping duties shall take
place as soon as possible, normally within 12 months, and in no case more than
18 months, after the date on which a request for a final assessment of the amount of the
anti-dumping duty has been made. Any refund shall be made promptly and normally in
not more than 90 days following the determ ination of final liability made pursuant to
this sub-paragraph. In any case, where a refund is not made within 90 days, the
authorities shall provide an explanation if so requested.

 9.3.2 When the amount of the anti-dumpi ng 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. A refund of any such duty paid in excess of the actual margin
of dumping shall normally take place within 12 months, and in no case more than

804 Supra, para. 7.112.
805 Supra, para. 7.141.
806 Supra, paras. 7.127-7.137.
807 Supra, para. 7.100.
808 Supra, para. 7.101.

18 months, after the date on which a request for a refund, duly supported by evidence,
has been made by an importer of the product subject to the anti-dumping duty. The
refund authorized should normally be made within 90 days of the above-noted
decision.

 9.3.3 In determining whether and to wh at extent a reimbursement should be made
when the export price is constructed in accordance with paragraph 3 of Article 2,
authorities should take account of any change in normal value, any change in costs
incurred between importation and resale, and any movement in the resale price which
is duly reflected in subsequent selling prices, and should calculate the export price with
no deduction for the amount of anti-dumping duties paid when conclusive evidence of
the above is provided. (footnote omitted)

7.198 Article 9.3 requires that the amount of the anti-dumping duty not exceed the margin of dumping
as established under Article 2. Articles 9.3.1 and 9.3.2 specify certain rules to implement this
requirement when the amount of the anti-dumping duty is assessed on a retrospective basis
(Article 9.3.1) or on a prospective basis (Article 9.3.2). In the context of Article 9.3, a margin of
dumping is calculated for the purpose of determining the final liability for payment of anti-dumping
duties under Article 9.3.1 or for the purpose of determining the amount of anti-dumping duty that must
be refunded under Article 9.3.2. An anti-dumping duty is paid by an importer in respect of a particular
import of the product on which an anti-dumping duty has been imposed. An importer does not incur
liability for payment of an anti-dumping duty in respect of the totality of sales of a product made by an
exporter to the country in question but only in respect of sales made by that exporter to that particular
importer. Thus, the obligation to pay an anti-dumping duty is incurred on an importer- and
import-specific basis.

7.199 Since the calculation of a margin of dumping in the context of Article 9.3 is part of a process of
assessing809 the amount of duty that must be paid or that must be refunded, this importer- and
import-specific character of the payment of anti- dumping duties must be taken into account in
interpreting the meaning of "margin of dumping". In our view, the interpretation advanced by Japan,
according to which a margin of dumping under Article 9.3 must be determined on the basis of an
aggregate examination of export prices during a review period in which export prices above the normal
value carry the same weight as export prices below the normal value, is inconsistent with the importer-
and import-specific character of the obligation to pay an anti-dumping duty. The implication of such an
interpretation is that, if a Member applies a retrospective duty assessment system, a Member may be
precluded from collecting anti-dumping duties in respect of particular export transactions at prices less
than normal value to a particular importer at a pa rticular point of time because of prices of export
transactions to other importers at a different point in time that exceed normal value. We find it
significant, in this respect, that Article 9.3 contains no language requiring such an aggregate
examination of export transactions in determini ng final liability for payment of anti-dumping duties
under Article 9.3.1 or in determining the amount, if any, of refund due under Article 9.3.2.
810

809 Under Article 9.3 an anti-dumping is assessed either on a retrospective basis or on a prospective basis.
It follows from this context that the word "assess(ed)" in Article 9.3 refers to the timing of the determination of the
amount of the anti-dumping duty, (more particularly, the timing of that determination relative to the importation
of the product).
 810 Article 9.3.2 also does not require that "the actual margin of dumping" be determined in respect of a
particular period of time. Japan asserts that in an assessment proceeding the margin of dumping must be
determined in relation to a "review period". Response of Japan to Panel Question 55(c). However, the concept of
a "review period" does not appear in Article 9.3.2. As a consequence, there is no textual basis to read into
Article 9.3.2 a requirement to conduct an examination at an aggregate level by linking the phrase "actual margin"
to "review period".

7.200 We consider, in this respect, that Article 9.4(ii) of the AD Agreement is important contextual
support for the view that the term "margin of dumping" as used in Article 9.3 does not require a Member
to carry out an aggregate examination of export pri ces in which the same weight is accorded to export
prices that exceed the normal value as to export prices that are less than the normal value.
7.201 Article 9.4(ii) expressly refers to the calcula tion of the liability for payment of anti-dumping
duties on the basis of a prospective normal value. 811 Under such a system, the amount of liability for
payment of anti-dumping duties is determined at the time of importation on the basis of a comparison
between the prices of individual export tran sactions and the prospective normal value. 812 Under this
system, an importer who imports a product the export price of which is equal to or higher than the
prospective normal value cannot incur liability for payment of anti-dumping duties. There is no textual
support in Article 9 for the proposition that export pr ices in other transactions are of any relevance in
this respect.813
7.202 Japan argues that the argument of the United Stat es that in a prospective normal value system
margins of dumping are determined with respect to individual transactions confuses the distinct
concepts of the "amount of the anti-dumping duty", on the one hand, and the "margin of dumping", on
the other. 814 Japan argues, in this regard, that "w hen the customs authorities impose and collect
anti-dumping duties on individual entries they are not calculating margins of dumping within the
meaning of Article 2".
815 Japan considers that the collection of a variable duty on an entry-by-entry
basis in a prospective normal system does not involve the establishment of margins of dumping in
respect of individual export transactions because the actual margin of dumping in such a system is only
determined in a review under Article 9.3.2.
816 Thus, Japan asserts that in a prospective normal value
system "... the final liability for duties must be assessed in a review under Article 9.3.2".817
7.203 In our view, to deny the relevance of the relationship that exists in Article 9.3 between "margin
of dumping" and the payment of an anti-dumping duty is illogical and contrary to the text and purpose
of Article 9. Article 9.3 expressly establishes a relationship between the amount of anti-dumping duty
and the margin of dumping by providing that "the amount of the anti-dumping duty shall not exceed the
margin of dumping as established under Article 2". Although "amount of anti-dumping duty" and
"margin of dumping" may be "distinct concepts", that does not mean that the fact that Article 9.4(ii)
expressly refers to a prospective normal value system is without relevance to the interpretation of the
concept of "margin of dumping" as used in Article 9. 818 Nothing in the text of Articles 9.3 and 9.4

