Document: WT/DS402/R Page A-1 ANNEX A FIRST WRITTEN SUBMISSIONS OF THE PARTIES OR EXECUTIVE SUMMARIES THEREOF Contents Page Annex A-1 Executive Summary of the First Written Submission of Korea A-2
Document codes: WT/DS402/R
Complainant: South Korea
Respondent: U.S.
Third parties: China, EU, Japan, Mexico, Thailand, Vietnam
Dispute stage: Panel
Agreements cited: Art. 2.4.2  Anti-dumping

ANNEX A

FIRST WRITTEN SUBMISSIONS OF THE PARTIES OR
EXECUTIVE SUMMARIES THEREOF

Contents Page
Annex A-1 Executive Summary of the First Written Submission of Korea A-2
Annex A-2 First Written Submission of the United States A-6

ANNEX A-1

EXECUTIVE SUMMARY OF THE FIRST WRITTEN
SUBMISSION OF KOREA

1. In this dispute, Korea contends that the fi nal determinations, amende d final determinations,
anti-dumping duty orders, and amended anti-dumping duty orders of the United States in three
specific anti-dumping duty investigations involving Korean products are inconsistent with U.S.
obligations under the first sente nce of Article 2.4.2 of the Agreement on Implementation of Article VI
of the General Agreement on Tariffs and Trade of 1994 (the "Anti-Dumping Agreement"), due to the
application of the methodology commonly known as "zeroing" by the United States Department of
Commerce ("USDOC") in the calculation of dumping margins in the cases.

A. THE MEASURES AT ISSUE

2. The specific measures in this dispute ar e the final determina tions, amended final
determinations, anti-dumping orders and amended anti-dumping orders imposed by the United States
in cases on imports of:

 (i) Stainless Steel Plate in Coils from the Republic of Korea (A-580-831);

 (ii) Stainless Steel Sheet and Strip in Coils from the Republic of Korea (A-580-834); and

 (iii) Diamond Sawblades and Parts Thereof from the Republic of Korea (A-580-855).

In the final determinations and amended final determinations in these three cases, the USDOC applied
the zeroing methodology to determine the dumping margins for certain Korean exporters of the
products under investigation. Accordingly, for cer tain Korean exporters, th e determinations and the
ensuing anti-dumping orders reflected and include d dumping margins that were calculated on the
basis of zeroing.

3. In calculating the dumping margins for the r espondents in each of the investigations, the
USDOC:

 (i) identified different "models," i.e., types of products based on the most relevant
product characteristics;

 (ii) calculated weighted average prices for sales in the United States and weighted
average normal values for sales in the comp arison market on a model-specific basis,
for the entire period of investigation;

 (iii) compared the weighted average normal value of each model to the weighted average
United States price for that same model;

 (iv) calculated the dumping margin for an exporter by summing up the amount of
dumping for each model and then dividing it by the aggregated United States price
for all models; and in doing so

 (v) effectively set to zero all negative margin s on individual models prior to summing the
total amount of dumping for all models.

By applying this zeroing methodology, the USDOC calculated margins of dumping in amounts that
exceeded the actual extent of dumping, if any, by the investigated companies. Consequently, the
United States also collected anti-dumping duties in excess of those that would have been due had the
zeroing methodology not been applied in contravent ion of U.S. obligations under the Anti-Dumping
Agreement.

B. ARGUMENT

4. As the Panel is aware, the first sentence of Article 2.4.2 of the Anti-Dumping Agreement
establishes the following requirements for comparison of export prices and normal values in an anti-
dumping investigation:

Subject to the provisions governing fair comp arison in paragraph 4, the existence of
margins of dumping during the investiga tion phase shall normally be established on
the basis of a comparison of a weighted average normal value with a weighted
average of prices of all comparable export transactions or by a comparison of normal
value and export prices on a transaction to transaction basis.
Under this provision, the existence of margins of dumping must normally be es tablished using one of
two permissible methodologies: (1) an average- to-average methodology that compares "weighted
average normal value with a weighted average of pr ices of all comparable export transactions," or (2)
a transaction-to-transaction methodology that compares transaction-sp ecific normal values to
transaction-specific export prices.

