Document: WT/DS264/RW Page B-1 ANNEX B THIRD PARTIES' SUBMISSIONS Contents Page B-1 Executive Summary Third Party Submission of China B-2 B-2 Third Party Written Submission by the European Community Executive
Document codes: WT/DS264/RW
Complainant: Canada
Respondent: U.S.
Third parties: China, EU, India, Japan, New Zealand, Thailand
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. 1, 2, 4, 5, 9  Anti-dumpingArt. VI  GATT 1994Art. 18  Anti-dumping

ANNEX B

THIRD PARTIES' SUBMISSIONS

Contents Page
B-1 Executive Summary Third Party Submission of China B-2
B-2 Third Party Written Submission by the European Community Executive
 Summary
B-6
B-3 Executive Summary of the Third Party Submission of Japan B-13
B-4 Executive Summary of New Zealand's third Party Submission B-18

ANNEX B-1

EXECUTIVE SUMMARY
THIRD PARTY SUBMISSION OF CHINA

I. CANADA’S REQUEST THAT THE UNITED STATES BRINGS ITS MEASURES
INTO CONFORMITY WITH THE DSB’S RECOMMENDATION IS CONSISTENT
WITH ARTICLE 21.5 OF THE DSU

1. China disagrees with the United States that there is not "a modicum of consistency" between
Canada’s arguments in the original proceeding and its arguments before this Panel established
pursuant to Article 21.5.
1 China notes that the US claimed he re that it has implemented the DSB’s
recommendations and rulings by reaching Secti on 129 Determination adopting the transaction-to-
transaction methodology.2 Therefore, China believes that Canada’s new claim regarding zeroing in
transaction-to-transaction methodology concerns the "measures taken to comply" under Article 21.5
of the DSU.

2. The Scope of Article 21.5 that Canada advocates is also consistent with the prior decisions of
the Panel and the Appellate Body in several WTO dispute cases. For example, in the EC-Bed Linen
Case, the Appellant Body stated that " an Article 21.5 panel is not confined to examining the
‘measures taken to comply’ from the perspective of the claims, arguments, and factual circumstances
relating to the measure that was the subject of the original proceedings…. "
3 Thus, it is
understandable that the claims, arguments, and fact ual circumstances relating to the "measures taken
to comply" will not necessarily be the same as those relating to the measures in the original dispute.

3. Turning to the case before the Panel, Canada ’s argument challenges the inappropriate practice
of zeroing in the transaction-to-transaction methodolog y. The purpose of the new claim is to assess
whether the United States’ "measures taken to co mply" with the Panel and Appellate Body’s prior
findings are fully consistent with the DSB’s recomm endations or rulings. To this end, China urges
the Panel to conclude that Canada’s claim in this proceeding is consistent with Article 21.5 of the
DSU.

II. THE SECTION 129 DETERMINATION INCORPORATING ZEROING IN
TRANSACTION-TO-TRANSACTION METHODOLOGY IS INCONSISTENT WITH
ARTICLE 2.4.2 OF THE ANTI-DUMPING AGREEMENT.

A. "ALL COMPARABLE EXPORT TRANSACTION S" SHALL APPLY TO THE TRANSACTION-
TO-TRANSACTION METHODOLOGY

4. For the purpose of a fair comparison under Artic le 2.4.2, China believes that the investigation
authority should take into account "all comparab le export transactions" in the entire process of
determining the existence of dumping of the product, and should not be limited only to the weighted
average-to-weighted average comparisons. China fu rther believes that the determination of dumping
shall be based on the product at issue, rather than certain individual transactions that are conducted at

1 US’s First Written Submission, para. 5.
2 See Notice of Determination Under Section 129 of the Uruguay Round Agreements Act: Anti-
Dumping Measures on Certain softwood Lumber Products From Canada.
3 EC-Bed Linen (Article 21.5 -India), WT/DS141/AB/RW, para. 79.

a particular price level. China also believes that the purpose of an anti-dumping investigation is to
establish whether dumping exists. For this purpose, all the products described shall be fully taken into
consideration, and not only those sold at the dumped prices. However, in the underlying proceeding,
the practice of zeroing in transaction-to-transaction comparisons, in fact, excludes those transactions
in which the export prices are higher than the normal value. In doing so, US DOC is changing the
prices of the export transactions in those "negativ e margin" comparisons. As a result, the dumping
margin was inflated, and an affirmative determin ation could be made in circumstances where no
dumping would have been established in the absence of zeroing.

B. ZEROING IN THE TRANSACTION-TO-TRANSACTION METHODOLOGY IS INCONSISTENT
WITH ARTICLE 2.4.2 OF ANTI-DUMPING AGREEMENT

5. In Article 2.4.2 of AD Agreement, there is in fact a textual difference between the provisions
concerning weighted-average-to- weighted-average methodology a nd the transaction-to-transaction
methodology. However, Article 3.2 of the DSU re quires panels to interpre t "covered agreements",
including the AD Agreement, "in accordance with customary rules of interpretation of public
international law". Pursuant to general principle provided in Article 31.1 of the Vienna Convention
on the Law of Treaties, a reasonable interpretation of Article 2.4.2 shall serve its object and purpose.

6. The language of Article 2.4.2 specifically establishes the permissible bases for establishing
the "existence of margins of dumping", as stated in Article 2.1 of the AD Agreement. And it is clear
that the ultimate goal of Article 2 is to establish wh ether the product concerned is being dumped, or in
other words, whether dumping exists, rather th an determining the dumping margins of those
transactions below the normal value. As the requi rements of Article 2.4.2 should be construed as
applicable to the entire process of determining the existence of margins of dumping for the product,
China believes that the investigation authority sh ould follow Article 2.1 and try to discover whether
the product as a whole, rather than a particular model or transaction of the product, is dumped.

7. In addition, China believes that since the AD Agreement contains no preference or priority of
one methodology over the other in Article 2.4.2 in relation to the weighted-average-to-weighted-
average methodology and transaction-to-transaction me thodology, it should be interpreted to mean
that those two methodologies shall be applied equall y in an anti-dumping investigation, and it should
also be reasonable to assume that adopting either of those methodology should not lead to materially
different results. Therefore, the zeroing practice pr ohibited in weighted-average-to-weighted-average
methodology should not be used in the transaction-to-transaction methodology.

III. THE SECTION 129 DETERMINATION INCORPORATING ZEROING IS
INCONSISTENT WITH ARTICLE 2.4 OF THE ANTI-DUMPING AGREEMENT

8. China believes that Article 2.4 imposes on Members a general obligation of making a fair
comparison between export price and normal value in determining the existence of dumping and
calculating dumping margin. In order to make such comparison, the investigation authority is required
to make "due allowance" affecting "price compar ability" whenever appropriate. However, such
allowance shall not include the adjustment of the export prices which are above the normal value.

9. In addition, pursuant to the principle of treaty interpretation provided in Article 31 of the
Vienna Convention on the Law of Treaties, we believe that "fair comparison" here in the ordinary
meaning, context as well as its object and purpo se of AD Agreement, should not exclude those
transactions that are above their normal value.