811 Article 9.4(ii) provides that an anti-dumping duty applied to imports of exporters or producers not
examined individually shall not exceed, "where the liability for payment of anti-dumping duties is calculated on
the basis of a prospective normal value, the difference between the weighted average normal value of the selected
exporters or producers and the export prices of exporters or producers not individually examined."
812 See also Panel Report, US – Softwood Lumber V (Article 21.5) (appeal pending) para. 5.53 ("Under a
prospective normal value duty system, anti-dumping duties are assessed as individual import transactions occur,
by comparing a transaction-specific export price against a prospective normal value.")
813 See also Panel Report, US – Softwood Lumber V (Article 21.5), (appeal pending) paras. 5.53-5.57.
814 Japan Opening Statement at the Second Substantive Meeting of the Panel with the Parties, para. 27.
815 Ibid, para. 28.
816 Ibid, 30 and 32.
817 Ibid, para. 32.
818 Japan argues that its position is supported by the distinction drawn by the Appellate Body in
paragraphs 123-124 of its report in EC – Bed Linen (Article 21.5 – India) between the determination of the margin
of dumping, on the one hand, and the imposition and collection of anti-dumping duties, on the other. However,
read in light of footnote 155, it is clear that paragraphs 123-124 of this report discuss the distinction between the
determination of the existence of margins of dumping under Article 2.4.2, on the one hand, and the imposition and
collection of anti-dumping duties under Article 9, on the other. These paragraphs contain no discussion of the
relationship between "amount of anti-dumping duty" and "margin of dumping" in the specific context of Article 9.

indicates that, as implied by Japan's interpretation, if an anti-dumping duty has been collected on a
particular transaction in which the export price is below the prospective normal value, authorities must
subsequently re-assess the amount of that duty by calculating a margin of dumping that reflects prices
of other export transactions, including prices of export transactions that are higher than the normal
value.
819
7.204 In this regard, we consider that Japan's argument that in a prospective normal value system final
liability for payment of anti-dumping duties must be determined through a review procedure under
Article 9.3.2 is inconsistent with the prospective nature of such a system. It is clear from the text of
Article 9.4(ii) of the AD Agreement that in a prospective normal system " liability for payment of
anti-dumping duties is calculated on the basis of a prospective normal value". Although Article 9.3.2.
provides for a refund procedure when the amount of anti-dumping duties is assessed on a prospective
basis, a requirement that arguably also applies to prospective normal value systems referred to in Article
9.4(ii), a refund procedure in a prospective duty assessment system is not a determination of final
liability for payment of anti-dumping duties . The phrase "determination of the final liability for
payment of anti-dumping duties" is used in Artic le 9.3.1 in connection with retrospective duty
assessment procedures but does not figure in Article 9.3.2.
7.205 We therefore consider that, notwithstanding the possibility of a refund, liability for payment of
anti-dumping duties is final in a prospective normal value system at the time of importation of a
product. Because in such a system liability for paym ent of anti-dumping duties is incurred only to the
extent that prices of individual export transactions are below normal value, we consider that the fact that
express provision is made in the AD Agreement for this sort of system confirms that the concept of
dumping can apply on a transaction-specific basis to prices of individual export transactions below the
normal value and that the AD Agreement does not require that in calculating margins of dumping the
same significance be accorded to export prices above the normal value as to export prices below the
normal value.
7.206 If in a prospective normal value system individual export transactions at prices less than normal
value can attract liability for payment of anti-dumping duties, without regard to whether or not prices of
other export transactions exceed normal value, we see no reason why liability for payment of
anti-dumping duties may not be similarly assessed on the basis of export prices less than normal value
in the retrospective duty assessment system applied by the United States that is the subject of Japan's "as
such" and "as applied" claims in this dispute.
7.207 We note, in this regard, that Japan has criticized a statement made by the United States in its
Second Submission that "[t]he US assessment system operates in a manner comparable to a prospective
normal value system, examining individual export transactions, albeit using contemporaneous normal
values".820 Japan asserts that this statement is misleading because in review proceedings USDOC does
not assess duties on each entry of a product but undertakes multiple comparisons to determine a single
overall margin of dumping for all transactions in the review period and a single overall
importer-specific assessment rate fo r each importer that will apply to future entries of the product.
Japan asserts that "whereas an entry-by-entry co mparison would arrive at multiple entry-specific

Thus, we fail to see how this report supports Japan's position that the basis upon which liability for payment of an
anti-dumping duty is incurred is without relevance to the interpretation of the concept of margin of dumping in
Article 9.3.
819 We note, in this respect, the observation in the panel report in US – Softwood Lumber V (Article 21.5)
(appeal pending) that "...in the context of a prospec tive normal value duty assessment system, the 'margin of
dumping' referred to in Article 9.3 is the transaction-sp ecific margin of dumping established in respect of the
specific import transaction being assessed". Panel Report, US – Softwood Lumber V (Article 21.5) (appeal
pending), para. 5.53.

conclusions that would each have regulatory con sequences for a single entry, the United States'
assessment system arrives at a single conclusion pur portedly for all transactions, and that conclusion
has product-wide consequences."821
7.208 The issue before us is whether the AD Agreement must be interpreted to mean that in
determining whether dumping exists and in calculating margins of dumping Members are obligated to
accord the same weight to export prices above the normal value as to export prices below the normal
value. The express reference in Article 9.4(ii) to a prospective normal value system in our view is an
important reason why the answer to this question must be negative because it demonstrates that liability
for payment of anti-dumping duties may be based on a comparison of a prospective normal value and
prices of individual export transactions below the normal value. 822 We note, in this regard, that the
United States has simply suggested that its duty assess ment system is "comparable" to a prospective
normal value system in that it determines liability for individual export transactions. That USDOC does
not examine and assess a duty on each transaction individually at the time the transaction takes place but
examines a number of transactions on a retrospectiv e basis and calculates a single margin of dumping
and a single assessment rate for importers does not mean that the system cannot be said to be
"comparable" to a prospective normal value system in that the amount of liability for payment of
anti-dumping duties is determined by the extent to wh ich prices of particular import transactions are
below the normal value. As stated by the United States, "the total amount of anti-dumping duties
collected [in the US duty assessment] system is th e same as if duties were collected on each import
transaction".
823 We see no textual basis in Articles 9.3 and 9.4 for the view that if an authority assesses
the amount of the anti-dumping duty on a retrospective basis by examining export transactions that have
occurred during a certain period, it is obligated to take into account export prices above the normal
value that it would not have been required to take into account if it had applied a prospective normal
system.
7.209 We conclude that Article 9.3 of the AD Agreement, especially when interpreted in light of the
express reference to a prospective normal value system in Article 9.4(ii), lends further support to the
view that it is permissible within the meaning of Article 17.6(ii) of the AD Agreement to interpret
Article VI of the GATT 1994 and relevant provisions of the AD Agreement to mean that there is no
general requirement to determine dumping and margins of dumping for the product as a whole, which,
by itself or in conjunction with a requirement to establish margins of dumping for exporters or foreign
producers, entails a general prohibition of zeroing.
7.210 With respect to Article 2.4.2 of the AD Agreement, one of the provisions invoked by Japan in
support of its claim regarding simple zeroing procedures in relation to periodic reviews and new shipper
reviews, we recall our finding that Article 2.4.2 do es not support the view that zeroing is prohibited
outside the context of the average-to-average co mparison method when estab lishing the existence of
margins of dumping during the investigation phase. 824 Therefore, whether or not Article 2.4.2 applies