5. The zeroing methodology that the USDOC used in the anti-dumping investigations subject to
this dispute is virtually identical to the methodology that was held to be inconsistent with Article 2.4.2
of the Anti-Dumping Agreement in European Communities – Anti-Dumping Duties on Imports of
Cotton-Type Bed Linen from India (WT/DS141/R and WT/DS141/AB/R), and also in United States –
Final Dumping Determination on Softwood Lumber from Canada (WT/DS264/R and
WT/DS264/AB/R).

6. It is well-settled that an investigating aut hority may, when applying an average-to-average
methodology, initially divide the product under inves tigation into "models" or other sub-groups, and
compare average normal values to average export pri ces for the individual sub-groups. However, it is
clear from Article 2.1 of the Anti-Dumping Agreement and Article VI of GATT 1994 that "dumping
is defined in relation to a product as a whole as de fined by the investigating authority." As the
Appellate Body has observed, this means that "'[d]umping,' within the meaning of the Anti-Dumping
Agreement, can therefore be found to exist only for th e product under investigation as a whole, and
cannot be found to exist only for a type, model, or category of that product." It follows, then, that
"[w]hatever the method used to calculate the margins of dumping ... these margins must be, and can
only be, established for the product under investigation as a whole." In sum, "[a]s with dumping,
'margins of dumping' can be found only for the pr oduct under investigation as a whole, and cannot be
found to exist for a product type, model, or category of that product."
1

7. As a result, while investigating authorities may be permitted to compare normal values and
export prices for sub-groups, the results of those co mparisons do not constitute "margins of dumping"
within the meaning of Article 2.4.2. Instead, tho se model-specific results "reflect only intermediate
calculations made by an investigating authority in the context of establishing margins of dumping for
the product under investigation." In other word s, "[i]t is only on the basis of aggregating all such

1 United States – Final Dumping Determination on Softwood Lumber from Canada , Appellate Body
Report, WT/DS264/AB/R, 11 August 2004.

intermediate values that an investigating author ity can establish margins of dumping for the product
under investigation as a whole."
2

8. In this regard, a proper aggregation of the in termediate results of model-specific comparisons
must reflect the result of all such comparisons. As the Appellate Body has explained:

We fail to see how an investigating author ity could properly establish margins of
dumping for the product under investigation as a whole without aggregating all of the
"results" of the multiple comparisons for all product types. There is no textual basis
under Article 2.4.2 that would justify taking into account the "results" of only some
multiple comparisons in the process of calculating margins of dumping, while
disregarding other "results". If an investigating authority has chosen to undertake
multiple comparisons, the investigating aut hority 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.
3
In short, an investigating authority is not permitted to disregard some of the intermediate results of
model-specific comparisons, or to treat some of those intermediate results as being greater or less than
they actually are.

9. The practice of zeroing, as employed by the USDOC in the cases subject to this dispute, does
not comport with this requirement. As the Appellate Body has explained:

Zeroing means, in effect , that at least in the case of some export transactions, the
export prices are treated as if they were less than what they actually are. Zeroing,
therefore, does not take into account the entirety of the prices of some export
transactions, namely, the prices of export tr ansactions in those s ub-groups in which
the weighted average normal value is less than the weighted average export price.
Zeroing thus inflates the margin of dumping for the product as a whole.
4
10. In these circumstances, the USDOC's use of th e zeroing methodology in investigations in the
cases that are the subject of this dispute is not consistent with the requirements of Article 2.4.2 of the
Anti-Dumping Agreement.