10. Firstly, from the ordinary meaning given in the context, we believe that "fair" should mean
"free of prejudice", "just", "equitable" or "having the qualities of impartiality and honesty".
4 As the

4 See Black’s Law Dictionary 6th Ed, Page 412.

Appellate Body states in US – Corrosion-Resistant Steel Sunset Review, " 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 "
5. Therefore, it is clear that the zeroing methodology with
the "inherent bias" will certainly violate the require ment of "fair comparison" provided in Article 2.4
of the AD Agreement. Due to its adoption of zeroing methodology with the "inherent bias", the
Section 129 Determination is inconsistent with the "fair comparison" requirement in Article 2.4.

11. Secondly, we can understand the content of "fair comparison" from the object and purpose of
AD Agreement. As a part of Article 2, the provision of Article 2.4 is subject to the object and purpose
of the Article 2 "Determination of Dumping". Just as the Panel states in EU- Bed Linen , " a
determination that there is dumping, can only be established for the product at issue, and not for
individual transactions concerning that product, or discrete models of the product. "
6 Further, in the
Appellate Body finding in the EU- Bed Linen , the Appellate Body held that " whatever the method
used to calculate the margins of dumping ,…th ese margins must be, and can only be, established for
the product under investigation as a whole "7. Thus, the investigation authorities shall make a "fair
comparison" of all the comparable transactions for the purpose of determining dumping for the
product under investigation as a whole.

12. By adopting zeroing, the US DOC failed to take into account all the export transactions. As a
result, it essentially distorted the fair basis for comp arison. Just as the Appellate Body stated in the
EU- Bed Linen that " we are also of the view that a co mparison between export price and normal
value that does not take fully into account the pri ces 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 by Article 2.4.2."
8.

13. In fact, by adopting zeroing methodology, the US DOC is selecting the transactions for
comparison, which is not permitted by AD Agreement. China is of the view that, as the zeroing is
formulated with an inherent bias that distorts th e comparison of normal value and export price, it is
inconsistent with the "fair comparison" requirement in Article 2.4 of the AD Agreement. Therefore,
the Section 129 Determination is inconsistent with Article 2.4 of the AD Agreement.

IV. CONCLUSION

14. In conclusion, China is of the opinion that,

 1. Canada’s request that the United Stat es bring its measures into conformity is
consistent with Article 21.5 of DSU

 2. The Section 129 Determination incor porating zeroing is inconsistent with
Article 2.4.2 of the AD Agreement

 3. The Section 129 Determination incorporati ng zeroing is inconsistent with Article 2.4
of the AD Agreement

5 US – Corrosion-Resistant Steel Sunset Review, WT/DS244/AB/R, para. 135.
6 EU- Bed Linen, WT/DS141/R, para. 6.114.
7 EU- Bed Linen,, WT/DS141/AB/R, para. 7.9.
8 EU- Bed Linen,, WT/DS141/AB/R, para. 7.11.

15. China hereby wishes to thank the Panel fo r this opportunity to comment on the issues
involved in this proceeding, and hopes that these comments will prove to be useful.

ANNEX B-2

THIRD PARTY WRITTEN SUBMISSION BY
THE EUROPEAN COMMUNITY
EXECUTIVE SUMMARY

I. ARTICLE 2.4, FIRST SENTENCE AND ARTICLE 2.4.2, FIRST SENTENCE
A. A TRANSACTION IS NOT EQUIVALENT TO A NORMAL VALUE
1. Article VI of the GATT 1994 and the ADA contain 9 definitions, but not of "transaction". A
transaction encapsulates the parties’ agreement on the terms of a trade : product description; quantity;
price; delivery date; payment date. Typically, it is evidenced by an invoice. In the phrase
"transaction-to-transaction" the first use of the word "transaction" refers to the home market of the
exporting country; and the second use refers to the ma rket of the country of import. The word "to"
indicates that one transaction is juxtaposed to the other.
2. The price at which a transaction in the home ma rket of the exporting country is concluded,
considered in isolation, is not equivalent to a " normal value". Rather, the final word "basis" in the
first sentence of Article 2.4.2 indicates that "tra nsaction-to-transaction" juxtapositions may be the
basis for the calculation of a margin of dumping. Th e word "basis" indicates that there is one thing
(one or more transaction-to-transaction juxtapositi ons) that is an underlying support for something
else (a margin of dumping). Thus, in a first step of the calculation, there may be one or more
transaction-to-transaction juxtapositions. However, ultimately, in a subsequent step of the calculation,
Article 2.4.2 expressly provides that there is "a comparison" (that is, a single comparison) of "normal
value" (also in the singular) and export prices, which therefore requires an aggregation of all
intermediate results established in the first step of the calculation.

3. The AB in US-Softwood Lumber V analysed the very same word ("basis") as it is used in
connection with the wa-to-wa method. If this is what the word means when it is first used in the first
sentence of Article 2.4.2, in relation to the wa-to- wa method, then this must also be what it means
when it is used a second time in relation to the t-to-t method. This is further confirmed by the first
sentence of Article 2.4, which provides that a fair comparison (in the singular) must be made between
the export price (singular) and the normal value (singular). Similarly, the sixth sentence of Article 2.4
also refers to "a fair comparison" (in the singular); and Article 2.4.1 refers to "the comparison" (also
in the singular). Furthermore, Article VI of the GATT 1994 consistently refers only to "normal
value" in the singular. The same is true of the ADA, which refers 15 times to normal value in the
singular, including in respect of the t-to-t method.
4. This is confirmed by a consideration of the or dinary meaning of the word "normal". Normal
means "constituting or conforming to a type or st andard; regular, usual, typical; ordinary,
conventional." Normality is a relative rather than an absolute concept. What is "normal" in one
society or population is not necessarily normal in anothe r. And this is just as true when a set (the
home market of the exporter) is populated with data (such as transactions). Thus, an IA cannot select
and isolate one transaction and characterise it as " normal". Rather, it is only possible to ascertain
normal value by a fair and balanced considerati on that takes into account the appropriate data
populating the relevant set.