821 Japan Response to Panel Question 43, para. 34.
822 We note that in paragraph 131 and accompanying footnote 234 of its Report in US – Zeroing (EC) the
Appellate Body explains that the text of Article 9.3 of the AD Agreement does not suggest that final anti-dumping
liability cannot be assessed on a transaction- or importer-specific basis and that the possibility that aggregation of
results of multiple comparisons might result in a negative value does not mean that authorities would be required
to compensate an importer for the amount of that nega tive value or that liability for payment of anti-dumping
duties may not be based on a prospective normal value. It is not entirely clear precisely how we should understand
these statements, given that the Appellate Body has also explained that Article 9.3 requires that the total amount of
anti-dumping duties collected on all entries of the subjec t product be compared with an exporter's or foreign
producer's margin of dumping for the product as a whole.
823 US Comments on Japan's Answers to the Panel's questions in connection with the Second Substantive
Meeting of the Panel with the Parties, para. 36.
824 Supra, paras. 7.113-7.140

to proceedings under Article 9 of the AD Agreement does not affect our conclusion that the use of
simple zeroing in such proceedings is not prohibited.
7.211 Even assuming, arguendo, that Article 2.4.2 were to be construed as prohibiting zeroing under
any comparison method, we would not uphold Japan's claim because we do not consider that
Article 2.4.2 can be interpreted to be applicab le to reviews under Articles 9.3 and 9.5 of the
AD Agreement.
825 Bearing in mind Article 17.6(ii) of the AD Agreement, we find that it is permissible
to interpret Article 2.4.2 as being applicable only to investigations within the meaning of Article 5 of the
AD Agreement. In this respect, we consider that the fact that Article 9.3 of the AD Agreement provides
that the amount of the anti-dumping duty must not exceed the margin of dumping "as established under
Article 2" and does not specifically exclude Article 2.4.2 is not sufficient to conclude that Article 2.4.2
applies to reviews under Article 9. The reference made in Article 9.3 to "Article 2" in general cannot
override the limitation on the applicability of Article 2.4.2 expressed in the text of that provision.826
7.212 The question of the applicability of Article 2.4.2 has been the subject of detailed argumentation
and analysis in the recent panel report in US – Zeroing (EC). We agree with the reasoning and
conclusion of the majority of that panel regarding the limited applicability of Article 2.4.2. We find the
following points particularly pertinent in this regard.
7.213 First, Article 2.4.2 of the AD Agreement applies to the establishment of "the existence of
margins of dumping during the investigation phase". 827 Thus, the phrase "during the investigation
phase" defines when Article 2.4.2 is applicable. In terpreting "during the investigation phase" to apply
to any activity of an investigating authority that involves the calculation of an anti-dumping margin
would deprive that phrase of its useful effect because it would essentially apply whenever an authority
determines a margin of dumping. By contrast, interp reting "during the investigation phase" in light of
Article 5, the provision of the AD Agreement that is the most specific w ith regard to the concept of
investigation, makes it possible to make a meaningf ul distinction between the investigation phase and
other phases.828 Second, whereas there is textual similarity between Articles 2.4.2 and Article 5.1 of the
AD Agreement, the AD Agreement does not describe the purpose of proceedings under Articles 9 and 11
in terms of establishing "the existence of margins of dumping during the investigation phase" but uses
rather different terminology in these provisions.829
7.214 Third, while the AD Agreement does not define the word "investigation," it does not follow that
"investigation" in Article 2.4.2 must necessarily be interpreted in accordance with a generic dictionary

825 We recall that Japan has expressly stated that it considers that it is not necessary for the Panel to
decide whether or not Article 2.4.2 applies to proceedings other than investigations under Article 5. Nevertheless,
we consider it appropriate to address this issue as add itional support for our view that simple zeroing is not
prohibited in the context of periodic reviews and new shipper reviews. We also note that in our analysis of
whether Article 2.4.2 contains a general prohibition of zeroing, we have already indicated that we agree with the
view that Article 2.4.2 is limited in its application to investigations within the meaning of Article 5. ( supra,
paragraph 6.119). We consider that we must state the reasons for that position.
826 As stated by the panel in US – Zeroing (EC):
"If Article 2 itself provides that Article 2.4.2 does not apply in the case of reviews under Article 9.3, that
is not overridden by the fact that 'Article 2' is speci fically referred to in Article 9.3. Absent anything
explicitly to the contrary, that reference to 'Article 2' in Article 9.3 must be read as including any
limitation that is expressed in Article 2 itself." Panel Report, US – Zeroing(EC), para. 7.146 (emphasis in
original).
827 In US – Softwood Lumber V , the Appellate Body stated that "Article 2.4.2 of the AD Agreement
permits the use of three methodologies, applicable during the investigation phase, for establishing the existence of
margins of dumping". Appellate Body Report, US – Softwood Lumber V, para. 76 (emphasis added).
828 Cf. Panel Report, US – Zeroing (EC), paras. 7.153-7.155.
829 Panel Report, US – Zeroing (EC), paras. 7.156-7.157.

definition of that word. The concept of "investigation" in the AD Agreement in most cases refers to the
particular phase of the proceeding in which the authorities determine whether conditions exist
justifying the imposition of an anti-dumping measure.830 That "investigation" has a specific meaning is
also apparent from the fact that Articles 11.4 and 12.3 provide that certain rules contained in Article 6
applicable to "investigations" shall also apply to "reviews" and from the distinction made in Article 18
between "investigations" and reviews. 831 Fourth, reports of panels and the Appellate Body provide
ample support for the view that investigations are phases or stages that are distinct from other phases or
stages of anti-dumping and countervailing duty proceed ings, that there is a difference between the
purpose of investigations and the purpose of other phases of anti-dumping or countervailing duty
proceedings, and that provisions that apply to investigations do not ipso facto apply to other stages or
phases of anti-dumping and countervailing duty proceedings, such as sunset reviews under Article 11 of
the AD Agreement or Article 21 of the SCM Agreement.832 833
7.215 Finally, we agree with the majority of the panel in US – Zeroing (EC) that the arguments of the
European Communities concerning possible alternativ e interpretations of "during the investigation
phase", subsequent practice, negotiating history and object and purpose of Article 9.3 and the
AD Agreement do not support its position that Article 2.4.2 is not limited in its application.834
7.216 In light of the foregoing, the Panel finds that by maintaining simple zeroing procedures in the
context of periodic reviews and new shipper re views USDOC does not act inconsistently with
Articles 2.1 and 2.4.2 of the AD Agreement and Articles VI:1 and VI:2 of the GATT 1994.
(b) Article 2.4 of the AD Agreement
7.217 The arguments of Japan and the United States on whether Article 2.4 of the AD Agreement
proscribes the use of simple zeroing in periodic revi ews and new shipper reviews are identical to their
arguments on whether Article 2.4 proscribes zeroing in the context of investigations within the meaning
of Article 5 of the AD Agreement.835
7.218 In respect of investigations, we have found th at simple zeroing is not inconsistent with
Article 2.4 of the AD Agreement.836 That finding was based on our conclusion that to interpret the "fair
comparison" requirement of Article 2.4 as creati ng a general prohibition of zeroing would undermine
the effectiveness of other provisions of the AD Agreement. We have also explained why we consider
that an interpretation that zeroing is prohibited under any comparison method and in any type of
proceeding is not supported by the provisions in Article 9 on the assessment of the amount of
anti-dumping duties.