11. As the Panel is undoubtedly aware, this interp retation of the inconsistency of zeroing with the
requirements of Article 2.4.2 is entirely in accord ance with the Appellate Body's decision in the
dispute concerning United States – Final Dumping Determination on Softwood Lumber from
Canada.
5 The same result was also reached by pane ls reviewing the identical zeroing methodology
used by the USDOC to calculate dumping margins in its anti-dumping investigations of shrimp from
Ecuador and Thailand and of re tail carrier bags from Thailand. 6 A similar result has also been
reached by the Appellate Body in several additional disputes.7

2 Id.
3 Id., para. 98 (emphasis in original). The Appellate Body has noted that this interpretation is also
consistent with a review of the co ntext provided by other provisions of the Anti-Dumping Agreement. See, id.,
paras. 99-100.
5 Id., paras. 86-103, 122.
6 See United States – Anti-Dumping Measure on Shrimp from Ecuador , WT/DS335/R, Panel Report,
30 January 2007; United States – Measures Relating to Shrimp from Thailand , Panel Report, WT/DS343/R,
29 February 2008; United States – Anti-Dumping Measures on Polyethylene Retail Carrier Bags from Thailand,
Panel Report, WT/DS383/R, 22 January 2010. These Panels closely followed the reasoning of the Appellate
Body in US – Softwood Lumber in concluding that the USDOC's application of its zeroing methodology in

12. In short, "there is a consistent line of A ppellate Body Reports finding that 'zeroing' in the
context of the weighted average- to-weighted average methodology in original investigations is
inconsistent with Article 2.4.2, first sentence."
8 Of course, the Panel is not bound by the reasoning in
prior Appellate Body and panel reports. Neverthele ss, adopted Reports create legitimate expectations
among WTO Members, 9 and "following the Appellate Body's conclusions in earlier disputes is not
only appropriate, but is what would be expected from panels, especially where the issues are the
same."10 And, because review of the text, context an d object and purpose of Article 2.4.2 confirms
that the practice of zeroing as described above is not consistent with the requirements of that
provision, the Panel should rule that the USDOC's use of zeroing in its calculation of the margins of
dumping for the products under inves tigation in the cases subject to this dispute is not consistent with
the obligations of the United States under the Anti-Dumping Agreement.

C. CONCLUSION

13. As this analysis demonstrates, the final de terminations, amended fi nal determinations, anti-
dumping duty orders and amended anti-dumping orders of the United States in the three cases subject
to this dispute are inconsistent with U.S. obliga tions under the first sentence of Article 2.4.2 of the
Anti-Dumping Agreement.

14. Therefore, Korea requests that the Panel find that the United States acted inconsistently with
the requirements of the first sentence of Article 2.4.2 of the Anti-Dumping Agreement when it
calculated the anti-dumping margins in its anti-dumping investigations of Stainless Steel Plate in
Coils from the Republic of Korea, Stainless Steel Sheet and Strip in Coils from the Republic of Korea,
and Diamond Sawblades and Parts Thereof from the Re public of Korea. Kore a further requests that
the Panel recommend that the United States be instructed to bring its measure into conformity with its
obligations under that provision.

weighted-average to weighted-average comparisons in inve stigations is inconsistent with its obligations under
Article 2.4.2 of the Anti-Dumping Agreement.
7 See United States – Laws, Regulations and Methodology for Calculating Dumping Margins (EC) ,
WT/DS294/AB/R, Appellate Body Report, 18 April 2006, paras. 222 and 263(b); United States – Final Anti-
Dumping Measures on Stai nless Steel from Mexico, WT/DS344/AB/R, Appellate Body Report, 30 April 2008,
para. 109; United States – Measures Relating to Zeroing and Sunset Reviews (Japan) , WT/DS322/AB/R,
Appellate Body Report, 9 January 2007, para. 121 et seq.
8 See United States – Anti-Dumping Measures on Polyethylene Retail Carrier Bags from Thailand,
Panel Report, WT/DS383/R, 22 January 2010, para. 7.24.
9 See Japan – Taxes on Alcoholic Beverages , WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R,
Appellate Body Report, 4 October 1996, at 13; United States – Import Prohibition of Certain Shrimp and
Shrimp Products (Recourse to Article 21.5 of the DSU by Malaysia) , WT/DS58/AB/RW, Appellate Body
Report, 22 October 2001, paras. 108-109; United States – Final Dumping Determination on Softwood Lumber
from Canada, Appellate Body Report, WT/DS264/AB/R, 11 August 2004, paras. 109-112.
10 See United States – Sunset Reviews of Anti-Dumping Measures on Oil Country Tubular Goods from
Argentina, WT/DS268/AB/R, Appellate Body Report, 29 November 2004, para. 188 ("The Panel had before it
exactly the same instrument that had been examined by the Appellate Body in US – Corrosion-Resistant Steel
Sunset Review; thus, it was appropriate for the Panel…to rely on the Appellate Body's conclusion in that case.
Indeed, following the Appellate Body's conclusions in earlier disputes is not only appropriate, but is what would
be expected from panels, especially where the issues are the same.").