5. Further support is provided by the phrase "ordin ary course of trade" in Article 2.2. Absent
any explanation, a single transaction cannot be taken as representative of the "ordinary course of
trade" and cannot therefore be considered a "nor mal value". Further support is provided by the
repeated references to "sales" (in the plural); a nd "the low volume of sales"; and "representative";
and "sufficient quantity" and "sufficient magnitude" in Article 2.2, footnote 2, and Article 2.2.1.
These provisions envisage a situation in which, in all cases in which normal value is to be derived
from transactions, there is a population of transactio n data sufficient and adequate for the purpose,
taking into account all the circumstances of the case, and which is duly taken into account.
B. CONSEQUENTLY, INTERMEDIATE RESULTS ARE NOT MARGINS OF DUMPING
6. Given the definitions of dumping and margin of dumping in Article VI of the GATT 1994, as
implemented and elaborated in Article 2 of the ADA, a margin of dumping can only result from a
comparison between a normal value and export price( s). If an IA does not first determine a normal
value, it cannot calculate a margin of dumping. Th us, it necessarily follows from the analysis in the
preceding section that the intermediate results of a series of t-to-t juxtapositions cannot be "margins of
dumping", because they do not involve a comparison betw een a normal value and export price. It is
only when any such intermediate results are finally combined, in a second st age of the calculation,
that the margin of dumping for the specific exporter will have been calculated.
C. THIS ANALYSIS IS NOT AFFECTED BY THE USE OF THE PLURAL
7. This analysis is not altered by the use of the plural "margins of dumping" in Article 2.4.2.
One proceeding may concern more than one count ry; and in accordance with Article 6.10, the
authorities shall, as a rule, determine an individua l margin of dumping for each known exporter. A
single proceeding may therefore result in more than one margin of dumping. The use of the plural
thus has a logic to it, whether or not the IA makes the comparison on a transaction-to-transaction
basis. In similar vein, one proceeding may involve more than one normal value, because there may be
more than one country and/or exporter. That expl ains the use of the plural "normal values" in the
final sentence of Article 9.4.
D. THE SECOND STAGE CANNOT FALL OUTSIDE THE ADA
8. In EC-Bed Linen and US-Softwood Lumber V the AB rejected the notion that, in
circumstances where there are two stages to the calculation, the second stage falls outside Article 2
and indeed outside the ADA altogether. The precise and detailed rules set out in the ADA would be
pointless if, in the final step of the calculation, th e IA would be free to make an unfair comparison.
This is confirmed by Article 1, pursuant to which an anti-dumping measure may only be applied
under the circumstances provided for in Article VI of the GATT 1994 and pursuant to investigations
initiated and conducted in accordance with the provisions of the ADA. The provisions of the ADA
govern the application of Article VI of GATT 1994 in so far as action is taken under anti-dumping
legislation or regulations.
E. IA CANNOT DISREGARD CERTAIN EXPORT VALUES
9. An IA cannot disregard the results of multiple comparisons at the aggregation stage. Other
provisions of the ADA are explicit regarding the permissibility of disregarding certain matters. For
example, Article 2.2.1 sets forth the only circumst ances under which sales of the subject product may
be disregarded. Similarly, Article 9.4 expressly directs IAs to "disregard" zero and de minimis
margins of dumping, under certain circumstances. Article 2.7 effectively ex cludes the disciplines of
Article 2 in cases involving non-market economies. Annex II permits IAs in certain circumstances to
disregard information. When the Members permitted IAs to disregard certain matters, they did so
explicitly.

10. As the AB has observed, "dumping" within the meaning of the ADA 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. In similar vein, the Panel in US-Softwood Lumber V stated that the
use of zeroing when determining a margin of dum ping based on the t-to-t method would not be in
conformity with Article 2.4.2.
F. FAIR COMPARISON
11. The object and purpose of the comparison rules in the ADA is to ensure that there is a fair
comparison between normal value and export price, as provided in the first sentence of Article 2.4.
The first sentence of Article 2.4 establishes an overa rching and independent obligation to make a fair
comparison. The importance of the rule embodied in this obligation has been repeatedly confirmed
by the WTO AB and Panels. The text of the Uruguay Round ADA contains an important and
significant innovation by comparison with the text of the previous Tokyo Round Anti-Dumping Code.
12. The ordinary meaning of the word "fair" indicates a comparison that is "just, unbiased,
equitable, impartial"; "offering an equal chance of success"; conducted "honestly, impartially"; and
"evenly, on a level". 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. That means that the same
methodology must be adopted to estab lish the value of the sales that w ill be used for the calculations.
Because "zeroing", which consists, in effect, in an arbitrary and artificial reduction of the value of
certain export transactions, is only applied to export transactions, there is no symmetrical treatment.
13. The EC believes that this view is supported by the context and the object and purpose of the
ADA. The EC does not enter into a discussion of the several possible economic rationales for the anti-
dumping rules, much discussed in the literature and well known. The fact remains, however – and
this much is uncontroversial – that they are all economic . The application of the discipline of
economics requires a minimum of consistency . It is not by chance that the ADA uses the words
"market" or "competition" or "compete" 28 times, these being the indispensable and basic building
blocks of consistent economic analysis. And it is not by chance that the basic parameters by which
markets are generally defined : product (or physi cal characteristics), geography and time play a
central role in the ADA. Nor is it chance that these are also the basic parameters essentially referred to
in the second sentence of Article 2.4.2. Finally, it must come as no surprise that the reasoning of the
AB in the EC-Bed Linen and US-Softwood Lumber V cases is essentially about consistency with
respect to one of these parameters : product definition. Viewed in this light, it is not possible to fairly
measure international price discrimination between tw o different markets (the domestic market of the
exporting country and the domestic market of the importing Member), if the fundamental
methodology for defining and measuring behaviour in each of the markets is different. Absent good
reason (targeted dumping), such an approach is actually incapable of measuring alleged international
price discrimination. It is unfair, because it is internally inconsistent.

G. THE SELECTION OF THE PERIOD OF INVESTIGATION
14. Just as an anti-dumping proceeding concerns "a product" (the subject product), so it also
concerns a margin of dumping based on a comparison of sales made at as nearly as possible "the same
time" (the investigation or review period). Just as the ADA contains no express rule governing the
definition of the "subject product", so it contains no express rule governing the definition of the period
of investigation or the period of review. The "sam e time" might be a shorter period or a longer period
(such as a year). Just like product characteristics, ti me (along with geography) is typically a parameter
by reference to which markets – that is, categories of goods or services with a certain competitive
relationship or degree of comparability - are defined. Just as the US defined the "subject product", so
the US defined the period of investigation. Just as the EC does not take issu e, in this case, with the

definition of the subject product, so the EC does not ta ke issue, in this case, with the definition of the
period of investigation. Just as in the case of the "model zeroing" method that was the subject of the
EC-Bed Linen and US-Softwood Lumber V cases, having defined the peri od of investigation, the US
was obliged to ensure that the margin of dumping for that period of investigation was calculated in
conformity with Article 2.4.2. The US had become bound by its own logic.
15. The US having fixed the relevant period, it had effectively decided that "the same time" in
this case was the period of investigation. In short, the reasoning of the AB in the EC-Bed Linen and
US-Softwood Lumber V cases in relation to model zeroing also ap plies whenever an IA decides to fix
the parameters of its investigation, whether in rela tion to subject product, time, level of trade, region,
or any other parameter. The IA thereby becomes bound by its own logic, and must complete its
analysis on the basis of the same logic.