830 Ibid, paras. 7.158-7.167.
831 Ibid, paras. 7.168-7.169.
832 Panel Report, US – Zeroing (EC ), paras. 7.771-7.188. We also note, in this respect, the recent
Appellate Body Report in US – Anti-Dumping Measures on Oil Country Tubular Goods, which confirmed that,
because of the expression "anti-dumping investigations", Article 3.3 of the AD Agreement does not apply to sunset
reviews under Article 11. Appellate Body Report, US – Anti-Dumping Measures on Oil Country Tubular Goods,
para. 170.
 833 With regard to the distinction between the purpose of investigations and proceedings under
Article 9.3 of the AD Agreement , we recall our analysis above that th e argument that in duty assessment
proceedings under Article 9.3 export transactions must be considered on an aggregate basis is inconsistent with
the text and purpose of that provision.
834 Panel Report, US – Zeroing (EC), paras. 7.189-7.220.
835 This also applies to arguments submitted by China, the European Communities, Norway and Thailand
in support of their view that maintaining simple zeroing procedures in the context of reviews under Article 9 is
inconsistent with Article 2.4 of the AD Agreement.

836Supra, paras. 7.153-7.161.

7.219 In light of the foregoing, the Panel finds that by maintaining simple zeroing procedures in the
context of periodic reviews and new shipper revi ews, USDOC does not act inconsistently with
Article 2.4 of the AD Agreement.
(c) Articles 9.1-9.3 and 9.5 of the AD Agreement
7.220 Japan argues that the inconsistency of simple zero ing procedures, as such, with Articles 2.1,
2.4 and 2.4.2 of the AD Agreement necessarily gives rise to violations of Articles 9.1-9.3 and 9.5 of the
AD Agreement.
7.221 We have found that by maintaining simple zer oing procedures in the context of periodic
reviews and new shipper reviews USDOC does not act inconsistently with Articles 2.1 and 2.4.2 of the
AD Agreement, Articles VI:1 and VI:2 of the GATT 1994 and Article 2.4 of the AD Agreement .
Therefore, we reject Japan's consequential claims under Articles 9.1-9.3 and 9.5 of the AD Agreement.
7.222 The Panel finds that by maintaining simple zeroing procedures in the context of periodic
reviews and new shipper reviews USDOC does not act inconsistently with Articles 9.1-9.3 and 9.5 of
the AD Agreement.
(d) Articles 1 and 18.4 of the AD Agreement and Article XVI:4 of the WTO Agreement
7.223 We have found that by maintaining simple zeroing procedures in the context of periodic
reviews and new shipper reviews USDOC does not act in consistently with Article 2.1 and 2.4.2 of the
AD Agreement, Articles VI:1 and VI:2 of the GATT 1994 and Article 2.4 of the AD Agreement .
Therefore, we reject Japan's consequentia l claims under Articles 1 and 18.4 of the AD Agreement and
Article XVI:4 of the WTO Agreement.
7.224 The Panel finds that by maintaining simple zeroing procedures in the context of periodic
reviews and new shipper reviews USDOC does not act inconsistently with Articles 1 and 18.4 of the
AD Agreement and with Article XVI:4 of the WTO Agreement.
2. Claims regarding simple zeroing as applied in the context of certain periodic reviews
7.225 Japan submits that in 11 periodic reviews
837 USDOC acted inconsistently with Articles 1, 2.1,
2.4.2, 2.4 and 9.1 to 9.3 of the AD Agreement and with Articles VI:1 and VI:2 of the GATT 1994 by
using simple zeroing. The arguments of Japan in support of these claims are the same as in the case of
Japan's "as such "claims relating to periodic reviews and new shipper reviews.
7.226 For the reasons explained in the previous section, we reject the claims of Japan that simple
zeroing as applied in these periodic reviews is inc onsistent with Articles 2.1 and 2.4.2 of the
AD Agreement, Articles VI:1 and VI:2 of the GATT 1994 and Article 2.4 of the AD Agreement.
Therefore, we also reject Japan's consequential cl aims that the application of simple zeroing in these
reviews is inconsistent with Articles 1 and 9.1-9.3 of the AD Agreement.
7.227 The Panel finds that by applying simple zeroing in 11 periodic reviews USDOC did not act
inconsistently with Articles 1, 2.1, 2.4.2, 2.4 and 9.1-9.3 of the AD Agreement and with Articles VI:1
and VI:2 of the GATT 1994.

837 Supra, footnote 800.

D. CLAIMS REGARDING ZEROING PROCEDURES IN THE CONTEXT OF CHANGED CIRCUMSTANCES
REVIEWS AND SUNSET REVIEWS
7.228 Japan claims that maintaining zeroing procedures in the context of "changed circumstances"
reviews838 and "sunset" reviews839 is inconsistent as such with Articles 2 and 11 of the AD Agreement.
7.229 Japan also claims that USDOC acted inconsistently with Articles 2 and 11 of the AD Agreement
in two specific sunset review proceedings.
1. Zeroing Procedures As Such In the Cont ext of Changed Circumstances Reviews And
Sunset Reviews
(a) Arguments of the Parties
7.230 Japan argues that in conducting changed circum stances reviews and sunset reviews USDOC
relies on margins of dumping that have been calculate d in prior original investigations or periodic
reviews using either model zeroing or simple zeroi ng. It follows from the Appellate Body Report in
US – Corrosion-Resistant Steel Sunset Review that if in a changed circumstances review under Article
11.2 of the AD Agreement or a sunset review under Article 11.3 of the AD Agreement an authority elects
to rely on a dumping margin, that margin must be consistent not only with Article 2.4 of the
AD Agreement but also with the requirements contained in Articles 2.1 and 2.4.2 to determine dumping
and dumping margins for the product as a whole. By relying on margins of dumping calculated in prior
proceedings on the basis of model zeroing or simple zeroing, USDOC thus violates Articles 2.1, 2.4.2
and 2.4 of the AD Agreement. As a consequence, USDOC fails to comply with Articles 11.2 and 11.3 of
the AD Agreement and with the obligation in Article 11.1 to ensure that anti-dumping duties remain in
force only as long as, and to the extent necessary, to counteract dumping.
7.231 The United States submits that the Panel should reject Japan's "as such" claims regarding
changed circumstances reviews and sunset review s because the "fair comparison" requirement in
Article 2.4 of the AD Agreement cannot be read to require offsets in all proceedings and the
Appellate Body in US – Softwood Lumber V only addressed the issue of the use of offsets in the context
of the average-to-average methodology under Article 2.4.2, which by its own terms is only applicable to
investigations. The United States also argues that Japan has never demonstrated that in changed
circumstances reviews and sunset reviews USDOC does rely on margins of dumping calculated in prior
proceedings. Because of the prospective nature of the determinations made by the USDOC in such
reviews, these determinations are not dependent upon any specific magnitude of dumping. Thus, Japan
has failed to establish a prima facie case with respect to the USDOCs likelihood determination in either
a changed circumstances review or a sunset review.
(b) Arguments of Third Parties
7.232 The European Communities , Korea and Norway argue that since Article 2.4.2 of the
AD Agreement applies to reviews under Article 11, mainta ining zeroing procedures in the context of
such reviews is inconsiste nt with Article 2.4.2. Argentina and Norway also submit that maintaining
zeroing procedures in the context of reviews under Article 11 is inconsistent with Article 2.4, and refer
to the Appellate Body report in US – Corrosion-Resistant Steel Sunset Review
 as support for this
position.