ANNEX A-2

FIRST WRITTEN SUBMISSION OF THE UNITED STATES

1. The Republic of Korea ("Korea") claims that the United States breached its obligations under
the first sentence of Article 2.4.2 of the Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994 ) ("Anti-dumping Agreement") when the U.S. Department of
Commerce applied the "zeroing" methodology to cal culate certain dumping margins in the final
determinations and amended final determinations in the anti-dumping investigations of Stainless Steel
Plate in Coils from Korea, Stainless Steel Sheet and Strip in Coils from Korea, and Diamond
Sawblades and Parts Thereof from Korea.1

2. As an initial matter, the United States would like to thank the Panel for providing adequate
time to prepare this submission. This time was u seful in allowing the United States to review the
evidence and arguments presented by Korea and in tu rn helping to narrow the issues presented to the
Panel, as indicated below.

3. In WTO dispute settlement, the complaining pa rty bears the burden of proving that a Member
has acted inconsistently with an obligation.
2 In addition, Article 11 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes ("DSU") requires a panel to make an objective
assessment of the matter before it, including an obj ective assessment of the facts and the applicability
of and conformity with the covere d agreements. Thus, recently, in US – AD Measures on PET Bags ,
the panel correctly stated that it had to satisfy itself that Thailand had established a prima facie case
by presenting evidence and arguments to identify the measure being challenged and explain the basis
for the claimed inconsistency with a WTO provision, despite the fact that the responding party did not
contest the claims made by Thailand.3

4. In this dispute, Korea alleges that wh en calculating certain dumping margins in the
challenged investigations, the Department of Commerce: (i) identified different "models," i.e., types,
of products based on the most rele vant product characteristics; (ii) calculated weighted average prices
for sales in the United States and weighted average normal values for sales in the comparison market
on a model-specific basis, for the entire period of i nvestigation; (iii) compared the weighted average
normal value of each model to the weighted average U.S. price for that same model; (iv) calculated
the dumping margin for an exporter by summing the amount of dumping for each model and then
dividing it by the aggregated U.S. price for all models; and (v) set to zero all negative margins on
individual models before summing the total amount of dumping for all models.
4

1 Korea's Request for the Establishment of a Panel, WT/DS402/3 (8 April 2010), pp. 1-2.
2 US – Corrosion-Resistant Steel CVD (AB), paras. 156-157.
3 US – AD Measures on PET Bags, paras. 7.5-7.7. The panel in US – AD Measures on PET Bags cited
with approval the reasoning of the panel in US – Shrimp (Ecuador), which had similarly concluded:
[T]he fact that the United States does not contes t Ecuador's claims is not a sufficient basis for
us to summarily conclude that Ecuador's claims are well-founded. Rather, we can only rule in
favor of Ecuador if we are satisfied that Ecuador has made a prima facie case.
US – Shrimp (Ecuador), para. 7.9.
4 First Written Submission of The Republic of Kor ea, paras. 4 and 17 (her einafter "Korea's First
Written Submission").

5. The United States does not contest the accu racy of Korea's description of the zeroing
methodology set forth in paragraphs 4 and 17 of Kore a's First Written Submission, as it relates to the
investigations challenged in this dispute.

6. Korea specifies that its challenge pertains to the application of "zeroing" in the calculation of
certain margins in anti-dumping investigations of Stainless Steel Plate in Coils from Korea, Stainless
Steel Sheet and Strip in Coils from Korea, a nd Diamond Sawblades and Parts Thereof from Korea.
5
Specifically, with respect to the investigations of stainless steel plate in coils and stainless steel sheet
and strip in coils, Korea's claim pertains to the use of the zeroing methodology in calculating margins
for Pohang Iron & Steel Co. (POSCO) and the "all others " rate. With respect to the investigation of
diamond sawblades, Korea's claim pertains to th e use of the zeroing methodology in calculating
margins for the three investigated Korean producers as well as the "all others" rate.