16. The EC finds contextual support for the preced ing analysis in the second sentence of Article
2.4.2, which refers expressly to certain other pa rameters of the determination, including "time
periods". These words indicate that, having fixed the temporal parameters of its investigation, the US
had become bound by its own logic, and could not change those parameters only for certain aspects of
its investigation, unless the exceptional situation described in the second sentence of Article 2.4.2 was
present (which it was not). The same is true in r espect of any other parameters of the investigation
fixed by the IA, notably the purchasers and regions c oncerned, these also being matters referred to in
the second sentence of Article 2.4.2 of the ADA. The zeroing method used by the US is, at least
potentially, offensive to any one of these para meters, because it is performed at the most
disaggregated level, that is, at the level of indi vidual transactions. Further contextual support may be
found in a number of other provisions of the ADA which indicate that temporal considerations are
relevant to the calculation of a dumping margin.
H. PRICE VARIATION
17. The US offers no explanation for the t-to-t method that it has employed, and in the context of
which it claims that zeroing is permitted. It merely asserts that its choice of methodology was
justified because otherwise "given the high level of price volatility" US sales would be "matched to
home market sales made under different market cond itions." The EC does not take issue with the US
attempt to match export and domestic transactions at as nearly as possible the same time, as provided
for in Article 2.4. However, price variation or volatility cannot justify zeroing.
18. The whole point about the calculation of a margin of dumping is that it involves a comparison
between two different markets : the home market and the export mark et. To consider these together
to be one market, and, all other things being equa l, at the same time attempt to measure sustained
price discrimination in that one market, would be perfect nonsense : if there would be one market
then, by definition, the lower and higher priced sa les would simply equalise at the point of market
equilibrium. USDOC agrees, referring consistently to the US market and the home market, as two
distinct markets.
19. Viewing each of these markets independently, price volatility within one or both of them does
not, in itself, delineate the parameters of distinct sub-markets. In fact, aside from the perfect
theoretical market (which does not exist), price variation or volatility is the defining characteristic of a
market, as opposed to a command economy. Thus, assuming that both the home market and the US
market are exhibiting a degree of price variation within each market, prices moving up and down over
time; that the pricing behaviour of an exporter in e ach market also varies in the same way; and that
on average prices in the two markets are the same or nearly the same - when the two price curves are
placed alongside each other, there will almost always be some instances where one curve is above the
other, and vice versa. It would be highly unlikely, to the point of miraculous, if the two curves would
match exactly. In such a case, in truth, absent sp ecial circumstances, there is no international price

discrimination. And yet the practice of zeroing, in the context of the t-to-t methodology used by
USDOC, would certainly lead to a determination of dumping. In that sense, the choice of the
methodology makes the result a foregone conclusion, and that is why it is inherently biased and
unfair.

20. The fact that market conditions in the US market and in the home market may be different
(for example, demand might be very different in the two markets) has nothing to do with a
comparison between normal value (in one market) a nd export price (in the other market) – assuming,
of course, that all appropriate adjustments for any differences affecting price comparability have been
made, in accordance with Article 2.4. The existe nce of other differences (such as different demand)
might contribute to explaining why there is or is not dumping. They are irrelevant to determining
how dumping should be measured.
21. Thus, in truth, the question before USDOC was how the US market and the home market
should be defined, independently, in terms of product, geography and time ; and in truth what
USDOC has done – by using a transaction-to-transaction zeroing methodology - is to posit that the
home market, for example, should be temporally defined by reference to each day or each moment in
time, each day or time being a "different market". Th is is implausible in the extreme, to the point of
passing beyond a determination that could be made by an objective and even-handed authority.

I. POSSIBLE EXCLUSION OR REPEATED USE OF HOME MARKET TRANSACTIONS
22. The preceding analysis does not mean that it is in all circumstances impossible for an IA to
exclude some transactions in the home market. It may be that there are more home market
transactions than export transactions. In these circum stances, an IA may conduct a series of t-to-t
juxtapositions, and at the end of that process, a num ber of transactions in the home market may not
yet have entered into the calculation. That does not mean that the IA is precluded from using the
intermediate results. Article 2.4.2 expressly provides for the intermediate results to be part of the
basis of the final calculation of the margin of dumping. Similarly, if there are more export
transactions that home market transactions, it cannot be excluded that an IA might use a home market
transaction more than once.

23. However, it does not follow that the IA is rel eased from its obligation, in the second stage of
the calculation, when aggregating the intermediate results, to make a fair comparison between normal
value and export price. Consequently, at the second stage of the calculation, an IA must consider
whether or not the home market transactions it is using constitute a "normal value", capable of being
used to effect a fair comparison. If that is not the case, an IA is obliged to make whatever adjustments
or allowances are necessary, and if necessary return to or re-visit the first stage of the calculation, in
order to ensure that it uses a normal value that is comparable to export price, where appropriate
bringing other home market transactions into the calculation, or changing the home market
transactions used more than once, in order to en sure that it has a representative picture of normal
value in the home market.

24. Second, it does not mean that an IA is entitled, when combining the intermediate results at the
second stage of the calculation, to disregard (or zero) certain values or amounts.
J. THE UTILITY OF THE TRANSACTION-TO-TRANSACTION METHOD
25. It is not correct to say that the t-to-t met hod, without zeroing, will always produce the same
result as the wa-to-wa method, without zeroing. Th e results in each case ma y vary according to the
precise distribution of transactions, and particular ly according to which home market transactions
eventually do not form part of the final calculation, or which home market transactions are used more
than once. The t-to-t method may be particularly u seful insofar as it may eliminate the need to make