838 By "changed circumstances" review, Japan m eans a "review based on changed circumstances"
provided for in Section 751(b) of the Tariff Act.
839 By "sunset" review, Japan means a five-year review provided for in Section 751(c) of the Tariff Act.

(c) Evaluation by the Panel
7.233 Japan's claims concern changed circumstances re views and sunset reviews, which are subject
to, respectively, Articles 11.2 and 11.3 of the AD Agreement:
11.2 The authorities shall review the need for the continued imposition of the duty,
where warranted, on their own initiative or , provided that a reasonable period of time
has elapsed since the imposition of the definitive anti-dumping duty, upon request by
any interested party which submits positive information substantiating the need for a
review. Interested parties shall have the right to request the authorities to examine
whether the continued imposition of the duty is necessary to offset dumping, whether
the injury would be likely to continue or r ecur if the duty were removed or varied, or
both. If, as a result of the review under this paragraph, the authorities determine that
the anti-dumping duty is no longer warranted, it shall be terminated immediately.
11.3 Notwithstanding the provisions of paragraphs 1 and 2, any definitive
anti-dumping duty shall be terminated on a da te not later than five years from its
imposition (or from the date of the most recent review under paragraph 2 if that review
has covered both dumping and injury, or under this paragraph), unless the authorities
determine, in a review initiated before that date on their own initiative or upon a duly
substantiated request made by or on behalf of the domestic industry within a reasonable
period of time prior to that date, that the e xpiry of the duty would be likely to lead to
continuation or recurrence of dumping and injury. The duty may remain in force
pending the outcome of such a review. (footnotes omitted)
7.234 Articles 11.2 and 11.3 are silent on the issue of whether in reviews contemplated by these
provisions authorities are required to calculate margin s of dumping. In this regard, the Appellate
Body's Report in US – Corrosion-Resistant Steel Sunset Review states the following on the relationship
of Article 2 to Article 11.3 of the AD Agreement:
"Article 2 sets out the agreed disciplines in the Anti-Dumping Agreement for
calculating dumping margins. As observed earlier, we see no obligation under
Article 11.3 for investigating authorities to calculate or rely on dumping margins in
determining the likelihood of continuation or recurrence of dumping. However, should
investigating authorities choose to rely upon dumping margins in making their
likelihood determination, the calculation of these margins must conform to the
disciplines of Article 2.4. We see no other provisions in the Anti-Dumping
Agreement according to which Members may calculate dumping margins. In the CRS
sunset review, USDOC chose to base its affirmative likelihood determination on
positive dumping margins that had been pr eviously calculated in two particular
administrative reviews. If these margins were legally flawed because they were
calculated in a manner inconsistent with Ar ticle 2.4, this could give rise to an
inconsistency not only with Article 2.4, but also with Article 11.3 of the Anti-Dumping
Agreement."
840
7.235 In US – Anti-Dumping Measures on Oil Country Tubular Goods, the Appellate Body noted:
"As a separate matter, we refer to Mexico's characterization of the finding in
paragraph 127 of the Appellate Body Report in US – Corrosion-Resistant Steel Sunset
Review. According to Mexico, the Appellate Body clarified in that appeal that, when
an investigating authority 'uses a specific methodology that the Anti-Dumping

840 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 127 (footnote omitted)

Agreement does not require, the authority must not apply that methodology in a
manner that otherwise conflicts with the Ag reement.' In fact, the Appellate Body
found in US – Corrosion-Resistant Steel Sunset Review that, 'should investigating
authorities choose to rely upon dumping margins [in the context of a sunset review
determination], the calculation of these marg ins must conform to the disciplines of
Article 2.4.' Thus, the Appellate Body Report in US – Corrosion-Resistant Steel
Sunset Review does not stand for the proposition that a WTO-inconsistent
methodology used for the calculation of a dumping margin will, in and of itself, taint a
sunset review determination under Article 11.3. The only way the use of such a
methodology would render a sunset review determination inconsistent with
Article 11.3 is if the investigating authority relied upon that margin of dumping to
support its likelihood-of-dumping or likelihood-of-injury determination."
841
7.236 While Japan asserts that in changed circumstances reviews and sunset reviews "USDOC relies
on dumping margins calculated in a prior original investigation or a periodic review as the basis for the
review determination"842, the United States asserts that Japan has not demonstrated that USDOC in fact
relies on such margins in making its determinations in these proceedings. We recall that this claim of
Japan is a claim with respect to the zeroing procedures as such. Specifically, what Japan challenges as
such is USDOCs reliance, in changed circumstan ces reviews and sunset reviews, upon margins of
dumping calculated in prior proceedings in a WTO-inc onsistent manner. In lig ht of our view on the
conditions necessary for a measure to be capable of being challenged as such, i.e. independently of its
application in specific instances, and assuming that the reasoning of the Appellate Body on reliance of
margins of dumping in the context of Article 11.3 is equally applicable to Article 11.2, a key factual
question before the Panel is whether a rule or norm of general and prospective application exists by
virtue of which USDOC relies on margins of dumpi ng calculated in prior proceedings to support its
determinations in changed circumstances reviews and sunset reviews.
7.237 In its First Written Submission, Japan refers to the Owenby Statement as factual support for its
assertion that USDOC relies on these dumping margins in the context of changed circumstances
reviews and sunset reviews.
"I am unaware of a single changed circumstance or sunset review proceeding where the
USDOC calculated a margin. Where appli cable, the USDOC relies on the margins it
calculated in earlier stages of the case as th e basis for these determinations. Thus,
changed circumstance and sunset determinati ons reflect the model or simple zeroing
procedure used in the 'earli er' margin calculations upon which the determinations are
based."
 843
7.238 We also note that Japan rejects as follows the argument of the United States that it has not
demonstrated that USDOC relies on margins of dumping in changed circumstances reviews and sunset
reviews:
"The United States asserts in paragraphs 98-101 of its First Written Submission that
Japan has failed to demonstrate that the magnitude of dumping cited and relied upon by
the USDOC determinations is determina tive of its likelihood determinations.
However, it is disingenuous for the Unite d States to argue that, in its sunset
determinations, it does not rely on the dumping margins calculated for respondents in
the initial investigations and periodic reviews in light of the fact that the US Congress