7. Korea provides the following descriptions of th e calculation of the dumping margins at issue:

In the SSPC [stainless steel plate in coils ] investigation, the USDOC's use of the
zeroing methodology affected the determination of dumping margins for the Korean
exporter Pohang Iron & Steel Co., Ltd. ("POSCO"). In addition, . . .use of the
zeroing methodology affected the determina tion of the "all-others" rate, which was
equal to the rate established for [POSCO] . . . .
6
In the SSSS [stainless steel sheet and stri p in coils] investigation the USDOC . . .
applied its zeroing methodology to the determination of dumping margins for
POSCO. In addition, the use of the zeroing methodology affected the determination
of the "all-others" rate, which was equal to the rate calculated for POSCO . . . .
7
[Referring to the investigation of Diam ond Sawblades], [t]he USDOC applied its
zeroing methodology to the determinati on of dumping margins for the three
investigated Korean producers: Ehwa Diamond Industrial Co., Ltd. ("Ehwa"),
Hyosung Diamond Industrial Co. ("Hyosung"), and Shinhan Diamond Industrial Co.,
Ltd. ("Shinhan"). In addition, . . . use of the zeroing methodology affected the
determination of the "all ot hers" rate, which was calculated as the weighted-average
of the responding companies' dumping margins . . . .
8
8. To substantiate its factual claims, Korea h as provided evidence consis ting of the Department
of Commerce's published determinations, issues and decision memoranda, and computer programs
used to calculate the margins of dumping related to the final determinations in the original
investigations at issue.

9. The United States has reviewed the factual evidence submitted by Korea and does not contest
that the submitted documentation, including the co mputer programs used to calculate the dumping
margins, were generated by the Department of Commerce during its conduct of the three original
investigations at issue.

10. Korea argues that the zeroing methodology applied to certain exporters in the three
challenged original investigations is the same as the methodology found by the Appellate Body to be
inconsistent with Article 2.4. 2 of the Anti-dumping Agreement in US – Softwood Lumber Dumping .
9
The United States recognizes that in US – Softwood Lumber Dumping , the Appellate Body found that

5 Korea's First Written Submission, para. 2.
6 Korea's First Written Submission, para. 8.
7 Korea's First Written Submission, para. 11.
8 Korea's First Written Submission, para. 14.
9 Korea's First Written Submission, para. 18.

the use of "zeroing" with respect to the average-to -average comparison methodology in investigations
was inconsistent with the first sentence of Article 2.4.2 when it interpreted the terms "margins of
dumping" and "all comparable export transactions" as used in the first sentence of Article 2.4.2 in an
integrated manner.
10 The United States acknowledges that this reasoning is equally applicable to the
margins at issue in this dispute.

11. To the extent that Korea suggests that th e Panel should simply base its findings upon a
"consistent line of Appellate Body Reports," 11 however, it should be noted that prior panel and
Appellate Body reports are not binding on panels considering other disputes. 12 The rights and
obligations of Members flow from the text of the covered agreements. While prior adopted panel and
Appellate Body reports may be taken into account, th e Panel in this dispute is not bound to follow the
reasoning set forth in any prior report. Rather, as noted above, under Article 11 of the DSU, the Panel
is charged with making its own objective assessment of the matter before it, including its own
objective assessment of the facts, and the applicability of and conformity with the relevant covered
agreements.

10 See US – Softwood Lumber Dumping (AB), paras. 62-117.
11 Korea's First Written Submission, para. 24.
12 See US – Softwood Lumber Dumping (AB) , para. 111 (citing Japan-Alcoholic Beverages II (AB) and
US – Shrimp (Article 21.5 – Malaysia (AB) ). As the Appellate Body noted in its US – Softwood Lumber
Dumping report, adopted reports "'are not binding, except with respect to resolving the particular dispute
between the parties to that dispute.'" US – Softwood Lumber Dumping (AB) , para. 111 (quoting Japan –
Alcoholic Beverages II (AB)).