adjustments for differences affecting price compar ability – differences that may be difficult to
objectively quantify.
K. THE PHRASE "ALL COMPARABLE EXPORT TRANSACTIONS"
26. The US devotes its submission to the phrase "all comparable export transactions", which is
irrelevant. The EC has explained why the measure is inconsistent with Article 2.4, first sentence and
Article 2.4.2, first sentence; and, in addition, with Article 2.4, first sentence and Article 2.4, second to
fifth sentences, without referring to that phrase.
II. ARTICLE 2.4, FIRST SENTENCE AND ARTICLE 2.4, SECOND TO FIFTH
SENTENCES
27. The first sentence of Article 2.4.2 is "[s]ubject to the provisions governing fair comparison in
paragraph 4". The provisions gove rning fair comparison in paragraph 4 are the second to fifth
sentences of Article 2.4. Consequently, a comparis on of normal value and export prices on a t-to-t
basis may not be conducted in a manner that conflic ts with the obligations in the second to fifth
sentences of Article 2 4. The second to fifth sente nces of Article 2.4 describe the circumstances in
which a due adjustment or allowance may be made for differences affecting price comparability. It
necessarily follows that, if an ad justment is made in circumstances in which there is no such
difference, then an IA would act inconsistently with that provision Consequently, when an IA
combines the intermediate results of t-to-t juxtapos itions, in order to calculate the margin of dumping
for the exporter, it is not permitted to introduce in to the calculation any adjustments, whether to
export price, normal value, or otherwise, other than those duly permitted by the second to fifth
sentences of Article 2.4.
28. The ordinary meaning of the word "allowance" includes : "A sum or item put to someone’s
credit; deduction, discount" and "Addition or deduction in consideration of something". The ordinary
meaning of the word "adjust" includes : "Arrange, compose, harmonize, (differences, discrepancies,
accounts); assess (loss or damages)". The words "a llowance" and "adjustment" in Article 2.4 have
the same meaning. The allowance or adjustment may be to normal value, or export price, or in some
other way, before, during or after comparison. No thing in the second to fifth sentences of Article 2.4
limits the type or timing of allowance or adjustment with which the provision is concerned. The US
zeroing method is an "allowance" or "adjustment", effectively reducing the value of certain export
transactions. The US makes this allo wance or adjustment because of the difference between some
intermediate results (they are positive) and other inte rmediate results (they are negative); or because
of the sign (negative) of an intermediate diffe rence between one transactio n and another. That
difference is not something that affects price comparability, but part of the very comparison between
normal value and export price that the IA is obliged to carry out. Thus, the US acted inconsistently
with the second to fifth sentences of Article 2.4, and thus also with the first sentence of Article 2.4.
29. This analysis is consistent with the second sen tence of Article 2.4.2. A correctly executed
targeted dumping analysis, where all the conditions provided for in that provision are met, is a fair
comparison within the meaning of the first sentence of Article 2.4. 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. If two distinct patterns
of export prices are identified, based on different patterns among different purchasers, regions or time
periods, then there is a difference. If a comparison with normal value (market C) shows dumping in
market A, but not market B, an IA might be justified in not "setting-off" the "negative dumping" in
market B against the dumping in market A. If A an d B may be considered not comparable, then by
definition AB may also be considered not comparable with C. Insofar as this would be characterised
as an "adjustment" to the export data in market B, such adjustment would be made for a difference

(between markets A and B) that affected pr ice comparability (between markets A and B; and

between AB and C).

ANNEX B-3

EXECUTIVE SUMMARY OF THE
THIRD PARTY SUBMISSION OF JAPAN

21 July 2005

I. SECTION 129 DETERMINATION

1. In calculating the margin of dumping in the Section 129 Determination, the USDOC
compared normal value and export price on a transac tion-to-transaction ("T-to-T") basis. For each
comparable set of transactions, the USDOC calculated a price difference. To derive an overall margin
of dumping for the subject product, the USDOC pr oceeded to aggregate the multiple transaction-
specific comparisons undertaken. However, in aggregating the multiple comparison results, the
USDOC summed exclusively the positive price differe nces; all comparisons with negative differences
were systematically disregarded from the calculation of the overall margin of dumping for the product
under investigation as a whole. As a result, the total of amount of dumping was inflated by an amount
equal to the excluded negative differences.

II. FAILURE TO CALCULATE A MARGIN FOR THE PRODUCT AS A WHOLE
UNDER ARTICLES 2.1 AND 2.4.2 OF THE ANTI-DUMPING AGREEMENT AND
ARTICLE VI OF THE GATT 1994

2. The Appellate Body in US–Corrosion-Resistant Steel has stated that Article 2 of the Anti-
Dumping Agreement (the " Agreement") sets forth the "agreed disciplines" for determining the
existence of dumping and also calculating the margin of dumping.
 Article 2.1 of the Agreement
reiterates the definition of "dumping" under Article VI:1 of the GATT 1994. Relying on this textual
language, the Appellate Body in US-Softwood Lumber V stated explicitly that "dumping is defined in
relation to a product as a whole as defined by the investigating authority" , "the definition of
‘dumping’ as contained in Article 2.1 applies to the entire Agreement, which includes, of course,
Article 2.4.2", and that the term "‘margin of dumpi ng’ refers to the magnitude of dumping. As with
dumping, ‘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 ." (Emphasis and
underline added).

3. Thus, Article 2.1 of the Agreement and Article VI of the GATT 1994 require that "dumping"
and the "margin of dumping" as the scale to measur e the magnitude of dumping be determined for the
"product" as a whole. And, because Article 2.1 a nd Article VI of the GATT 1994 apply to the entire
Agreement, the terms "dumping" and "margin of dumpi ng" have uniform meanings throughout the
Agreement and accordingly, Article 2.4.2 imposes th e same requirement, for that provision
specifically refers to the very term "margins of dumping". Consequently, a comparison that is based
only on a sub-part of the product cannot produce a margin of dumping for the "product" as a whole.

4. As the above conclusion is re ached by virtue of the textua l analysis of Article 2.1 and
Article VI of the GATT 1994, it applies to the "mar gins of dumping" under Article 2.4.2 regardless of
whether a weighted average-to-weighted average or T-to-T comparison methodology is used. Indeed,
the first sentence of Article 2.4.2 makes no distin ction as to the meaning of "margins of dumping"
depending on the methodology to compare normal values and export prices.

5. The Appellate Body in US – Softwood Lumber V clarified the ramification of the requirement
to establish the margins of dumping for the produ ct under investigation as a whole, when the
investigating authorities adopt a comparison method that relies on multiple comparisons, by saying
"the results of the multiple comparisons at sub-gr oup level are…not "margins of dumping" within the
meaning of Article 2.4.2. Rather, those results reflect only intermediate calculations
 m a d e b y a n
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 "intermediate value" that an
investigating authority can establish margins of dumping for the product under investigation as a
whole. … If an investigating authority has c hosen 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 ." (Underlining
added).

6. In the Section 129 Determination, the US DOC established the margin of dumping on the
basis of multiple transaction-specific comparisons . Thus, the results of each of the transaction-
specific comparisons the USDOC undertook in reaching the Section 129 Determination are not
"margins of dumping" for the product as a whole within the meaning of Article 2.4.2 of the
Agreement. Instead, they are all "intermediate calculations" for a sub-part of the product (i.e. a single
transaction). To calculate a margin of dumping for the product as whole, all of these intermediate
calculations must be aggregated. However, in aggregating the multiple transaction based comparison
results, USDOC disregarded each and every co mparison with negative differences from the
calculation of the overall margin of dumping.

7. Contrary to the United States’ assertion, the phrase "all comparable export transactions" is
irrelevant for the panel to decide the case before it. The Appellate Body in US-Softwood Lumber V
did not refer to the phrase "all comparable export transactions" in concludi ng that "dumping" and
"margin of dumping" can be only determined fo r the product as a whole and the authorities are not
allowed to disregard the certain results of multiple comparisons. In fact, the Appellate Body observed
that the issue "centres on how the results of mu ltiple comparisons are interpreted and aggregated
when all comparable transactions have admittedly been taken into account at the sub-group level" and
that issue flow[ed] in essence from [the meaning] of "the terms ‘dumping’ and ‘margin of dumping’
in the Agreement – whether these terms apply at the product or sub-product level". As described
above, the obligation to give full effect to all "int ermediate calculations" ari ses from the requirement
set out in Article 2.1 and Article VI of the GA TT 1994 that dumping is to be determined for the
"product as a whole". The United States’ argumen t confuses two related but distinct sets of
obligations – on the one hand, the requirement to in clude, in the context of multiple comparisons, "all
comparable export transactions" in th e intermediate calculations of weighted average export prices at
the sub-group level of the product, which arises in the average-to-average comparison methodology
under Article 2.4.2, and, on the other hand, the re quirement that, once an investigating authority has
identified the universe of comparisons it will undert ake, it must "take into account the results of all
those multiple comparisons, in the aggregation stage, with a view to establishing margins of dumping
for the product as a whole".