841 Appellate Body Report, US – Anti-Dumping Measures on Oil Country Tubular Goods, para. 181.
843 Exhibit JPN-1, para. 24; Japan First Written Submission, footnote 200.

has expressly mandated that in sunset reviews, the USDOC " shall consider ... the
weighted average dumping margins determined in the investigation and subsequent
reviews ... ." The mandatory nature of this obligation is further demonstrated by: (1)
the specific requirement in the USDOCs regulations that respondents report this
information in their substantive responses to the USDOCs notice of initiation of sunset
reviews; and (2) the consistent citation by the USDOC, in its sunset determinations, to
the previous margins in concluding that dumping will recur at the specified margin
rates in the event that the anti-dumping order were revoked. It is hard to imagine a
clearer instance in which an authority " actually relies" on the specified types of
information."
844
7.239 Japan cites to the Final Results of Expedited Sunset R eviews: Anti-friction Bearings from
Japan 845 and to the Issues and Decision Memorandum for the Full Sunset Review of
Corrosion-Resistant Carbon Steel Flat Products from Japan 846 to support its assertion that USDOC
consistently cites to "the previous margins in concluding that dumping will recur at the specified margin
rates in the event that the anti-dumping order were revoked".
7.240 In our view, these arguments of Japan do not constitute a sufficient evidentiary basis to
conclude that a rule or norm of general and prospective application exists by virtue of which USDOC
relies on margins of dumping calculated in prior proceedings to support its determinations in changed
circumstances reviews and sunset reviews.
7.241 First, Japan's response to Panel Question 60 only addresses the issue of whether USDOC relies
on historical dumping margins in sunset reviews. It does not address the issue of whether USDOC
relies on such margins in changed circumstances reviews . With respect to changed circumstances
reviews, the only information provided by Japan as factual support for its argument that USDOC relies
on historical margins of dumping is the statement by Valerie Owenby in Exhibit JPN-1. In our view, a
statement of that nature cannot be a sufficient basi s for a finding that a rule or norm of general and
prospective application exists.
7.242 Second, with regard to sunset reviews, we consider that the fact that Section 752(c)(1) of the
Tariff Act847 requires the USDOC to consider "the weighted average dumping margins determined in

844 Japan Response to Panel Question 60, para. 104 (footnotes omitted).
845 Exhibit JPN-22.
846 Exhibit JPN-23.A
 847 Section 752(c)(1) of the Tariff Act provides:

 "(c) DETERMINATION OF LIKELIHOOD OF C ONTINUATION OR RECURRENCE OF DUMPING.

 (1) IN GENERAL. - In a review conducted under Section 751(c), the administering authority shall
determine whether revocation of an anti-dumping duty or der or termination of a suspended investigation
under Section 734 would be likely to lead to continuation or recurrence of sales of the subject merchandise at
less than fair value. The administering authority shall consider -

 ( A) the weighted average dumping margins determined in the investigation and subsequent reviews, and

 (B) the volume of imports of the subject merchandise for the period before and the period after the issuance
of the anti-dumping duty order or acceptance of the suspension agreement.

 (2) CONSIDERATION OF OTHER FACTORS. - If good cause is shown, the administering authority
shall also consider such other price, cost, market, or economic factors as it deems relevant.

the investigation and subsequent reviews" and that , as provided for in Section 752 (c)(3) of the Tariff
Act, USDOC provides to the USITC "the magnitude of the margin of dumping that is likely to prevail if
the order is revoked or the suspended investigation is terminated" does not automatically mean that
USDOC "relies on" margins of dumping in making its determination as to whether "revocation of an
anti-dumping duty order or termination of a suspe nded investigation would be likely to lead to
continuation of or recurrence of sales of the subject merchandise at less than fair value". As explained
by the Appellate Body, USDOC relies on margins of dumping calculated in prior proceedings when
such margins form part of the basis to support a determination of likelihood of recurrence or
continuation of dumping.
848 That USDOC considers dumping margins determined in the investigation
and subsequent reviews and reports to the USITC the margins likely to prevail in the event of
revocation of an anti-dumping duty does not mean that such margins are part of the rationale of
USDOCs determinations regarding likelihood of continuation or recurrence of dumping.849 Therefore,
Japan uses the term "rely on" in a sense that is diffe rent from the manner in which it has been used by
the Appellate Body. Japan thus has failed to provide factual support for its position that USDOC relies
on historical margins of dumping in the sense in which the Appellate Body used that term.
7.243 We conclude that Japan has failed to adduce evidence necessary to establish that a rule, norm or
standard of general and prospective application exists by virtue of which USDOC relies on margins of
dumping calculated in prior proceedings to support its determinations in changed circumstances
reviews and sunset reviews. We emphasize that we do not make a factual finding that USDOC does not
rely on such margins in this context. Rather, we consider that based upon the evidence presented by
Japan we cannot find that USDOC relies on such margins. We are mindful that we may not make a case
for a party.
7.244 In light of the foregoing, the Panel finds that Japan has failed to make a prima facie case that by
maintaining zeroing procedures in the context of changed circumstances reviews and sunset reviews
USDOC acts inconsistently with Articles 2 and 11 of the AD Agreement.
2. "As applied" claims regarding two sunset reviews
(a) Arguments of the Parties
7.245 Japan claims that anti-dumping measures adopted pursuant to two sunset reviews are
inconsistent with the AD Agreement and GATT 1994 because in these reviews the investigating
authorities relied on dumping margins calculated usi ng the standard zeroing procedures. This "as

 (3) MAGNITUDE OF THE MARGIN OF DUMPING. - Th e administering authority shall provide to the
Commission the magnitude of the margin of dumping that is likely to prevail if the order is revoked or the
suspended investigation is terminated. The administering authority shall normally choose a margin that was
determined under Section 735 or under subsection (a) or (b)(1) of Section 751."