8. In the Section 129 Determina tion, the USDOC failed to include the results of all of the
intermediate calculations in calculating the allege d margin of dumping for the softwood lumber
product as a whole. However, the aggregation of some, but not all, of the comparison results does not
show that softwood lumber is "dumped" under Ar ticle 2.1 and Article VI of the GATT 1994 nor does
it amount to a "margin of dumping" under Article 2.4.2. In other words, the purported margin of
dumping in the Section 129 Determination is not for the product as a whole but for only a carefully
selected sub-part of the product.

9. Therefore, in making the Section 129 Determin ation, the United States acted inconsistently
with Articles 2.1 and 2.4.2 of the Agreement, together with Articles VI:1 and VI:2 of the GATT 1994.

III. FAILURE TO CONDUCT A FAIR COMPARISON UNDER ARTICLE 2.4.2 OF THE
AGREEMENT

10. The first sentence of Article 2.4 of the Agreement requires that "A fair comparison shall be
made between the export price and the normal value. (Emphasis added.)"

 (a) Scope of the "comparison" in Article 2.4

11. As the panel in Egypt – 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 …"

12. According to the Appellate Body in EC-Bed Linen, the requirements of a "fair comparison"
involve "a general obligation" that "informs all of Article 2 …" In particular, the fairness obligation
applies to the provisions of Article 2 that relate to "the calculation of the dumping margin", as the
panel in Egypt – Rebar found.

13. Moreover, although Article 2.4 requires that certain adjustments be made to normal value
and/or export price to ensure "price comparability," the enumerated adjustments do not exhaust the
requirements of a "fair comparison". Instead, the requirements of fairness guide the comparison from
beginning to end. This is entirely appropriate because the goal of the comparison is to establish
whether producers or exporters are engaging in international price discrimination. Such
discrimination can only be shown through a focus on the producer’s or exporter’s own pricing
behaviour, free from manipulation by the investigating authorities.

14. As the panel in Egypt – Rebar found, the comparison process for calculating the dumping
margin begins when the "basic establishment"
 of normal value and export price is complete, and ends
when "the price difference", or "margin of dumping", for the product as a whole has been calculated.
In consequence, the process by which the USDOC sub-divided (i.e. matched individual transactions)
and then re-aggregated the product must be free of manipulation that would undermine the fairness of
the comparison.

 (b) Scope of the duty to make a "fair" comparison

15. Throughout the "comparison" of normal va lue and export price, Article 2.4 imposes a
"general" obligation that requires the investigating authorities to ensure a fair comparison. According
to its dictionary meaning, 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. The panel in EC –
Tube or Pipe Fittings held in the context of Article 2.4 that an "investigating authority must act in an
unbiased, even-handed manner and must not exercise its discretion in an arbitrary manner." This
suggests a meaning that is rooted in the basic re quirements of good faith and fundamental fairness.
The Appellate Body in EC-Hormones and EC-Bed Linen (Article 21.5) has observed that
"fundamental fairness" is known in many jurisdictions "as due process of law or natural justice."

16. The context provided by other provisions of the Agreement offers useful guidance for the
proper construction of the "fairness" obligation in Ar ticle 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", and that there was a "lack of even-handedness" in the USDOC procedures at issue
because the "combined application of [the measures] operated systematically to raise normal value ",
which "disadvantaged exporters". (Underlining added).

17. Second, panels and the Appellate Body have consistently held that, in making "injury"
determinations under Article 3.1, investigating auth orities must respect "the basic principles of good

faith and fundamental fairness". This finding is based on the need for authorities to conduct an
"objective examination". In EC – Bed Linen (Article 21.5) , the Appellate Body ruled that this
language requires authorities to reach a result that is " unbiased, even-handed, and fair". In US – Hot-
Rolled Steel , the Appellate Body found that it would not be "even-handed" for investigating
authorities "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".
(Emphasis added). The Appellate Body also opined that fairness precludes an investigating authority
from " favouring the interests of any interested party, or group of interested parties, in the
investigation." (Emphasis added).

18. Third, through the standard of review in Article 17.6(i), the Agreement effectively imposes a
duty on investigating authorities to evaluate facts in an " unbiased and objective" manner, as the
Appellate Body in that case also stated.

19. In sum, under Article 2.4, the process by wh ich 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.

20. Finally, the United States errs in asserti ng that Article 2.4 was not even at issue in EC – Bed
Linen. Although that dispute focused on the interpreta tion of Article 2.4.2, the applicability of the
"fair comparison" obligation imposed by Article 2.4 to the calculation of "margins of dumping" under
Article 2.4.2 was directly considered by the Ap pellate Body, and its conclusion regarding that
obligation comprised a necessary part of its r easoning. As the Appellate Body noted in US-
Corrosion-Resistant Steel, "[w]e . . . emphasized that a comparison such as that undertaken by the
[EC in EC – Bed Linen] is not a ‘fair comparison’ between export price and normal value as required
by Article 2.4 and 2.4.2."

 (c) The United States’ failure to make a "fair" comparison

21. In making the Section 129 Determination, th e USDOC failed to comply with the duty to
conduct a fair comparison. In US – Corrosion-Resistant Steel , the Appellate Body identified two
unfair elements of zeroing; (i) zeroing may lead to an affirmative determination that dumping exists
in circumstances where no dumping would have been established in the absence of zeroing; and
(ii) zeroing necessarily "inflates" the margin of dumping by always exclud ing from the aggregation
stage the results of negative intermediate co mparisons that would reduce the overall amount of
dumping if they were included. Immediately after noting these unfair elements, the Appellate Body
found that there is an "inherent bias in a zeroing methodology … of this kind". 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".

22. The zeroing applied by the USDOC in maki ng the Section 129 Determination involves the
same unfair comparison. By excluding the negative comparisons results from the aggregation of total
dumping, the USDOC overstated the total amount of dumping by an amount equal to the excluded
negative values. As a result, the dumping margin w as inflated. By inflating the dumping margin for
softwood lumber through zeroing, the USDOC depr ived the comparison of normal value and export
price of even-handedness. Instead, the comparis on systematically favoured the interests of
petitioners, and systematically prejudiced the inter ests of Canadian producers and exporters of the
softwood lumber.

23. The Appellate Body in US-Softwood Lumber V has described that "[z]eroing means, in effect,
that at least in the case of some export transactions, the export prices are treated as if they were less
than what they actually are. … Zeroing does not take into account the entirety of the prices of some
export transactions." (Underlining added).