848 Supra, para. 7.235.
849 Our view that the issue of the reporting by USDOC of a margin of dumping to the USITC is distinct
from the issue of whether USDOC relies on previously calculated margins of dumping to support a determination
in a sunset review is consistent w ith the analysis of the panel in US – Anti-Dumping Measures on Oil Country
Tubular Good. That panel observed that "we can find no provision of the AD Agreement, and Mexico has cited
none, that requires such 'reporting' of a margin likely to pr evail – this appears to be an element of US law that is
not derived from an element of the AD Agreement". Panel Report, US – Anti-Dumping Measures on Oil Country
Tubular Goods, para. 7.83. Thus, while we note that in the two cases referred to by Japan (the sunset reviews of
anti-friction bearings from Japan and of corrosion-resistant carbon steel flat products from Japan) USDOC applied
what it described as its normal policy of reporting to the USITC a margin of dumping from the original
investigation, this does not constitute evidence of the exis tence of a normal policy with respect to the issue of
whether USDOCs relies on margins of du mping calculated in prior proceedings to support its determinations in
sunset reviews.

applied" claim of Japan concerns the Final Results of Expedited Sunset Reviews: Anti-friction Bearings
From Japan
850 and the Final Results of Full Sunset Review: Corrosion-Resistant Carbon Steel Flat
Products From Japan.851
7.246 In support of this claim, Japan asserts th at, as confirmed by the Appellate Body in US –
Corrosion-Resistant Steel Sunset Review, if an investigating authority, in making a determination under
Article 11.3 of the AD Agreement of the likelihood of continuation or recurrence of dumping, relies
upon dumping margins, those margins must be calcula ted in conformity with Article 2.4 of the
AD Agreement and that where the authority relies upon dumping margins calculated in an original
investigation and/or subsequent periodic reviews, those margins must thus be calculated for the product
as whole through a fair comparison, as required by Articles 2.1, 2.4 and 2.4.2 of the AD Agreement.
7.247 Japan argues that in the two sunset reviews at issue both the USDOC and the USITC relied
upon on dumping margins calculated in earlier inves tigations and periodic reviews in reaching their
likelihood determination. As a consequen ce of the reliance on dumping margins calculated
inconsistently with Articles 2.1, 2.4 and 2.4.2 of the AD Agreement, the determinations made in these
sunset reviews are inconsistent with Articles 11.1 and 11.3 of the AD Agreement. Because the measures
adopted pursuant to these two sunset reviews are inconsistent with vari ous provisions of the
AD Agreement, they are also in violation of Article 1 of the AD Agreement.
7.248 The United States rejects the claims of Japan regardi ng these two sunset reviews, insofar as
they concern the determinations made by the USITC, as speculative and unfounded because, assuming
that the dumping margins reported to the USITC were calculated in a manner inconsistent with the
AD Agreement, it does not follow that the USDOC would have reported different margins if it had used
a different methodology. The United States also di sagrees with Japan's assertion that in these two
sunset reviews the USITC relied on the dumping marg ins reported by the USDOC. The United States
argues that the Appellate Body has recognized th at Article 11.3 does not require investigating
authorities to rely on dumping margins in making thei r determination of likelihood of continuation or
recurrence of dumping and that, likewise, Article 11. 3 does not create an obligation for investigating
authorities to rely on dumping margins in making thei r determination of likelihood of continuation or
recurrence of injury.
(b) Evaluation by the Panel
7.249 We examine first the factual evidence adduced by Japan as support for its assertion that in the
two sunset reviews at issue the USITC and USDOC relied upon historical margins of dumping.
7.250 As factual support for its assertion that the USITC relied on dumping margins calculated by the
USDOC in previous proceedings, Japan has submitted excerpts from the USITC Determinations and
Views in the sunset reviews of certain bearings and of carbon steel products.
7.251 With respect to both cases, Japan specifically refers to statements in footnotes that refer to the
dumping margins determined by USDOC:
"... Section 752 of the Act states that 'the Commission may consider the magnitude of
the margin of dumping' in making its determination in a five-year review investigation
... . The statute defines the 'magnitude of the margin of dumping' to be used by the
Commission in five-year review investigations as 'the dumping margin or margins
determined by the administering authority under section 1675a(c)(3) of this title.' ...
Commerce found the following dumping margins: TRBs – China, 0 to 29.40 percent;

850 64 Fed. Reg. 60275 (4 November 1999). Exhibit JPN-22.
851 65 Fed. Reg. 47380 (2 August 2000). Exhibit JPN-23.

Hungary 7.42 percent; Japan, 0.71 to 20.56 percent (TRBs four inches and under),
36.21 to 36.52 percent (TRBs over four inches), 36.53 percent for all TRBs from NTN
Bearing; and Romania 8.70 percent; BBs – France, 56.50 to 66.42 percent; Germany,
31.29 to 132.25 percent; Italy, 68.29 to 155.57 percent; Japan, 2.55 to 106.61 percent;
Romania, 39.61 percent; Singapore, 25.08 percent; Sweden, 105.92 percent; and
United Kingdom, 44.02 to 54.27 percent; CRBs – France, 11.03 to 18.37 percent;
Germany, 52.43 to 76.27 percent; Italy, 212.45 percent; Japan, 4.00 to 51.21 percent;
Sweden, 13.69 to 27.38 percent; and United Kingdom, 43.36 to 72.65 percent; SPVBs
– France; 39 percent; Germany; 74.88 to 118.98 percent; and Japan, 84.26 to 92.00
per cent ... .";
852 and
"...Section 752(a)(6) of the Act states that 'the Commission may consider the
magnitude of the margin of dumping' in making its determination in a five-year review
investigation.. ... The statute defines the magnitude of dumping to be used by the
Commission in the five year review investig ations as 'the dumping margin or margins
determined by the administering authority under section 1675a(c)(3) of this title'. ...
Commerce expedited its review of the anti-dumping order on corrosion-resistant from
all subject countries. It assigned sunset margins as follows: Australia; 24.96 percent;
Canada, 11.71 to 22.70 percent; France, 29.41 percent; Germany, 10.02 percent;
Japan, 36.41 percent; and Korea, 17.70 ...."
853
7.252 These statements demonstrate that the USITC re called that the Tariff Act provides that the
USITC may consider the magnitude of the margin of dumping in a five-year review and that, in this
connection, the USITC noted the specific margins of dumping determined by the USDOC. Nothing in
these statements indicates whether and how the USITC actually relied upon these margins as support
for its conclusion that revocation of the anti-dumping duty orders was likely to lead to the continuation
or recurrence of material injury within a reasonably foreseeable time.
7.253 Regarding the sunset review of certain bear ings, Japan also refers to page 94 of the
Determinations and Views of the Commission. Although Japan has not identified the particular passage
which it considers to be significant, we note that this page contains a comment, as part of a separate and
dissenting opinion of one Commissioner, to the effect that USDOCs findings that duties had been
absorbed on subject imports of ball bearings from France, Germany, Italy, Japan, Singapore and the
United Kingdom, are reflected in the dumping marg ins that USDOC had determined would likely
prevail if the anti-dumping duty orders were revoked.
854 However, there is no information before the

852 Certain Bearings from China, France, Germany, Hungary, Italy, Japan, Romania, Singapore,
Sweden, and the United Kingdom, Investigations Nos. AA-1921-143, 731-TA-341, 343-345, 391-397, and 399
(Review); Excerpts from Volume I: Determinations and Views of the Commission, USITC Publication No. 3309,
(June 2000), p.20, footnote 128. Exhibit JPN-22.C.
853 Certain Carbon Steel Products from Australia, Belgium, Brazil, Canada, Finland, France, Germany,
Japan, Korea, Mexico, Netherlands, Poland, Romani a, Spain, Sweden, Taiw an and United Kingdom,
Investigations Nos. AA-1921-197, 701-TA-231, 319-320, 322, 325-328, 340, 342, and 348-350, and
731-TA-573-576, 578, 582-587, 604, 607-608, 612, and 614-618 (Review); Determinations and Views of the
Commission, USITC Publication No. 3364 (November 2000), p.53, footnote 369. Exhibit JPN-23.B. Certain
Bearings from China, France, Germany, Hungary, Italy, Japan, Romania, Singapore, Sweden, and the United
Kingdom, Investigations Nos. AA-192 1-143, 731-TA-341, 343-345, 391-397 , and 399 (Review); Excerpts from
Volume I: Determinations and Views of the Commission , USITC Publication No. 3309, (June 2000), p.20,
footnote 128. Exhibit JPN-22.C.
854 Certain Bearings from China, France, Germany, Hungary, Italy, Japan, Romania, Singapore,
Sweden, and the United Kingdom, Investigations Nos. AA-1921-143, 731-TA-341, 343-345, 391-397, and 399
(Review); Excerpts from Volume I: Determinations and Views of the Commission, USITC Publication No. 3309,
(June 2000), p. 94. Exhibit JPN-22.C.

Panel as to whether other USITC Commissioners al so considered that this factor supported an
affirmative determination of like lihood of recurrence of material injury. In the absence of such
information, the mere reference to a comment made by one individual Commissioner is not sufficient to
conclude that the USITC actually relied upon dumping margins calculated in prior proceedings as
support for its finding that revocation of the anti-dumping order on imports of ball bearings from Japan
would be likely to lead to continuation or recurrence of material injury to an industry in the
United States within a reasonably foreseeable time.
7.254 In light of the foregoing, we conclude that Jap an has not substantiated the assertion that, in
determining that revocation of the anti-dumping orde rs on imports of ball bear ings from Japan and on
imports of certain carbon steel products from Japan w ould likely lead to continuation or recurrence of
material injury to an industry in the United St ates within a reasonably foreseeable time, the USITC
actually relied upon dumping margins calculated by USDOC in prior proceedings.
7.255 By contrast, there is sufficient evidence before us to conclude that in making its determinations
that revocation of anti-dumping order would result in continuation or recurrence of dumping, USDOC
did rely on margins of dumping established in pr ior proceedings. In the sunset review of
corrosion-resistant carbon steel from Japan, USDOC considered that "the existence of dumping
margins after the issuance of the order is highly probative of the likelihood of continuation or recurrence
of dumping". 855 Similarly, in the sunset review of anti-friction bearings from Japan, USDOC
considered that:
"In the instant proceedings, dumping margins above de minimis continue to exist with
respect to each of the orders. Therefore, given that dumping has continued over the life
of the orders, the Department determines th at dumping is likely to continue if the
orders were revoked. Because we have b ased this determination on the fact that
dumping continued at levels above de minimis, we have not addressed the comments
submitted by Torrington and MPB with respect to 'good cause', nor have we addressed
the arguments of other interested parties regarding the condition of the US market".856
7.256 We also note, however, that since in these two sunset reviews USDOC relied upon the
continued existence of margins of dumping after the issuance of the anti-dumping order as support for
its determination of likelihood of continuation or recurrence of dumping, the margins of dumping relied
upon by USDOC were margins calculated during pe riodic reviews, not margins calculated in the
original investigations. Since we have found that the AD Agreement does not proscribe simple zeroing
in periodic reviews within the meaning of Article 9.3, we cannot find that by relying on margins of
dumping calculated in periodic reviews on the basis of simple zeroing USDOC acted inconsistently
with the AD Agreement.
7.257 In light of the foregoing, the Panel finds that USITC and USDOC did not act inconsistently
with Articles 2 and 11 of the AD Agreement by relying on dumping margins calculated in previous
proceedings in the sunset reviews of corrosion-r esistant carbon steel from Japan and of anti-friction
bearings from Japan.

855 Issues and Decisions Memo for the Full Sunset Review of Corrosion-Resistant Carbon Steel Flat
Products from Japan; Final Results, 2 August 2000, p.6
856 Final Results of Expedited Sunset Revi ews: Anti-friction Bearings from Japan , 64 Fed. Reg.
(4 November 1999), p. 60275 at 60278.

E. CONCLUSIONS AND RECOMMENDATION
7.258 In light of our findings above, we conclude that:
(a) By maintaining model zeroing procedures in the context of original investigations
USDOC acts inconsistently with Article 2.4.2 of the AD Agreement.
(b) By using model zeroing in the anti-dumping investigation of imports of cut-to-length
carbon quality steel products from Japan USDOC acted inconsistently with
Article 2.4.2 of the AD Agreement.
7.259 We also conclude that:
(a) By maintaining simple zeroing procedures in the context of original investigations
USDOC does not act inconsistently with Articl es 1, 2.1, 2.4.2, 2.4, 3.1-3.5, 5.8 and
18.4 of the AD Agreement , Articles VI:1 and VI:2 of the GATT 1994 and
Article XVI:4 of the WTO Agreement.
(b) By maintaining simple zeroing procedures in the context of periodic reviews and new
shipper reviews USDOC does not act inconsiste ntly with Articles 1, 2.1, 2.4.2, 2.4,
9.1-9.3, 9.5 and 18.4 of the AD Agreement, Articles VI:1 and VI:2 of the GATT 1994
and Article XVI:4 of the WTO Agreement.
(c) By applying simple zeroing in 11 periodic reviews USDOC did not act inconsistently
with Articles 1, 2.1, 2.4.2, 2.4, 9.1-9.3 of the AD Agreement and Articles VI:1 and VI:2
of the GATT 1994.
(d) Japan has failed to make a prima facie case that by maintaining zeroing procedures in
the context of changed circumstances reviews and sunset reviews USDOC acts
inconsistently with Articles 2 and 11 of the AD Agreement.
(e) By relying on dumping margins calculated in previous proceedings in the sunset
reviews of corrosion-resistant carbon steel from Japan and of anti-friction bearings
from Japan USITC and USDOC did not act inconsistently with Articles 2 and 11 of the
AD Agreement.
7.260 We have also concluded, on grounds of judicial economy, that it is not necessary for the Panel
to make findings on:
(a) the claims of Japan that maintaining mode l zeroing procedures in the context of
original investigations is inconsistent with Articles 1, 2.1, 2.4, 3.1-3.5, 5.8 and 18.4 of
the AD Agreement, Articles VI:1 and VI:2 of the GATT 1994 and Article XVI:4 of the
WTO Agreement; and
(b) the claims of Japan that the use of model zeroing in the anti-dumping investigation of
imports of cut-to-length carbon quality steel products from Japan was inconsistent with
Articles 1, 2.4 and 3.1-3.5 of the AD Agreement.
7.261 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed
under a covered agreement, the action is considered prima facie to constitute a case of nullification or
impairment of benefits under that agreement. Ac cordingly, we conclude that to the extent the
United States acted inconsistently with the provisions of the AD Agreement, it has nullified or impaired
benefits accruing to Japan under the AD Agreement.

7.262 We therefore recommend that the Dispute Settlement Body request the United States to bring
its measures into conformity with its obligations under the AD Agreement.