24. In the Section 129 Determination, the use of zeroing resulted in these same price-based
distortions. By improperly excluding all negative co mparison results from the aggregation stage, the
USDOC effectively attributed a zero value to the excluded comparisons in question, instead of a
negative value. This means that, for the exclude d comparisons, the USDOC treated normal value as
equal to export price, whereas, in fact, export price was greater than normal value. Accordingly, as a
result of zeroing, the export transactions considered in the excluded comparisons were systematically
"treated as if they were less than what they actually are", as described by the Appellate Body in US-
Softwood Lumber V , or in other words, the zeroing systematically treated normal value as being
higher than it actually was. On either view, through zeroing, the USDOC distorted the comparison of
normal value and export price by interfering with price-based data for home-market or export sales.

25. The zeroing in the Section 129 Determination occurred through the inclusion of a single line
of computer code in the margin calculation program. This means that the inflation and distortion of
the margin of dumping, in the Section 129 Dete rmination, were not accidental. Instead, the
United States’ margin calculation procedures ar e, through the inclusion of the zeroing line,
purposefully designed and structured always to be biased in favour of a particular outcome and
particular interests (i.e., existence of dumping and the interests of petitioners), and conversely always
to be biased against exporters’ interests.

IV. CONCLUSION

26. Japan submits that the Panel should find in favour of Canada’s complaint because, the
United States acted inconsistently with Articles 2.1, 2.4 and 2.4.2 of the Agreement, as well as with
Articles VI:1 and VI:2 of the GATT 1994.

ANNEX B-4

EXECUTIVE SUMMARY OF NEW ZEALAND'S
THIRD PARTY SUBMISSION

21 July 2005

I. INTRODUCTION

1. The interpretation and application of the provisions of Article VI of the General Agreement
on Tariffs and Trade 1994 (GATT) has long been a concern of WTO Members. The approach to anti-
dumping has sustained interest and controversy th rough successive negotiating Rounds, leading to the
Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994
("Anti-Dumping Agreement").

2. New Zealand has joined this dispute because of our systemic interests in ensuring that the
balance of rights and obligations set out in the WTO Agreements, including the Anti-Dumping
Agreement, is maintained. More particularly, New Z ealand has an interest in the use of the
transaction-to-transaction methodology in the calculation of dumping margins and in ensuring that the
negotiating history of the Agreement is given adequate consideration when considering the
interpretation of the Agreement.

3. New Zealand prefers to use the transaction-to-transaction methodology in anti-dumping
investigations due to the relatively small number of shipments into the New Zealand domestic market.
This approach allows the export price to be compared with the corresponding normal value for
individual transactions in the domestic market of the exporting country. New Zealand considers that
it is a fair methodology which targets more precisely the dumping taking place.

II. TRANSACTION-TO-TRANSACTION METHODOLOGY

4. The history of the Tokyo Anti-Dumping Code and the Anti-Dumping Agreement is well
documented. As part of the development of th e Code, a Group of Experts on Anti-Dumping and
Countervailing Duties met in Geneva from 13 to 17 Ap ril, 1959 and discussed the problems that arose
from the fact that rarely was there only one selli ng price of a product on the domestic market. More
often than not there was a range of domestic prices for a particular product. The Group agreed that
adopting a uniform system of averaging of prices could in some circumstances nullify attempts to deal
with genuine dumping and could in other circumstances lead the importing country to conclude that
there was a margin of dumping where in fact dumpi ng had not occurred. In this way transaction-to-
transaction was seen as the preferred methodology to establish margins of dumping in anti-dumping
investigations.

5. Article 2.4.2 of the Anti-Dumping Agreement lays down three methodologies that may be
used: weighted average-to-weighted average; tran saction-to-transaction; and weighted average-to-
transaction. The Article was the subject of cont entious negotiations during the Uruguay Round which
centred on two main issues: how to ensure a cons istent methodology in comparing normal values and
export prices; and how to treat "negative dumping", in particular, how the practice of "zeroing" (not
taking into account negative dumping margins but taking into account volumes associated with those
negative margins) should be treated when establis hing margins of dumping. Various proposals were
tabled by proponents during the negotiation in an effort to constrain the recourse to anti-dumping,
including proposals to limit the methodology for establishing dumping margins to a comparison of

weighted average normal values to weighted aver age export prices, and to require that negative
dumping margins be included in the calculations.

6. The proposals met with resistance. The final text included not only the weighted average-to-
weighted average and the transaction-to-transaction methodologies but also the weighted average-to-
transaction methodology. The ability to use the transaction-to-transaction methodology was
preserved and has equal status to the weighted average-to-weighted average methodology under the
Anti-Dumping Agreement . The various draft texts, however, are less clear on the extent to which
negative dumping margins should be included in the overall calculation of dumping. The Dunkel
draft did make one significant addition to the earlie r New Zealand texts, namely that a comparison of
weighted average normal values and weighted aver age export prices had to be of "all comparable
export transactions".

III. LEGAL ANALYSIS

7. The Anti-Dumping Agreement details the procedures for how Members are to go about
determining whether dumping has taken place and whethe r a remedy may be applied. There must be
a determination of whether dumping has occurred. An analysis must also be undertaken of whether
there is material injury to the domestic industry. If these elements are met, there must be a causal
analysis of the effect of the dumped imports, a nd the effect of other factors, including non-dumped
imports, on the domestic industry. If it is establis hed that the dumped imports are causing material
injury or threat thereof to the domestic industry, a remedy may be applied to the dumped imports.
The level of the remedy cannot exceed the dumping margin but can be at a lesser level if that removes
the injury caused by the dumped imports.

8. This process from beginning to end has relevan ce when one is assessing the validity of certain
actions taken by a Member in applying a remedy to redress dumping. It means that how dumping
margins are calculated has to be considered along side the 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 Anti-Dumping Agreement must take a holistic persp ective that takes into account
all these elements of the anti-dumping regime.

9. Article 2 of the Anti-Dumping Agreement provides the framework for the determination of the
existence of dumping. The purpose of the tran saction-to-transaction methodology is to compare
export prices in each transaction with the prices in comparable normal value transactions to determine
the transactions that have been dumped. There ar e three primary methods of determining margins of
dumping using a transaction-to-transaction methodology. First, all individual transactions, whether
dumped or non-dumped, are included in the determin ation of any dumping margins. Second, only
dumped transactions are included in the determina tion and if dumping does not exist in relation to a
particular transaction it is disregarded on the grounds that there is no dumping. Third, the zeroing
method is used.

10. Using the transaction-to-transacti on methodology as is permitted under the Anti-Dumping
Agreement does not necessarily dictate that any one of the above three methods be used. In all three
calculations, the non-dumped transactions are consider ed when completing the injury analysis under
Article 3.5 of the Agreement.

11. Article 3 lays down the requirements for a dete rmination of injury, the effect of the dumped
imports on prices in the domestic market, and the consequent impact of these imports on domestic
producers. It sets out the factors which have to be taken into account in an examination of the impact
of the dumped imports on the domestic industry, including "the magnitude of the margin of dumping".
Further, the investigating authority must demonstrat e that the dumped imports, through the effects of
dumping, are causing or threatening to cause material injury to the domestic industry. And there must
be a demonstration of a causal relationship betw een dumped imports and injury to the domestic

industry, based on factors other than dumped impor ts, including the volume and prices of imports not
sold at dumping prices. Following a determination of the existence of dumping and that such
dumping has caused or threatened to cause material injury to the dom estic industry, Article 9 sets out
the requirements for the imposition of anti-dumping duties. In particular Article 9.3 provides that the
amount of the anti-dumping duty shall not exceed the margin of dumping as established under
Article 2. In this way Article 9 establishes a direct link between the determination of dumping in
accordance with Article 2 and the imposition and collection of anti-dumping duties in accordance
with Article 9.

12. In New Zealand’s view there should be a symmetry between the manner in which the
existence of dumping is established, the injury an alysis under Article 3, the causal relationship
between the dumping and material injury or threat thereof, and how the anti-dumping remedy is
applied. There is support for this in the context of the Anti-Dumping Agreement as a whole. Article 3
makes a distinction between the effect of dumped imports on prices, and the impact of non-dumped
imports on producers. Article 9 makes it plain th at anti-dumping duties are to be applied only to
dumped imports, and at a level no greater than the margin of dumping.

13. When using any of the three primary methods under the transaction-to-transaction
methodology, only those transactions found to be dumped are taken into account in the analysis of the
volume and price effects and consequent economic impact on the domestic industry of dumped
imports. Therefore, in order to preserve symmetr y, the determination of the margin of dumping may
be based only on those dumped transactions so take n into account. In the same way, symmetry is
preserved by taking into account those transactions f ound to be non-dumped in the analysis of the
volume and prices of imports not sold at dumping pr ices. This ensures "consistent treatment" and
"even-handedness" in the anti-dumping investigation.

14. Article 2.1 sets out the basic definitional con cept of "dumping" and lays the foundation for the
rest of the Article. The purpose of Article 2 as a whole is to provide a methodology for determining
whether a product is dumped, i.e. whether the export price is less than the normal value.

15. The calculation of dumping margins must also meet the "fair comparison" requirements of
Article 2. The Appellate Body (in European Communities – Bed Linen ) has indicated that this is a
general obligation that informs all of Article 2, but applies in particul ar to Article 2.4.2. Article 2.4
imposes specific requirements including, inter alia, to make comparisons at the same level or trade
and at as nearly as possible at the same time, a nd to make due allowance for differences affecting
price comparability. These requirements condition the selection of individual transactions which are
used for the determination of the existence of dumping.

16. The obligation to make a fair comparison a pplies regardless of the methodology used. In
terms of allowing for a fair comparison between the export price and the normal value, the
transaction-to-transaction methodology is the most a ccurate approach as it targets the dumped goods
and directly addresses the material injury or thr eat thereof. The weighted average-to-weighted
average methodology is not as targeted, may not reflect the range of dumping margins in an
investigation, and may not fully address the material injury being caused or threatened by the dumped
imports. In contrast, the calculation of dumping margins using the transaction-to-transaction
methodology is inherently a "fair comparison" as it targets the dumping that is occurring and takes
into account the impact of dumped and non-dumped im ports on the domestic industry. This applies
irrespective of the method used to calculate du mping margins using the transaction-to-transaction
methodology.

17. Article 2.4.2 enables the existence of dumping margins to be determined on the basis of a
comparison of individual transactions where the tran saction-to-transaction methodology is used. The
comparison of the individual domestic sales trans actions to export sales transactions leads to the
determination of whether dumping of the product under investigation exists.

18. The Appellate Body in US – Softwood Lumber upheld the Panel’s finding that the
United States acted inconsistently with Article 2.4.2 of the Anti-Dumping Agreement in determining
the existence of margins of dumping on the basis of a methodology incorporating the practice of
‘zeroing’. The Appellate Body expressly confined th e issue in that case to th e weighted average-to-
weighted average methodology, not the transaction-to-transaction methodology. It based its reasoning
on the particular wording of Article 2.4.2 as it rela tes to the weighted aver age-to-weighted average
methodology. In particular, the Appellate Body interpreted the phrase "all comparable transactions"
as requiring the results of all comparisons to be taken into account including the results of all multiple
comparisons of product types. The words "all comparable transactions", however, are not
 found in
connection with comparisons on a transaction-to-transaction basis. The omission of a phrase in
respect of one methodology, where it is used in relation to another, must be given weight.

19. New Zealand also wishes to draw the atten tion of the Panel to the dissenting opinion by a
Member of the Panel in that dispute which drew no comment from the Appellate Body. New Zealand
believes this dissenting opinion warrants close attention by the Panel in these proceedings.
20. The Appellate Body (in EC – Bed Linen ) considered the term "product" in Article 2.1 when
interpreting the margins of dumping referred to in Ar ticle 2.4.2. It considered that margins of
dumping should be established for the "product as a whole". In comparing the normal value and the
export price on a transaction-to-transaction basis the individual transactions where dumping has been
found to exist are assessed to determine whether dump ing is considered to exist for the product under
investigation. In this way the transaction-to-t ransaction methodology targets the importation of the
product that is being dumped. It does not attempt to calculate dumping on the basis of the averaging
of transactions for all
 sales of the product.

21. The interpretation of "pro duct" in Article 2.1 of the Anti-Dumping Agreement has to be seen
in light of the context of Article 2.4.2. The term "product" when referring to the transaction-to-
transaction methodology must take into account the nature of that methodology. That methodology
selects individual transactions for analysis which are representative of the "product as a whole".
Therefore the "dumping of a product" within the terms of Article 2.1 means, in relation to the use of
the transaction-to-transaction methodology, the dumping established through the selection of
comparable individual transactions representing the product which is the subject of the anti-dumping
investigation. Any of the three methods which may be used to calculate the dumping margins using a
transaction-to-transaction methodology can be used to establish that dumping exists.

22. The standard of review that governs the work of Panels when examining whether a Member
has violated the Anti-Dumping Agreement is set out in Article 17.6(ii). In New Zealand’s view the
text of the Anti-Dumping Agreement does not exclude the possibility of taking only dumped
transactions into account in establishing the dumpi ng margin using a transaction-to-transaction
methodology and that this is a permissible interpretation in accordance with Article 17.6.

IV. CONCLUSION

23. New Zealand considers that there is no textual support in the Anti-Dumping Agreement for an
obligation to take non-dumped tr ansactions into account in establishing the existence of dumping
margins under Article 2.4.2 where using the transact ion-to-transaction methodology (as distinct from
the weighted average-to-weighted average methodol ogy). Indeed, it is permissible to interpret
Article 2.4.2 as permitting a Member to take into account only dumped imports in establishing the
existence of dumping margins under Article 2. Su ch permissible interpretations are specifically
preserved under Article 17.6(ii) of the Anti-dumping Agreement.